What Every Techie Wants To Know About The First Blockchain Transaction In The EU

Property investors want fast, easy deals for in-demand locations. Yet, until now, it’s been hard for anyone to buy a property remotely. By integrating decentralized technologies like smart contracts into the real estate sales process, Propy.com removes the complications. Secure transactions can be made across borders, without the traditional long delays that frustrate buyers.

Seville, Spain, is one of the hottest real estate markets in the world right now. A French buyer recently used our platform to buy a property there.

How do we do it? We’ll show you exactly how we use smart contracts on the Ethereum blockchain to:

• Make real estate deals more efficient
• Provide a transparent sales process that is not open to manipulation
• Store immutable records on the blockchain, which is more secure than traditional paper records

We’ll share an overview of the suite of smart contracts at Propy, and go through how a deal is processed, step-by-step, from that perspective.

For a broader overview of how the Propy transaction platform works, check out our video explaining the transaction platform. With our user-friendly web interface, users can complete real estate deals with no blockchain knowledge.

(Note that the video describes the California workflow, so the documents and roles involved are a bit different than those for this deal in Spain)

How Propy Sells Real Estate on the Blockchain

Each property deal is represented by its own self-contained group of smart contracts on the Ethereum blockchain. We’ve designed the system to be flexible, with contracts interacting with each other via generic interfaces that allow a lot of room for different contract implementations going forward. There are three smart contracts that make up a deal: Deed, Property, and Escrow.

Deed Smart Contract

Deed contracts define the terms and parties of the deal. They track the flow of events as the deal happens. The hashes of all relevant signed documents are stored here as an immutable record.

Property Smart Contract

Property contracts contain metadata about the property’s physical characteristics, such as its physical address and measured area. They also maintain a record of property owners and transfers of ownership.

Escrow Smart Contract

Escrow contracts track the flow of money. There are many potential types of escrow contracts and the process is handled slightly differently for different currencies.

• For example, if ETH is used for the transaction (as was the case for this Seville deal), the Escrow contract itself can hold the funds until conditions for their release have been met.
• For other currencies (like USD and BTC), the transfer of money happens through separate systems and the Escrow contract serves more as a record of events.

The Propy Registry

Before going further into the flow of the deal, it’s important to note how the Deed, Property, and Escrow contracts are created and managed. The Propy Registry suite of contracts is the hub that keeps track of all Deed and Property contracts, manages users and their roles (such as notary, agent, buyer, or seller), and provides a central place for interacting with all aspects of the system.

The Propy Registry is made up of a significant number of components, and it’s designed to be flexible and upgradable. Essentially, it’s used to set up the contracts, users, and parameters for each deal.

The Flow of the Deal

A deal begins when a potential buyer finds a property on the Propy Listings Platform and contacts one of the agents assigned to the property. The buyer officially starts the process by sending a deposit, which reserves the property for the deal. After the buyer reserves the property, other participants get invited to close the deal and our smart contracts become involved.

First, the Deed, Property, and Escrow contracts are created by the Propy Registry system. It’s also possible that a Property contract already exists for the property in question. In this case, the existing Property contract would be used.

As an aside, here are the Ethereum addresses of the smart contracts for this Seville deal:

• Deed contract: 0xc1e63555628be09bed9e1cc086c4db919bd0b68f
• Property contract: 0xB8c63aeE7A399CE1729F0FfdaDEC19F4b1A8594A
• Escrow contract: 0x99F82dFf6e94F589A786c6063f14bCD9BFf17cA8

After the contracts are created, the Deed contract is initialized with information about the parties involved (such as who the agents, buyer, and seller are), the sale price, and the required documents/signatures for the deal.

The required documents/signatures for the deal are set up into a series of steps that must be progressed through in order for the deal to go through. Actions are then taken to move the deal forward through these steps. Each step requires certain conditions to be met, which includes the corresponding documents being signed and uploaded.

• Documents are signed using DocuSign, which is integrated into our transaction platform. Prior to signing, the paperwork is verified by the Propy legal team. In the future, we’re planning to handle document signatures on an Ethereum-based platform.
• The hash of each document is stored in the Deed contract, which provides a verifiable record for any parties who have the original document.
• Currently, the documents themselves are stored by Propy. We’re looking to provide a decentralized file storage solution in the future.

For this deal in Seville, three of these steps were required, involving the signing & uploading of a Nota Simple (Property Registry Filing in English), a Gastos de Comunidad (HOA Fees Agreement), and the Escritura itself (Deed).

Once all the required documents are signed and uploaded to the satisfaction of all parties, the buyer deposits the funding required into whatever escrow system is being used. This is recorded by the Escrow contract.

At this point, we’re almost ready to officially transfer ownership.

Propy Fee

There is a fee to buy a property using our service. This fee is paid in PRO tokens and is divided between the Network Growth Pool wallet and the Propy wallet. The amount of tokens that will go to each is clearly defined in the Deed contract. The Network Growth Pool is used to incentivize the engagement of users in the platform in an automatic and transparently auditable way. It’s also used to incentivize governments and other related institutional actors to use the platform. You can read more on cryptoeconomics and the Network Growth Pool here.

To pay the fee, the buyer sends PRO tokens to the Deed contract’s address. Then, the Deed contract can distribute the tokens between the two wallets as defined in its terms.

Once the fee is paid, ownership of the property can be officially transferred on the blockchain. The notary who was a participant in the transaction platform and thus smart contracts records the deal to the government registry as well.

Each of the three smart contracts plays a role in the ownership transfer process. The Deed contract enters a finished state and records that the deal is complete. The Escrow contract releases the funds to the seller (if the deal was done in ETH), or records that the money was transferred successfully (if the deal was done in another currency). The Property contract records the Ethereum address of the new owner.

Join the Real Estate Revolution

Propy is automating real estate. We make transactions faster, simpler, and more secure. If you’re a developer interested in working on global problems, get in touch. You can contact our world-class technology team on info@propy.com.

Read more about the Seville blockchain property deal

Written by Thomas Spofford, Solidity Engineer at Propy