The startup thinks it can use blockchain to revolutionize real estate.

By Jen Wieczner
July 19, 2017

As lending startup SoFi expands from student loans to full-service banking, it is also venturing into one of the trendiest areas among big Wall Street banks at the moment: blockchain.

Yet while Bitcoin, the original blockchain, commands the lion’s share of attention—and also the biggest valuation of any cryptocurrency—SoFi sees much greater potential in its younger sister, Ethereum.

That’s because bitcoin, although designed to be used as a currency, is not a very practical one, whereas the Ethereum blockchain can be used to facilitate all sorts of other financial transactions, SoFi CEO Mike Cagney said Wednesday.

“If the dollar didn’t exist, and all we had was Bitcoin, we would be fine. But the fact that it trades [in dollar terms] and its value fluctuates so significantly makes it nearly impossible…to use as currency,” Cagney said at Fortune’s Brainstorm Tech conference in Aspen, CO. “The blockchain on Ethereum, on the other hand, has absolutely fascinating infrastructure applications.”

An upstart cryptocurrency, Ethereum’s price has surged so dramatically in recent months that it now commands nearly as much market share as Bitcoin itself. Driving that rise is excitement about the way Ethereum allows its blockchain technology to be used to develop myriad other projects, as Cagney described.

In particular, SoFi, which is valued at more than $4 billion, is exploring a way to use blockchain to revolutionize title insurance, a standard requirement for many home buyers.

SoFi got into the real estate business when it began offering mortgages in the fall of 2014. But the title insurance process, which involves checking property ownership records to determine whether a house can be rightfully sold, is still painfully old-fashioned, Cagney said. Under the current system, a home buyer typically pays thousands of dollars to hire someone to go to the county courthouse and search through documents for any outstanding liens on the property.

Instead, those paper records could be moved to the blockchain, where a transaction log can be securely stored—and still easily accessible—on what’s known as a distributed ledger, “where you have absolute truth in terms of what those liens are and what that information is,” Cagney explained. In order to generate revenue to fund the development of such a system, he suggested, the information could be encrypted, and SoFi could sell the key to unlock it.

The main challenge for SoFi to pull this off is persuading a county government to agree to fully switch over to the digital system—a move without which SoFi wouldn’t be able to monetize it. “If you run [both systems] in parallel, the blockchain or the Ethereum aspect of it is not enforceable, because [users] can revert back to the paper trail,” Cagney said. “So you need to find a county that’s willing to do a complete conversion onto a distributed network, and when you have that, there’s an interesting application there. And that’s a multibillion dollar industry.”

Fortunately for SoFi, it has already found a county willing to get on board, Cagney said. (He didn’t specify which county; a follow-up question to a SoFi spokesperson went unreturned.) But the company may reveal more details soon. Asked whether SoFi expects to launch the blockchain system for title insurance later this year, Cagney responded, “We’re trying.”

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