Decentralization puts power in the hands of the consumer*
Let's bring in the Enterprise Blockchain Award winner who has brought more transparency to the Real Estate sector and beyond
Named Canada's top tech titan, Dr. Atefeh Mashatan, is the Director of the Cybersecurity Research Lab and an Associate Professor at Ryerson University. This renowned cryptographer found a way to reduce fraud in the real estate sector as well as the insurance marketplace and in supply chain management with eSURe. This application that was built to solve one challenge ended up having applicability in several other business use cases.
She also discusses her work on Mosaïque - a purpose-built digital wallet that interacts with blockchain applications, and enables secure transaction workflows as well as identity management services.
Lauren Weymouth (00:00):
Hello, I'm Lauren Weymouth, Director of the University Blockchain Research Initiative, at Ripple, coming to you from San Francisco. I hope you can hear it in these podcasts how much I love my job, getting to talk to the foremost experts around the world that are developing blockchain on a daily basis. Today, we're introducing one of the top five most influential women in the world of cybersecurity. Canada has named her a top tech titan because she is known for developing emerging tech solutions that address things that you need and I need.
And last year she received the Enterprise Blockchain Award by Blockchain Research Institute for developing the Mosaïque digital wallet. A fully decentralized identity management system for business environments. Drrrr, drum roll, please. Dr. Atefeh Mashatan, fondly, called Atty, is the Director of the Cybersecurity Research Lab and an associate professor at Ryerson University. Welcome Atty.
Atefeh Mashatan (00:57):
Thank you Lauren. Thanks for having me.
Lauren Weymouth (01:00):
So, your university bio page says that you work with government and industry to solve problems through cutting edge information, security and research into cyber risk mitigation strategies and solutions. That's a lot of words to establish that you're a renowned cryptographer. And so, we'll inherently hear about the advances in cryptography and what they bring us, but we also wanna learn how you got into blockchain. And I, I know from talking to you before, that you have a personal story that was your epiphany into blockchain and how when utilized it could really make a difference. So, I think that's a great place to start our discussion today.
So, tell us about your real estate experience?
Atefeh Mashatan (01:36):
Absolutely. So, yes. I was, nearly a victim of a double ending deal where my selling agent was only presenting me with his own buying clients, trying to maximize their commission obviously at my expense. So as a seller, I wasn't being presented attractive offers from other buying agents and I was looking at it and saying, "How can it be?"
Luckily, I realized the pattern and caught it in time, but that experience proved to me that there is a serious shortcoming in the system as it is, and that there is not enough transparency provided to the sellers or even buyers sometimes, depending on the scenario you're looking at. They're left at the mercy of their agents who may not act in their best interest.
Lauren Weymouth (02:22):
How did the light bulb go off such that blockchain could solve this endemic problem in real estate?
Atefeh Mashatan (02:28):
I was working in financial industry. And in there I was looking at applications of blockchain technology in know your client, um, and other financial processes. So, I was familiar with, what wonders blockchain technology could do in terms of efficiency, transparency, all the good stuff that we talk about. Lots of technology in the enterprise. so when this happened to me, I was looking at it, "Okay, I wish I had more transparency," but I didn't, start working on this project right away.
It was the year after, where I read an article in a Globe and Mail article, a newspaper here in Canada, in April, 2017, that was illustrating what we call paper flipping fraud. W- when, an agent purchases something, together with a dummy buyer, with the intention of flipping that paper and w- with an more expensive price, and then get the, income under the table without reporting, tax on it the entire story of paper flipping fraud.
That same month there was, a Marketplace, episode, Marketplace is a popular show here in Canada. It was, uh, an episode when, the producers used, undercover camera. And then they went and talked to real estate agents in two main provinces, Ontario where I live and British Columbia. And they asked them about, "Okay, we don't have an agent and you're the selling agent? How about, w- what are, things that you can do with us?"
And then agents actually told them, "We're going to give you information that, would, benefit you in giving a better attractive offer." Information that was not supposed to be revealed to these,potential buyers. So, they actually showed double ending fraud in action. And, there was a lot of, discussion about it and that same year, there were numerous reports how prevalent, this issue is. the double ending fraud in hot real estate markets, not just in Canada, in North America and in other places.
And you have to realize the transaction costs in, in real estate, is really large, is 11 to 22%, depending on which jurisdiction you're, on the total price, on the total purchase price. So, it's very attractive for whoever sees, an avenue of getting more out of this, milking the transaction, this, and get something that they can either not pay property tax, properly or income tax on it and so on and so forth. And then, as part of the research that we did, we realized that since 2008, there were 2.8 billion, dollars from companies who have entered in the Toronto real estate market. So, it was a huge market and there was definitely something going on that needed more to be done.
And as soon as you're dealing with this type of, situation, the government comes in and says, "We need to understand what's going on. We need to regulate this." So, they just need to put up a show that there's something that they're doing about this. hopefully they actually address it. And in this case, the Premier of Ontario in 2017, came and said, "Okay,we have this, Affordable Housing Act, where 16 rent and housing, reform actions that we're announcing in 2017."
And, one of them included this, working to understand and tackle real estate practices that allow, they specifically said, allow paper flipping and a speculation and reviewing the rules for real estate agents to ensure that the consumers are fairly represented and in a double ending, case, it is possible for, consumers not be fairly, represented.
So, that was, my aha moment that as you said, the light bulb went off and said, "Okay, wait a second. This is a much bigger and pervasive issue. There's something that I can do about it." And in 2017, I was already in academia. The beauty of, academic freedom is that, you know? You can work on whatever you like. So, this was, "Okay, I know about your technology from a different context." Which was financial industry as I mentioned to you.
And now this is a context that I understand, real estate. I was actually personally impacted by it. So, I had that drive to actually do something about it. And then the rest is history. We had eSURe, and then we had Mosaïque and I can tell you more about them as well.
Lauren Weymouth (06:53):
(laughs). Well, we can really hear the need for putting more power back in the consumer's hands, right? And now, and then when you have the government getting involved saying, "Hey, there needs more oversight, more regulation on all the parties, other than the consumers." Right? So, trying to think about all the, transactions and the parties that are brought together in one real estate deal, you have the buyers and the sellers, but then you have the mortgage brokers, the lawyers, appraisers, agents, bankers and now regulators. And, they're not necessarily designed to work together. are they using different paper systems, why hasn't there been an all encompass system?
Atefeh Mashatan (07:25):
That's a great question. 'Cause, there's definitely the need. You wonder why something like this hasn't been created, already. So, all of these different, players or stakeholders, you mentioned buyers, sellers, mortga- mortgage brokers, lawyers, appraiser. They all have created their own software in silos. So, it's not necessarily paper-based, they're actually softwares, but it's, they we're created in silos to achieve their own specific goals, as opposed to handling the real estate transaction from the beginning to the end.
So, there's no interoperability. There's a lot of gaps in between these software, applications. And hence, paper-based processes were adopted naturally to address these gaps in the process from the beginning to the end. And as we know, paper-based systems are slow, error prone, costly and not transparent, and hence very susceptible to fraud. And that's why there hasn't been any, all encompassing system, because these parties don't necessarily trust each other. It's not their mandate to actually make this easier for the consumer. there's no governing body that would mandate this type of interoperability either. So, that's unfortunate.
Lauren Weymouth (08:44):
Right. So, how does decentralization solve these conflicts of interest?
Atefeh Mashatan (08:48):
Yeah. So, decentralization is going to put the power in the hands of the consumers. And we've heard this before, in you know, many different contexts. In this context, all of these players are acting as equals. You don't have a centralized, company or body that is going to say, "If you want to transact with me, you're going to use my system." the buyers, the sellers and all these other parties are acting as equals and hence have similar say, equal say in how things are going to work together.
So, 2018 when we started doing this, we started by mapping out the actual business process that is happening currently, out there, into flow charts. To see how these, different parties are going to transact with one another. we started in Ontario and they looked at other jurisdictions in Canada and in, the US. so there's a lot of generalizability, and there's a lot of, commonality in how these, different, processes work.
So, with the caveat, that double ending is completely illegal in very few jurisdictions. The rest of the shortcomings that we see, are rather identical among different jurisdictions in North America. when we mapped the current, flow of things into a flow chart, we saw that there's need for some transparency in the bidding aspect of blockchain. And that can happen on a decentralized system, using blockchain, which gave rise to, our m- platform, Transparent Bidding Blockchain, TBB.
We also saw that this entire transaction could be mapped into a decentralized system for the property ledger. We called it Smart Property Ledger, SPL. Again, it's decentralized, all of these different parties do their own piece that they have to on this, a blockchain based platform. And in some cases where the properties are pre-constructed like condos or townhouses. Um, you get into a contract, now, the condo is going to take four or five years until it's built. So, there's a long period of time, and you're only left with a not so transparent paper contract, right?
So, that pre-construction contract, is only happening on paper-based system or siloed systems currently. So, we thought we could have a pre-construction contract registry on a blockchain, a decentralized way of, bringing all of this information about, "Okay, I'm an end user, getting into this contract and I have my lawyer. this is a condo that I'm going to purchase in five years from now, but this is the contract that, defends or protects, my right to this condo that is going to come out in five years."
So, that's, pre-construction contract registry.a very common, instance, of, transacting properties these days, in, in hot real estate markets.
Lauren Weymouth (11:42):
Well, thank you for taking us through all the multiple components of the eSURe system. by the way, have you said what eSURe stands for?
Atefeh Mashatan (11:49):
(laughs). That's a nice one as well.in 2019 after we did the theoretical work that we had done, we didn't call it eSURe. We had three components, we had the Smart Property Ledger, we had the Transparent Bidding Blockchain, TBB, we had the pre-construction, uh, contract registry, and we said, "Okay, theoretical work, paper research, that's great. Let's build actual proof of concepts and show that this can work."
So then we said, we're going to call them all an umbrella term, Equitable Smart Unified Real Estate. So, because it's equitable, everybody has equal say in this, and it's obviously smart and it's unified. So, from the time you start bidding for a property, to the time that you're actually the transaction and money is going from one bank to the other, you are on this eSURe system. So, eSURe stands for Equitable Smart Unified Real Estate.
Lauren Weymouth (12:45):
That's awesome. I love that. (laughs). Going back to the Smart Property Ledger, is that what replaces the paper records? And, does it keep a record of all the transactions? Can you tell us a little bit more about that?
Atefeh Mashatan (12:55):
Yeah. So, there's, a ledger that,keeps track of all the transactions, that are happening, you know? From the time that you are into a contract for pre-registery or after you bid. So, is feeding to one another. So, you start bidding for property that already exists. So, that's the Transparent Bidding Blockchain. And once you have a potential, buyer that this is my buyer. And you have one buyer and seller,you feed the output of Transparent Bidding Blockchain to the Smart Property Ledger.
And then you have, the rest of the,parties. at that point, you have the lawyers, you have the appraisers, you have the banks as well, that feeds into Smart Property Ledger, and that transaction, exchange of money and exchange of keys happens on Smart Property Ledger. the alternative is that you're not bidding on any existing property, you're signing up for a property that has been pre-constructed. So, pre-construction registry, that takes place, and then the output of that feeds into the Smart Property Ledger. So, the Smart Property Ledger is the ultimate ledger that keeps a record of all the transactions that actually have taken place. and this is not just the numbers, it's not just the, purchase price, right?
it's also the other condition. So, is there a condition on finance? Is there a condition on, appraisers? we need to come and check the house to make sure there's no mold in the basement. And, when is the date that we actually wanna close the transaction? the bids are actually a little bit more complicated than just the purchase price.
So, sometimes you have competing bids, as, price of one is higher than the other one,that's not necessarily the more attractive one. All of that. You want to look as a seller. You wanna have at least the option to know everything, that is,being placed, on a blockchain you can. So, the system that we have is going to notify, it would be like, it's something that pops up in your cell phone, as, as part of this application that, hey, this was a bid that was just,placed on the Transparent Bidding Blockchain app. And these are the information. Then you have all the information, you're not left at the mercy of your agent to come and present something and not present something to you.
Lauren Weymouth (15:12):
Got it. So, through the Transparent Bidding Blockchain shows the entire package.
With transparent bids, how do we verify the bids are from qualified bidders?
Atefeh Mashatan (15:21):
So, if the qualification is about whether or not they can afford the price that they're offering, that happens on the Smart Property Ledger when you have the banks involved. When they look at the mortgage application and approve the mortgage application. However,in the unlikely event that the mortgage application is not approved, the bidder is going to lose the deposit that they put in place during the bidding. That's the safety net, basically.
So, if somebody's bidding, and you choose them to be the winning bid, and all of a sudden, they're not qualified to get the mortgage to security offer and complete a transaction, they lose a deposit and that's a check, they lose that money, basically.
Lauren Weymouth (16:03):
Built in incentive, yeah.
Atefeh Mashatan (16:04):
Lauren Weymouth (16:05):
Yeah. Got it.
Atefeh Mashatan 16:06):
Lauren Weymouth (16:07):
How does it work that on the registry the developer, buyer, seller are all informed about the state of the property and the c- pre-construction contract resale.
Atefeh Mashatan (16:15):
So, all of these, components, the Smart Property Ledger, the Transparent Bidding Blockchain, and pre-construction contract registry, they notify you, they're your applications, so, they will notify you. and they tell you what the status of in the state that you are. So, if you are a lawyer and you send something to your client to sign, as soon as the client signs, you're going to be notified that your client just signed something.
And then it moves you in that state to the next state. So, it's a state diagram, and it has loops and arrows that takes,the actual event or this property from one state to the other. if you have five days to do something, and if you don't do it sends you a reminder that, "Okay, you have one more day to do this, and then it's going to expire." So, all of those are built in the app and notifications are sent automatically.
Lauren Weymouth (17:05):
That's pretty awesome. I do like getting notifications, in real time.
Atefeh Mashatan (17:09):
Lauren Weymouth (17:10):
Yeah, that's great.
it sounds like you've thought of all the different components to make this work for all the parties involved, was there any hiccups or anything missing along the way that you then had to do some discovery around and put in?
Atefeh Mashatan (17:21):
So, the eSURe system was designed to address the shortcomings in the real estate industry that we talked about, lack of transparency, the slowness, lack of efficiency,fostering fraud or making it possible to, transact, fraudulently. so, we had that, but when we implemented eSURe, you realize that there was this big bottleneck and that was onboarding all of these people, right?
Atefeh Mashatan (24:12):
in the current system, when everything is siloed, all of these different organizations, whether it's a brokerage, or a bank or l- lawyer's office, they have an onboarding system that works for them. So, you go to a lawyer's office, you give them your Driver's License, or another piece of government issued ID, they onboard you. They verify who you are with that. You go to the bank, you already have a bank account with them. in brokerages, they have an onboarding,system for their agents. And when you are a seller or buyer, you are onboarded through the channel of your agent. So, all of these are different systems.
Now, when we put it all together in an all encompassing system, what do we do with, onboarding? If you wanna onboard these people, you need to verify their identity as well. Right? So, that became the big bottleneck that we had to also address. So, then, it gave rise to our, follow-up project, which we're working on right now is called Mosaïque. because it's the Mosaïque of different, components of this, put it all together, which is a purpose built digital wallet for real estate. it's a digital wallet for all your transactions, real estate, related, that addresses that.
However, we realized that, "Okay, it's not just real estate that has this bottleneck." Look at insurance, any insurance claim, you have all sorts of, the appraiser, contractors who come and deal with something. The insurance companies, the bank who is paying, insurance, claims is the exact same scenario. And all of those are done in siloed, and paper-based, siloed softwares and paper-based systems to cover up the gaps.
So, if you were going to create an all encompassing system for r- insurance claims, we had the same issue of onboarding and identity became a thing. And, supply chain, another context. So, supply chain it's, across borders, across jurisdictions, you're dealing with multiple different companies. Some of them are smaller, some of them are bigger and suppliers, clients, end users, big and small, they again, are dealing with silos softwares.
And if someone was creating,an all encompassing system for all that, their bottleneck would have been a digital... Not Having a digital wallet that handles the identity. So, our Mosaïque started with real estate context, but now we're envisioning it to be much bigger than what we started with, that idea that it can be a multi-purpose digital wallet for things about identity and, processes that are, again, decentralized And, you're not only dealing with a centralized or consortium that has limited stakeholders.
Lauren Weymouth (20:30):
Well, this sounds like every entrepreneur's dream, right? You build an application to solve one challenge and you end up having applicability to several other business use cases.that's fantastic.
So you bring transparency and accountability of transactions to light, and it's obvious how these solutions are very beneficial to the customers. How have you been unfolding this new program to all the different parties involved and what has the reception been?
Atefeh Mashatan (21:02):
That's a great question. So, we have dangled our system in front of, regulatory, bodies, as well as brokerages, big brokerages. they tell us it's great, but there's not much appetite. And you wonder why, who wouldn't be excited about transparency and giving control to the consumer? This should be your best recipe for a great PR, campaign. But no, there hasn't been much, pickup.I think what could help is, the government and consumer advocacy, groups to take a more active role in here.
The consumer advocacy groups need to understand that there is a solution to this problem. So, there's a little bit of knowledge translation that we're doing as well. So, yes, these things are going on and in the real estate market, and these are big problems, but we don't have to live with them. We can actually solve them. So, everyone can be proud of the efficiency and transparency and this and that.
So, we are in that stage. We're trying more of an education. So, all the different stakeholders know that this can be done and there's not much cost to them. And,it's a good thing to have. However, we cannot assume, or we can not even expect that, the brokerages and the banks are going to come and say, "Yes, we wanna do this. What is our piece to actually do?"
We need the government to be a little bit more proactive. We need the consumer advocacy, teams to, groups to come and advocate for this type of thing. as the public knows more about, "Okay, technology can solve these problems." We have a better chance of actually seeing more meaningful action.
Lauren Weymouth (22:38):
Yeah. And hopefully getting the word out with podcasts like this, and, you know, it gets people to-
Atefeh Mashatan (22:43):
Lauren Weymouth (22:44):
... be more educated.
Atefeh Mashatan (22:45):
Lauren Weymouth (22:46):
we hear about a lot of your local work in Ontario 'cause that's where you actually are. What are your plans to scale it?
Atefeh Mashatan (22:52):
On the education piece, we are publishing papers, we're giving talks here and there. that's North American, is not that local.
Lauren Weymouth (23:03):
(laughs). Okay. Atty, what's next?
Atefeh Mashatan (23:05):
Great question. So, we have a lot of exciting things that we're cooking up, particularly, with UBRI's grant, we're currently working on integrating XRP into our R&D as a payment vehicle. So, the integration of our Mosaïque Wallet serving as the underlying self sovereign identity, and XRP as the payment vehicle. we are obtaining a complete and harmonious package achieving the promise, transparency and efficiency of blockchain technology.
this combination of, XRP as the payment vehicle and our digital wallet, Mosaïque, has the potential to revolutionize many use cases, not just real estate.insurance claims and supply chains, as I mentioned, are a couple that we were focusing on, next, but there's a lot more, that can be done with this combination as well.
Lauren Weymouth (23:57):
is there anything I have not asked you that you'd like to share with our audience?
Atefeh Mashatan (24:01):
The next phase of our research is to devise, a detailed decision tree that dives deeper into some of the technical parameter choices of, of blockchain implementation. So, not just whether or not a blockchain implementation is the way to go for your company, uh, and if it's a public or private blockchain that you want to do. Let's look at some of the common technical architectural questions and answer those. So, that's something that we're working on, as well.
another active area of our research is identifying the drivers and barriers of blockchain adoption to develop methods, to reduce challenges and foster widespread organizational adoption. Okay. So, all these great things that we do, as R&D, if we don't see a widespread mass adoption, we haven't achieved our goal yet, right?
So, we're looking at supply chain management, electricity and green energy, as well as real estate industry. And we're working with our industry partners in cracking some of these cases where there's mutual interest in studying a specific industry. And when, a generous donor provides us with funding for, R&D, it gives us the freedom to think big and aim higher, which brings me to what we're doing in real estate with, UBRI's grant, as I mentioned.
Lauren Weymouth (25:18):
That's great. I actually think that's really needed, right? a framework that helps all businesses check in and see, is this applicable to my business? how can it help, us be more efficient, more productive? where do we wanna send people to find out more about your blockchain adoption framework and more about the eSURe system?
Atefeh Mashatan (25:36):
I'm glad you asked. So, we have, a website which is very easy to find actually. Ryerson, R-Y-E-R-S-O-N.ca/CRL for Cybersecurity Research Labs, so, CRL. And, I maintain a CRL one on one page with, articles that are very short and easy to understand. then a research tab that we talk about all of our R&D
So, we have under Mosaïque front, for instance, we have, what is the problem? Two paragraphs. What is the solution, two paragraphs. Click here, if you want to know more, and there's an entire article, as well.
Lauren Weymouth (26:14):
Have you been seeing an increase in interest from your students, in this field?
Atefeh Mashatan (26:19):
Absolutely. Blockchain technology is really hot and the students know that there's a big, talent shortage in it as well. So, I have, seen increased interest from obviously technical students who come from engineering and computer science background, but also business students. They wanna know, if they become the next consultant at Deloitte or KPMG, they wanna know what blockchain technology is all about so they can make, you know, informed presentations.
And in fact, I designed a new elective for our fourth, business technology management students that I'm teaching this fall, on blockchain technology in the enterprise. I'm very excited to be teaching that.
Lauren Weymouth (27:01):
That's exciting. I'd love to sit in on your class in the fall. Atty, you've put together a phenomenal product that when implemented will save people from experiencing the headache that you once did in trying to transact property. You're also a key role model for women in this burgeoning field, creating real-world solutions for this tech. Thank you so much for sharing your work with us.
Atefeh Mashatan (27:20):
Thank you for having me. It was great talking to you.
Lauren Weymouth (27:22):
Yeah. It's been a terrific pleasure hosting you on UBRI's podcast, All About Blockchain. And loyal listeners, thank you for your valuable time today. If you have any questions about this episode or feedback for new episodes, please reach out to firstname.lastname@example.org. Until, next time.
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