Eliminating Intermediaries and Reducing Fraud with Blockchain with Kirill Bensonoff - REIA 471

Welcome to Real Estate Investing Abundance, the show for busy, fulfilled professionals like you to learn how to develop financial independence built on solid passive real estate investments. Now, here is your host, Dr. Allen Lomax.

Hello, enlightened investors. Welcome back to Real Estate Investing Abundance. I'm so glad you are with us today. We have a very exciting topic to share with you. We're going to be looking at AI's impact on real estate investing. We have an expert with us today on this topic. Kirill Benzenov is the, the co-founder and CEO of NewSilver, which recently launched free loan origination software for its wholesale partners. And they have had a successful journey in creating Dynamic Financial Tech Solutions. And Kirill, thank you for being with us and tell us all about what's going on in the fintech industry and essentially how can we use technology to invest in real estate.

Oh yeah, thanks for having me, Allen. Um, it's a, you know, it's a big topic to cover, I guess. Um, Yeah, I can tell you a little bit about what New Silver does. So, we've been around and maybe my own personal story a little bit. I'm a technologist. Haven't really been— I've been an investor but more on the startup side, angel investor type of deal. Haven't really invested much in real estate. But at one point, a friend of mine was running a small fund for fix and flip type of construction stuff that they were doing themselves and I invested with him. And, um, you know, I kind of learned through that about the fix and flip world and real estate investing in general and became very interested. And, and that was kind of the beginning of the NewSilver journey. This is back, you know, like a decade ago. We obviously didn't start NewSilver until 2018 or '19 is when we went live. But, um, you know, if we fast forward to 2018, NewSilver actually started out as a software product with a different use case, but We essentially built a pricing engine that looks at as-is and as-repaired value of residential real estate in the US, and we try to use technology and data to figure out what the pricing will be after the value-add component. As-is, I think, is a little bit easier. There's obviously like AVMs and other methods of getting as-is valuation, but as-repaired is a little bit harder. So, that was our initial foray into the tech, you know, using tech to speed up and improve underwriting and improve originations, improve the whole experience. And, you know, since then we've built a bunch of other stuff. We kind of brought the whole experience online. You know, our sort of North Star is convenience. We really want to make the whole experience as convenient, as pleasant as possible for the borrower. That also obviously involves the speed to to origination. And, you know, on our end, that involves underwriting. So, you know, we use tech as much as possible for underwriting communication, you know, just kind of doing everything as quickly, as conveniently as possible for the borrower. But yeah, I mean, I think as far as to your question on, you know, in general, I mean, there's lots going on, obviously AI and other things. Like, I, you know, I can't call myself an expert in AI. I, I do know a fair amount. I'm probably, you know, a bigger expert in blockchain, though both are valid things I can definitely discuss. We use AI ourselves. We haven't really built AI, but we've built blockchain apps. So yeah, I'm happy to, happy to chat about any of these topics.

Well, how does— how can the, the passive investor make use of the products that you put together?

Right. So, we, you know, we ourselves, I mean, as far as the technology, technology is really an enabler. We don't really sell the technology, right? Technology is just part of our process. We have a, what we call New Silver Income Fund, which is a fund for a passive fund for accredited investors that basically invests into the pool of our originated loans. So, I guess, like, you know, on our end, we don't have many tools that we could share with others As far as AI and things like that, we do use blockchain ourselves. So this this pool of loans are using is using blockchain technology to cut some costs and speed things up, etc. So and that's why we're able to we're able to return over 17% net of fees last year to our investors in the income fund. But you know there there are plenty of other tools that I can talk about. I think the biggest one is is one that probably most people know, but I don't know how much people use for for these things is ChatGPT. That is by far the most comprehensive tool and my favorite tool for for many different things, including looking for investments. I think the value there is that instead of spending hours figuring out what let's say you're interested in passive investing in commercial real estate, for example, right? There are a number of platforms that offer this, whether it's a fund, right? There's many funds, right? There's publicly traded funds, private funds. There's crowdfunding platforms like Fundrise and others. So one great use case for something like ChatGPT would be, you know, helping you save time and figuring out— I mean, you have to figure out first what is it that's important to you. Are you looking for, you know, the highest return and therefore are willing to take on some risk? Are you looking for a short duration or long duration lockup? You know, that type of stuff. And you can simply ask ChatGPT these questions or ask it to help you think of these questions even, right? It knows what questions to ask when thinking about a passive investment, and it's going to come back to you with a list, a short list of however, or a long list, you know, whatever you want. It's going to come back to you with a list of, you know, the top in its opinion. Right? What are the— what are these top that fit within your specified parameters? So that right there could save you, you know, hours, days of work, right, with going to different websites and reading about different information. So that is definitely my favorite tool, you know, overall. And I think the other— I think the other pieces of it is like they have a different app that is part of ChatGPT, and it's It's, it's basically for data analytics, right? So you could essentially, if you have some data or you, you get data from a third party or whatever, and you want the AI to analyze this data and, and figure out, you know, again, where are the best returns, where is the lowest risk, essentially any type of thing like that, you can simply upload the spreadsheet, ask AI to analyze the spreadsheet And it'll come back to you with, with an answer within, you know, within minutes. I mean, it's a huge time saver. So that's what— that's— I think that's what's available right now. I use— I personally use OpenAI's ChatGPT extensively, and obviously it's, it's, it's a platform, and, and many other folks use it, you know, for their own use cases within their own software and things like that. But, you know, in the not too distant future, there's, there's going to be a lot of other stuff. So I'm sure that companies, you know, larger companies that do investment on behalf of their clients already use AI for, you know, figuring out where to invest. Right. That is certainly a great use case for people that analyze a lot of data.

Yeah. ChatGPT is Is very beneficial to a lot of us. I've been using it for quite some time now and have found it to be a remarkable tool. You mentioned blockchain, so that's been around for quite some time now, but I think many of us still don't really understand what it is and how it works. And I know it's an important component and it provides security and different things like that, But I myself still don't really understand it. So could you try to explain it to me again?

Sure, no problem. And I think I want to separate blockchain from cryptocurrency, right? They do work together, but they're separate and distinct pieces of technology, right? So I would think of blockchain— the way I typically explain it is a collection of computers or servers, nodes, that communicate on the internet and use cryptography to encrypt these messages that they transmit to each other and are able to move value and value that is being cryptocurrency that is often, you know, what we think of as, you know, a different type of money, I guess. And in addition to that, is able to make smart decisions based on a smart contract that developers would create. And a smart contract is, I mean, it's a, you could think of it as a workflow-like contract that is developed, programmed, and then deployed onto the blockchain. So it sits on this node of computers in a distributed fashion, right? There's no single point of failure, meaning if one of these computers goes down, the whole thing isn't going to fail, right? I mean, There are times when it could fail when it's 50% or more of them are compromised in some way, right? So I think there is certainly, and this is a very simplistic, there's very simplistic explanation. I think now over time we have many different types of cryptography that is being used for this. We have many different types of ways of validation, like meaning, Making sure that the network nodes are in sync and then they trust each other. So, and then there's many different versions or layers. So there's, you know, if you, if you, I'm sure you've heard of like Ethereum, which, which was the one of the first or the first virtual machine-like blockchain, meaning it could, it could, it could compute. It has some of these smart contract capabilities. Now there's, you know, many others. Similar. And then there's others that are built on top of these, what's called a layer 1. Like Ethereum is the layer 1. On top of that would be another blockchain that could, you know, make some improvements on Ethereum. So there is a ton there. But I think the basic notion of it is that it's, you know, it's a network of computers that can move value around, that can make decisions based on on something that's been pre-programmed and where the value, the use cases are. And I'll talk specifically where it relates to real estate because there's quite a few use cases, I believe. Anything from obviously the most simple one is moving financial value across, you know, across anywhere in the world, right? Like as long as you can have a wallet on a computer or a phone and somebody else does too, and then you know their address, you could send them something that is worth some value. So that is the most basic use case, but certainly may not even be the best, right? Because as we've seen, even though I think there are companies using blockchain behind the scenes that we don't think of regularly for moving value, it hasn't really caught on as people expected. Like, hey, I'm going to send you $5. It's easier to do in Venmo still than it is to like, you know, buy some cryptocurrency, send it to you, and then you have to like do something else with it. I do think that time will be there. It's all about, you know, it's all about just other applications kind of using these platforms and making it easier for you because us as a consumer, we aren't gonna spend the time to, you know, go out and buy some crypto just to send it to somebody else where you can already do it with basic banking services or apps like Venmo and things like that. But for investments, right, I think it opens up a whole, a whole other way to invest, right? First of all, it could remove many of the friction points that exist today when investing in, let's say, whether they're private or public securities. I mean, even public securities, you've got to go on an exchange and buy something. People understand, or I hope they do, that the exchange that you buy it on, the broker-dealer, does not actually have these securities when you buy them, right? They essentially takes them X number of days. I think it's still 3 days, T+3 for settlement. I think they're going, or some of them are going to T+1, I was reading. So that is a big improvement, but it's still not as fast as a blockchain could do it, right? And using blockchain you could settle within seconds or minutes, right? So, and then there's no third party, it's non-custodial. So once you buy something, it's in your wallet, there's nothing anyone can do to remove it from your wallet, right? Whereas again, you're dependent on, and we hope they work and they generally work, these exchanges, you know, like Robinhood or Schwab and others. But they have had, if you think back in time, many times there's been— Failures there, right? And the government sometimes has to step in, and sometimes they didn't step in and people lost money. So you know we're always kind of relying on that. I think with blockchain there's more certainty of these types of execution. That's one use case to sort of speeding up settlement. Another great use case is fractionalization, right? So if you're buying, let's say if you're investing in a in a commercial property or whatever any type of property. And it's sort of a crowdfunding-like offering where you have, I don't know, tens, hundreds of folks participating and everyone's putting in different amounts for this pool to buy this investment. Again, I think it could work without blockchain, but then you sign some papers, you're relying on some third party to have record of this. And then if they disappear, then you know you got to go to court, try to figure out. You know, I mean there's ways again, but it's it's just not as efficient. And then this third party obviously wants to get paid, right? They're they're not doing any of this stuff for free. There's humans there getting salaries and and everything else. Whereas with the blockchain, this could be programmed, right? So let's say you're this is like a scenario that may or may not exist right now, but you know in a in a world that's probably not too far away. You could potentially buy a property that will be represented by a token on the blockchain, a unique token. So when you own it in your wallet, it's you know it's proven that you're the owner, right? There's maybe a recording, a paper somewhere as well. But the the token in your in your wallet is at some point will be considered the primary fact of your possession of this property, your title to the property or whatever. And then if you wanted to. Sell it, right? You could essentially, you know, break this property up into 100 pieces, and then each piece will be represented by another token which will sit in 100 investors' wallets, and they'll have proof that they're a part owner of this piece of property. Now, there's other great things there, right? So now there's— they have a token, and you could then send them their dividends, their interest earned, or whatever, on-chain. And you could do this hourly, daily, you know, you could do this all the time and it'll be very fast and very efficient. And, you know, they open up their wallet one day of the month and they see that they've accrued, you know, X number of dollars worth of dividends from their investment. So that's a great use case, right? And again, most of these things could be done without much human intervention. So that's just scratching the tip of the iceberg. I think there's a ton of other use cases related to investing, related to buying and selling anything that has a paper trail to it that now, and especially things that involve a third party. Another great use case that I've been talking about and thinking about is, again, having to do with the sale of the property. I think this is such a— on one hand, it's very complex. Process to change because it's been here for hundreds of years and it's been done in a very similar way for all this time, right? But on the other hand, if somebody is able to kind of effect these changes, this will be a huge savings for all of the consumers that are involved in, in, you know, in the buying or selling of real estate and specifically getting rid of some of the intermediaries involved Specifically title insurance. I think that's a big, you know, it's very, very expensive lender policy, owner policy, right? It adds up to, you know, a percentage of the cost of property that's not small. And the only thing it really does is it protects the bank or the finance company from, you know, in the new buyer, right, from any kind of title issue that somebody is going to come back at you a year down the road and say, no, this, this is actually my property, and take you to court. And, you know, whether there's a chance that something wasn't recorded properly, something didn't— somebody didn't do something properly, and yeah, you just bought a property and it's not actually yours anymore.

Right.

So title insurance covers that. But, you know, with blockchain, if you have that token in your wallet That property means it's yours. Nobody else can claim it. You know, that's kind of the way I'm thinking about it. And then if you sell it, you could send it to a smart contract. The buyer sends money to a smart contract. The smart contract is like the escrow. And then once the conditions are met, you know, documents, whatever else, it could figure, it could do anything that you program it to do. Once the conditions are met, then it sends you the token, the title, and sends the seller their money. Basically, and that's it.

Enlightened Investors, if you haven't done so already, be sure and click that like button and also click that share so others can take advantage of the content. And finally, be sure to subscribe so you don't miss a single one of our upcoming episodes. Well, I'm, I'm a little amazed, just as you are, that this hasn't really caught on with the real estate industry or the banking industry. And I mean, we're still doing overnight deliveries through FedEx and UPS and so on and so forth to close properties, and it could be done in seconds. I mean, extraordinarily— I mean, it just is extraordinarily cumbersome the way that it is done now. We have to have paper signatures and and those actual paper documents, when blockchain has those encryptions and those safety measures in there that could make this really actually safer than doing it the way it is now. And the— and with banking, there's tremendous amounts of fraud involved with wire transfers. These days. I mean, we have to be extraordinarily careful with that wire transfer process, and yet they're still doing it the way they were doing it 40 years ago. And why aren't they— why aren't they using blockchain?

So I think some, some, some banks actually are, or I believe Western Union and some companies. Yeah, but this is on their, their back end. So once you, once you approve some kind of a transfer, then They would move it from one bank to another. You know, I believe there are some that have been using blockchains to do those transactions. But again, we as consumers, you know, don't really see that. You know, I think the challenge with blockchain is, is, you know, I think that there is cryptography there. But when it comes to errors, it's not very good at handling errors yet. Meaning you just mentioned an interesting case, but wire transfers, right? Like right now, like if I want to do a wire transfer from my bank account, I'm gonna, you know, fill out a form online or, you know, DocuSign or whatever. I'm most likely gonna get a call from the bank. They're gonna go through— it takes like, you know, this is what my bank does now, uh, and it's like a smaller credit union, but they give me a call every single time. If it's $500 or $5,000, right, doesn't matter. They're gonna go through a bunch of disclosures and they're gonna tell me, you know, once the money leaves my account, blah blah blah, you know. Do you agree to this? Is this the correct accounts? They're going to go through all that, and still there's fraud, and still there's errors. With blockchain, I think that the— I think the consumer-facing technology hasn't really got to a point where these sort of fraud and errors could be prevented as effectively because, because it is more automated. So in on-chain, if you do something, if you send somebody you know, any amount of money, that you cannot recover that money unless they send it back to you, you know, voluntarily. So that is one thing that, like, there's no chargeback per se that I'm aware of, at least on-chain. So once there's been a movement of value, to get it back, I don't— I'm not aware of any mechanism that would, you know, Again, there are these escrow mechanisms where you send something to the escrow, the other party sends, and then the escrow disburses it based on— but if you're sending something directly to another wallet, once you send it, there's no way to get it back. So, oops, I made an error.

Damn it.

Yeah. I mean, the best you can do is if you know the other party, you could try to call them and ask for your money back. But if not, then that's it. And that's why there's been so many hacks and so much, you know, so many things are happening on the blockchains because, you know, if a hacker, if they're able to gain access to a wallet and some very prominent people have been hacked who are blockchain experts and security experts themselves, but it's just so difficult, you know, and sometimes it's not even their error per se. Like sometimes there's this phishing, right? Like somebody will send you an email and say, and they're very good at targeting the right messages saying like, I don't know, you click here because you just bought this and you actually just bought this, right? And like they're asking for another payment or whatever it may be, right? They're very good. But you could still see that sometimes if you're careful, you could see that it's fake. And a lot of people catch that. But there are hacks that you can do nothing about with blockchain. For example, You know, people can essentially like grab your cell phone because a lot of the stuff is on people's phones, right? They have an app that you know wallet can send stuff. They have their keys on their phones and passwords and everything else. So you know, people will actually go like I read about this before that they'll go to a Verizon store and impersonate this this person and and try to you know say like hey I lost my phone. you know, get a— get another phone and get a SIM card. You know, the original phone gets turned off, but now they have your phone, they can restore your data. And if they have enough time, and if they know what they're doing, they can essentially gain access to a lot of your stuff. So there are those types of much more sophisticated hacks that, you know, you can almost do nothing about sometimes.

Yeah, the criminal mind never ceases to amaze me with their Continuous creativity. And I just think with those creative minds, all of the positive and wonderful things they could be doing.

Exactly. I agree. They could create things and benefit humanity, but I guess it's sometimes for them it's easier to steal, right, and hope they can get away with it.

Yeah. We are visiting today with Kirill Bensonov and And he is with NewSilver.com, and they are a high-tech AI platform for passive investors. So Kirill, just take us out of the show here and share with us one of the biggest challenges you have had in the last few years. in dealing with, uh, fintech and, uh, and AI?

Oh God, I mean, I think it's, um, there's many challenges, but I think for me personally, it's because I, I, I guess I was fairly new to the financial services markets, uh, or not markets, but financial services industry, right, as a participant in the industry, uh, when we started NewSilver. Prior to that, I was involved in the Enterprise IT, very different industry. And I think for me, it's the cyclicity of the markets that seem to affect, you know, they, you know, affect everything. Obviously, the, you know, the rate cycles that we're going through now, prior to that, it was COVID and everything. I mean, that affected many other things, but it certainly affected financial markets. And I think we're still recovering from that. I think that's You know, this potentially this inflationary period is is caused by you know the the money supply that was put out there potentially and you know the zero interest rates that we've had for so long etc. But and and then other things right like there's just I think the the the changes that are happening in kind of the office space, the ways that people's work people work you know the hybrid work, the work from home. I mean that I think that is. Mostly for the better, in my opinion, but there are these changes. So to me, it's the cyclicity of the markets that affect me. I'm a technologist, right? I just want to build tech and make sure it works and people can use it and they have a good experience. Now, when you throw these uncertainties into it, that just makes everything so much harder. So that's been the biggest challenge for me.

Well, Kirill, thank you so much for being with us. A very enlightening conversation. And Enlightened Investors, thank you so much for being with us. And live abundantly in all areas of life, and I will see you in the next episode.

Thank you.

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