Blockchain is defined as a digital ledger that keeps transactions made using cryptocurrency. Blockchain technology acts as a secured decentralized platform to guarantee the fidelity of transactions. Why is it called blockchain? Well, this technology collects and groups information in the form of ‘blocks’ and links it to previously created blocks, forming a ‘chain’ and hence the name blockchain!
Why Is This Technology Of Any Significance To Real Estate Investors?
We are slowly but surely moving towards a digital world. Everything, from the news to workspaces to entertainment, has moved to a virtual platform. People are looking at creative and low risk passive income ideas, and the real estate business is a great investment for those who wish to make money from home. How has this gone virtual? The process of payments and transfers is now almost fully digital, compared to the earlier method of using cash or checks.
How Recording Transaction Data Will Change Real Estate
Property Title – Blockchains offer instant proof of property ownership. The best part about this is that all information on this database is verifiable.
Multiple Ownership – It gets easier to divide a property into multiple fractions and be owned by many people. This reduces the amount of capital needed by a single person and allows the sale of partial equity without hassles. This may sound similar to how a REIT functions, but it isn’t, as this grants actual ownership of the investment property, unlike what happens with REITs.
NFTs of Properties – NFTs or Non-fungible tokens act as authenticity certificates in the metaverse. They are mainly used in art. A person purchases an artwork and receives an NFT of that art, which acts as its digital certificate of authenticity. The real estate industry can do the same! NFTs representing real, physical properties in our world can have NFTs in the metaverse. This will lead to creating investment opportunities for more people.
Decentralized Finance – Real estate is a field that is heavily dependent on finance. Borrowing, lending, financing, and refinancing are some of the many aspects of real estate that can go digital and be handled by blockchain. Through smart contracts on blockchain protocols, these aspects become open to more people across the world. This decentralized finance (DeFi) is popularly dubbed ‘Wall Street 2.0’ by many.
Property Listings and Listing Platforms – Crypto attracts a crowd. This is a fact everyone knows, so why not use it to the property’s advantage? Metaverse platforms like Cryptoroof, Bithome, or Crypto Real Estate can showcase virtual properties. Payments can be made to sellers digitally or through a combination of digital and fiat currencies. The only thing that one needs to keep in mind, though, is that buyers need to find title and mortgage companies that accept these digital payments.
Is This All Possible Today?
According to a survey by Redfin, 1 in 9 first-time homebuyers have said that they saved for their house’s down payment by selling cryptocurrency. That makes up about 11.6% of homebuyers! A slow move toward crypto and the metaverse is a minor step toward a major change. Many components of blockchain and crypto have gone mainstream. Its impact may not be felt today, but it is undoubtedly tomorrow’s direction.
Editor’s Note: All information mentioned in this article has been adapted from multiple sources including, but not limited to, ‘Journal of Property Management – Recording History, Issue January/February 2022’ and ‘National Association of Realtors – Cryptocurrency is Too Big to Ignore, Volume XXXI No. 9, September 2022.’
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