Industry experts note blockchain technology will eventually revolutionize all businesses. So far, we have seen undeniable evidence in finance, gaming, logistics, etc. However, news of the influence of blockchain technology on real estate seems to be flying under the radar.
The real estate industry leverages technology but not disruptive measures like others. There is not much that the internet revolution did for real estate compared to other sectors. The situation is almost the same for blockchain technology.
There are empirical paradigm shifts noticeable to the casual audience. So, this article explores between the lines of the news and buzz to comprehensively detail the place of blockchain in real estate.
The current synergies between Blockchain and real estate
Blockchain technology has been in place for a while. However, the technology only became famous in 2009, thanks to Satoshi Nakamoto. Everyone knows the story — of how Bitcoin came to be, subsequently irking the creation of over 2000 cryptocurrencies in existence.
The advent of cryptocurrencies redefined global financial systems, adding an extra payment option to international business. Thanks to cryptocurrencies, transactions are no longer limited to fiat currencies. Instead, you can now make payments in cryptos — to businesses accepting them as payment.
The concept of payments and remittances introduced real estate to the blockchain. The first of such payments was the Texas home bought with Bitcoin in 2017. Several other micro and macro home purchases have leveraged Bitcoin ever since. So far, the largest Real Estate transaction carried out in cryptocurrency was the sale of a Miami building for $22.5 million worth of BTC.
As interesting as these news-worthy activities are, the most significant synergy between blockchain and real estate is Smart Contracts. Yes, more buyers want to pay for homes in bitcoin; however, the surge is only the tip of the iceberg. The several potential Smart-Contract-powered use cases of blockchain in real estate are the real deal.
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Smart Contracts aim to simplify complex processes, and we can deploy them in various ways. Some of these include price negotiations, title transfers, etc. The early signs of synergies between blockchain and real estate promise a revamped industry in the next few years.
Blockchain concepts are bound to influence real estate markets
Not all blockchain-related concepts will directly impact the real estate industry. For instance, it is hard to see how NFTs, on their own, can be valuable in the tangible aspects of the industry. However, other concepts like smart contracts, metaverse, etc., could play a significant role in real estate.
These are programs developed and maintained on the blockchain. Thanks to these contracts, solving complex processes becomes easy. Also, a smart contract facilitates the seamless connection between sellers and buyers. The strengths of smart contracts lie in their self-executing abilities. So, there is no need for an administrator for projects, as there are rules and conditions to follow.
The metaverse is virtual and augmented reality built on the blockchain.
Prospects used virtual reality to view properties before the metaverse became a thing. With the metaverse, activities like property tours, interior décor, etc., are carried out and are subsequently executed immediately across all necessary channels thanks to smart contracts.
The metaverse combines different functionalities, culminating in an exceptional ultimate viewing experience. Moreover, that experience is well leveraged in gaming currently.
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It is absurd that virtual real estate is fast becoming a thing for folks lacking knowledge of the new economy. With virtual real estate, you can own pieces of digital land and sell them at will. However, beyond the viewing experience, we can only wait to see how metaverse real estate relates to physical real estate. An example of blockchain projects focusing on this area is Decentraland.
If you have heard anything about blockchain technology, it is probably decentralization. Blockchain technology by design eliminates central authorities. For instance, blockchain eliminates the main bodies — banks in financial services.
The traditional real estate industry exists with brokers, banks, lawyers, etc. However, when the use of blockchain in the industry goes mainstream, roles and participation will be affected. Hence, you can eliminate intermediaries. That way, buyers and sellers get more value from the transactions, owing to direct interactions.
Furthermore, the decentralized nature of blockchain accounts for its impressive security. Therefore, if blockchain gains ground in the real estate industry, data transparency and immutability will improve the quality of service.
The tokenization of entities in the industry will aid fractional ownership. Hence, rather than not investing because you do not have all the money, tokens help you own a piece.
As a result, premised activities for maintenance and leasing manifest from collective decisions. However, this comes with a disadvantage; no fractional owners can use the property as collateral to access a loan.
Blockchain technology use cases in real estate
Several companies and sellers now accept Bitcoin as a mode of payment. However, asides from paying for a new house in bitcoin, there are some other cases.
Asset management and real estate funds
Tokenization in real estate refers to digitizing securities, alternative assets, and other financial instruments. For instance, building on Ethereum makes it possible to (custom) reconfigure assets. We can program digital assets to include ownership rights, transaction history, and other regulations based on transactional peculiarities. Hence, there could be a standard for every scenario.
Furthermore, tokenization lowers the operational cost required to bolster creation and proceed with issuing while exchanging assets.
Managing properties on a large scale is grossly ineffective. Hence, the need to leverage the data sharing of blockchain. When accurately deployed, blockchain has the capacity to:
- Streamline rental collections and payments to owners
- Provide due diligence across your portfolio.
Many times, during community planning, property development is neglected. Usually, when this happens, the project may be out of place. However, urban community master plans, infrastructure features, educational resources, feedback loops, and other token-powered incentives are simplified when deployed on the blockchain.
So, it becomes easier to drive the community on the same page with these measures in place. On the flip side, personal project owners get to integrate the community’s plans into their projects. By so doing, property value, perception, and sustainability improvements.
Blockchain’s influence on the real estate industry is still developing. However, in a few years, thanks to the number of innovations currently in the works, it’ll be safe to say blockchain rejuvenated the real estate industry.
Blog Credits: Medium