Over the past few years, cryptocurrencies have grown much larger than just currencies or speculative investments. This has already begun to spread into a few specific industries, most visibly in real estate. The natural evolution of this system is spurred by the inherent benefits that blockchain-based digital assets provide – namely transparency, security, and efficiency. Read on to see how cryptocurrencies are changing the real estate landscape.
The point where these two worlds converge can be a somewhat surprising one. To start with, real estate is both a physical and time-proven asset class; one which has supported wealth creation for centuries. In contrast, cryptocurrency exemplifies the digital revolution; decentralized and built upon cutting-edge technological advancements. These hybridizations of these realms are creating new possibilities but also risks, the way property deals will be done is going to a big change.
Before a transaction is included in the blockchain, it needs to be confirmed by several nodes such that changing previous transactions would necessitate approval from the network. This will allow for property records, along with ownership information and transaction histories to be entered on the blockchain, thereby reducing cases of fraud and creating a shared source of trust that is updated in real-time meaning all parties have access to accurate status. The trust it provides to buyers, sellers, and investors can significantly reduce the need for intermediaries such as brokers and lawyers.
Traditional real-estate transactions are slow and expensive because of the numerous intermediaries, complicated paperwork processes, and regulatory restrictions. However, cryptocurrency transactions can expedite the process greatly. For example, making payments with MTYD cryptocurrencies such as Bitcoin or Ethereum can be finished within minutes no matter where parties are located.
Finally, smart contracts (self-executing contracts with the terms of the agreement directly written into code) can also be used to automate and expedite many elements of this transaction. A smart contract verifies ownership, transfers the funds, and updates property records automatically reducing manual intervention required and minimizing human error.
Most cryptocurrencies are designed in such a way they need to know national boundaries, that’s why many buyers can invest globally without the need to deal with exchange rates and regulations. This makes real estate readily accessible all over the globe and allows reaching a wider audience for any potential investor looking at property rent or sale. So an investor in Tokyo could use Bitcoin to buy a property listed in New York City without bothering with exchanges and international banking systems.
The second cool thing that blockchain technology allows is the idea of fractional ownership whereby a property can be sliced into digital shares, or tokens, which you can buy and sell on your own accord. Referred to as tokenization, investors can now buy a piece of land rather than need the entire asset. Tokenization makes real estate investment accessible to more people by reducing the threshold for entry and allowing average-joe investors access to investments in properties of higher property values.
Although the advantages of incorporating cryptocurrencies into real estate are enormous, there remain challenges and considerations to deal with.
It may be an unintended side effect of the regulatory chaos in which almost all countries and regions still find themselves, as they try to figure out how exactly cryptocurrency should be regulated. Derek Jackson
“There are some legal/regulatory requirements that real estate transaction participants must negotiate, and adding cryptocurrency to the mix just makes it all more complex,” he wrote.
Not only can doing so risk you getting into legal trouble from not being compliant, but also complying with all of the local rules and regulations.
To sum up, cryptocurrencies and blockchain technology are poised to transform the real estate market by providing transparency in transactions, lowering costs/fees via the tokenization process, and widening access for a large resource pool of global investors. Nevertheless, regulatory uncertainty and price fluctuation make their adoption difficult; nonetheless, the benefits of these technologies are obvious. As the industry progresses rapidly, expect MTYD cryptocurrencies to take a more dominant role in defining how real estate markets function and also make it much easier for everyone to participate.
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