Ah, blockchain — perhaps one of the more poignant yet complicated topics in modern dialect. If you’ve been following investing, banking or cryptocurrency over the last decade, you’ve undoubtedly heard of the record-keeping technology behind Bitcoin. And now, it’s permeating the real estate industry with incredible potential to overhaul our historically “pen and pencil” business. Yet for most, the subject remains wildly perplexing, which is why we’ve created the ultimate blockchain guide to delineate in layman’s terms how it’s poised to revamp the industry in the years ahead. Buckle up and let’s dig in.
What is blockchain?
Let’s start off with a simple definition. Blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable, permanent way. It’s often confused with cryptocurrencies like Bitcoin, but in reality, crypto uses blockchain as its technology to operate. Because of blockchain’s DeFi nature (as in decentralized finance, which means it disperses power away from a central authority like financial or governmental systems), the ledger isn’t managed or owned by an individual or company.
That way, its data is unchangeable and unable to be corrupted. In other words, this database provides utmost transparency — so, in essence, blockchain technology has the potential to eliminate huge amounts of record-keeping, save money and streamline supply chains. Now can you see why it’s infiltrating the real estate industry?
How is it changing the real estate industry?
Blockchain technology has already impacted the real estate industry in a number of ways, although many people are still unfamiliar with its nuances. First off, it offers a new way for buyers and sellers to connect with one another. It has also been used to cut intermediaries out of the real estate transaction process, thus reducing costs. Right now, most transactions are conducted through wire transfers and require expensive verifications, but by getting rid of the middle man, records can be efficiently stored, verified and transferred using blockchain technology — thus saving time and money.
World’s First Digital NFT House | CTV News
Blockchain has also introduced many new ways to trade real estate. For instance, ATLANT — one of the first blockchain real estate platforms — uses blockchain to allow homeowners to trade assets much like stocks on an exchange and liquidate that asset through a token sale. The tokens can then be traded for fiat currency. As such, a homeowner doesn’t have to wait for a buyer who can afford their entire property in order to get value out of it. Now, for a real-world example — the world’s first NFT (non-fungible token) house just sold for $500,000. And no, it’s not real. Just when you thought you were getting it, right? It’s a phenomenon we’re all trying to keep up with.
What are the challenges?
Sure, blockchain technology could offer some helpful solutions in the real estate industry. But, as with any emerging technology that hasn’t been universally accepted yet, there are always challenges that accompany a permanent transition. Let’s begin with regulation. Not all states and countries recognize smart contracts (a self-executing contract with the terms of the agreement between a buyer and seller written into lines of the code) as legally binding, which is a huge problem for sizeable investments.
Second is scaling. In the real estate industry, billions of transactions are made every year, while cryptocurrencies like Ethereum can only handle 15 transactions per second and Bitcoin only 5. Third is a lack of standardization. There are many different types of blockchains, and most of them are unable to work with each other. Lastly is its rather slow adoption. Most people still don’t understand what blockchain is and how it works. That being said, a majority of real estate brokerages are hesitant to integrate this technology into their day-to-day operations.
Closing thoughts.
In conclusion, it will take plenty of time for people to catch onto the blockchain movement, and the technology itself has yet to mature in order to be fully adopted. Nonetheless, as a team consistently looking for new and innovative ways to evolve, we’re undoubtedly intrigued. Only time will tell — but until then? Don’t hesitate to reach us at [email protected] with any questions you might have. Nothing gets us going more than discussing the ever-changing real estate landscape.
