Two Unique Ways That Blockchain Is Used In Real Estate
The global market capitalization for crypto tokens used in real estate is at $155,399,395 at the time of writing. In consonance with Jack Ma, Blockchain could change our world more than people imagine. What we see repeatedly is Blockchain taking things with real value in the conventional world and making them more valuable by backing them with transparency, security, and global inclusiveness.
Real estate, also called Real Property, denotes land and improvements. Improvements here are taken to mean those things attached to the land, including water, trees, buildings, minerals, fences, etc. Usually, real estate transactions are physical and involve in-person communication to finalize, but the emergence of blockchain technology has disrupted this norm.
In this article, we’ll discuss the usefulness of blockchain technology in real estate and the different ways that real estate organizations have integrated this technology.
Blockchain Uses In Real Estate.
Blockchain provides numerous utility to real estate but let’s highlight five major uses:
In one sentence, Blockchain is ‘The new technology of trust’. This is, perhaps, the most innovative reason why Blockchain is useful to all sectors because with trust, comes security.
There is a degree of trust required to carry out real estate transactions. Buyers don’t want to be cheated so they prefer to buy from realtors they trust. Realtors spend time trying to build buyer trust. Blockchain removes that constraint because it is transparent and serves as a public ledger where information can be recorded and confirmed.
The conventional method of owning real estate requires that a buyer purchase an entire property. It also allow buyers come together as a pool of investors to do so. Land is not divisible in bits and can only be sold in square miles, kilometers, and acres.
Tokenization allows fractional ownership of properties. The act of tokenizing means that tokens are issued to digitally represent a real tradable asset, in this case, real estate. Tokens like this are called Security Tokens.
With the integration of the blockchain, buyers with limited resources can own properties and receive rental income from them.
3. Lower Barriers To Entry.
Fractional ownership allows almost anyone to be an investor in real estate property. It no longer becomes an investment opportunity for people of a certain class or age but becomes an investment platform for everyone.
4. Time & Speed
With blockchain technology, the need for third parties in real estate transactions is eliminated. This would have a direct effect on the amount of time needed to acquire properties and increase transactional speed.
Tokenization allows digital tokens to be created to represent the real estate. These tokens are a type of cryptocurrency and can be readily traded in the crypto market.
Undeniably, this makes for good debate in favor of integrating blockchain technology into real estate. But how do these companies integrate this cutting-edge technology?
How Real Estate Companies Integrate Blockchain Technology
Using tokenization, organizations would have to list properties on the blockchain before selling them in fractions. But there is also the metaverse where real estate is provided by Web3 companies. These are then sold to users who want to own properties in the Metaverse.
These show that there are two ways that real estate integrates blockchain tech:
1. As Agencies
2. As virtual realtors.
Using Blockchain In Real Estate As Agencies
These are organizations that specialize in selling properties listed on the Blockchain.
Popular real estate firms in the blockchain, Lofty and Propy, fall into this category.
Propy made a name for itself when it sold Techcrunch’s founder, Michael Arrington’s apartment at an auction for 36 ETH (a little over $93m).
Lofty has a reputation for selling out houses worth over $100,000 in under 5 minutes or less.
You can find dissimilarities among each firm though. Let’s note them quickly.
Few Dissimilarities Among Real Estate Agencies Who Use Blockchain
Underlying Blockchain: Every agency that integrates blockchain technology has to build on it, but they choose which platform to build on. Propy, for instance, is built on the Ethereum blockchain while Lofty is built on the Algorand blockchain.
This means that these companies would enjoy the benefits and also face challenges associated with their blockchain of choice.
Minimum Capital Requirement: This is the lowest amount acceptable by the agencies for investment in available properties. Lofty, for example, allows a minimum capital of $50.
Modus Operandi: Each agency has Its method of operation including the frequency of payment, how to verify users, and the process involved to list a property.
Lofty requires you to download an Algorand wallet and connect it to your dashboard. They also ask you to verify your identity by uploading documents like your driver’s license, national ID, etc.
Now, let’s look at the realtors in virtual real estate.
Using Blockchain As Virtual Realtors.
This category covers every real estate project in the metaverse. The Metaverse is a virtual reality platform where people can live as though in the real-world, owning assets and engaging in physical activities, albeit virtually.
The majority of metaverse real estate is owned by the Big Four: Decentraland, Sandbox, Somnium Space, and Cryptovoxels.
Like the agencies, they also build on their Blockchain of choice but three out of them, are built on the Ethereum Blockchain.
They offer you hyper-realistic graphics of your land & property and allow you to co-own an estate by entering an agreement with another real estate owner.
Big names are buying these virtual lands. Some of them are Adidas, MTN Group, Samsung, JP Morgan, Snoop Dogg, Paris Hilton, etc.
Metaverse real estate is all the rage now. The Big Four have collectively sold over $600m worth of virtual properties from 2021. It is also projected that it would surpass $1 billion this year.
This is not financial advice but in the long run, only those projects with good use cases will be sought after.
Every good investor would always consider this when investing in blockchain projects.
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