NFT and cryptocurrency is altering the real estate industry in a significant way. It is now possible to invest, buy, or acquire a virtual “house” that only has a digital existence. Not only are the boundaries of the traditional real estate market being expanded by that technology, but brand-new innovations have complicated what it means to truly “own” real estate. This article overviews the rapid advancements these technologies present in the real estate industry.
Blockchain Real Estate Investment
Most real estate investors get used to seeing the legal record of a particular property’s ownership, that is typically stored in a centralized location such as a county clerk’s office and verified by that governmental authority. By contrast, blockchain is a decentralized database that acts as a ledger for many different types of transactions, most commonly in the context of cryptocurrency ownership and transactions. Blockchain technology is being used to “tokenize” real estate ownership. This means that a piece of real estate can be identified on the blockchain and divided into multiple, smaller units of ownership, or “security token”/ “utility token.” In turn, each token or fractionalized piece of real estate can be freely bought and sold on the blockchain. These transactions are secured using the blockchain, which mimics a traditional chain of titles through its permanent ledger of these transactions.
Specific blockchains can also create and execute some “smart contracts,” which can automatically perform certain agreed-upon functions. The smart contract can simplify some aspects of complex real estate transactions. For example, a smart contract can automate the escrow and transfer of currency as part of a real estate transaction. The simplicity of this technology enables efficient trading of minimal investments in real estate, which might make tokenized real estate investing much more accessible. This technology also potentially automates the function of institutions such as title companies, county recording offices, or even attorneys, adding the potential for further cost efficiencies. As retail investing platforms such as Robinhood provided widespread access to the stock market through fractional share ownership with little to no fees, so too could blockchain real estate investment expand access to tokenized real estate ownership.
Dividing real estate ownership into smaller, more affordable investment units is not a novel idea. REITs – Real estate investment trusts are tradeable funds that operate on essentially the same idea. However, the use of blockchain to maximize the efficiency of real estate investing has caught the attention of even the large, publicly-traded REIT. There are numerous benefits to utilizing the blockchain to facilitate a real estate transaction; lenders can verify information about the property and the borrower much faster or even automatically holding escrow deposits can easily be made via smart contract, and any jurisdictional complications are nonexistent on the borderless blockchain. Furthermore, the efficiency and permanence of the blockchain ledger can counteract potential fraud.
Investors should remain aware of the many regulatory burdens that are in effect for real estate transactions and understand that the use of cryptocurrency does not nullify them. For example, In Vietnam, currently, due to the lack of many legal regulations on crypto-assets, some unclear rules, and different perceptions, problems have arisen, such as Competent state agencies The right has no basis for proposing measures to prevent, combat, and handle administrative violations related to tokenized assets. The anonymous nature of the blockchain may spark action amongst regulators seeking to close any loopholes created by the technology. While blockchain offers many new ways to participate in the real estate industry, it should not be viewed or used as a way to circumvent the law.
Buying Real Estate with Cryptocurrency
With cryptocurrencies becoming more widely used, investors may turn to invest in the real estate industry when deciding what to do with their gains. However, buying the property with cryptocurrencies may not be as straightforward as many would hope. If you wish to settle a transaction in cryptocurrency, the most significant initial hurdle is likely finding a seller willing to sell their property for cryptocurrency. While there is a trend toward broader acceptance, potential buyers still face many difficulties finding reputable, quality real estate brokers and suppliers.
Virtual Real Estate
It may surprise some readers that large sums of money are exchanged for entirely virtual real estate industry; that is, a plot of “land” that is altogether intangible and only exists in a digital space that lives on a blockchain. Of course, the value of anything is whatever someone is willing to pay for it. For example, in the blockchain-based digital world called Decentraland, an entirely virtual plot of land was recently sold for over USD 913,000 (and was purchased using the in-world cryptocurrency called MANA.) Over a single 24-hour period, $3.5 million in “land” sales were completed in The Sandbox, another metaverse that runs on blockchain. A buyer of virtual real estate may find added value in the fact that, as represented by a NFT (non-fungible token), virtual parcels of land are unique and easily transferable. This means that each parcel can only have a single owner, verified by the blockchain, which can be immediately transferred or sold. While the “fake real estate” may be too abstract for some investors’ comfort, that has not stopped the creation of dedicated virtual real estate funds and the rapid rise in the price of these “parcels.”
Other Technological Innovations Real Estate Industry
Technology is also increasingly being used to supplement the traditional real estate industry. Virtual reality allows potential buyers to explore a property without visiting it. Imagine viewing photos of a house for sale on the site of your choice. Now imagine stepping into those photos and seeing the property all around you as if you were there. This was an option that has been available for a few years but rapidly developed during the pandemic Covid-19, when in-person tours, staging, and open houses became highly impractical. Virtual reality showings are here to stay, as it allows for certain freedoms that the in-person option cannot (no appointments, no need to travel.) And that’s not all. Augmented reality technology will enable you to use your smartphone to see different furniture in a space and change or add to the décor in a home.
Technology drives innovation across the real estate industry and allows buyers, sellers, realtors, and other stakeholders to do things they never could before. As the world increasingly adopts the blockchain for various purposes, the real estate industry stands to gain significant value from the increased accessibility and efficiency that it provides. While implementation is sure to cause some initial hiccups and pushback, increased public understanding of these innovations is crucial if the industry fully realizes the potential benefits.
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