We are living in an age of disruption like never before. Almost overnight, entire industries are being replaced by newer, cheaper and more convenient ways to do business. Airbnb changed the way we vacation, Uber changed the way we get from A to B… and then Uber Eats changed the way tonight’s dinner gets from A to B.
Our real estate industry could likely be on the verge of a similar disruption: a faster, more convenient and infinitely more secure way to transfer property ownership from one individual or business to another. Cryptocurrency and blockchain are beginning to enter the real estate world, and this technology holds the promise of being exactly what our industry needs to move our business practices into the twenty-first century. But before I explain how, let’s do a quick primer on how cryptocurrency works.
The New Kid on the Currency Block
The concept behind cryptocurrency was to create a system that eliminated the middle-man -- aka the banks and credit card companies -- from the flow of money as it changed hands from one person or company to another. With cryptocurrency, the transaction is recorded on a decentralized system called the blockchain. The blockchain is a virtual ledger that records a growing list of transactions; every time money changes hands it’s recorded on a block in the chain, and once the block reaches a certain data limit, another block is added to the chain. This growing chain of data documents every single Bitcoin or Ethereum (or Doge) etc. transaction ever made, and is verified and stored across multiple computers around the world, ensuring the integrity of the system and making it virtually impossible to hack or create “counterfeit” currency.
READ: Could Blockchain Technology Allow Small-Scale Investors to Get in the Real Estate Game?
What are the advantages of cryptocurrency? You don’t have to trust your bank or credit card company records your transactions correctly because every transaction is stored and verified across multiple computers on the block. You also don’t have to pay a fee for the honour of using the bank or credit card company’s service. It’s easy to move money across international borders. And crypto transactions are completed in a matter of minutes, unlike the days it takes for banks to authenticate cheques and larger transactions.
A Real Advantage
The successful cryptocurrency concept and the blockchain technology that powers it could offer several advantages to the real estate industry. In the same way that physical money has been transformed into a digital asset, real estate assets could become digital assets or “tokens.” Tokenization could create an opportunity for multiple individuals or companies to enjoy fractional ownership of a property; a scenario that could also be put into play when friends or couples own real estate together but don’t contribute equally, thus allowing each individual to own the correct portion of the asset. Real estate is already an extraordinary investment; blockchain technology could take your investment portfolio to the next level.
Blockchain also eliminates the opportunity for fraudulent ownership of a property because every transaction is recorded and validated by the system. Property owners could even hold their real estate assets in the same digital wallet that manages their cryptocurrencies. Blockchain could remove the number of brokers and banks, lawyers and underwriters involved in the transaction through the use of smart contracts, effectively digitizing much of the process.
READ: Is the NFT Craze Coming for Virtual Real Estate Next?
Ultimately, the possibilities of real estate and blockchain are endless, from managing rental real estate and tenant relations to home sales and investments. Meridio is one company that has enjoyed some success in this arena already for making fractional ownership of commercial properties possible with low investment minimums; Propy is another firm that has implemented blockchain to streamline and simplify the real estate transaction process.
Some people say cryptocurrency isn’t like real money because it only exists online, but doesn’t that apply to “real” money, too? Whether you get your paycheques deposited directly into your bank account, purchase a pair of shoes on your credit card, get a new car through a dealership’s incredible financing offer or take out a mortgage on a new home, no physical money ever changes hands. It’s a digital transaction that takes place on computers. A lot has changed since Bitcoin’s debut over a decade ago -- economically, technologically, and socially. Yet we’re still just scratching the surface of blockchain’s full potential. The possibilities for our industry are exciting and empowering.
Make no mistake, the technology is here to stay; embrace it and work with it to its full potential, or run the risk of getting left behind.
