Cryptocurrencies could boost accessibility to homeownership
Blockchain and digital currencies have entered most sectors. However, some are taking longer than others to adopt the innovative technology.
Those who’ve been keeping an eye on the news over the last few years know that blockchain technology, cryptocurrencies and NFTs have been causing a lot of buzz. Well-known news platforms cover stories about new crypto projects, and organizations from all sectors are looking for ways to integrate them into their operations.
Real estate is one of the industries that took longer to adopt crypto and blockchain, but it made sure not to miss the opportunities they could bring. If a couple of years ago, real estate agents and landlords felt it was too risky to secure property transactions using digital currencies, nowadays, they have no issues accepting cryptocurrencies like Bitcoin. The transparency and access of Bitcoin, Ethereum, Solana, and other digital currencies hooked real estate investors from the start, who now believe that this kind of technology could change the sector forever.
If you’re interested in finding out more about the subject, this article might help.
How to use crypto in real estate
Digital currencies are used to buy real estate assets in real or digital spaces. The growth of the Metaverse has brought new real estate opportunities because now people can diversify their portfolios by purchasing real estate properties in the digital world.
Cryptocurrencies like Bitcoin and Ether are digital money developed to be used as alternative fiat currencies. They don’t have a tangible form but can be used online. Cryptocurrencies are pieces of code based on blockchain.
Bitcoin and Ethereum are the most popular and largest cryptocurrencies by market cap. And while some real estate transactions use them, others utilize digital currencies developed especially for real estate transactions.
Diving into crypto, blockchain, and NFTs
Let’s assume you’re unfamiliar with the above terms and just learned about crypto. The information presented earlier might not suit you at all because you have no idea what we’re talking about. It’s essential to break things down to understand what crypto is and what it’s not. While numerous technologies and assets are based on blockchain, not all function similarly and have similar purposes. Cryptocurrency is a digital form of money. Blockchain, the technology that powers it, records all transactions because it functions like an encrypted and decentralized database. While all transactions are transparent on the blockchain, no central authority can monitor, control or verify them. All operations completed with the help of blockchain technology are verified and added to the chain as new blocks.
Blockchain is the innovative technology that enabled the development of cryptocurrencies. At its core, it’s a ledger of digital assets and trades. Blockchain users can track the operations completed in the network. These blockchain verifications are nearly impenetrable to hacking making it one of the safest ways to store value; hence why many investors are turning to tokenization to secure the value of their real world assets (RWAs) like real estate, art, luxury cars, etc.
NFT is short for non-fungible tokens, a kind of blockchain asset that allows people to own digital or real assets. NFT offers ownership of all kinds of assets, from real estate property to Metaverse land and artwork. In the real estate sector, non-fungible tokens are used to complete transactions.
How does blockchain support the real estate sector?
Increased security
Regardless of their size, real estate transactions are sloth-slow, requiring tremendous patience and numerous resources to finalize a deal. The process simplifies when blockchain enters the scene because it enables agents and investors to prevent fraudulent activities. The search for a real estate property becomes easier because the parties are no longer afraid they might become the victims of a scam.
Blockchain technology enables real estate agencies to identify document inaccuracies because the network allows them to trace data. When all information is available and transparent on the chain, it’s easy to find false or inaccurate data.
Storing real estate data on the chain allows stakeholders and real estate agents to remove the risk factor and save resources.
The use of smart contracts
Smart contracts are innovative tech tools essential in powering safe and transparent transactions. Buyers and sellers utilize smart contracts to speed up transactions. When the parties rely on smart contracts, they no longer need intermediaries, which saves time and money. Smart contracts are based on blockchain technology and aim to automate transactions. Therefore, when the established set of requirements is met, the transaction is completed.
Real estate is tokenized
Tokenization is a term used to refer to the digitization of securities with the help of blockchain. The process enables the tokenization in digital format of real-world assets, with the purpose of being distributed to network members.
The tokenization of real estate transforms the sector into a more accessible and democratized space to address more buyers and provide personalized services to meet the market’s needs.
Higher liquidity
The real estate market goes through turbulent times due to increasing interest rates, inflationary prices, and a lower number of buyers and sellers. These periods are often characterized by a tendency to sell liquidity to banks. However, blockchain could provide investors with an alternative because they could sell a percentage of their properties in the form of tokens.
How could blockchain-based money make homeownership more accessible?
The adoption of cryptocurrency opens the real estate sector to a larger pool of buyers, who have funds to purchase property, only that they have it in digital currency instead of fiat money. Many crypto traders don’t qualify to get a loan from a traditional bank, but if the sellers accept crypto as collateral, they could invest in real estate.
The real estate market has shown some signs that it might slow down in the next months, but even if it does, the prices and competition remain high. Many people refuse to invest in real estate due to the increased interest rates, so banks ask for loans. But if lenders would look at crypto as viable collateral, the sector would open to a new world of buyers. Cryptocurrencies could mean the end of credit score-based transactions.
Digital currencies are used for purchasing real estate. However, the parties involved in the process establish the exact terms of crypto-based transactions. But let’s bear in mind that crypto transactions are only for some investors because not everyone is willing to take the risk of investing in a sector that is still in the development stage.
