Blockchain has commanded headlines for a couple of years now, riding the wave of excitement surrounding cryptocurrency. But don’t let the headlines fool you – blockchain does more than facilitate Bitcoin transactions.
Essentially, blockchain is an immutable (read: permanent and impossible to tamper with), decentralized and publicly visible ledger for transactions. As soon as a transaction moves onto the blockchain, there’s no opportunity for either party to defraud the other or renege on the contract. Moreover, because the technology distributes its database across a peer-to-peer network in real-time, transactions are instantaneous.
Naturally, some enterprising real estate investors (and consumers) saw an opportunity in blockchain. Can you leverage this new technology to bring convenience and security to an industry infamous for the opposite? Yes, you can.
Here’s how blockchain is benefitting real estate.
Blockchain Saves Buyers and Sellers Money
As mentioned, blockchain facilitates secure and instant transactions – utilizing “smart contracts,” which you can read more about here. Therefore, many of the intermediary roles traditionally involved in a real estate transaction (lawyers, notaries, brokers, etc.) and associated fees (escrow, loan and registration fees, etc.) aren’t necessary.
A buyer or seller stands to save a lot of money using blockchain, eschewing the standard catalogue of ancillary costs.
It Saves Time
Blockchain also saves time. Sellers in a hurry to offload an investment (for whatever reason) do not need to leap through multiple hoops to exchange their assets for cash. In this way, investors and owners can treat their assets as liquid rather than illiquid assets.
Blockchain Reduces Fraud
Real estate’s shift to online spaces has been mostly positive, but there’s a dark side to the digital age of real estate. According to Nobul founder Regan McGee,“Anecdotally, because so much has moved online, there is more opportunity for fraud.” McGee notes that while “much of AI-driven fraud detection technology is still in its infancy,” the new digital ecosystem may be “vulnerable to be exploited.”
Blockchain might be the protective measure the real estate industry needs right now. As mentioned, the ledger is impossible to tamper with and publicly shared across a peer-to-peer network – both mechanisms that reduce fraud.
It Enables Fractional Ownership
Usually, real estate investment requires a buyer to gather a sizeable down payment plus the intermediary costs and administrative fees. Especially as property prices soar across North America, this is a cost-prohibitive proposition for many young buyers – and older investors, for that matter.
Blockchain enables fractional ownership – the ability to buy shares, or “tokens,” of real estate rather than the whole thing. Fractional ownership lowers the bar for market entry, effectively democratizing an investment once reserved for the wealthier classes.
Blockchain might owe its name recognition to Bitcoin, but it’s far more than just a ledger for crypto transactions. Its implications in real estate alone make it a potentially revolutionary technology. To recap, blockchain can cut costs, free up time and liquidity, reduce fraud and democratize real estate investment through fractional ownership.
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