Putting Blockchain & Cryptocurrency to Work in Real Estate
While both existed pre-pandemic, the outbreak accelerated the movement with organizations needing “touchless” ways to transact and cybercrime has become a bigger concern than ever. Data breaches cost organizations $4.24 million in 2021 (up from $3.86 million in 2020), with stolen or misused credentials responsible for 61% of those breaches.
As the technological foundation for cryptocurrency (among other things), blockchain is a distributed database that’s shared across computer network modes. It stores information electronically in digital format and guarantees the fidelity and security of a record of data. By definition, cryptocurrency—the best known of them being Bitcoin—is a medium of exchange (e.g., US dollars) that’s digital and uses encryption techniques to control the creation of monetary units and verify the transfer of funds.
These capabilities have been well received by the real estate industry, which is always looking for ways to streamline transactions and make them more secure for all involved parties. As a sector that still has to send very clear warnings about how anyone who is heading to the closing table should not ever follow wire instructions that come via email from an unknown source, having a safe, reliable platform for the transfer of funds—among other activities—should be a welcome relief for brokers, buyers, sellers and other third parties.
“I have always been a believer in the future power of digital assets. In 2017, I persuaded a seller client to accept Bitcoin as payment by arguing that it could be an even better anti-inflationist asset than real estate itself, thinking this would be an experimental sale,” Barnes International’s Adam Redolfi writes in Forbes. “[Today] I am seeing more and more sellers and developers accepting cryptocurrencies as a form of payment. Four years from now, I predict that blockchain-integrated real estate will be implemented on a whole new level beyond payments in a digital currency.”
When associated with the real estate sector, blockchain platforms provide an answer in terms of speed and safety that can considerably reduce the risk of fraud,” according to Redolfi. “All stages of the real estate transaction are concerned by this innovative technology,” he writes, “and its implications for simplifying the transmission of data and reducing the time between the signing of the preliminary sales agreement and the deed of sale before the notary.”
How Crypto is Being Used in Real Estate
Here are some platforms that are already using blockchain and cryptocurrency as part of the real estate transaction, according to Built In:
• SafeWire’s platform operates via a blockchain network to ensure security over vulnerable transactions from the moment they are sent to the time they are received and processed, reducing the amount of money lost, clients lost and time lost due to wire fraud.
• RealT is a fractional real estate investment platform that allows investors around the world to invest in the US real estate market through a fully-compliant, token-based blockchain network.
• PropertyClub uses blockchain to refine the way people market, search for, buy, sell and invest in properties. Using smart contracts, the company conducts real estate transactions digitally using cryptocurrencies like Bitcoin or its own PropertyClub Coin (PCC).
• ManageGo is ledger-backed software that helps property managers and owners process payments, thoroughly complete credit background checks and manage maintenance ticketing.
• RealBlocks lets investors buy fractional interest rather than entire portfolios or assets. Through tokenization that’s applied using blockchain technology, RealBlocks helps reduce fees, speed up processes and provide liquidity options.
The list doesn’t end there. According to UpNest, bitcoin has been showing up in real estate through home listings, where sellers and brokers have been using this tactic to create more buzz and attention for their properties. “Some sellers have insisted on all bitcoin. Others have asked for payments split between US dollars and bitcoins,” it points out. “This may work well for high-end house listings where the most likely buyers may have and want to use their bitcoins for real estate.”
More to Come
Despite its recent value fluctuations, cryptocurrency will continue to gain momentum and likely make its way into more real estate transactions in the future. “Digital currencies have many applications in real estate,” UpNest says, “with many potential benefits for promoters, investors, individual buyers, sellers, renters, and the market itself.”