How The Blockchain Technology Is Disrupting Real Estate Markets
It seems that the blockchain technology is spreading like a mad wildfire – it has moved into every possible space. ICO’s are launched for the wackiest of objectives, like Potcoin for cannabis enthusiasts and TrumpCoin, which is – well – self-explanatory. Dogecoin, initially launched as a satirical ICO, sits on a market cap of $280 million today. Basically, everything is possible in the crypto-world.
The real estate is another space that the blockchain has taken by storm. Properties and the real estate form one of the oldest globally recognized markets. The real estate is also one of the slowest developing markets in terms of adoption of technology. It has always been handled with traditional mindsets, conventional technologies and long-established investors. Considering this background, it will be interesting to observe how the market reacts to the entry of blockchain over the next year.
The blockchain can be thought of as a digitally distributed database that is duplicated across every computer that is part of the system. Thus, every change is reflected on all other computers as well.
In very simple terms, blockchain allows all parties working together on a project to continuously track the other party’s actions – so essentially, whenever anyone commits a fraud, everyone is instantly alerted. With this technology, one need not trust people they’re working with in order to achieve the desired objective.
With the blockchain, the real estate market could see a potential elimination for all sorts of middlemen, like realtors, brokers and property managers. These middlemen are the people responsible for the inflation of property prices. We’re basically cleaning out the whole process of buying properties when we implement the blockchain – by placing control in the hands of the buyers.
To understand how the blockchain behaves in the real estate market, let’s roll back and first understand how Initial Coin Offerings (ICOs) work. ICOs are disrupting the way startups raise money today. Startups often launch new cryptocurrencies, through which they offer blockchain-based solutions to current problems, in the form of ICOs. During an ongoing ICO, a predetermined amount of tokens are made available to the public, and usually only bought with established cryptocurrencies like Bitcoin and Ethereum (and not any fiat currency).
ICOs may be launched as Utility Tokens or Security Tokens. Security tokens signify ownership of the company’s assets, like shares. On the other hand, utility tokens grant the owner future access to the company’s solution/product.
Real Estate With The ICO
Imagine a house as an equity – of which shares can be issued and bought by the public. This may sound like a bizarre concept, but it’s already happening today. Thus, with the help of a shared database, “fractional ownerships” of the particular property can be traded and tracked. This process would continue until a whale comes in and buys the whole house in a go.
Those of us, who cannot afford an entire property, can own fractional ownerships of multiple real estate properties depending on which property they think will appreciate the most in terms of value. The functionality doesn’t end there – one can venture into international territories to buy properties in foreign lands (in fact, the ICO Propy aims to facilitate exactly this endeavour).
Due to its infancy, the partnership between real estate and blockchain faces innumerable legal hurdles. For one, there are hardly any systems to track titles of ownership in the developing world. Even in the USA, every state has its own legislation to track titles. Most of the veteran investors will be dissuaded from investing into this space due to this very reason – and also because of the fact that they’re not familiar with the technology.
Obstacles aside, with the blockchain and real estate coming together, the possibilities are endless – and numerous ICOs out there have creatively utilized this space to come up with amazing ideas. Let’s have a look at a few of them below.
Rentbery claims to be the first rental platform powered by the blockchain. According to its market analysis, 59% of new homes will be rented instead of bought by 2030, thus providing Rentberry with enormous scope for growth. The platform will allow tenants and landlords to complete the rental process directly, instead of through brokers.
Priced at: 1ETH = 2,500 Berry
Cavier is built on the Ethereum blockchain. According to the CEO Kirill Bensonoff, Cavier “offers access to stable real estate with built-in downside protection and automatic diversification.” Cavier is the next generation of Cavier Capital, which has had experience with redevelopment projects in the past 5 years. Cavier claims to have capitalized reserves and wants to develop an artificial intelligence predictive model that will allow investors make informed investment decisions.
Priced at: 0.1 USD
Propy facilitates the buying and selling of unique properties internationally in bitcoin. The real hurdle is to negotiate with governments to store property titles in a 3rd party’s blockchain system. This task is going to become increasingly difficult with more and more governments becoming wary of cryptocurrencies, or coming up with their own regulations to monitor the blockchain technology.
Priced at: 1 USD
Like Rentberry, CryptoBnB also aims to work with tenants and landlords, but for short-term rental requirements. It is also developing a smart tenant matching marketplace based on the user’s requirements. With a small amount of transaction fee, this cryptocurrency aims at boosting trust between the involved parties by conflating artificial intelligence and blockchain technology.
Priced at: 0.008 USD
Cryptectum can be defined as a platform facilitating “investments in Swiss real estate through blockchain.” Switzerland is known for its real estate returns, which have consistently clocked as high as 8% in the past few years. However, it is impossible for small-time investors to cash in on this gain because Swiss properties are too expensive. This is where Cryptectum steps in – using blockchain, the platform will initiate crowd-funding to collect enough funds for property purchases.
Priced at: 1 USD
In retrospect, it is clear that blockchain has the potential to disrupt the real estate markets with its genius technology – only time will tell how the world reacts to it.