The rapid development of blockchain technology in recent years has revolutionized many aspects of the financial sector. It’s hard to find any aspect of finance that has not been disrupted or influenced by the dawn of digital currency. From payment of remittances to investing, blockchain technology has created a wealth of new opportunities and challenges. The real estate sector is no exception.
Real Estate And Blockchain Technology
Traditionally, real estate has been among the least digitized financial sectors, primarily because of the relatively high value of the assets being traded. This has meant that most real estate transactions are handled by the increasingly old-fashioned method of listing properties and setting up meetings involving banks and brokerages. The advent of blockchain has the potential to disrupt this status quo by providing new and innovative methods by which real estate assets can be traded.
Shares Of Real Estate Via Tokens
One potential application for blockchain technology is the ability to use blockchain tokens to represent shares of real estate in a way that was not necessarily possible or cost-effective before. some online platforms, such as the one run by ATLANT, provide means to effectively digitize real estate assets into blockchain-based tokens. This has the potential to revolutionize how real estate investing works altogether. The ability to freely trade shares of real estate for fiat currency, cryptocurrency, or other real estate tokens would give investors the flexibility and accessibility to get more involved in real estate.
Traditionally the real estate sector has been among the most exclusive financial sector due to the high upfront costs, but fractional shares being traded as blockchain tokens would allow for a far lower barrier to entry and open up real estate to consumer investors who might not otherwise have the capital to meet upfront costs.
Reducing Intermediaries
Another major benefit of a blockchain system for real estate is that it drastically reduces the need to involve intermediaries such as banks, brokerage firms, and other financial institutions. All of these intermediaries are going to charge a premium for their services and avoiding them can dramatically decrease the cost of doing business and increase the profits for both the buyer and seller. Additionally, due to its decentralized nature and high transparency blockchain has the potential to be a very secure and safe method of executing transactions.
The proliferation of so-called “smart contracts” that don’t execute until conditions are met increases this security even further to the point where there is far less need to negotiate legal contracts. This means that there is less need to involve lawyers and reduces the risk of litigation which, once again, lowers the overall cost of the transaction. In addition to the savings in capital, blockchain technology also has the capacity to save an enormous amount of time. Arranging and executing a smart contract directly between a buyer and seller can happen in a matter of hours or even minutes and can be conducted entirely online. This eliminates the need for face-to-face meetings and time-consuming negotiations involving lawyers and bankers which works to the benefit of both the buyer and seller.
More Liquidity
Finally, another benefit of blockchain “tokenization” of real estate is that it has the potential to make real estate assets far more liquid than they have been traditionally. If trading real estate is as simple as exchanging a token for money then real estate could eventually be as liquid as the stock market. Of course, liquidity has its downsides as well, it can lead to an increase in volatility which could potentially undermine a reason why many investors are attracted to real estate in the first place. This can be mitigated to some extent by making sure the blockchain tokens represent a relatively large share of the property, much in the same that some companies intentionally do not split their stock price as it increases, keeping it too high to be traded rapidly by consumer investors.
The development and use of blockchain technology have the potential to level the playing field and make it possible for consumer investors to get a slice of this lucrative pie. It is believed that real estate continues to be a driver of millionaires around the globe. With this market still having a difficult barrier to entry for folks other than millionaires, blockchain technology can fundamentally change the way the market operates from an investment standpoint.
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