Bitcoin and Blockchain Tech Expected to Disrupt the Global Real Estate Industry
Over the past month, Bitcoin (BTC), the world’s leader in digital cryptocurrency, has been taking over headline news around the globe – as it should – and attracting the attention of the global Real Estate market! A few weeks ago, Bitcoin surpassed a $10,000/coin valuation, and the price has been increasing as the days go by. As of this writing, the current cost of Bitcoin stands at approximately $13,000/coin and in the grand scope of things – this is only the beginning. What is even more startling is that Bitcoin, supported by an online ledger system called a blockchain, was worth less than one cent (USD) when it was publicly launched in 2009, and still less than one dollar (USD) in 2011 when it hit the mainstream. The world has not seen valuation increases this significant since the Dutch Tulip Bulb Market in the 1600s – the main difference being, that this is no bubble.
Individuals who invested small sums of money in Bitcoin’s early years are now Millionaires today. Bitcoin is not the only cryptocurrency, however – far from it. Combined, as of this writing the cryptocurrency market cap represents approximately $474 Billion dollars – and we are just seeing the beginning!
I’m not going to try to convince you either way if Bitcoin is a strong investment, or try to discuss the technical/theoretical specifics of cryptocurrency – there are thousands of articles across the internet that touch on these points. What I am going to do, however, is emphasize the implications that both Bitcoin and blockchain technology are going to have on the Global Real Estate market.
The truth of the matter is that cryptocurrency is here to stay, and they – along with the blockchain technologies that support them – are already impacting the way that property is purchased and sold. A few U.S. states have already changed laws allowing the tech to be utilized in property deals, and around the world, luxury properties including those in the major cities of Los Angeles, Miami, and London are already being purchased with Bitcoin, and offered to those who want to transact in this way. Some early adopting developers want in on the action as well, as a few projects are now accepting Bitcoin in cities such as New York and Dubai (talk about a way to gain additional PR!).
Transacting in Cryptocurrency
Today, the majority of Bitcoin transactions in Real Estate involve only one party that wants to deal in cryptocurrency. If the other party prefers a more traditional transaction, accepting only cash, the deal can still take place. Eventually, transacting in cryptocurrency directly will become normalized – I estimate in as soon as 10 years from now, we will see more than 20 percent of Real Estate transactions occurring through cryptocurrency. Until then, there are services such as BitPay, or some international banks that allow users to convert their Bitcoin into cash (or local currency).
Interestingly enough, a few transactions have already taken place where both parties in the transaction, the buyer and seller, opted to keep the Bitcoin intact. There are still some looming questions surrounding this approach, such as how these deals are taxed, and who has access to the blockchain data. In the Luxury Real Estate markets, this uncertainty stirs up appeal. Because cryptocurrency is purely digital and encrypted, the owner can remain relatively anonymous in their dealings. Sellers are able to receive Bitcoin as payment for just about anything, but there may be concerns pertaining to the legality and source of the funds. In today’s Real Estate market this brings up a lot of questions.
Peer-to-peer (P2P) digital transactions involving cryptocurrency are attractive on an international level as well, as they are instantaneous and negate the need for transfers between international banks and conversion of currency, which can take weeks or months in some cases, and have the potential to face legal restrictions. Furthermore, for those living in countries with higher interest rates, and who prefer not to hold on to their own nation’s currency, transacting in cryptocurrency provides them with a way to spend as they please.
Blockchain Tech Streamlines Title Transfer & Real Estate Data Recording
Blockchain, in short, is an overgrowing ledger, or list of records that is capable of containing data, that once recorded can never be deleted, falsified, or altered. It is permanent, will always be accessible to the public, and can never be changed. It is supported by a peer-to-peer (P2P) network consisting of computers – each one of these computers is responsible for validating the transactions/data input and the user’s status in the blockchain using known algorithms. You can truly put any input data you want into a blockchain – from a Real Estate perspective, this includes any and all data about the property, transaction history, appraisals, inspection records, etc. in a Real Estate deal.
Each time something is inputted and verified (validated by the other computers plugged into the blockchain), the transaction is combined with other transactions, creating a new block of data that is permanently stored in the ledger. An easy way to picture the blockchain is to imagine an unbreakable chain, where all of the links store data in a linear fashion. You can add links to the chain but the links cannot be removed from the chain. Once a new link is added to the chain, the transaction is complete and a record of the transaction and all of its details is permanently locked into the chain.
The Commissioner of financial regulations in Vermont, Michael Pieciak, one of the leading states in adopting Blockchain technology, notes that, “[if] you were to design a [title] system today, it would look a lot more like what people are talking about in terms of recording electronically and through something like the blockchain than the system we have in place now.”
The way that property records have been held historically is archaic at best – existing sometimes only in writing on paper, and stored in files and boxes or in closed systems managed by government agencies. While in the United States there may not be a significant threat of malfeasance, in other remote parts of the world, these systems may not be as secure. In the past few years, there have been significant pushes towards digital, but even today, there is potential threat for manipulation of records.
Blockchain technology could theoretically allow for all of these records to be recorded, collated, and organized more efficiently – resulting in faster, and more accurate inquiry and analysis of Real Estate data. It would also allow for a clean chain of data that can be referenced in a linear fashion (everything that we enter to date from the past, and everything moving forward.)
What Lies Ahead
There are still many questions that need to be answered, technological refinements that need to be made, legislation that needs to be agreed upon, and public understanding of the technological intricacies related to cryptocurrency and blockchain technology, but we are headed in the right direction.
I envision a future where it becomes the standard in the global Real Estate industry for buyers and sellers to transact in cryptocurrency, with blockchain technology being used to record all of the data pertaining to these transfers.
It’s not a question of if, but when. Are you ready?
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