What is blockchain?
First, you don’t need a computer science degree to understand blockchain technology. We’ll explain it in terms that anyone can know if you keep reading.
Blockchain and databases are similar, but they serve the purpose of data storage. Blockchains use encryption, giving them a strong security system. Databases are easily compromised and changed. Blockchains prevent data from being changed.
Let’s examine it in more detail. A blockchain collects related information and groups it together, known as “blocks” that hold data sets. Each block has a specific storage cap. When a block is full, another block is chained onto the one filled first. As a result, a chain of data-filled blocks is formed; hence, the term “blockchain.” The chain around the blocks makes the data unchangeable and unbreakable. Because the data is distributed among a network of computers, this chain also generates a verifiable ledger of transactions that anyone can review without being able to change. Because databases typically store data in tables without secured encryptions, blockchains differ from databases.
Fungible and non-fungible tokens coexist on blockchains. Data is encrypted, and information is recorded on a blockchain, making it impossible to alter or hack. Blockchains can be compared to electronic transaction logs.
The difference between bitcoin, cryptocurrency, and blockchain
What are the differences and connections between bitcoin, cryptocurrencies, and blockchain?
Bitcoin is the first cryptocurrency or digital currency used to expedite transactions. Each type of cryptocurrency has its own unique set of identification codes. You will have to exchange real money (like USD) for cryptocurrency to buy goods and services from a company, much like buying chips at a casino. Currently, there are over 6,700 different cryptocurrencies. Bitcoin is only one of these.
Blockchain technology has made it possible to use cryptocurrencies.
The data stored on blockchains for a particular cryptocurrency does three things:
- determines its worth
- regulates and records transactions
- makes value conversions easier
Increased security is one of the main benefits of blockchains and cryptocurrencies. Central banks are no longer necessary when buying and selling goods and services using cryptocurrencies, improving the payment system’s directness. Find out how this relates to real estate by reading on.
Tokenization transforms physical assets into safe and secure digital assets, such as bonds, works of art, and real estate. Tokens, like cryptocurrencies and title registration, contain ownership rights, rules, and transactional history. After tokenization, the support is split into several pieces. Therefore, a token may be distributed among several owners.
How is blockchain useful in real estate?
There are many benefits to using blockchain technology in real estate. From title transfers to price negotiations, complex real estate transactions can be completed quickly and securely using blockchain technology and a blockchain dApp development company.
Consider the evolution of apartment tours over the past few years. You can schedule a self-guided tour and visit an apartment without talking to a leasing agent. Similarly, blockchain technology provides secure online options that streamline and digitalize many property purchase processes.
A brief history of blockchain technology in real estate
Since the 1910s, real estate agents have acted as middlemen between the seller and the buyer. The agent helps the two parties establish trust while facilitating the real estate transaction. The agent is familiar with the local laws and regulations. They can confirm that the seller owns the property and that the buyer has the funds necessary to pay for it in this way. The business sector is still using the same tactics and methods.
Blockchain, however, is gradually but significantly altering the process. On January 9, 2009, a person or group using the alias Satoshi Nakamoto published the initial version of Bitcoin and the ensuing blockchain database. Nine years later, in February 2018, America oversaw Vermont’s first-ever blockchain-based real estate transaction.
The deal with Propy included a pilot project. Through Propy, a San Francisco-based startup, anyone can buy or sell real estate online anywhere. With the help of blockchain technology, every stage of a real estate transaction is documented, from initial expressions of interest to contracts being signed and ownership titles being transferred.
What lies ahead?
Despite its youth, blockchain technology in real estate is innovative and full of potential. Several startups, including Redfin and Propy, are already completely digitizing all real estate transactions. By avoiding paperwork, audits, and insurance whenever possible, these tech-enabled brokerages lower the costs of intermediaries, such as realtors and bankers.
The real estate sector will benefit from blockchain in three exciting ways:
- Blockchain-based smart contracts
- Making property investing accessible
- Property listing services that are transparent and secure
1. Blockchain-based smart contracts
The terms of the agreement between the buyer and the seller are laid out in a self-executing contract, or “smart contract.” The times are stored across a decentralized blockchain network as lines of code. Blockchain codes track the execution of the contract, and these transactions are transparent and irreversible.
Offer sheets, listing agreements, letters of intent, and closing papers are examples of contracts that can be digitalized on blockchains. Signing smart contracts rather than writing ones can accelerate the entire transaction process. It also eliminates the need for in-person discussions with brokers, bankers, and lawyers while guaranteeing the security and legality of the transactions.
2. Making property investment accessible
Historically, investing in real estate has been time-consuming and difficult. Whether you’re investing in a single-family home or a complex of buildings, you need to involve several parties in the due diligence process. Before thinking about buying real estate, you should also be financially stable.
By purchasing tokens for a building, many people can jointly own it with the aid of blockchain technology. This way, the property has been tokenized, enabling fractional or partial asset ownership. Tokenization can increase the commodity’s liquidity for real estate, making it simpler for owners to resell their shares for a profit. The real estate market has become more democratic and decentralized, attracting more prospective buyers and investors.
3. Property listing services that are transparent and secure
Most current real estate listing services are privately held businesses without a centralized database for cross-referencing. In the past, the real estate industry used a pen and a pencil to keep track of transactions and records. Even worse, these services frequently impose high subscription fees on users.
Creating a uniform, a secure database accessible to everyone is made possible by combining those real estate listing services onto a single server powered by a decentralized blockchain. For instance, customers can use decentralized finance (DeFi) services to objectively decide on investment or purchase. Furthermore, since the information has been verified and is securely stored, it cannot be tampered with by third parties who might inflate the price or spread false information.
How you can benefit from blockchain technology
We’ve discussed blockchain technology’s benefits for the real estate sector. Now let’s talk about how you can make money from it as a resident, manager, investor, developer, or property owner.
There are significant implications for
- Property developers
- Property owners and investors
- Residents and tenants,
- Property managers.
When multiple parties invest in a project, developers can raise the money needed to launch it more quickly and efficiently. Although fractional real estate ownership is nothing new, blockchain technology makes the process easier and increases the number of potential investors. When requesting capital contributions from investors outside their immediate network, the project’s sponsors won’t have to worry about screening investors or dealing with a ton of paperwork. Blockchain maintains a record of all the data, permits the execution of smart contracts, and notifies all parties of updates and briefings.
All engineering plans, appliance manuals, and architectural documents are stored on a blockchain safely and securely. This shows that if owners, investors, or anyone involved in the development project wants to access the information, it is simple to do so on the blockchain system. As a result, transaction time and costs are significantly reduced, allowing developers to focus on creating the project.
Property owners and investors
Real estate buyers and investors can feel secure because blockchain technology eliminates the possibility of data corruption or falsification. In other words, when investing their money in a property, they can do so with confidence regarding its value and legitimacy.
The tokenization of real estate or the conversion of its value into cryptocurrency also destroys the sector. The entry point for potential buyers or investors is more convenient due to the liquidation. As a result, before a buyer can pay the property’s full value, the seller must make a profit on their investment.
Residents and tenants
Renters gain from a better rental and living experience thanks to blockchain, including the ability to take virtual tours, sign leases with smart contracts, and submit rent payments and maintenance requests. Thanks to the security offered by blockchain technology, all parties are informed that the property listing is legitimate, identities are verified, and personal information is encrypted.
Thanks to blockchain, moving across the country or even the world has never been easier than it is now. Thanks to blockchain’s removal of all geographical boundaries and prevention of privacy and data breaches, you could lease a property in San Francisco without leaving Tokyo and conduct business without leaving the country.
More than just painting walls and installing new appliances is now part of property management. Most of the work entails processing paperwork, like lease agreements or maintenance requests.
But all that paperwork becomes nearly error-proof smart contracts when you use a single decentralized, blockchain-based property management system. In a blockchain-based system, everything from rent amounts to payment schedules to tenant and property histories to contractor agreements is completely transparent.
Should you accept rent payments in blockchain?
Although cryptocurrency has yet to be widely embraced in real estate, some businesses use blockchain technology to record rent and other related transactions.
Even the adoption of online rent payments has been sluggish, demonstrating the industry’s continued reliance on checks and cash. Although some condos and luxury buildings have started to accept bitcoin as payment in recent years, we have yet to reach the point where residents pay their rent entirely in cryptocurrencies. Even though some apps, like ManageGo, let tenants pay their rent in cryptocurrencies, the funds are simply converted into dollars.
How blockchain technology can prevent subleasing
One of a property manager’s biggest headaches is dealing with tenants who illegally sublet their homes or apartments in contravention of the terms and conditions of their leases.
Due to the need for decentralizing information about property listings, tenants can easily list their homes for sublease without the manager ever knowing. With a blockchain-based property listing service, a tenant cannot sublet without being caught because the system will immediately flag the illegal listing.
What does this mean for the future of real estate?
Blockchain technology has the potential to transform the real estate sector completely. Simply put, it is a disruptive innovation that will change the roles of different industry players.
Every other technological advancement seemed improbable. Consider a smartphone as an illustration. The idea that you would always have access to the internet in your pocket was unthinkable. Or even a device that could make purchases, start a car, or open your apartment door.
Invest in proptech
If you invest in proptech, your property will be able to adapt to a blockchain-enabled future more quickly because most resident and property information can be transferred securely onto a blockchain thanks to devices like smart home technology and smart video intercoms that are already internet-connected. Proptech integration will enable you to outperform the competition across your entire property.
Blockchain technology will allow for integrating all property management systems and protect devices, which a single database will then manage. Without additional programming, all your devices will communicate with one another and instantly verify the data. This makes it simple to include all the moving parts of the real estate industry.