In the early days of crypto, blockchain enthusiasts constantly talked about its potential to transform our society and markets. Now, more than 10 years after the launch of Bitcoin, that prediction has come true. Crypto markets have grown immensely and have a market capitalization of more than $1 trillion.
You can find blockchain projects in banking, agriculture, art, gaming, and, of course, real estate. But how is this possible? Well, simply put, a blockchain is an immutable digital ledger of information, a chain of blocks containing data.
This data can be anything from the balance of a wallet to a certificate of ownership. The latter is what makes it ideal for real estate. The ability to record the ownership and condition of a property in an open and immutable ledger ensures transparency and security because the record cannot be tampered with.
Michael Arrington, founder of TechCrunch, purchased the first property traded on a blockchain using the real estate platform Propy.
Later, he auctioned his NFT-minted apartment for 36ETH. Thanks to smart contracts and NFT-certified ownership rights, there is less paperwork, and the procedure is extremely simplified (without middlemen involved).
Buying or selling real estate can be a hurdle. Whether you are interested in European or Dubai properties, blockchain has already revolutionized these markets, and you can reap the benefits.
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Blockchain Can Make You a Better Homeowner
Smart contracts, one of blockchain’s most promising features, are an ideal tool for improving real estate transactions. You could set up a smart contract to handle the payment process and transfer of ownership.
This has been happening with digital art for a few years now, and it can easily be adapted to real estate. The use of blockchain reduces the need for intermediaries, like banks and brokers.
If you’re looking to sell, that means you get a bigger share of the sale price. If you are buying, it could mean that the property is sold at a lower price. HM Land Registry used blockchain in a prototype sale, to test its potential for the housing market.
The entire process took place on a Zoom call, and transactions were made in about ten minutes. A typical property transaction without blockchain could take months to settle.
The main obstacle, though, is the lack of adoption. Platforms like Propy already integrate this new tech, but it needs to grow on investors and sellers.
Real estate involves many different parties, all of which need to agree on the use of blockchain. Furthermore, the technology is still unregulated in many jurisdictions, and others outright prohibit it, driving away investors and sellers who might be interested in using it.
Others may also be wary of switching from traditional platforms and systems, further hindering blockchain adoption.
Blockchain Can Make You a Better Investor
Agencies using blockchain in real estate do so by tokenizing the property as a non-fungible token (NFT). This creates a digital asset representing the property, which can then be freely traded in the market.
Crypto markets are huge, and crypto investors are always looking for new investment opportunities. Offering properties on the blockchain could attract buyers who wouldn’t otherwise be interested. Blockchain also improves fractional ownership of real estate.
This already exists in traditional markets, but it’s a complicated process involving income splits and shared benefits. The use of a smart contract could automatically assign profits to each owner.
But we need more sellers willing to jump on the blockchain bandwagon. The metaverse showed that even digital real estate can be a profitable investment, but the industry still doesn’t see blockchain as a major disruptor.
Blockchain Can Make You a Better Citizen
Regardless of that, blockchain keeps growing and improving various sectors of society. Central banks around the world are creating their own cryptocurrencies, and government agencies are considering blockchain to improve voting systems. Despite the benefits, some opponents keep repeating false claims about crypto mining’s contribution to greenhouse gas emissions.
But these claims are unsustainable, pun intended. The studies used to demonstrate this effect are mostly based on Bitcoin, a Proof-of-Work (PoW) blockchain, while most smart contracts take place in Proof-of-Stake (PoS) blockchains, such as Ethereum. PoS mining does not require energy-intensive devices running to process transactions. Instead, token holders put their coins at stake to validate transactions on the network.
Some valid concerns have to do with privacy issues. If all transactions are open to everyone, doesn’t that put investor data at risk?
There are a few private blockchains, but they are not used for this type of transaction and are more heavily regulated. The lack of interoperability between different blockchains can also be a problem, as all participants need to agree on one network among the few dozen that exist.
Here we’ll list some advantages and disadvantages of blockchain in real estate.
| Advantages | Disadvantages |
| More transparency | Less privacy |
| Faster transfer of property rights | Price volatility |
| Access to wider audiences and investors | Lack of adoption by market participants |
| No need for intermediaries | Regulatory uncertainty |
Conclusion
Blockchain technology definitely has the potential to revolutionize the real estate market, and it is already doing so.
However, for this revolution to really happen, it needs to overcome its current limitations — achieving privacy without compromising transparency, creating a standard network that anyone can participate in, and finding a way to avoid volatility without imposing inorganic prices on assets. These are just a few things the industry needs to work on before expecting widespread adoption of the blockchain in real estate.
