Leverage
Blockchain Tech and Real Estate
by Sean Finn
[as originally published on leverage.com]
The term “blockchain,” though common vernacular these days, was not so just a few short years ago. It’s a technology that was known only to those working in the tech field, but came into public awareness along with the advent of cryptocurrency or “bitcoin.”
The initial purpose of the blockchain system was to keep track of and record transactions of digital currencies, yet in a way that remained outside of the central bank systems. This task was done by way of an independent network of computers, each one keeping its own record of each transaction. The transactions thereby became, to all intents and purposes, “public knowledge” and easy for anyone to trace and verify. As this technology developed and became more accepted in the cryptocurrency world, it also became the platform for tracking and maintaining digital records of another sort of asset — and thus the NFT was born.
“NFTs, or “non-fungible tokens,” are digital information that can represent a number of types of assets and are unique unto themselves, meaning they cannot be replaced and are not interchangeable (non-fungible). They are digitally unique; no two NFTs can be exactly the same. They are one-of-a-kind items that live in the digital world, and they are gaining popularity at an unprecedented rate.
The beauty of NFTs is the ease with which they are verified and transferred between owners. As this technology took root and further advanced, so did its content, one of those being artwork. This quickly became one of the most common uses of NFTs, though there are literally endless applications of NFTs and blockchain technology. And now the medium has entered the realm of real estate, a realm that is very close to my heart.
This entry into real estate occurred initially in February, 2022 with the first ever real estate-backed NFT transaction. It was a home in Florida that sold for $653,163 worth of the cryptocurrency known as Ether. In addition to the digital currency being utilized for the transaction, the home’s property rights were also minted as an NFT — a digital representation of ownership — which served to cut down on closing time, the holder of the NFT then owning the property by way of an LLC that houses the crypto asset.
This dynamic led to the next step, which was the technology itself being used for the specific tools that were utilized to strike and negotiate real estate deals. Some of those advantages being: automated transactions that mitigate risk and increase speed, reduced costs of transactions, the use of “smart contracts” that can automate leasing agreement terms and prevent modifications, public transactions for full transparency, not to mention indisputable lease and payment transactions. These are just a few of the uses of this technology in the real estate world. Frankly, I see this as just the beginning of an unstoppable evolution and am excited to see what awaits us just beyond the horizon.