Ever since we were little, most of us envisioned a future where we’d own a place to call home. As we got older, we either drew closer to this dream or further away depending on our financial situation. Now blockchain technology is here to shake things up in the real estate industry. It’s now easier than ever before to own property, part of a property, virtual property, or even just grab innumerable opportunities in the real estate industry through blockchain.
Time Skip: 2:30
What is blockchain?
Blockchain technology can simply be understood as a digital decentralized database. From a more technical point of view, it’s a digital immutable decentralized ledger that stores encrypted data in groups called blocks. Once these blocks are full, they’re then linked or chained together, hence the term blockchain.
To further understand how it works, think of a shared Google Doc. You can create and share a document among several people. This distributed the document instead of duplicating it or transferring it. This means that a decentralized distribution chain has been created and it gives everyone involved access at the same time. So, if someone made changes to the file, they’ll be visible in real-time ensuring transparency among all parties involved.
Blockchain technology shares a similar idea but it’s far more complex. In fact, once data is recorded it can’t be altered and it’s distributed among several computers (called nodes) around the globe. One MIT Technology Review states that the whole point of blockchain technology is to let people who don’t trust each other share valuable information or transactions in a tamper proof and secure way.
Did you know Republic Realm, a popular online investor, bought virtual land for a record-shattering $913K? We’re used to people buying vacation homes that they visit every couple of months, but virtual property? In a recent tweet, Republic Realm announced they can’t wait to tell us their future plans about the property.
You may wonder, how is virtual real estate going for such absurd prices? Now, this is where blockchain technology shows its real muscle through tokenization. Tokenization has turned the tables and shifted gears for both physical and virtual real estate.
how is blockchain shifting gears?
The Tokenization of property
Imagine having a unique token that can’t be duplicated, forged, altered, subdivided, or exchanged for another. This is what non-fungible tokens are. A Non-Fungible Token or NFT is immutable data held on the blockchain that represents a specific asset – in this case, property. Unlike what you may have heard about NFTs in digital art and other industries, the value of real estate NFTs isn’t determined by what the buyers are willing to pay for. Here, their value is guided by fundamental economic indicators that have less volatility.
Tokenization is the process of producing virtual tokens (NFTs) that can be used to represent real estate ownership. NFTs in the real estate space are flexible and can represent innumerable variables.
This includes representing full or fractional ownership of a piece of property, real estate payment rights (like distributions, dividends, or shares of profits) and so much more.
This has already been put in real-life use cases by Dapps (decentralized apps based on the blockchain) developing several models of tokenization. Today, the Republic of Georgia is already using a blockchain technology land registry for sales, leases, and mortgages.
Smart contracts are integrated within these tokens. They’re self-executing agreements that don’t require external action to execute. Once all conditions that were previously agreed upon are met, then the smart contract automatically executes an action. For example, a buyer and seller can agree that once the seller’s NFT is sent to them, the funds are deposited in the buyer’s wallet automatically.
Smart contracts enable independent, secure, transactions that favor all parties involved. They can be used to transfer title deeds, rental agreements, and much more. However smart contracts aren’t enforceable by any central body, so if anything were to go wrong the parties involved can’t take it to court.
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Fintelics is an AWS Advanced Tier Consulting Partner that specializes in developing custom software and apps utilizing emerging technologies including (AI, Blockchain & Cloud Computing).
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