Understanding Blockchain's Impact on Real Estate
Blockchain is revolutionizing the way we make transactions and record information across various industries and use cases. And now we’re seeing its application take off for one of the oldest and most change-resistant industries—real estate.
Blockchain’s Real Estate Use Cases
The impact of introducing blockchain to real estate is far reaching—into the lives of everyday homeowners, as well as giving investors more options and control, and transforming how real estate professionals operate in their jobs.
It’s an instrument for more than just improved efficiency and convenience, however. As arguably the most prominent and successful wealth-building vehicle there is, real estate has already become more accessible to the average person than ever before thanks to blockchain, and as the technology continues to develop, I believe we will see even greater accessibility and economic impact.
Impact on Retail Investors
One of my personal favorite areas in terms of impact lies with retail investors. By breaking up a larger real estate asset—for example, a high quality, multimillion dollar commercial property—into tradable, smaller assets stored on the blockchain, retail investors can easily crowdfund a much larger deal than they could have had access to on their own.
While crowdfunding has existed and continues to exist independent of blockchain technology, the benefits of tokenizing real estate projects are vast and impactful. For one, investors can theoretically buy into a project at any price point—even a dollar—meaning anyone with the desire to do so could become an investor.
Increasing Accessibility to Investments
While it may seem ridiculous to think about investing a single dollar into real estate, the effect of this level of accessibility is tremendous. Before tokenization, high quality real estate investments were reserved for those who had access to large amounts of capital. Now we’re entering a new era in which anyone can build wealth via a stable, reliable investment vehicle and partake in the ownership—even if partial—of real world assets.
Another aspect of this is the liquidity, which should not be overlooked. To be able to sell your real estate tokens at will and retrieve whatever equity you’ve earned—nearly instantly—further de-risks the investment and increases accessibility.
Blockchain for Realtors and Developers
Smart contracts are another growing field of interest as a way of avoiding disputes and control over funds. Using protocols to automatically execute on critical steps such as releasing funds increases transparency in an industry rife with fraud and mistrust. There is virtually no opportunity for error or deceit by taking out a third party facilitator in favor of relying on blockchain solutions.
Homeowners and Access to Funds
HELOCS (home equity lines of credit) are another area of real estate being disrupted by blockchain, which will allow homeowners to access equity in their property via tokenization. Typically this process would take place through a bank or third party institutional lender who could act as a potential barrier to obtaining that loan—while blockchain acts as a bypass, putting homeowners in the driver seat.
The Greater Impact of Blockchain on Real Estate
New features and use cases for blockchain technology are always exciting, particularly when they are industry disrupting. Yet nothing beats completely altering economies and opening up individual lives to new levels of opportunity and abundance.
Efficiency in real estate transactions means a better world for anyone purchasing real estate and for the agents who facilitate those transactions, as time savings translates into real dollars and a reduction in the high levels of stress associated with transacting property. Here we need to see adoption, which calls for founders to tackle the space with innovative consumer facing solutions.
Taking Down the Gatekeepers
The decentralization of the process and record of real estate ownership is another powerful frontier, as it removes banks as the gatekeepers of how and when we utilize our own accrued wealth. Implementing this aspect of blockchain will require that antiquated government run systems be eradicated and replaced, and it will likely take a long time for us to see full adoption of this technology due to deeply embedded tradition.
The democratization of real estate via its intersection with blockchain is perhaps the most disruptive technological advancement we will see in the coming decade—akin to the rise of the internet in the 90’s. The economic impact of such technology will be seen on a macro level as well as individual lives and communities. I believe it has the potential to raise the standard of living for lower classes who previously lacked access to investment opportunities or to equity from inherited assets.
Blockchain is quickly breaking down barriers to wealth creation and leveling the playing field in a way that could eventually bring stability, balance, and growth to the larger economy, resulting in a healthier capitalism based more on value creation than luck.