Cryptocurrency offers benefits in real estate business, but there are risks
Like most things in life, cryptocurrency offers some benefits to stakeholders in the real estate business, including landlords, tenants, buyers, and service providers. But there are some risks too.
As a digital currency in which transactions are verified and records maintained by a decentralized system using cryptography as opposed to being driven by a centralized authority, cryptocurrency is based on a ledger system.
This system records and makes new transactions on the basis of previous ones. The transactions are accessible to the public, but cannot be falsified. The operational ledger system of Crypto is known as blockchain.
Crypto has the potential to make unique and significant impacts on the commercial real estate environment. When fully adopted and operated, the following unique and significant impacts would be obtained.
Ease of Property Search:
A search for property either for leasing or sales will be simplified and improved upon using Blockchain Technology and Cryptocurrency. The current procedures of property search for either leasing or sales using isolated and fragmented platforms and agents make the processes difficult.
When Blockchain Technology and Cryptocurrency are adopted, prospective stakeholders such as Landlords, Tenants, Buyers, etc will have easy access to the system in the comfort of their homes and offices. The accuracy of property details like location and address, age, state of repairs, ownership history, etc will be guaranteed via Blockchain and Cryptosystems.
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Ease of Investment in Real Properties:
Cryptocurrency driven by Blockchain ensures a robust commercial real estate investment environment. It is common to see investments traded on stock and bonds of companies, mutual funds and even commodities such as gold, oil, etc. However, Cryptocurrency offers a novel opportunity for commercial real estate to be traded upon.
This is evidenced in the fact that cryptos such as Digix and Gold Tokens which are based on and backed up by physical gold bullions are already traded on. In like manner, it will become quite easy to liquefy commercial real estate assets and into tradable tokens.
Apart from easing the convertibility and trading on real estate properties, investors with lean capital who are unable to acquire a whole real estate asset can possibly have the opportunity to buy portions or pieces of the whole assets. Cryptos such Ethereum, Bitcoin, Ripples, Litecoin, etc are traded in bits and small fractions. It is envisaged that the same business model would be applied to commercial real estate assets. Possible positive impacts would be evidenced in ease of conversion and transferability of titles to willing buyers as opposed to waiting for a single buyer who may never exist.
Smart and Swift Transactions:
The Blockchain system which drives Crypto is based on a ledger confirmation system that links virtually all stakeholders in the network. This makes each transaction smarter, faster and even cheaper with ease of validation. It is expected that the cost of processing real estate transactions via Blockchain will be much lower compared to the existing method. It is even envisaged that associating cost such as registration fees, etc could be averted.
We have risks embedded in every form of investment. The risks of adopting Cryptocurrency in the real estate business may not deviate significantly. It is worth mentioning that the biggest risk that Cryptocurrency could possibly bring to real estate transaction is akin to being the same risk inherent in every industry which involves trading on securities.
Cryptocurrency has high-risk exposure to a new form of financial theft by hackers. It is on record that several institutions have already fallen victim of this threat, like the hacking of the Singapore-based exchange. This is because, unlike fiat currency, Cryptos are invisible, exclusively digital forms of currency, and that makes them vulnerable to hackers. This calls for caution when Cryptocurrency becomes more integrated into real estate transactions. This also makes it reasonable for additional measures such as the involvement of the services of insurance companies to cater for the associated risks.
Change is constant. The dynamism of real estate business, like various other revolutionary changes, Cryptocurrency is envisioned to have the capacity and potential to effect changes in several segments of real estate business against known principles and concepts.