Last updated on September 19th, 2023 at 05:04 pm
When the first crypto real estate purchase was successfully carried out in the State of Texas on September 18, 2017, it was very clear that using Bitcoin to close a deal has come to stay.
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Imagine a world where buying a property with crypto can be seamless as sending a text message. Since the creation of Bitcoin, the financial landscape has been transformed by the emergence and invention of other digital currencies like Ethereum, Tether, and Origin Protocol.
As cryptocurrencies continue to rise in popularity and acceptance, they’re beginning to reshape the real estate sector as we have seen in the financial landscape.
This article explores the role of cryptocurrency in real estate deals, shedding light on the emerging trend that has the capability to revolutionize how we can buy and sell property using Bitcoin or other altcoins.
We will aslo delve into nuances of this revolutionary digital frontier, exploring the benefits, challenges, and the potential future of using crypto in real estate transactions.
Cryptocurrency has been around for some time now, yet it is important to simplify the concept of cryptocurrency. The best way to explain this is that cryptocurrency is a type of digital or virtual currency which doesn’t exist in physical form.
This means that, unlike dollars or pounds, cryptocurrency can not be touched. It only exists online and uses cryptography. Cryptography is a method of protecting information for secure transactions.
The oldest and most popular used cryptocurrency is Bitcoin, introduced in January 2009 by an anonymous cryptography expert code named Satoshi Nakamoto.
The magic of blockchain
If you’re wondering what makes cryptocurrency transactions secure, a study of technology called blockchain would provide clarification. The power of crypto lies in blockchain technology.
Picture blockchain as a digital ledger or notebook: whenever a crypto transaction occurs, it is recorded in the notebook. The record is visible to everyone in the network.
Once the transaction is ‘written’, it becomes impossible to be deleted or altered. This transparency enhances the security of transactions.
Real-life examples of cryptocurrency transactions
Let’s give you a real-life example of cryptocurrency transactions taking place…
Richard wants to send some Bitcoin to Charles. He does this using his digital wallet (like your bank account). Richard’s wallet generates a digital signature by solving a complex mathematical problem. Once solved, the transaction is recorded on the blockchain and verified by the network.
After the verification, Charles receives the Bitcoin in his own digital wallet. The sender and recipient must have a Bitcoin wallet to carry out transactions.
Cryptocurrency and the Financial Market
Crypto has a significant impact on the traditional financial markets. The key features of crypto such as decentralization, security, and transparency make it an appealing investment.
Cryptocurrency is not controlled by any government or central authority unlike USD, EUR or Pounds. Although, governments around the world are trying to come up with legislation to monitor crypto-related transactions.
Investment opportunities and risks
There are many investment opportunities in cryptocurrencies, and that’s why smart early investors in Bitcoin (BTC) made massive returns. For instance, a BTC by the end of 2010 was worth just $0.30, but by November 2021, Bitcoin reached all-time high of $68,990 less than a dollar.
Imagine a BTC investor who bought $500 worth of Bitcoin in 2010 and decided to sell just 500 out of his Bitcoin holdings around the time it reached ATH.
While it is possible to make triple of your investment in Bitcoin, it is important to remember that cryptocurrencies are highly volatile. Their value can swing dramatically in a short time, leading to potential losses.
If you’re considering cryptocurrency as an investment option, it’s crucial to understand the market and, if possible, seek advice from financial advisors. A potential high return often comes with high risk as well.
Is cryptocurrency used in real estate?
The real estate sector started to embrace cryptocurrencies as the world continues to digitize. The integration gave birth to a new trend where property owners and real estate firms accept Bitcoin for transactions.
A few samples of notable real estate transactions done with cryptocurrency include:
In 2017, a home in Austin, Texas (USA) was purchased using Bitcoin, we’ve seen other sales of homes using BTC as a method of payment.
According to reports, both parties said the transaction was straightforward and fast. The payment was processed through a Bitcoin payment service. It demonstrated the potential for a streamlined real estate transaction process.
In 2019, three luxurious residential properties in Iloilo City, Philippines, were sold using Bitcoin and Litecoin.
The sold properties included a 2-bedroom condominium unit near Esplanade River; a 3-bedroom house in Lapaz; and a 4-bedroom villa in Iloilo City, according to Property Guru’s Property Report (Asia’s largest online property portal group).
On May 27, 2021, Miami Beach penthouse was traded for $22.5million in cryptocurrency equivalent.
Away from the U.S. and the Philippines, a Dubai-based real estate developer DAMAC Properties on June 4, 2022, became the first real estate firm to close a deal worth $50 million using cryptocurrency. It is the largest-known real estate deal in cryptocurrency in the United Arab Emirates (UAE) and Asia.
The Chief Operating Officer of the property firm Ali Sajwani was later quoted as saying that the company proved a point that it is worth it to invest in cryptocurrencies, NFTs, and the metaverse.
So, yes, cryptocurrencies, especially Bitcoin, Ethereum, Litecoin, and any other popular cryptos are used in real estate.
These cases highlight the growing acceptance of crypto in the real estate industry. There are now crypto real estate agent and crypto real estate companies and other enablers that make such transactions seamless in the U.S. and other countries around the world.
The Role of Blockchain in Real Estate Transactions
Blockchain – the core technology behind cryptocurrencies – can also bring transformative changes to real estate transactions beyond facilitating payment as follows:
While Bitcoin is virtual, it can’t be seen or touched, real estate entails property that is visible with a specific location and address. Its sales involve some significant paperwork, including a change of ownership.
With this, blockchain technology could streamline this process by securely storing all real estate documents, this will minimize illicit funds that could be used for the acquisition of real estate, including details of seller and buyer.
Blockchain for land registries
Blockchain can be explored for land registries. At the time of publication at least four countries – United Arab Emirates (UAE, )Estonia, The United Kingdom, the government of Georgia, and the United States – are using blockchain for land registry.
This process enhances security and builds trust between buyers and sellers of real estate. It offers a tamper-proof system in the real estate sector.
The Future of Cryptocurrency in Real Estate
As Bitcoin and other cryptocurrencies become more popular and accepted, we are going to see its role in real estate transactions evolve significantly. Two of such possibilities can be seen in:
- Smart contract
- Property tokenization
Tokenization of real estate
Tokenization of property is the process of converting rights to a property into a digital token on a blockchain. The benefit of this is that it could potentially allow for parts of a property to be owned by multiple investors, the same way stocks represent a portion of ownership in a company.
Tokenization of real estate could make investing in real estate more accessible to a broader range of people irrespective of location.
Smart contracts could significantly reduce the time and paperwork involved in real estate transactions.
A smart contract is a self-executing contract with the terms of the agreement written into code. Through blockchain, a smart contract could automatically transfer property documents to new owners once conditions are met.
Practical Tips for Using Crypto for Property
Thousands of cryptocurrency investors are looking for possibilities of using Bitcoin for real estate transactions. If you’re considering this option, here are some tips to help get on board:
Learn about cryptocurrency. You need to know and understand how crypto works, its benefits, and risks. You don’t want to venture into what you don’t how it works.
- Secure your investment
- Seek financial advice
- Seek legal advice
- Choose the right platform
Examples of cryptos created for real estate
A few examples of cryptos that have been designed specifically for real estate sector are:
- Propy (PRO)
- Real Estate Asset Ledger (REAL)
- Atlant (ATL)
- Imbrex (REX)
Five years ago, it seemed cryptocurrency in real estate was not going to be possible, today, blockchain is being deployed in the real estate sector. The union of real estate and cryptocurrency represents a significant step towards simplifying investment in real estate.
However, it is important to use it with caution and talk investment advisor, just like other businesses.