How Bitcoin Works And Its Impact On The Real Estate Market

Posted On Friday, 20 November 2020 22:22

Blockchain technology has effectively disrupted the financial markets in the past few years. What started as a small financial innovation, has spread like wildfire through most industries. 

Cryptocurrencies and Bitcoin have challenged how people view investing and loans. It has also revolutionized a wide array of industries like the food supply chain and pharmacy.  

Real estate hasn’t been able to escape the crypto revolution either. Before, transferring high-value assets like real estate was done face-to-face, through brokers, realtors, and banks. Bitcoin and blockchain technology has enabled us to change our old ways, for the better. 

Bitcoin allows for value to be seamlessly transferred between peers, without the need for a third party. Through permissionless access to the network and smart contracts, blockchain technology has revolutionized the way we trade with real estate.

In this post, we will go through five different ways Bitcoin has affected the real estate market and the new possibilities it has opened. 

Let’s get started. 

What is Bitcoin and how does it work?

Bitcoin is a peer-to-peer currency that was created in 2009 by the mysterious Satoshi Nakamoto. The network where all Bitcoins are stored, the blockchain, can be used by anyone willing to make a transaction. 

What makes it different from traditional currencies, is that Bitcoin is completely decentralized. This means that there’s no single entity that controls the blockchain. No government or bank can shut it down and users don’t need permission to use it. 

Conversely, the transactions on this blockchain, are completely transparent and accessible by anyone. Transfers are near-instant and done from one wallet to another, without third-party meddling in the transaction. 

Additionally, there are various ways to buy Bitcoin, and the currency is accessible to almost anyone in the world, whether they own a bank account or not. 

All of this makes it a suitable technology to be used in the real estate market. Users can use it to transfer properties, and it can be used to cut intermediaries out of the real estate transaction process, thereby reducing costs.

Here are some of the ways that Bitcoin and blockchain technology can directly impact the real estate market. 

1. New Marketplaces

Usually, the real estate market is focused on listings that interconnecting property buyers and sellers. Blockchain technology introduces us to a new way to trade real estate through different platforms. 

For example, ATLANT has developed a platform that tokenizes real estate for investing and renting. Properties can then be traded much like stocks on an exchange and transactions can be done online.

This enables users to exchange property just like they exchange Bitcoin, from one user to another. These peer-to-peer transactions are cheaper and faster than traditional ones that have to go through banks. Especially if international transfers of huge sums are involved. 

2. No intermediaries

The peer-to-peer nature of the blockchain eliminates the bank from the real estate ecosystem. It is even believed that one of the main reasons for Bitcoin’s creation was to avoid future occurrences of the banking housing crash of 2008. 

Cutting out the middlemen (banks, brokers, etc), buyers and sellers save immense amounts of money that would otherways go to transaction fees and commissions. 

3. Fractional Ownership

Usually, when acquiring property, you have to front a lot of funds. But with blockchain technology, you do not have to own an entire token. When tokenizing real estate, it can be fractioned into smaller parts. 

This can help investors acquire smaller parts of real estate. Additionally, buyers can pool their funds to buy bigger properties and co-invest. On the other hand, sellers can sell only parts of their property, as they see fit. 

4. Increased Transparency 

One of the biggest benefits of the technology is built into the network through its public ledger. Information stored in the blockchain is accessible to anyone that participates in the network, making data transparent and immutable.

The housing bubble crash in 2008 was mainly caused by greed and a lack of transparency in the quality of mortgages. With the increased transparency of blockchain technology, fraud by misleading investors becomes impossible. 

5. Increased Liquidity

Real estate properties are mainly considered illiquid assets. But through tokenization, they can be readily traded for cash or other cryptocurrencies. 

The blockchain renders real estate investments much more versatile than before.  A seller doesn’t have to wait for a buyer who can afford the whole property to get some value out of it. Instead, it can be sold fractionally and reinvested in other assets immediately. 

Conclusion

Bitcoin and the blockchain have brought their share of innovations to the real estate business. While the technology is still in its early days, it has opened the doors to new investors and allowed seasoned entrepreneurs to diversify in the market. 

Thanks to increased transparency, security, and avoiding third party costs, we are certain to see Bitcoin become much more important in the real estate business in the upcoming years. 

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