Why is Real Estate embracing Bitcoin and Blockchain Technology?

Why is Real Estate embracing Bitcoin and Blockchain Technology?

Photo by Shubham Dhage on Unsplash

It’s not uncommon for a mortgage application to involve dozens of entities on three or more continents. The platform has features like high compatibility with all devices, a massive range of trading tools, and many more. Though the industry is evolving to achieve efficiencies, these factors make absolute trust in every party involved difficult. If you are into digital assets, you may check about Bitcoin vs Altcoins

A bitcoin can exist without any paper money backing it up but instead relies on mathematical calculations to earn trust from other users who are also running the same calculations. In a world where trust is an imperative factor, blockchain technology has the potential to bring transparency and security to the industry. In addition, it can encourage efficiency by removing unnecessary steps or even reduce costs by eliminating go-betweens.

Blockchain technology has been explored in real estate for the past couple of years and is gaining a foothold in the industry. However, as of late, the share of banks exploring investing in the blockchain has dropped significantly from around 55% (2017) to less than 20%, which requires banks to look for alternative solutions.

Real estate solutions connected with blockchain technology are not just limited to realty as a service provider but also include lenders, brokers, escrow agents, and title companies. The example of these institutions are listed below:

A. Real Estate Investment Platforms

A blockchain-based online real estate investment platform allows investors to invest in the US, UK, and Australia and generate income from the platform through dividends. These companies have attracted a significant portion of their investors from the cryptocurrency community, who were looking for platforms where they could invest in real estate. While many investment opportunities in the real estate market are available only to accredited and institutional investors, these startups enable small and large investors to invest through cryptocurrencies like bitcoin and Ethereum.

B. A Blockchain-based mortgage solution

One of the blockchain-based solutions that provide an opportunity to obtain a real estate loan with the prediction of credit risk by using artificial intelligence models to judge personal and financial creditworthiness, improving the lending process is extremely common in real estate.

C. Blockchain title transfer technology

One of the biggest hurdles for home buyers and sellers is closing on time when purchasing a home. Title companies are responsible for managing the clearing and settlement of properties across state lines. At times can get delayed due to various reasons, including human errors, delays from government records, or covering costs related to any issues discovered during a title search. Carrying a blockchain-based title transfer technology can eliminate errors and fraud and ensure that the process is completed on time and cost-effectively.

D. Blockchain Escrow Services:  

Blockchain escrow services hold funds or cryptocurrency in escrow until certain conditions are met by the parties involved in the transaction, ensuring that both parties are protected from each other’s actions. As a result, both real estate sellers and buyers can take advantage of a blockchain-powered escrow where transactions are possible through cryptocurrencies with less chance of security threats for all parties involved.

E. Smart contracts:  

Using blockchain technology, smart contracts provide a way for two entities to agree on a future transaction regardless of where and when it occurs, minimizing the risk of error and third-party interference. Smart contracts are written in code that defines the rules and penalties around an agreement that must be executed precisely.

F. Cryptocurrency Lending Platforms:  

A lending platform on blockchain leverages cryptocurrency holders’ assets as collateral to provide short-term liquidity to those in need. It is designed to be as secure as one’s property and can make loans at rates lower than the traditional banking system for those with cryptocurrency.

G. A Blockchain-powered home insurance company:

One of the other technologies that can benefit the real estate industry is blockchain-powered home insurance companies. The idea behind blockchain-powered home insurance is that it provides excellent benefits for both consumers and providers of insurance services, such as, for example, better customer service and data protection than a traditional insurance company could provide. There are startup companies developing solutions for the real estate industry based on blockchain technology.

It intends to solve the problems by underwriting and insuring various complex risks in the real estate market, such as property damage, natural disaster, etc. These potentially costly risks may lead to the extremely high cost of insurance. The technology behind these startups uses artificial intelligence to judge clients’ credit risk without involving any third parties but by using neural networks and genetic programming algorithms.

Real estate transactions are fast and relatively low, making it ideal for digitally transferring assets over a distributed ledger. In addition, the lack of intermediaries between the two parties makes it easier for the parties to use the platform to verify and authenticate the transaction, track and monitor their assets, and perform other operations via remote access.

Every day, more real estate transactions are recorded on blockchain technology, including complex deals such as mortgage loans or tenancies. In addition, various organizations use blockchain technology to create a network where homes or commercial properties can be sold, rented, or exchanged through encrypted intelligent contracts.

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