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Bitcoin. Blockchain. Cryptocurrency. Digital money. These are the buzzwords of 21st century finance and technology. They are making rapid inroads into every business and, according to some estimates, will become as mainstream as cash and credit cards by 2030. Are we in the real estate sector ready for this paradigm shift in the way we do business?
If you’re not up on each of these terms, let’s start with a few definitions. Digital money is any currency that can be transferred electronically from one party to another. Cryptocurrency is a type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. It operates independently of a central bank. Bitcoin is the best- known type of cryptocurrency. Blockchain is the un-erasable record of cryptocurrency transactions maintained across several computers that are linked in a peer-to-peer network.
The biggest impact Bitcoin will have on real estate is its ability to securely and transparently track transaction histories. Even lease histories can be securely logged, with more privacy, to keep clear records for landlords and tenants.
All this is possible because of the technology behind Bitcoin. Without getting too technical, Bitcoin in “mined” using thousands f computers across the world in an open, transparent protocol of complex algorithms called blockchain. Every transaction on the blockchain is scrutinized by millions of “eyes” at any given time, so chances of fraud are infinitesimal. That makes it ideal for real estate transactions that can be worth millions of dollars in value.
Title insurance companies check the histories and record transactions. Both processes can be automated by blockchain technology. According to a recent study by Brickvest, over 50% of real estate investors expect blockchain technology to become the dominant method for recording ad tracking real estate transactions, including payments and title history.
The most important benefit of blockchain to the real estate sector is its ability to digitize real estate transactions, while at the same time, make the process completely transparent.