How blockchain and cryptocurrencies affect the real estate market

Shortly before she started investing, she had an experience that showed the power and availability of digital currencies. She and her brother went to Cuba with cash in hand. They thought they had enough for the entire trip, but the money ran out sooner than expected.

Smith recalls the painful process of accessing more money, mentioning that the transfer took days and required a Cuban citizen to come to her for cash, further delaying access to her money.

“I opened my eyes. If I only had the password, it would have been for me,” she adds.

The access and transparency of cryptocurrency, or crypto, captivated Smith from the start, and she has long felt that this innovative financial technology could transform the real estate industry. She has since advocated for more real estate professionals to pursue crypto.

Natalia Karayaneva, founder and CEO of Profile, a real estate trading platform that is a participant in the NAR REACH accelerator program, says her company is proof that change is already happening.

Profi has already completed more than $4 billion in blockchain real estate transactions. The company recently fully transferred ownership of a condominium in Tampa, Florida, in 15 minutes. The process provided transparency that traditional real estate transactions don’t provide. Everything from reviews to offers were available online.

While blockchain, crypto and non-functional tokens are still something new to most real estate agents, Smith thinks it’s important to take the plunge into the new era of finance.

A brief introduction to Fintech and digital currencies

For newcomers, the new wave of trading with blockchains, cryptocurrencies and tokens can be overwhelming. If digital technology has never been studied before, the term seems strange.

Fintech, financial technology, is defined by Columbia University as “a term that encompasses anything related to software, mobile applications and other technologies created to improve and automate traditional forms of finance for both businesses and consumers.” Fintech can include everything from simple mobile payment applications to complex blockchain networks that accept encrypted transactions. These include transactions such as depositing checks using a smartphone, funding startups on online platforms such as kickstarter, or using digital money.

Here are some key terms you may hear when it comes to digital currency and the world of digital sales.

Cryptocurrency-Smith says that these digital forms of currency allow transactions to be verified and recorded by decentralized systems using encrypted databases rather than by centralized institutions such as governments. Digital currencies are bought and sold online and are not as tangible as paper dollars or coins.

The best cryptocurrency systems include Bitcoin, Ethereum, XRP, Cardano and Litecoin. Digital money can now be used as a virtual form of cash to pay for many things, including homes.

Blockchain is the technology that enables the existence of cryptocurrencies. Smith says it is an immutable exchange mechanism that facilitates the process of recording transactions and tracking assets on a business network. For example, when you decide to purchase a 100 bitcoin asset, the transaction will lock 100 bitcoins into the corresponding digital currency chain, along with all other transactions that have occurred using that currency.

Assets can be property, cars, cash or intangibles such as intellectual property, patents, copyrights and brands.

NFT nonfunctional tokens are unique blockchain-based assets that represent items such as art, music, videos and real estate, Karajaneva said. “NFT is fully compliant with U.S. regulations,” she says.

What makes cryptocurrency and blockchain attractive in real estate

Karajaneva, a 15-year real estate expert, was frustrated with traditional real estate transactions that were time-consuming and likely fraudulent. She wanted something better, safer and faster for all parties involved. But at first, she didn’t think this kind of fintech was the answer.

“In fact, I interviewed reporters three years ago, and they said it was impossible to get a deal like this done in the next 10 to 20 years,” she says.

Karajaneva says she was surprised at how quickly technology has evolved. Improving your home-buying experience in just a few clicks is a big accomplishment.

The Tampa condo deal is an example of the ease and speed with which real estate transactions can be completed using blockchain and NFT. Karayaneva is complemented by Propy’s new NFT trading platform, which gives all traders the ability to view the process in real time.

Smith credits the rapid movement of completed transactions across the blockchain to the lack of credit and identity requests. Unlike traditional financing, cryptocurrencies don’t use this process to buy assets.

“They only see your collateral. It opens up a whole new world of buyers. “She adds. “You’re no longer judged by your credit score or identity verification.

There are many people who are afraid of cryptocurrencies because of their unpredictability, but there is also a type of cryptocurrency called “Stablecoin” that reduces risk.

The Tampa condo sale was completed using USDC, a stablecoin pegged in value to the U.S. dollar, to limit risk.

How can blockchain and cryptocurrencies make home ownership more affordable?

While there is more risk when identity and credit checks are not completed, the use of cryptocurrencies and blockchain opens up the real estate world to a pool of buyers who may not have been eligible.

For example, some companies lend cryptocurrency users up to 50% if their collateral is in bitcoins, a certain type of cryptocurrency. The same person may not have been eligible for a traditional loan due to a lack of credit rating or tangible collateral, but cryptocurrencies open up their options.

Smith believes that even without a credit check, more and more debtors will join the blockchain and cryptocurrency movement. She says lenders will charge higher interest rates from 8 percent to 10 percent, but people will pay that amount.

Even though the real estate market is slowing, prices are still high and competition is still fierce. For example, according to Smith, from 2020 to 2021, 100,000 people moved to Dallas. You may not be able to compete with cash buyers or get a loan because you don’t have a down payment or a low credit rating. Paying a higher interest rate is not a deterrent for people who want to buy a home but couldn’t because of market conditions or because they don’t qualify for a mortgage in traditional terms.

“If lenders are only looking at your mortgage, it’s a whole new world of buyers. They won’t be judged on credit scores anymore,” she adds.

How Real Estate Professionals Can Learn About Blockchain Sales

New and intangible things like passwords are scary, but the Internet was once considered new and intangible.

Smith says getting rid of fear starts with learning more about how blockchain and cryptography work. That’s why she’s spreading the word.

At the Phoenix Broker Summit in April, Smith talked about the basics of blockchain and cryptocurrencies and how they are used in the real estate market. When she started learning about this type of fintech, she spent as much time as she could searching podcasts, articles, YouTube videos and anything else she could find in her research. Smith encourages others to do the same.

Karajaneva says Propy offers a crypto-certified agent course. Seven sessions of 30 minutes each explain cryptocurrency trading in the housing industry. There are currently more than 1,000 real estate professionals nationwide. She says these agents share their knowledge with agents who first learn about the process during an online session every Friday. Karajaneva also told CoinDesk about updated information.com and Cointelegraph.I suggest looking at sites such as com.

Both Smith and Karajaneva believe that blockchain and cryptocurrencies will continue to change the real estate industry. For that reason, the more industry experts understand how they work, the better.

“Blockchain is a huge phenomenon that will change our world,” Karajaneva says. “It’s already happening, as the Internet has done. It will fundamentally change finance, real estate and other aspects of our lives.”