What if buying a piece of real estate wasn’t a complex and time-intensive process? Dealing in real estate typically involves interacting with an intermediary, swimming through paperwork, and paying steep fees and commissions.
Even with the latest advancements in technology, many jurisdictions still require real estate buyers and sellers to show up in person to execute their documents. Most often, this is due to notaries being required to see people physically sign documents, and while some notaries can do this task virtually, not all have the same capabilities.
Now, with the help of cryptocurrency (specifically NFTs and smart contracts), the trajectory of real estate transactions is rapidly changing. We’re talking about taking out the middleman and obtaining and transferring ownership with ease. Sales can even be made through sites similar to eBay, but with a new level of added security.
In this writing, we will be specifically focusing on crypto’s effect on the luxury real estate market. But first, let’s start with the basics—how NFTs and smart contracts work.
What is an NFT?
NFTs, short for non-fungible tokens, are cryptographic tokens that can come in the form of many things (e.g., music, drawings, videos). Each NFT is 100% unique and cannot be replicated or replaced. Many times, NFTs represent digital ownership of something, such as a piece of digital art. In other instances, they can be representative of a physical item, such as real estate property and memberships.
NFTs use blockchain technology to maintain their verifiability and proof of ownership. Theoretically, the actual digital file that an NFT lies on can, in fact, be copied, but this does not mean that someone has taken over ownership. The culprit would need access to the smart contract that’s attached to the NFT as well. Moreover, they would have to be able to alter the smart contract that has been recorded on the blockchain, which is virtually impossible to do.
What is a smart contract?
Smart contracts are self-executing pieces of code built to facilitate a transaction. The transaction automatically resolves after pre-defined conditions have been met. The contracts are coded into the blockchain and maintained by regulators after recording them.
They are binding contracts that do not require the interference of a central authority or legal system. Because of this, they’re much more cost-efficient. After all, attorneys, realtors, and appraisers…
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