The founders of today’s most popular cryptocurrencies have spent the better part of a decade trying to convince the masses that their technologies have real world applications. If for nothing else, the sentiment regarding cryptocurrency is divisive at best. So is cryptocurrency the next big thing for investors? Or is it nothing more than a short-lived trend?

There’s one thing both sides can’t ignore: cryptocurrency is already starting to make waves in a lot of sectors, not the least of which is the real estate industry. In fact, today’s cryptocurrencies appear primed and ready to disrupt the real estate sector in a way that could change it forever.

WHAT IS CRYPTOCURRENCY?

Instead of serving as a tangible piece of currency, as their names suggest, cryptocurrencies are digital assets that have been assigned an arbitrary value. Cryptocurrency was intended to be used as a digital currency, as a replacement for fiat currencies (legal tender whose value is backed by the same government that issued it, not unlike the U.S. dollar).

As a digital currency, however, cryptocurrency isn’t a coin or even a bill you can hold in your hand. Instead, it uses encryption techniques to regulate the generation of currency and verify the transfer of funds over a highly secured blockchain network.

The most intriguing component of today’s cryptocurrencies, however, is widely believed to be the blockchain network many of their transactions are carried out on. Blockchains were specifically designed to host a decentralized marketplace; one where the transfer of funds may remain unanimous and protected by the highest of securities. In doing so, blockchains require every computer connected to their network to successfully confirm the impending transaction before it is granted permission to proceed.

In its simplest form, many blockchains act as a “smart contract” that doesn’t grant each part access to what it wants until predetermined criteria are met, not unlike an escrow company. In the end, blockchain makes it safer for each party to complete a transaction.

The whole idea behind using cryptocurrencies is to take advantage of blockchains. Not only are blockchains safer to conduct transactions on, but they will also decentralize the market and enable the use of a single, global currency.

HOW IS CRYPTOCURRENCY AFFECTING THE REAL ESTATE MARKET?

Nearly a decade old, the first cryptocurrency (Bitcoin) is still in its infancy; it’s true potential has yet to be unlocked. However, there’s a large contingent of investors that believe cryptocurrencies have the ability to alter the financial landscape as we know it. As it turns out, however, some industries have taken to cryptocurrencies sooner than others; specifically, the real estate sector.

That’s not all. Let’s take a look at some of the other ways real estate continues to be impacted by cryptocurrencies and their blockchain platforms:

• Get Rid Of Intermediaries: For as long as real estate has been bought and sold, every transaction has relied upon the synergy of several professionals: brokers, lawyers and banks (just to name a few). Countless individuals are involved in a real estate deal, not the least of which is responsible for an integral component of the transaction. That said, the evolution of blockchain may eliminate the need for so many people to be involved in a single deal, effectively cutting out the intermediaries. Blockchain platforms and smart contacts may eventually be able to assume the roles of those responsible for listing homes, writing checks and documentation. In doing so, buyers and sellers may be granted access to a smoother, quicker and more affordable transaction.
• Liquidity: Real estate transactions have become synonymous with lengthy closing tables. The sheer volume of paperwork that must be completed and amount of people involved in each transaction see to it that even the simplest real estate deals aren’t exactly efficient. Cryptocurrencies and blockchains may be able to shorten the amount of time spent on completing a deal, effectively making real estate a more liquid asset.
• Fractional Transactions: In the event real estate is eventually tokenized, there’s no reason buyers and investors couldn’t partake in joint ventures that result in factional ownership of properties. Blockchain could potentially make it possible for several investors to pool their funds in order to acquire a single property. Investors may be able to buy and sell fractions of properties (as tokens) with the use of an app. At the same time, blockchain may lower the barrier of entry and make investing more affordable for all.
• Trust & Security: As a decentralized platform, blockchain is one of the most secure technologies in circulation. Since information is so easy to verify, buyers and sellers will conduct business with much more confidence. Fraud, as we know it, could essentially become a moot point.

REAL ESTATE VS BITCOIN: FACTORS TO CONSIDER

Bitcoin has seen its rapid rise to fame culminate in an equally disastrous downfall. At its height, the first cryptocurrency was worth upwards of $20,000 per “coin.” However, relative uncertainty over Bitcoin’s capabilities have brought its price crashing back down to earth, and the leading cryptocurrency is now only worth a fraction of what it one was: just over $4,000.

At the very least, Bitcoin remains a volatile asset, due largely to the cryptocurrency’s slow adoption rate. There are those that remain pessimistic about Bitcoin, as they question whether or not an intangible form of currency actually has a place in the financial world. However, there’s also a large contingent that believes Bitcoin is the future. There’s no doubt that Bitcoin has potential, but it has yet to be realized, if ever.

Until then, real estate remains a promising asset. The benefits of a properly performing real estate asset are hard to beat. Real estate has not only proven that it belongs in an investor’s portfolio, but it has already demonstrated that it’s capable of awarding investors with a reliable source of income. For a better idea of how real estate stacks up against other assets, read this piece on the benefits of real estate vs. other investment opportunities.

SUMMARY

Cryptocurrencies, and the blockchain network, in particular, are relatively new technologies most people are still trying to wrap their heads around. Nonetheless, there appears to be a considerable amount of momentum supporting the development of cryptocurrencies. The real world applications appear almost limitless, and the real estate sector looks as if it could benefit sooner rather than later.

If speculation is remotely close, the housing sector could be in the midst of a significant disruption. From shortening the transaction timetable and simplifying the closing process, to increasing trust and security, cryptocurrency has the chance to make a meaningful impact. In fact, it no longer seems to be a question of whether or not they will change the face of the real estate industry, but rather when.