Recently, a house in South Carolina was sold as a non-fungible token (NFT). This is the first time in history that a house was directly sold through the blockchain system. A major feat in the real estate industry and the world of Web3, this transaction proves that blockchain can go beyond intangible digital assets and can contribute to the progress of how we handle and transact with real-world assets in different industries.
Web3, the third iteration of the internet, is already becoming a major platform for innovations for both digital and real world transactions. People can now use cryptocurrencies as a new payment method in stores, different industries can track their supply chain by recording it on the blockchain and automate the execution of their contracts, and many more.
Blockchain-based buying and selling of homes and the idea of NFT home ownership are only the start of how Web3 can spark a major transformation in the real estate industry. Web3 integration in the sector can provide accessibility and less hassle for homebuyers to purchase their homes in as easy as one click, which is far from the complex, costly and lengthy process that involves realtors, lawyers, lenders and other third parties.
As Web3 sets the stage for innovations in real estate transactions, we are listing some of the benefits and trends that we would likely see in the horizon, and how Web3 can further be an agent of change in the real estate industry.
The current NFT home ownership purchase is one step closer to a future where home deeds can be NFTs and traded within blockchain networks. Before the South Carolina house, a real estate company sold an NFT linked to the ownership of an LLC, which then owned a physical house in Florida.
Turning home deeds into NFTs may be more present and it is not far to becoming the trend moving forward as it gives homeowners the peace of mind of smooth and seamless transfer of real estate assets.
NFTs also appreciate in value over time the same way a property does. Having NFTs as a testament to home ownership will be beneficial as it consolidates and secures all the records, data and information regarding the house in the blockchain network, making it easy for the homeowners to look up information in one place, rather than having important ownership information held by the Registry of Deeds.
There are some people around the world who already use cryptocurrencies in purchasing their homes. But in the future, we see that Decentralized Finance companies or DeFi may play a role in the evolution of the home buying process. DeFi provides blockchain-based, accessible finance and banking solutions aimed at filling the gaps of the traditional banking system. DeFi firms can provide various home financing options available to more people.
Instead of getting a traditional mortgage loan, potential homeowners could do an initial coin offering, which is a type of fundraising in Web3 where issuers can issue coins for lenders or investors. Or they can do a mix of both with mortgage and funds raised from an ICO. These alternatives can empower people, especially young couples, to get their dream house by making the whole process of borrowing money faster, accessible and more efficient.
Smart contracts, with codes programmed to automatically enforce a contract agreement once terms are reached, can create more efficient real estate transactions. This automation eliminates potential errors and loopholes that can be exploited, and saves time and manpower doing administrative work in the settlement process.
Since it is self-executing, smart contracts also limit the need for convoluted third party involvement such as lawyers and brokers, resulting in smooth and straightforward transactions that cost much less than traditional real estate sales.
Decentralized Autonomous Organization or DAO is a blockchain-based organizational structure where members have voting rights through holding governance tokens. A DAO is usually formed by people coming together to work on the same purpose they are passionate about – usually present in blockchain-based ventures and advocacy-forward groups.
By forming a DAO, like-minded individuals can come together to compete with large real estate investment funds in acquiring properties, whether it is to foster competition, counter increasing prices, build something for their cause, or for other purposes. Read more about the pros and cons of DAOs, and find out if it is applicable to your industry or venture.
Metaverse (aka virtual worlds), virtual reality and augmented reality are all known for providing unique and exhilarating real-time digital experiences for users to appreciate visuals of digital project offerings, wherever they are in the world.
Instead of the traditional pictures, videos and open houses, homebuyers can tour the houses virtually through metaverse and VR/AR. The concept of virtual touring of homes itself is not new. But instead of only rendered images and 3D models, the house can be toured inside metaverses by the users’ avatars, which allow homebuyers to have a feel of all the features of the home.
Metaverses and VR/AR are seen to become the host of the next wave of innovations in the world of Web3. Top companies are scurrying to create their own metaverses, come up with digital assets accessible inside various metaverses, or just be a part of it in some way. It may be worthwhile for real estate developers and builders to look at using the metaverse to reach out to their target audiences, especially to younger audiences who are digital natives.
Gigster helps out companies wishing to explore opportunities in the world of Web3. We provide a team of skilled professionals in Web3, to both aid in the creation of Web3 ventures and educate organizations on all things Web3. As the trend moves toward enabling seamless transactions around the world, Gigster is there to guide forward thinking companies on their journey to create disruptive and responsible Web3 projects which are beneficial for their respective industries.