If you’ve ever bought a house, condo, or co-op, you’ll know it’s a major process. Many joyful buys took a good deal of trudging through weeks of stressful communication challenges. The journey was loaded with people, paperwork, and fees. Why do we put ourselves through it? Because getting into the market is a key wealth-building method.
But could there be a better way?
Tokenization seems ready-made to simplify real estate deals. To say an asset is tokenized means it’s represented by a token on a blockchain.
Just Hype? Take Another Look.
Except for some small, pilot-style projects, you might argue, blockchain for real estate doesn’t amount to much so far. And that’s true. Developers, agencies, and the financial world all need to be on board if tokenization of real estate will go mainstream.
But saying “it can’t be done” doesn’t seem to be interrupting the people doing it.
A well-established project named Chainlink aims to jumpstart tokenization. The Chainlink network, built on the Ethereum blockchain, can place tamper-proof data onto smart contracts. Now, it’s working on linking up real-world assets — homes included.
The hoped-for payoff? An efficient, safe, and transparent method for real estate deals.
Still skeptical? Consider that even SWIFT, the international banking system’s very old transfer system, is going on blockchain… with Chainlink. Collaborators include BNY Mellon, Citi, and Lloyds.
“Zero-Knowledge Proofs” Can Ruin a Fraudster’s Day.
Blockchain’s inherent security features make tokenization an especially compelling idea. Tokenization of a property could avert deed fraud.
That’s because smart contracts will only accept and execute approved transactions between verified sellers and buyers, mortgage lenders, escrow companies, and so forth. Smart contracts rely on verifiable data so people aren’t taken in by fraudsters.
Chainlink uses zero-knowledge proofs to verify real property details, too.
Why call them zero-knowledge? Because these proofs enable verification without compromising people’s financial histories and identities.
Non-Fungible Tokens: Destined for a Key Role.
Non-fungible tokens, or NFTs, are tokens that aren’t fungible — meaning they aren’t used as shares to be traded. Instead, they stand for particular homes. Using the NFT market, people may buy homes without long waits heading into closing.
Key title information is etched into the NFT. Chainlink includes self-updating features. This means an NFT will always hold valid details about:
- The age and condition of the property.
- Records of upgrades.
- Rental values for a property.
- Liens, other claims, and other factors potentially affecting the property value.
- Details of past sales.
So, this is not just about quick, efficient deals. More important, it’s about buyers knowing what they are getting, without having to rely merely on seller disclosure forms. An NFT can hold visual material. Over time, it builds the detailed story of a home’s changes over the years.
The NFT can take investor-ownership to the next level, too. It can unwrap the value of a home as a rental property from the value of homeownership itself. So, the NFT could represent the right to rent payments — and people could buy and sell these rights.
Looking Ahead, as the Future of Real Estate Unfolds…
In the future, owning an NFT for real estate could have the same significance as holding title. Tokens could be transferred from person to person, to hasten the process, increase the parties’ access to knowledge, and shrink the costs of closing on a home.
Ernst & Young says notarization and transfer taxes could be “technically obsolete.” As closing costs come down, we can hope for a more inclusive real estate economy. That would be good news indeed for those sidelined today.
Please note: This article is offered as general information to our readers. It is not financial advice. Deeds.com is not affiliated with any companies or projects discussed on this website.
Thanks for taking this brief tour with us on the evolving potential of real estate!
Supporting References
Chainlink via X/Twitter.com (Jan. 21, 2024; discussing the Real World Asset, or RWA, trend).
Chainlink via Chain.Link: What Is Tokenized Real Estate? (updated Jan. 12, 2024).
Víctor Alberto Delgado Guillén for Altcoin Buzz Pte Ltd: Chainlink’s RWA [Real World Asset] Push: Real Estate as dNFTs With Zero-Knowledge Proofs (Jan. 22, 2024).
And as linked.
More on topics: Tokenizing real estate, proptech
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