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Posted on Mar 20 2020,11:09 am
How the Blockchain will affect investment process and real estate?
How the Blockchain will affect investment process and real Estate?
The blockchain is breaking as one of the most disruptive technologies and promising for the future of transactions and therefore also the online investment .
Investing in housing , in other processes or acquiring real estate through this technology will be a reality thanks to this 'blockchain'. We explain how:
Cryptocurrencies, the money used in blockchain
There are several types of virtual currencies, but the best known is Bitcoin. This coin was created in 2009 under the pseudonym Satoshi Nakamoto . Soon its popularity increased along with its value.
Can I buy a house with bitcoins?
The answer is yes . In Spain, payment by bitcoins is legalized and some real estate agencies accept them as a currency, but it is still a 'cumbersome' system since, since it is not an official currency, the value has to be changed to euros. The transaction for the acquisition of part or of the entire house through bitcoins has to be carried out before a notary . This will certify the amount delivered and the documentation, which must appear in legal tender (euros) and thus avoid any suspicion of money laundering. On the other hand, since it is a fluctuating value, if at the time of the transaction the price of bitcoin rises and profits are obtained, the real estate agent must pay it.
And what will the blockchain guarantee?
To summarize in a very simple way the blockchain , it is like a large account book where each and every one of the operations appear digitally registered. Each information management and update will be reproduced equally in each of the multiple nodes (computers or hard drives) that store the information, which guarantees unprecedented fairness, veracity and transparency in all data. The operations between company and user will be carried out through a 'smart contract' or smart contract that will be encrypted and can be modified or signed by means of a digital certificate. All this will imply that the figure of notaries, lawyers or other managers involved in the sale and purchase process of, for example, a property is not necessary.
Digging deeper into smart contracts
The smart contract was born between 2013 and 2014. Initially, they were programmed to carry out a transaction between a
User A who requests the services of a user B.
When B ends the services,
A accepts that the funds be released and paid to B If you disagree, within 7 days a 'judge' will make a verdict to agree with A or B.
It was not until 2015 when the full potential that smart contracts could have was known . In that year the first transaction was made with Ethereum, another of the most popular cryptocurrencies. Ethereum made its blockchain chain available so that others could develop decentralized applications (known as dApp).
This fact was a technological milestone since it allows todevelop blockchain-based applicationswithout having to start from scratch, saving costs and technical, financial and logical barriers, and opening the panorama to be able to create new cryptocurrencies.
The applications decentralized have as an open source features a BBDD protected by a public blockchain and its own token to access the application. In the case of Bitcoin, Bitcoin (BTC) is its token and in the case of Ethereum, Ether (ETH), it is its token.
The author of the book 'The business blockchain', William Mougayar, defines the token as “a unit of value that an organization creates to govern its business model and give more power to its users to interact with its products, while facilitating distribution and distribution of profits among all its shareholders ”.
A token can represent from a DNI , to an insurance policy, a credit or a property right, for example. Therefore, dApps can issue tokens which represent what the dApp promoter and its community agree on.
Token, ICO and Smart Contract, the future of investment
The combination of these three factors will be the future of the investment. You already know the Smart Contracts and tokens, now we give you a brief brushstroke about what ICOs are:
ICOs (Initial Coin Offering) are financing prior to the creation of a cryptocurrency.
The advantages of making an ICO are multiple, both for the ICO promoter and for its investors.
Among the advantages for the promoter: An ICO offers a scalable financing solution , added to the 'momentum' that ICOs now have in general.
Being able to offer much smaller amounts of investment than through traditional channels thanks to its scalability, the number of investors that can be used is much greater.
It allows linking the promoter's future market with the project, giving a representative sample of its potential.
Being a decentralized model, it eliminates intermediaries , having a superior scalability compared to centralized models.
Among the advantages for the investor:
By being able to go with very small investment amounts, an ICO makes it easier to diversify the investment portfolio .
Since tokens are listed on exchange houses, the investor will always know what their token is worth and will be able to liquidate it whenever they want.
While the collection is taking place, the developer will normally use a Smart Contract in the similar way as an escrow account (deposit accounts for the purchase of companies where part of the deposited price is in guarantee) to block the funds. In this way, the investor has security regarding the destination of his funds.
As you see, cryptocurrencies, blockchain, investment and real estate are closely linked with each other. Investing in an ICO for the creation or development of cryptocurrencies and acquiring real estate through them through smart contracts that guarantee security on both sides may be the future where the real estate sector is established.
Stay tuned to our blog to be informed of all our news and consult our real estate guide to find out everything you need to know about the sector.