Blockchain Real Estate Welcome the STO
Bitcoin started it all. And as it gained exposure, there were more blockchains and coins to follow. Most people focus their attention on the coins, and if there is a rapid rise in the price. What most people do not think about is the underlying technology that exists, and which is what is really changing the digital landscape and how we move money around.
What everyone needs to focus on long term is the blockchain (distributed ledger) and the smart contracts that come with some of the blockchains. The reason this is important to focus on is because it will change how a large number of things are bought and sold. Most importantly, it will change how real estate is bought and sold.
Right now when you buy real estate, it is a very long drawn out process that takes weeks, even months. With the blockchain you can complete a deal in a fraction of the time of a typical transaction. The distributed ledger that makes up the block chain is like a network of computers that manage a database. So, imagine Google smart sheets, but instead of google controlling it, it is controlled by a large network of computers owned by different people. This allows a multitude of users to verify entries into the ledger, which can be much safer than one person verification.
In addition to the ledger are smart contracts. With smart contracts a number of different transactions can be automated. What is a smart contract? I will let Wikipedia help us with this one:
“A smart contract is a computer program or a transaction protocol which is intended to automatically execute, control or document legally relevant events and actions according to the terms of a contract or an agreement. The objectives of smart contracts are the reduction of need in trusted intermediators, arbitrations and enforcement costs, fraud losses, as well as the reduction of malicious and accidental exceptions.”
So smart contracts can automatically execute and govern legally relevant events such as a real estate transaction. This will allow great changes in how real estate is transacted. It will also allow flexibility in how and where real estate is transacted. This about the following: You own home, and it is governed by a smart contract that is on a blockchain and is governed by a token or coin. You want to sell it. Rather than going through the long process of the traditional real estate sales process, you engage in a new process. You meet a buyer at the property and you both open your phones and scan a QR code and sell the property. All relevant issue such as loans, deeds, liens, etc are all on the block chain and when you scan the barcode the property is transferred to the buyer and all the relevant information is settled instantly. Now, that is a simplified version of what can happen, yet it will be possible.
Now, enter the next evolution in smart contracts: STO’s. An STO is a Securitized Token Offering. Think about it as buying a stock in a company or a share in a building. It can instantly be transferred and it is all stored on the blockchain. Then that contract can be bought and sold without the original issuers permission. This will not only change the way real estate (and other items) are bought and sold, but it will also change how real estate is invested in. You can buy into an apartment investment group and you can cash out whenever you want.
No longer will you have to stay invested in a deal until the property sells. If you need your money out, you just sell it to another investor. They might be a part of the original group, or might be a new investor. If you do not like how the property is being run, you can sell. You have so many options with an STO.
The STO marketplace is still in a bit of infancy. The first project was done in 2018. So, in 2021, we are still gaining traction, yet the software and other necessary pieces to the puzzle are rapidly evolving and the entire sector is picking up steam. The final phase will be investor adoption and then it will really change the way real estate is bought and sold forever!
Want to learn more about real estate Investing? Visit our education section.
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