Real estate is one of the world’s oldest forms of investment. What happens when you pair land and buildings with cutting edge technology like “blockchain”? Some of the most innovative real estate investors are experimenting with this technology. Many investment opportunities will be created in the coming years with this technology.
Blockchain is like a database except that it is publicly controlled.
Most databases are controlled by the owner of the database. For example, when you log into an online banking portal and view your account records, you are using a database. But the contents of that information are entirely under the control of the bank. Obviously, this is for very good reasons. Disaster would ensue if other customer’s accounts were in full view or if users could add a few zeros to their account balances.
A database operated on a blockchain is public in that it allows data to be shared and stored globally on thousands of servers. Anyone on the network can see everyone else’s entries in near real-time. One advantage of a public database is that any business or individual using the network has access to all the data and can use the data for business purposes. The data can be trusted because no single user or group can gain control of the network.
How can a technology like blockchain and be paired with a physical asset like land? One way is through tokenizing real estate assets. Property interests of any kind can be conceptually divided into any fraction. For example, I can imagine that a commercial building is made up of a fraction of 100/100ths or 10,000,0000/10,000,000ths of a whole. Blockchain technology can enable trading of fractional shares through “tokens” on the blockchain. Tokens are freely tradable on the blockchain network without going through any intermediaries. Any kind of property interest can be tokenized including a single property, a pool of properties, or income streams from property.
One benefit of this technology is the ease in which partial interests in real estate can be traded. Imagine buying or selling a small fraction of a real estate investment with the same ease as purchasing a home appliance on a credit card. The exchange can be made in whatever fractional amount you want. These kinds of real estate deals are where the initial experiments are occurring. Countless other applications will be found in the future.
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