Cryptocurrency: What you Need to Know & How it’s Impacting Commerical Real Estate
Cryptocurrency is a hot topic amongst investors, entrepreneurs, and essentially anyone involved in technology, business, and/or finance. The use of cryptocurrency is expected to spread into the real estate sector in the coming years. The rise of this digital payment isn’t surprising, given the number of companies that now accept it for goods and services. In fact, legendary entrepreneur Mark Cuban made headlines when he announced that dogecoin, a popular form of cryptocurrency, can be used to pay for tickets and merchandise online for supporters of the Dallas Mavericks, the NBA team that he owns.
PayPal recently announced the launch of Checkout with Crypto, a feature that allows consumers to check out at millions of online businesses using cryptocurrency. According to Tech Crunch, the feature expands on PayPal’s current investments in the cryptocurrency market, which includes its partnership with Paxos to power its service that allows customers to buy, sell and hold a range of cryptocurrencies, a move that could significantly boost the use of digital assets in everyday commerce. However, cryptocurrency is difficult to navigate given its volatility and is not without risk. The rollercoaster ride of cryptocurrency is the price it pays for its limited supply and its lack of a central bank.
So, what exactly is cryptocurrency?
According to Forbes, Cryptocurrency is decentralized digital money, based on blockchain technology. You may be familiar with the most popular versions, Bitcoin and Ethereum, but there are more than 5,000 different cryptocurrencies in circulation. You can use crypto to buy regular goods and services, although many people invest in cryptocurrencies as they would in other assets, like stocks or precious metals. While cryptocurrency is a novel and dynamic asset class, purchasing it can be risky as you must take on a fair amount of research to fully understand how each system works.
How does cryptocurrency work?
As explained by Nasdaq, a cryptocurrency is a medium of exchange that is digital, encrypted and decentralized. Unlike the U.S. Dollar or the Euro, there is no central authority that manages and maintains the value of a cryptocurrency. Cryptocurrency runs on blockchain technology, which is simply a digital ledger of transactions. This ledger (or database) is distributed across a network of computer systems. No single system controls the ledger. Instead, a decentralized network of computers keeps a blockchain running and authenticates its transactions.
How Cryptocurrency is impacting real estate
One of the most impactful aspects of cryptocurrency on the real estate market is the way in which new platforms are being provided for sales. By eliminating the bank middlemen, buyers and sellers can connect in real time, significantly speeding up the process for transactions. The blockchain enables transactions with new online marketplaces or trading platforms like ATLANT, which allows properties to permit asset trading online.
By reducing real estate fees and enhancing online security, the blockchain helps encourage investment in real estate. Cryptocurrency is also opening the door for fractional ownership. Rather than saving a larger chunk of upfront funds to acquire a property, investors could potentially buy and sell fractions of their real estate tokens instead. This would bring the property market closer in line with how the stock market works. Additionally, the cost of processing transactions on the blockchain will be much lower than they are currently. The use of a decentralized blockchain network in CRE will also cut out costs incurred while using more centralized network costs. Inspection costs, registration and loan fees, and even property taxes could be reduced, or possibly eliminated.
Cryptocurrency offers a plethora of new opportunities in a variety of industries, including real estate. Now that you know more about cryptocurrency and how it is impacting real estate, you can decide if investing in crypto is right for you and for your business. Of course, with new and exciting opportunities comes new risks. For example, commercial real estate companies and investors must take additional steps to ensure they are protected against theft and hacking. Furthermore, cryptocurrency is not yet insured by insurance companies, so it is extremely important to do your research before investing into crypto.
If you’re interested in learning more about Cryptocurrency, here are some links to resources to dig deeper into this emerging digital payment method.