New technology brings new innovations and applications. We have seen blockchain technology and its uses revolutionize a number of industries from sporting memorabilia to government processes. Among these new technologies to emerge from the blockchain are non-fungible tokens (NFTs). So, what are NFTs, and what is NFT real estate? Let’s take a look.
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What are NFTs?
Before we investigate how an NFT can be used in the real estate context, we must first understand what NFTs are. As previously mentioned, NFT is the abbreviation for non-fungible tokens, a technology made possible by blockchain’s decentralized ledger technology.
The term fungible refers to a good or commodity whose units are interchangeable, and each part is indistinguishable from the other. For example, if you have a piece of pure gold, it’s considered fungible because another piece of pure gold with the same weight is considered equivalent to your piece, even if one is solid and one is liquid. We also see this principle when we talk about cryptocurrencies: though the value of Bitcoin fluctuates, one Bitcoin carries the same value as another Bitcoin because they are alike.
When something is non-fungible, it means that the assets are not interchangeable. For example, if you were to lend your friend your car, but the car he returns to you is a different car—even if it is the same make and model as your own—you probably wouldn’t be very happy with your friend. That’s because cars are not fungible when it comes to ownership.
When we talk about tokens in the context of blockchain, we’re talking about the process of converting something of value into a digital token that’s usable on a blockchain application. A tokenized asset can either be tangible—like a house—or intangible. Because a token always serves as a reference to the original data, that data can be distinguished, differentiating one token from another. In other words, they become non-fungible!
NFT Real Estate
As previously mentioned, a tangible piece of property like a home can be tokenized and sold as an NFT. But why would you do that? One of the major downsides of real estate investment is the hassle of transferring property ownership from the buyer to the seller. It takes an extraordinary amount of paperwork to buy a property or to open an equity line. With an NFT, the process is streamlined, allowing the buyer to quickly assume ownership of the property in minutes.
You may be wondering if such a transaction is susceptible to cyber fraud. One of the trademark qualities of smart contracts and the blockchain network they’re built on is the high levels of security and data integrity they provide. This protects both buyer and seller and makes it easier to transfer assets with minimal security risk.
NFTs streamline the transfer process of home titles.
How Does it Work?
Selling real estate as an NFT requires necessary legal preparation (often requiring legal counsel with experience with blockchain); staying within the limitations of the law must, of course, be a priority. Once this has been prepared, you can “mint” your NFT with descriptive and legal data about the property and uploaded to a website called an NFT Marketplace, where potential buyers can bid for the NFT—and therefore the house—using either cryptocurrency or fiat (which is traditional paper) currency. Once the funds have been released, the NFT and the ownership of the house is transferred into the buyer’s crypto wallet.
NFT Real Estate for Real World Transactions
When we talk about using blockchain-related technologies in the real world, we’re often forced to speculate about future applications. Relatively speaking, blockchain is a very new technology—first hypothesized in the 1980s and only coming into our collective consciousness when Bitcoin emerged in 2009. The good news is that when we talk about selling a piece of property as an NFT, we’re talking about developments that have already happened!
In February 2022, a Florida home was auctioned as an NFT for an equivalent of $650,000 in ether—which is believed to be the first transaction of its kind. Be sure to check out the story here!
As innovators in the homebuying space, we believe that leveraging blockchain, smart contracts, NFTs, and other technologies will revolutionize the home buying and real estate industry. The team at Millennial Blockchain is committed to pushing the technology to new heights and we’re excited to be a part of its adaptation in the market.