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The new trend is likely here to stay, so learn the how and why behind cryptocurrency real estate purchases.
Key points
- The Miami Beach penthouse that sold for $22.5 million in cryptocurrency tells us something about the power of blockchain technology.
- Smart contracts simplify the buying process and simultaneously increase the speed and safety of the home-buying process.
Blockchain technology is increasingly moving into more and more aspects of our lives. And the real estate market is not immune to this. Just last year, the most expensive penthouse in Miami Beach sold for $22.5 million — all in cryptocurrency. That alone may cause jaws to drop but the truly amazing part of this story is that the closing process only took 10 days from start to finish. And therein lies the appeal of making large real estate purchases using cryptocurrencies such as Ethereum and Bitcoin.
Cryptocurrency in real estate
The uncertain nature of cryptocurrency could create initial resistance to the already unpredictable (and sometimes volatile) realm of real estate. Real estate investors already have enough conjecture to do in the housing market alone, why add to it by buying in cryptocurrency rather than cash? For one thing, cryptocurrency has now been around long enough for investors to see it is indeed a legal and legitimate way to make purchases and investments. But even if crypto is here to stay, what advantages does it offer as opposed to U.S. dollars?
Why buy real estate using cryptocurrency?
It’s important to recognize that a primary value of cryptocurrency is the technology that runs it. For instance, most cryptocurrency transactions are carried out using smart contracts. A smart contract is, of course, a contract of a transaction between two parties, but it cuts out the middleman of a bank or the government, by writing the terms of the agreement directly into lines of code. These codes, and therefore the agreements they contain, are permanently documented on the blockchain network. So the transactions can take place safely and directly, yet without the need for a centralized system to facilitate them (and of course, charge a fee).
This technology is the real advantage of buying a home with Bitcoin or Ethereum rather than money through a traditional bank. As mentioned earlier, the Miami penthouse purchase process took only 10 days. This streamlined speed and safety are appealing to real estate investors. The smart contracts involved do not require a third party, they are automatically and eternally recorded in the blockchain, and this fluidity of transaction information improves cost efficiency across the board. The money (in tokens) is transferred directly from one wallet to another.
We are seeing this technology being used more and more, and all indicators point toward it not only sticking around but growing.
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