While the real estate industry has expanded over the years, many investors still struggle with assets’ authentication and ownership claims. Thus, when real estate was presented in digital forms, developers aimed to solve real estate transparency issues through blockchain technologies. Even though NFTs seem to be gaining recognition only in recent years, it has the power to improve virtual real estate’s transparency and accessibility.
NFTs provide authentic ownership of digital assets by storing metadata on blockchain. This yields a real estate marketplace where people can share properties, and distribute profits based on allocated fractions.
In this piece, you will learn more about NFTs’ role in improving virtual real estate experience. These roles include exclusivity, uniqueness, transparency, effectiveness, timeliness, authentication, and many more.
What is an NFT Marketplace?
An NFT (Non-fungible token) marketplace is simply a platform where people can buy, sell, or trade digital assets. It’s an avenue for creators to showcase their works, which could be music, art, videos, or collectibles. These digital assets are transferred in the form of tokens, which is referred to as NFTs. Examples of NFT marketplace where people exchange assets are SuperRare, Axie Marketplace, OpenSea, Niffy Gateway, and Rarible.
Since NFT is built on blockchain technology, it’s integrated into virtual real estate to validate and safely secure proof of ownerships.
Once a token has been burned onto the blockchain, it provides the buyer of the NFT with a failsafe proof of ownership that can be verified in the public domain
CEO of Brand3D, Hans Hansen.
NFTs Impact in Real Estate Industry
The process of buying and selling properties have become easier with blockchain technology. Not only that, below are other four ways in which NFT impacts the real estate industry.
- Increased level of transparency: One of the major downsides of traditional real estate is minimal security and lack of transparency. Your title deed or documents could be lost, altered, or even forged. Since all NFTs transactions are recorded on blockchain, it guarantees a tamper-proof real estate environment. Ownership history and transactions can be traced to validate buyers’ claims. This helps investors to trust in virtual real estate better, with the hope of getting a high return on investment in the future.
- Increased accessibility: NFT increases real estate accessibility, by providing every individual access to diverse properties, irrespective of the social class. This generates huge liquidity in real estate, and unrestricted information about cash flow and building valuations. Thus, you can easily determine if a property will yield the expected ROI or profit. This saves time and huge estimation costs associated with traditional real estate.
- Encourages wealth distribution: NFTs will encourage wealth distribution across the crypto ecosystem by allowing traders to tie their wealth to digital assets. This solves the challenges traders encounter with high rates of crypto volatility. Thus, NFT creates a balance system where users can protect their assets during crypto unfavorable market conditions. It also encourages new crypto traders to come on board, without the fear of losing their investments.
- Promotes real estate communities: NFT’s impact in real estate goes beyond the digital space. It helps build micro-communities of individuals with similar interests, where knowledge and helpful tips are shared. In fact, NFT enthusiasts often organize meet-ups, where investors can share ideas on generating profits. When each of these individuals gather and contribute capitals, it boosts their purchasing power.
Use Cases of NFTs Real Estate
NFT encourages international collaborations in real estate, since buyers and sellers can transact from anywhere in the world. The increased number of investment opportunities in real estate is also responsible for the increased numbers of global investors. For instance, Forbes reported that big platforms like Decentraland offers upto 90,000 plots of lands, providing users with more investment opportunities. Thus, investors may choose to buy a fraction of collective property, own an individual land, or even render rental service to other users.
Another common use case of NFT real estate is networking and bonding. Virtual real estate provides an avenue for individuals to network and socialize with one another. Thankfully, developers keep implementing games and social rewards into real estate platforms. A perfect example is Axie Infinity (AXS), where players are rewarded tokens and in-game resources for unlocking higher gaming levels.
Brands like Nike improved their customers’ experience, by allowing them to participate in NFT virtual real estate. According to research, Nike collaborated with Roblox in November 2021, to create NIKELAND, where customers can experience unlimited access to virtual sports. Thus, the real estate marketplace is being utilized by brands and customers alike.
Properties Value Estimation in Virtual Real Estate
There are several factors influencing property values, including trading activities, introduced innovations, location development, and utility. According to the co-founder and CEO of Tokens.com, areas with high traffic hold more value than areas with lesser traffic.
If you start with an oversupply of real estate and have low economic activity, you will see a natural dilution of value occur across the board just as if you were to build thousands of flats for a low population center that has no demand for them.
Co-founder and CEO of Tokens.com, Andrew Kiguel.
As mentioned earlier, some brands use virtual real estate as an advertising space, while others host conferences. As a result, certain areas or locations generate more traffic than other areas. The locations with high traffic rates are usually more valuable than other locations. For instance, platforms like Sandbox and Decentraland seem to generate more traffic than smaller platforms. Conversely, Skechers entered the metaverse through Decentraland’s Fashion District in March, 2022. According to Sketchers President, the company’s goal is to attract new customers through metaverse, and generate a revenue upto $10 billion by 2026.
Although the co-founder of SuperWorld agrees virtual real estate’s value is largely influenced by demand and supply, he believes the value could be uncertain. According to research, the rise of hundreds of multiverses requires users to pay extra attention to virtual real estate activities.
These worlds are still developing so no one can be sure where the perfect shopping district is going to be – and there will be hundreds of different metaverses.
Co-founder and CEO of SuperWorld, Hrish Lotlikar.
Securing NFT Real Estate
Unfortunately, there are several reports on third-party infringement on NFT assets, which exposes users’ data to theft. Nevertheless, NFT has a promising future in the real estate industry, and implementing the measures below will solve major data infringement issues.
- Smart contracts: Developers use smart contracts to automate transactions, reducing error-risk from manual inputs. This also eliminates partiality and possible alteration of transaction details between buyers and sellers.
- Cold storage wallet: This method involves storing digital assets offline, which is also known as hardware wallet. Cold storage wallet is more secure than hot wallets, and will protect your assets against frauds or cybercriminals.
- Privacy protection: Developers are responsible for securing users data by implementing privacy protection. For instance, developers may implement data encryption to restrict unauthorized access to users’ data.
- Testing and code reviews: Developers should constantly test and audit the website to identify and fix loopholes. Code review is also a verification process that can help identify bugs and cross-check code quality.
- Two-factor authentication: Every user can set a two-factor authentication (2FA) to secure their login process. This is an added security layer that is often encouraged by developers and NFT founders. The screenshot below is a pictorial representation of a Tweet advice from an NFT expert about security.
🚨 Some tips to avoid scam in NFT space:
1)do not share your private key with anyone;
2)create strong passwords for your cryptocurrency wallet and other NFT accounts;
3)Choose two-factor authentication for all your NFT accounts.
— Artvisionᴺᶠᵀ (@ArtvisionNFT) April 12, 2022Conclusion
NFT provides the essential values that have been lacking in the real estate industry for many years. With blockchain technology, investors have been able to implement tools that generate more wealth. This further encourages more people to own digital assets and promote financial stability within the society.
