There is a lot of hype around blockchain technology, so it’s nothing new to see an article that plays on that hype. What is interesting, however, is when you see decentralized real estate predictions like the one made by Garratt Hasenstab, a real estate developer, in a recent Forbes article.
Hasenstab made this prediction in 2018, but he still stands by it. In his words, “by 2025, the majority of global real estate investments will be issued as tokenized asset offerings (TAOs) and held as cryptoassets, specifically security tokens, just like traditional securities but traded peer-to-peer without financial intermediaries.”
That’s a pretty bold statement. But could that happen?
Introduction to Decentralized Finance
There’s no doubt that blockchain technology, and distributed ledger technology, is changing the world of finance. Some big companies are investing billions of dollars into development in this nascent new field. According to PwC, blockchain technology is only of moderate importance to the real estate industry in 2019. Of 13 technologies identified as disruptors this year, it’s ranked 12th in terms of importance.
Still, six years is a long time. A lot can happen between now and 2025. And new technologies have a way of advancing rapidly once they catch on. For that reason, I’d say real estate investors and real estate developers alike should start performing some due diligence today on how blockchain technology can change the way they do business.
One area where there is huge potential is in what they call decentralized finance. It’s the buzzword of the year and simply refers to using blockchain technology to deliver peer-to-peer transactions more efficiently.
State of the Dapps (decentralized applications) lists more than 50 dapps in the property category. DeFi Rate states that the total locked value of assets in decentralized finance has gone from $0 to $513 million in the last year. That’s some stellar growth.
Decentralized Real Estate Investing
While there is good evidence to believe that the future of real estate investing will involve decentralized finance and blockchain technology, the future hasn’t arrived yet. At the heart of decentralized real estate investing is the peer-to-peer business model, or what has come to be called marketplace lending. It’s taken a decade to solidify the business model and maintain the respectability of the traditional investment sector, but online real estate investing has become its own asset class. If blockchain technology is the future, it will be because platforms like Sharestates formed the backbone that made it possible.
For developers, the benefit to marketplace lending is you can get access to much-needed capital from funding sources not traditionally available to you. When you can’t get a bank loan, equity or debt financing is available from accredited investors willing and able to move your project forward.
For investors, marketplace lending offers higher returns on short-term investments that have been fully vetted by the platform. You spend less time on due diligence and more time managing your investments.
Marketplace lending isn’t going anywhere any time soon. Blockchain technology may improve the efficiency of the markets, but until it fully takes root, you might as well spend your time pursuing the deals where the deals are being made. And right now, that’s on marketplace lending platforms like Sharestates.