Cryptocurrency has been referred to as the money of the future — and for a good reason. To put it simply, cryptocurrency is a digital or virtual currency that is designed to work as a means or medium of exchange. But how exactly does it work, and how does it work with blockchain? Where do cryptocurrency and blockchain fit into the future of CRE technology? Is there a use case for Blockchain tech in CRE brokerage?
How Does Cryptocurrency Work?
Cryptocurrency works independently of a centralized bank with encryptions that are used to both secure and verify transactions, and also control the creation of new units. These encryptions are completed by individuals who are referred to as miners, and only these miners can confirm transactions by solving a cryptographic puzzle. In this process, they take transactions, mark them as being legitimate, and then spread them across the network. These transactions are then instantly added to a transparent ledger, which is essentially a public account and record of all the transactions that have happened in the network.
What is Blockchain?
The ledger mentioned above is known as blockchain technology. Since this ledger is considered public information, anyone in the network can see the balance of every account. Each transaction is a file that contains the public keys (wallet addresses) of both the sender and the recipient, as well as the amount of cryptocurrency transferred. While blockchain and its technology may appear complicated and complex, it is actually very transparent and incredibly accurate.
The Different Types of Cryptocurrency
There are different types of cryptocurrency in existence. The first cryptocurrency to be developed, and the best-known example of cryptocurrency is Bitcoin, which was invented and announced ten years ago. While Bitcoin may be the most well-known example of cryptocurrency, there are many other variations currently available — and more are being created every day.
Other examples of cryptocurrency include Ethereum (otherwise known as ether tokens), which was also underwritten by a Blockchain network. This system launched in 2014 with a mission to pursue further decentralization. Another example of cryptocurrency is Ripple, which was developed in 2012 and has been heralded by some industry experts as the natural successor to Bitcoin, mainly in part to the fact that it is not only a currency system but also a system through which any currency can be traded or transferred.
Cryptocurrency, Blockchain and the Future of Commercial Real Estate
As technology continues to advance, people are seeking alternative forms of currency to use as payment across many industries — and commercial real estate is among them. Cryptocurrency and blockchain will likely play a role in commercial real estate, as digital currencies have already been essentially used as trade for physical property.
Further, using a technology system such as blockchain to record CRE transactions could make the process both efficient and seamless, essentially creating “smart” contracts. These types of contracts, as well as the technology behind them, will impact the way CRE transactions are handled.
Imagine a smart contract that is connected to a commission agreement. All based on mutual approval, the automated movement of currency could happen based on date or event triggers. Seamless and transparent. It will take some time for CRE brokers and landlords to adopt something like this, but the efficiencies are there to be taken advantage of.
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