Real Estate Investing and NFTs: A Marriage Made in the Blockchain?

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Would you buy a slam dunk by LeBron James for $208,000? How about a digital house for $500,000? For most people, that’s a hard no. After all, why in the world would you buy something digital for so much when it could be easily pirated and distributed elsewhere?

Well, that’s the funny thing about non-fungible tokens (NTFs) and why they’re starting to take the world by storm. By definition, non-fungible tokens are unique (the non-fungible part), and even though they exist in the digital world, they’re able to be secured and tracked using blockchain technology. Yes, the same blockchain that’s made Bitcoin, Dogecoin, and all the other -coins possible.

NTFs are wholly unique items, albeit digital ones, and that’s part of what gives them value to collectors. But that’s hardly the whole story.

Non-fungible tokens: what they are, what they aren’t

The reason Bitcoin comes up in pretty much every discussion of NFTs is that by now, it’s a somewhat familiar concept based on very similar blockchain technology. Although NFTs use the same technological backbone to track and authenticate individual tokens, that’s where the similarities with Bitcoin end. Unlike bitcoins, which all have the same value and are interchangeable, NFTs are wholly unique.

This is where it gets a little confusing, since many NFTs being created right now are digital items that are actually quite easily reproducible. How, then, can you ensure that you own a specific unique digital item when there are tons of screen captures, videos, and the like running around the internet unbranded?

This is where the blockchain comes in. When you purchase an NFT, you’re registered as the owner of that NFT, regardless of what it is. You are the only person who can claim ownership of the unique item, and it’s easily verifiable.

This may seem like a frivolous distinction, seeing as how you could probably download a video of that $208,000 LeBron dunk to your computer at any given moment. However, when it comes to having actual rights to these NFTs, the blockchain backbone is where the magic happens. Let’s say that you get some kind of royalties for every time that dunk is replayed on television — that’s where an NFT is going to matter. That’s the hard proof that you’re the current owner of the digital asset.

NFTs and real-world real estate

When it comes to things that can become NFTs, the sky’s the limit. Anything can become a token and is thus recorded as a unique item in the blockchain. So, although people are currently toying with the idea of selling virtual real estate in digital worlds using NFTs, they’re also eyeing NFTs as a better way of conveying title in real-world real estate transactions.

Rather than waiting on a lengthy title search, which can be fraught with potential land mines, depending on the history of the property, in theory, transacting using NFTs and blockchain technology would make it very easy to check titles and ensure the chain of ownership. This would eliminate a lot of surprises, but it isn’t really a viable option just yet, as there are still a lot of bugs to work out.

For example, being a digital token, NFTs are still susceptible to hacking. Another major concern: Losing a private key to any asset on the blockchain results in your immediately losing access to that asset, which could be problematic without third-party companies that are designed to ensure ownership continuity. These exist now, but not with the capacity that would be required to drop all real estate data into NFTs right away.

The Millionacres bottom line: NFTs may change the real estate world, but not today

For most people, NFTs really aren’t going to affect their investment decisions or real estate transactions. Right now, NFTs are largely the playthings of the ultra-rich and considered more akin to digital collectibles than true investments. They’re status symbols that may be capable of appreciating in value but are so volatile that they could just as easily have all value wiped out in a moment.

Real estate investors, and even homebuyers, may one day be issued an NFT with the purchase of real property, once the technology has matured and is more proven. It could be an easier tool to use for very real applications like title searches, making it easier and cheaper to issue title insurance for both banks and transactional parties. But, as of today, this is only a far-off dream.

Keep an eye to NFT news, but don’t bank on it right now. Unless, of course, you’re in the market for a pocket full of collectible pixels.