Everyone is telling you it’s time to get on board with cryptocurrency, NFTs and understanding the vast new world of Web 3.0. But when you hear the word “blockchain” you feel like, well, a blockhead.
In June 2022, President of eXp Commercial Jim Huang summoned a group of leading experts on the brave – and somewhat unfathomable — new world of crypto. It was time to get the best minds on a conference call to deliver incredibly succinct insight into these new forms of currency and transactions.
“I think many of us are laymen with these terms. I definitely knew I was (in 2011) when I started to first look at blockchain and crypto. As I always say: Find people smarter than yourself and pick their brains. That’s what we’ve done here regarding Web 3.0, digital real estate, with NFTs and crypto,’’ Huang said.
“I’ve been hearing it on a very peripheral basis like many of us, but we have to go deeper. The opportunities in and surrounding Web 3.0 transactions are things we cannot be missing out on. That’s why we’re all here to learn and get the knowledge,” Huang said.
What followed was a masterclass by these experts:
- Glenn Capel: Certified Blockchain and Cryptocurrency Expert
- Chris Mattmann: Chief Technology Officer NASA
- Phu Styles: CEO Blockchain PR
- Chirag Sagar: Co-founder of Mission Matters Media
Based on their discussion, here’s a useful primer that every commercial real estate agent working today can put in their tool box regarding digital real estate and the potential for a real estate blockchain. Let’s start off with a rundown of some of the main terms discussed by the panel.
Useful Ways to Visualize Terms Like ‘Blockchain’ and ‘NFTs’
- “Blockchain is the highway and cryptocurrencies and NFTs are the vehicles riding upon that highway.” – Glenn Capel
- “(A way to think about) NFTs for digital space (is to think about) air rights, mineral rights and other rights (attached to a commodity) but if somebody takes a picture, what does this look like?” – Jim Huang
- “NFT, a non-fungible token, is an acronym. This token shows who the true owner of something is. So, if you’re an artist for example, and let’s say you drew the Mona Lisa and you are the true owner of that art piece and every single time you sell that art piece, it shows you who the true owner is. Where it becomes interesting, especially with NFTs, is you get royalties back as the originator of the true art.’’ – Phu Styles
- “ICOs is short for initial coin offering. Basically, all these new coins that are developing. The city of Miami itself is launching its own coin and it’s all backed. It’s a securitized smart contract that just verifies who the true owner is and you can authenticate it.’’ – Phu Styles
Decentralization: The Concept Behind Transactions on the Blockchain
With his work at NASA and Apache Software Foundation, Chris Mattmann is a foremost authority on internet technology. He said “Decentralized Financing,“ or DeFi, allows for private and unregulated (so far) virtual transactions that don’t require an enterprise or authority of “trust” to act as an intermediary.
That is unlike Web 2.0 applications, where consumers access services through internet-based companies like Google or Facebook, Web 3.0 applications allow individuals to be in charge.
“Web 3.0 is the concept that … a centralized authority like a social media company or even centralized banks … aren’t the only model or the way that you can transact. If you reverse that model, you create a decentralized interaction in which people own their data, people own their wallets, people own their IP (internet protocol) you could reverse that traditional centralized model.’’
Bitcoin: The Most Well-Known Example of How the ‘DeFi’ Concept Was First Popularized
“It was the idea that everybody could have decentralized wallets transact and, instead of having a single centralized ledger or source, that everybody could maintain their own. And, when necessary, (those sources) could be brought together to form a unified thing. (The difference from a bank or U.S. dollar is that bitcoin) didn’t always have to be centralized or held only in the authority of a few individuals,’’ Mattmann said.
DeFi was popularized via currency, but Mattmann said that “now that concept extends to all sorts of things: People purchasing real estate, or people purchasing media and IP and on top of that. This is a native way to do it … and so that’s traditionally what people are talking about when they’re saying Web 3.0 and NFTs.”
Inflation/Recession: How Wealth is Being Generated in Crypto & Tokens
Glenn Capel emphasized the importance of understanding the role that crypto and virtual transactions will play, and the way the real estate industry needs to engage.
“Because of Web 3.0, the wealth that will be created in the next 10 years will be more than that which was created in the last 100 years,” Capel said.
“There are 300 million users on bitcoin. Next year, or by the end of this year, we should have roughly about one billion users of bitcoin. If there’s going to be an increase in inflation and interest rates are going to rise, this is an opportunity for you to get into cryptocurrencies because when you have high interest rates, the dollar strengthens,’’ he said.
Capel said the total crypto market cap (in June) was $94 billion, and total market cap for NFTs (in June 2022) was $40 billion.
Is It Possible to See Real Estate Tokenization?
Like other assets, real estate is a ripe market for tokenization. And opportunities will become more prevalent. Tokenization allows for fractional ownership by converting the physical asset of a home, building or complex into digital tokens.
“When you also get involved with tokenization, which is the converting something of value into a digital token, which is usable on the blockchain application and then putting that for sale, that is how you tokenize commercial property. For example, the Empire State Building has been the subject of talk for being tokenized,’’ Capel said.
Hurdles exist as to how to scale tokenization, but similar to offering stock options in a company to create shareholders and disperse equity, real estate has that fractionalization potential.
The Metaverse Is a Real Estate Wonderland
Blockchain influencer Phu Styles said she’s very bullish on the real estate metaverse. She described her activity in Polka City, an NFT-based virtual platform where you can invest in virtual assets.
“One of my projects is worth several million dollars. Last year, a piece of land inside of Sandbox sold for $4.5 million, so the money’s there. I’m going to lease out parts of my building and I have a ton of people asking me to put their restaurant and ATM (there and) things like that. So, I’m becoming a real estate developer inside the metaverse. I don’t have any experience doing that in the real world, but in the metaverse it’s a fantastic opportunity. So, I’m seeing that there’s opportunities for anyone and everyone, you just need a computer,’’ she said.
Other metaverse real estate worlds where people can transact include Decentraland, and Sandbox.
“Polka City’s market cap is like $50 million so the opportunity to turn into a billion dollar company this year is very possible. Sandbox within a year went from a few million to two billion very quickly. And that’s what you get inside full cryptocurrency blockchain opportunity: Things can go up overnight. Also, they can go down overnight – and everything follows bitcoin.’’
To provide an additional perspective to the potential of virtual real estate and the idea of a real estate blockchain, the Motley Fool writes: “Real estate has always been an important part of most people’s investment portfolios. Much, if not all, of that real estate has been “real.” Today’s real estate investor, however, may also be considering something a little less touchable — virtual land. Building a virtual real estate portfolio could be the next big thing for investors who aren’t afraid to take a chance on new technology.’’
What’s In Your Wallet? What IS a Wallet?
If the blockchain is the highway upon which cryptocurrency runs, then wallets are where individuals store their virtual currency. These systems and their connectivity have grown more accessible, in part because of a “standardization of protocols that exists across these blockchains,” Mattmann said.
“What’s caused these things to really take off is you can write a very simple set of instructions for how to download a wallet, how to get going on MetaMask or Coinbase, get money loaded up into it, purchase an NFT or purchase some coin, purchase some Ethereum and purchase some Polygon MATIC, and then start to transact and exchanging between them. So, that’s what really enabled all that,’’ Mattmann said.
Investigating Web 3.0 companies and applications can help newcomers get an understanding of the crypto landscape and potential for crypto real estate. Here are some names the panel discussed:
Get Ready to Serve Crypto Buyers for Real Estate
Huang asked how real estate agents can transverse deals from the physical world to the virtual world and whether it’s possible to buy a house with crypto. Phu Styles provided this feedback about real estate cryptocurrency:
“There are a lot of people out there who are very crypto rich and fiat poor, so they show no income, but they have like $50 million worth of crypto and they want to buy a house. How are you as a real estate agent going to make this happen for them?
“You have to figure out a way for them to off-ramp that money and get a loan. There are banks out there … that will help these crypto people collateralize their crypto and get a loan out. So, those are things that I would suggest that each individual real estate agent figure out.
“There are tax implications to consider, too. Buyers may say ‘I don’t want to sell any of my crypto because I don’t want to pay capital gains tax.’ There are ways that you can help your clients get that crypto and put it into a real estate asset and without paying capital gains.
“There are also forms like Nexo and Celsius where you take loans out. And so you can get loans out on your crypto that way.’’
Advice From the Crypto Experts
Glenn Capel: “When Charles Shrem talks about crypto, it’s probably your best interest to listen and pay close attention because he’s considered a godfather of cryptos. Another person I listen to is Gary Vaynerchuk. He’s got something called VeeFriends and VeeCon. Gary is huge with NFTs.“
Get Some Skin in the Game
Chirag Sagar: “It’s actually still very early. Believe it or not, as much as you guys might be hearing all these terms and how long cryptocurrency has been around, it’s not really that long in general. People are still not even invested into crypto or into NFTs or any of these projects. The easiest way to get started is set up a MetaMask account, or go on Coinbase, and just start buying a couple of coins just to get kick started, get some skin in the game. That’s really my bottom line.”
Glenn Capel: “What’s out there is the future of money. There are insane amounts of wealth that will be made over the next 10 years. However, I will say this: There’s too many people that chase the trophy without realizing that it’s the reps in the gym that makes the goal.‘’
Glenn Capel: “Learn all that you can before you go and invest and invest one foot at a time, only a fool tests the water with both feet. So, you want to be careful as you get out there, find someone that you can mentor and be a coach for you because it is very much more volatile than the stock market.”