The American dream is now available on the blockchain. After disrupting the art and music landscapes, digital collectibles known as non-fungible tokens (NFTs) have made their way into one of the most traditional sectors of the economy — real estate. NFTs are all about proof of ownership, as is property, so a hybrid deal was probably only a matter of time.
Blockchain-fueled startup Propy and Heckler Real Estate were behind a real estate NFT blockchain auction for a property in Gulfport, Fla., the first of its kind in the United States. With an opening bid of $650,000, the investment-based property gives the winning bidder access to an entity that owns the Spanish-themed property plus a digital version in the form of an NFT, the ownership rights to which are stored in a cryptocurrency wallet. Bids were taken in Ethereum (ETH), with the house/NFT combo ultimately selling for 210 ETH, or roughly $652,000.
Cryptocurrencies have a reputation for being anonymous and unregulated, but they've evolved. For example, to participate in the Propy deal, bidders had to verify their identity via a know-your-customer (KYC) form, which is the standard for crypto exchanges like Coinbase these days. In addition, bidders had to prove they could afford the property with at least the minimum bid in their crypto wallet to participate. Thousands of people wanted in. Propy tweeted,
“Oh wow! We know it’s a great property but just wow! We didn’t expect so many of you to be interested in our first RE NFT auction in the US. As we speak, we are swamped with people trying to get verified.”
You might be wondering if the owner, AJ, gets a set of physical keys to the house or digital keys to open the door to the metaverse. The answer is both. On the physical side, the winning bidder gains access to an LLC that owns the five-bedroom, three-and-a-half bath house in the St. Petersburg area. At that point, it's up to the new owner if they want to move in, rent it out, or flip it. On the digital side, the winning bidder also gets an NFT that stores their LLC ownership on the blockchain, not to mention bragging rights.
That Was Then, This Is Now
This is not the blockchain industry's first NFT rodeo. In 2017, Michael Arrington, founder of high-tech news site TechCrunch, sold his Kyiv apartment in the first-ever NFT real estate auction. Arrington's apartment/NFT was sold to Devon Bernard for 36 ETH, worth just shy of $93,500 at the time. There were close to four-dozen bids for the real estate NFT. That was then, and the industry has only exploded over the past year.
NFT sales reached an eye-popping $25 billion last year across art, music, media, gaming, etc. Now the industry can add real estate to the list. The momentum appears to have spilled over into 2022, with JPMorgan recently predicting that NFTs are poised to “dominate the digital asset universe” going forward. The Wall Street bank also notes that gaming is an “important use case.”
The Ethereum blockchain is the go-to platform for NFTs. It's been used by major auction houses like Sotheby's and Christie's. Last year, digital artist Beeple made mainstream headlines when his “Everydays” artwork sold as an NFT on the Christie's platform for $69 million, paid for in ETH — with no physical version.
As the second-biggest cryptocurrency, Ethereum is also highly volatile, with the price having taken investors on a roller-coaster ride lately. In the past 90-day period, the ETH price has ranged from $2,172 to nearly $4,900. That volatility looms over future potential real estate NFT deals — and any major purchase for that matter — but it isn't stopping them altogether. Propy has already unveiled its next hybrid property, a condo located where else but Tampa, Fla.
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