Benefits and Challenges of Web3 in Real Estate

Web3 technology presents both opportunities and obstacles for the real estate sector.

The use of web3 in real estate enables the industry to safeguard sensitive data. This is achieved through features like a decentralized network, blockchain technology, and the efficient application of artificial intelligence and machine learning.

Did you know the fast food giant McDonald’s makes most of its revenue not from food but from rent? Some analysts call McDonald’s recession-proof, and there is one major reason for this claim; the company’s efficiency in buying and selling real estate. Apart from large organizations, even individuals can build their cash flow and wealth by investing in real estate at a small scale level. There is no denying that purchasing land is a good investment; however, it comes with a whole set of challenges and potential risks.

The process of purchasing real estate has always been tedious. Individuals have to go through rounds of documentation before owning a property. This process is slightly improved with digitization since it helps to maintain online records, showcase properties and more. However, along with convenience, digitization also brings in a new set of problems. Online data is prone to cyberattacks. Since real estate data include sensitive information like financial records, losing them can be disastrous. However, recent technological developments like Web3 in real estate can greatly benefit the industry. It features decentralized networks, which gives users better control over their belongings.

In this article, we’ll learn about the challenges faced by the real estate industry and how Web3 can help to solve them.

Challenges of WEB3 in Real Estate Industry

Here are some of the challenges faced by web3 in the real estate industry to maintain sensitive information.

Cybersecurity Threats

Real estate is a goldmine of sensitive data like financial records, property details, personal information, social security number and more. This makes it the perfect target for cybercriminals. These criminals use software to breach the servers and steal valuable information. Once they gain this unauthorized information, they can sell it on illegal online markets or use it as ransom. 

For instance, cybercriminals breach company servers by using software called malware. Once they successfully breach the servers, these criminals render the server useless and demand payment. This can lead to financial losses and delayed services. Small real estate companies with weak security measures fall victim to these crimes. Apart from malware, cybercriminals also use methods such as keylogging. Here, they record the keys entered by users to predict weak passwords and gain unauthorized access. Since many people use the same or similar passwords across different platforms, it becomes easier for criminals to gain access to them.

Phising

Phishing includes sending emails or other forms of messages while pretending to be from a reputable organization to trick individuals into revealing personal information. This information can be their passwords, credit card numbers, etc. Phishing has affected multiple industries, and reals estate is no different. In the real estate business, phishing is used to impersonate agents or bank employees to steal information from unsuspecting individuals.

For instance, scammers find an individual who is in the closing phase of purchasing real estate. Then, these scammers impersonate real estate agents or bankers and send fake emails to the individual. They use social engineering techniques to trick the individual and prove their legitimacy. Once they are successful, they send links to wire money to fraudulent accounts under the pretense of closing the deal. These accounts are then depleted and deleted as soon as the money changes hands. Old people or technologically challenged people are usually prone to such attacks. Since the fraudulent accounts are deleted, it becomes difficult to find the scammers. Over the period, scammers have improved their techniques to avoid detection. According to FBI data, about 13,638 people were victims of wire fraud in the real estate and rental sector in 2020, with more than $213 million in losses.

Third-Party Risks

Real estate companies often list properties on third-party websites to act as a bridge between the buyer and the sellers. These websites are convenient for buyers since they showcase multiple properties in the same place. Buyers can check for properties at their preferred locations and compare them with other properties. The sellers can also use several features of third-party platforms to increase their reach.

Moreover, they can use their inbuilt features to create and maintain buyer records. Although third-party platforms have loads of advantages, they are at risk from cyber-attacks. Cybercriminals can breach these platforms, use malware to steal sensitive data like user information and property details or render the platform useless. Since these platforms handle massive data from several sellers, cyberattacks on such platforms can lead to huge losses and affect the seller’s reputation.

Property Record Maintenance

Bookkeeping is a crucial part of the real estate industry. Real estate dealings generate piles of paperwork in the form of legal documents, financial records, buyer/seller information, contracts, closing disclosures, and more. In the case of any regulation, both parties are required to present these documents. Maintaining these records can be a task for buyers, sellers as well as third-party platforms. Some companies prefer paper-based documents, which are immune to cyber-attacks. However, these documents are prone to human error. Moreover, retrieving the right documents from massive piles can be difficult. If lost, the involved parties have to go through rigorous processes to prepare new documents. On the other hand, online record maintenance is easier. However, it is prone to cyberattacks.

Cybercriminals can breach the servers containing records and hold them as ransom. This can lead to the loss of important data.

Benefits of WEB3 In Real Estate

Web3 (or Web 3.0) introduces many features like decentralization, blockchain technology, and token-based economics, many of which were excluded from Web 2.0. In Web3, users have more control and privacy over their data, which is not centralized among the industry giants known as “Big Tech.” It is regarded as the next big step in the evolution of the Internet, and it comes with multiple applications. Here are some ways Web3 can help the real estate industry protect sensitive data.

Advanced Security and Privacy

One of the major features of Web3 is decentralization. This feature allows users to store data in multiple small packets instead of a single centralized server. Since the data is scattered across peer-to-peer networks, cybercriminals cannot target and breach the servers to gain unauthorized access. Moreover, it uses brand-new technologies like artificial intelligence (AI) and machine learning (ML) to safeguard user information. With such technologies, cybersecurity programs can detect and predict cyberattacks quicker and more efficiently to thwart them. Information stored on Web3 is immutable. Meaning that once created, it is permanent and cannot be modified. This will allow buyers and sellers to create contracts that cannot be tampered with.

Multi-Factor Authentication 

Another important feature of Web3 is Multi-Factor Authentication (MFA). This feature allows users to safeguard their data with multiple layers of identification. Since this allows users to add extra layers of protection, it protects them from phishing attacks. In Web 2.0, user data is protected with a username and a password. However, scammers use social engineering techniques to trick users into providing this sensitive information to them. With MFA, users can use multiple layers of authentication to secure their online data. For instance, here are some factors that users can use to safeguard their data:

• Username and Password

• One-time password (OTP)

• Biometric and Facial Recognition

• QR-based MFA app

These factors act as multiple lines of defense and can help users to protect their data efficiently.

Smart Contracts

As we know, third-party platforms are convenient for purchasing real estate but are prone to cyberattacks. However, with the help of Web3, sellers can directly connect with the sellers without the need for intermediaries. Smart contracts are a feature of Web3 that automate the purchasing process. These contracts are lines of codes stored on a blockchain. They are executed once both parties meet the predetermined conditions. There are multiple advantages to using smart contracts to purchase properties. The first being these contracts are immutable. So no third party or hacker can alter the contracts to scam the parties involved. Second is that these contracts are time efficient. Smart contracts are automated and are executed as soon as the conditions are met. So there is no need to process piles of paperwork manually. The third being these contracts are transparent. Involved parties can view the contracts whenever they want.

Decentralized Property Registries

Although convenient to use, online records are at risk of cyberattacks and data fraud. With the help of Web3, users can maintain decentralized registries to safeguard their real estate documents. Decentralized property registries use peer-to-peer networks to store user data. This greatly reduces the risk of server failure often seen in centralized servers. 

Double allocation is a major problem the real estate industry faces. In this case, two or more documents are issued as proof of ownership to different parties. This method is used by powerful parties to illegally seize a piece of property. Web3 can be used to put a stop to it with tamper-proof documentation.

To Sum Up

By leveraging the applications of Web3 in real estate, the industry can overcome many challenges while maintaining sensitive data. As this technology is rapidly evolving, its applications will enhance over time. Real estate industries can make use of these applications to avoid property fraud, phishing, and other security concerns.