Non-fungible tokens (NFTs) have been used to disrupt several industries, starting with the art market and diversifying into music, communities, and real estate. 

While these rapidly changing markets have been easier to disrupt, real estate could pose a much more significant challenge being a slower market, taking an average of 8 weeks per sale compared to art, which typically takes no longer than a wire transfer. 

This article will look at how NFT real estate works, reasons to use NFTs in the real estate market, the top two NFT real estate projects, challenges real estate NFTs could face, and their future in the market. 

How Do Real Estate NFTs Work?

Real estate NFTs are similar to traditional NFTs; they can be purchased on cryptocurrency marketplaces such as OpenSea and  SolSea using Ethereum, Solana, or the cryptocurrency chosen by the seller. Each NFT is then held in a cryptocurrency wallet. 

Real estate NFTs can be used to generate a passive income by representing equity in a real-estate project. They can cover everything from property ownership to a share, in which the NFT holder will be paid much like a traditional dividend. For example, if the NFT owner represents a 15% share in a real estate project, the holder will earn 15% of the net profit. 

Due to their tokenized nature, most real estate NFTs can be sold at any time, provided there is a marketplace with sufficient liquidity for the asset. However, some real estate investments will require the owner to hold for an agreed period, which will be made clear before a purchase is made. 

Why Use Real Estate NFTs?

With NFTs still being a new technology, how practical are they compared to a system that’s been in place for decades? 

Being immutable, NFTs show absolute proof of ownership, improve credibility, and are fully transparent, without many of the complexities of the traditional real estate system, such as surveying and complex contracts. Here are two benefits that NFTs bring to real estate. 

NFTs can dramatically decrease the volume of paperwork required to purchase a property. Current real estate investments require copious amounts of paperwork as part of the ownership transfer, which can be overwhelming for all parties involved. 

Real estate NFTs help streamline this process, as much of the back-office paperwork can be automated with the NFT’s underlying smart contract. This, in theory, allows buyers and sellers to transfer ownership in a matter of minutes (after legal counsel has been consulted). 

Top NFT Real Estate Projects

Origin Story 

Origin Story has partnered with the real estate investment group Roofstock to bring real-world real estate properties to the NFT marketplace. Roofstock believes that this deal will help cut sellers’ fees by 50%, dramatically improving the profitability of selling property. 

Roofstock also believes that on-chain real estate transfers could increase transaction speeds, streamlining the buying process. Since 2015, Roofstock has facilitated over $5 billion in investment transactions and plans to implement NFT real estate investments in 2023. 

The Sandbox

The Sandbox is one of the largest Ethereum-based Metaverses in the DeFi market. Showcasing an entire world to explore, The Sandbox offers unique play-to-earn virtual reality gameplay in which players can buy land plots, buy and sell in-game assets, and complete tasks for rewards. 

The Sandbox first rose to fame in 2021, when it was endorsed by Deadmau5, Snoop Dogg, and Atari, all of which own land plots within the digital world. Land plots are valued based on the area they’re in, with land close to celebrities having a higher value. For example, the three plots around the Snoop Dogg Mansion sold for $1.23m, with one selling for $453,000. 

LoanSnap

LoanSnap launched the first seven mortgage NFTs in November 2021 in the form of home equity loans. These NFTs work like traditional mortgages, replacing mortgage notes with NFTs. 

The location and size of the NFT mortgages were not disclosed and have not yet been available to the general public or crypto investors. However, LoanSnap also plans to issue a stablecoin called bHome. bHome will represent fractional ownership in the NFT mortgage notes, which would allow investors to own a percentage of the mortgage. 

Challenges for NFTs in Real Estate

Much like any other new technology, real estate NFTs don’t come without their drawbacks. Firstly, only 12% of Americans understand the concept of NFTs, creating an educational divide. Although NFTs offer a wide array of benefits, the underlying technology could be too complex for everyday real estate workers and home buyers to fully utilize without the risk of hacks and scams, which have been used to steal $100m since July 2021.  

Secondly, regulation could make real estate NFTs more complex than first thought. The U.S. Securities and Exchange Commission (SEC) has ramped up its investigation into NFTs, stating that NFTs are being used to raise money, like traditional securities, rather than being sold as art. 

Real estate NFTs would undergo a Howey test before they’re accepted into the mainstream real estate market. Should they be considered a security, they will have to be registered with the Securities Exchange Act of 1934, file regular reports, and comply with Rule 505 of Regulation D.

Final Thoughts: Do NFTs Have A Place In The Future Of Real Estate?

In the future, real estate NFTs could be used to streamline both residential and commercial real estate transaction processes, and open the asset class to an international decentralized community of buyers and sellers.  

As the real estate market is already heavily regulated, current laws covering privacy and data protection will likely make it difficult to buy and sell real estate properties as NFTs. Property laws in the real estate’s location could also add additional complexity to the deal, with different states and countries having different rules regarding real estate ownership.  

That being said, real estate NFTs may begin to slowly influence the real world market, allowing individuals to hold mortgage debt, support new building projects and take part in group investments instead of outright buying and selling a whole property.

Pastel Network is excited to announce that it will be working with Astar, a layer1 parachain in the Polkadot ecosystem. Astar provides the infrastructure for building dApps with EVM and WASM smart contracts offering developers true interoperability with cross-consensus messaging (XCM) and a cross-virtual machine (XVM). Astar and Pastel will collaborate with the goal of providing Pastel’s Web3 tooling solutions — Sense and Cascade — to its NFT ecosystem. This collaboration signifies the continued successes of both Pastel and Astar, and is a massive step forward for the overall NFT ecosystem. It is a testament to the growing need for NFT reliability, security and verifiability, solved via Pastel’s advanced infrastructure.

What is Pastel Network?

Pastel Network provides mission critical Web3 tooling to the NFT ecosystem. Pastel infrastructure enables existing layer-1 blockchains, decentralized applications, or third-party enterprises to protect creators and collectors. From digital collectibles & media to documents & applications, users and developers are able to certify asset rareness and truly store data forever. Lightweight protocols delivered by interoperable open APIs such as Sense and Cascade can be easily integrated across existing networks.

Pastel’s near-duplicate detection system, Sense, is a deep-learning based system that assesses the relative rareness between NFTs, which is used to detect scams / copyright infringement and provide certification of authenticity.

Pastel’s storage solution, Cascade, is a fully-distributed storage protocol that ensures permanent NFT data storage. Every validator (Supernodes) on the Pastel network holds a random, fragmented copy of data, ensuring that a user will never lose their NFTs. It is a pay once and store forever model that prevents centralized points of failure, ongoing maintenance, IPFS link rots, or 404 errors.

What will this collaboration entail?

Pastel is bringing its very powerful and lightweight infrastructure, Sense and Cascade, to the Astar Ecosystem. We will also have collaborative marketing efforts to push for the growth and adoption of Astar as well as the push for builders to use Pastel’s tooling in the ecosystem.

Sense enables marketplaces or NFT projects to certify the rareness of the NFTs. It also allows marketplace builders to drastically reduce the need for manual verification of NFTs and collections being minted on the platform. This provides an additional method of determining rarity based on image rather than through metadata characteristics. For creators, the rarity score allows for their artwork to be protected from plagiarism while it boosts confidence in making NFT purchases for collectors.

Cascade creates an environment where builders will never need to be concerned with long-term storage costs or the process of renewing contracts with storage solution providers. Cascade over-provisions the data and has self-healing properties to ensure data integrity and permanence. Builders can now pay once and store data forever. Additionally, NFT related projects have the guarantee that NFTs minted can be stored in a permanent manner which provides significant value to end users.

How can Astar dApps and projects implement these tools?

Pastel has made it easy for builders to implement its technology into their projects with the creation of a detailed builder’s guide. The guide is available on the Astar Community Bulletin Medium page as well as on the Astar Github and developer documentation page, making it easily accessible to anyone who wants to use it. The guide provides all the information needed to use Pastel’s APIs via its Gateway service, which can be easily incorporated into any build.

For NFT related projects, builders can utilize Sense & Cascade within the Astar (PSP34) NFT standard. For those looking for a robust decentralized permanent storage solution, they can call the Cascade Gateway API during the storage process. Note that Pastel’s Gateway service also pins data to IPFS for continued decentralized redundancy. ArtZero, an NFT marketplace built on the Astar ecosystem, is in the process of implementing Sense & Cascade to help enhance the security and value proposition that they provide to their users.

What does this mean? These highly innovative technologies are an API call away. For example, a project has NFT data that it would like to store on Cascade and run through Sense for rareness certification and authentication. Depending on where the project’s builder wants the API requests to occur, Sense and/or Cascade API requests can be executed at any point in the NFT mint function or completely separately from the function itself. From there, the NFT data will be stored permanently and the asset rareness analysis and authentication information will be sent back to the project via an API call within seconds.

Pastel has made it simple for builders to incorporate its technology into their projects, giving them access to advanced blockchain capabilities.

What does this collaboration mean for the Astar ecosystem and the wider Web3/NFT ecosystem as a whole?

The collaboration between Pastel and Astar has significant implications for both the Astar ecosystem and the wider Web3/NFT ecosystem. By incorporating new functionalities into the Astar ecosystem, builders are now able to refine their projects and offer greater value to end-users. The utilization of Sense within the NFT standards will raise the bar for NFT projects and give creators and collectors peace of mind knowing that their artworks are certifiably rare. The Cascade permanent storage solution also provides confidence to all users that the NFTs they own will never be lost or inaccessible. This collaboration is a significant step forward for the wider Web3/NFT ecosystem as a whole, and will drive innovation, growth, and adoption of these cutting-edge technologies.

About Pastel Network

Pastel Network is a fully decentralized, developer-friendly layer-1 blockchain serving as the preeminent protocol standard for non-fungible tokens (“NFTs”) and Web3 technology.

Pastel allows for the development of third-party decentralized-applications (“DApps”) to sit on top of its Network, enabling developers to enjoy the scalable registration features, storage processes, and security of the broader ecosystem. Lightweight protocols such as Sense — which was built to assess the relative rareness of a given NFT against near-duplicate metadata — and Cascade — which conducts permanent, distributed storage of underlying NFT data — can be integrated cross-chain across various layer-1 blockchains, layer-2 protocols, or other third-party apps.

Pastel is managed by world-class developers, cryptographers, and technologists, supported alongside an experienced and extensive network of marketers, influencers, and third-party agencies. Pastel is backed by key stakeholders including Innovating Capital, a prominent venture fund.

For more information on Pastel Network, visit https://pastel.network/.

NFTs, wouldn’t exist without smart contracts, and digital agreements written with computer code and deployed on a blockchain. Their main function is to execute one or multiple actions if conditions are met, often following simple “if/when-then” statements, e.g., if X is true, then Y will happen. 

These programs automate execution, and workflow, and streamline the outcome of an agreement between one or multiple parties without the need for an intermediary. These actions, for example, could be the transfer of funds from one wallet to another, storing an NFT, locking deposited funds into a liquidity pool, and more

NFT smart contracts have an important role in keeping the NFT ecosystem healthy and honest Some of their most important functions include handling royalties, ensuring the NFT is unique and non-replicable, verifying ownership rights, and enabling access to exclusive NFT merchandise or events (NFT projects usually throw around exclusive benefits to those who buy a specific NFT from their collection).

What are NFT Smart Contracts?

The versatility of NFT smart contracts plays a key role in the development of the metaverse and the Web3 industry. 

NFT smart contracts are smart contracts specifically designed to create the relatively complex requirements of NFTs, such as provenance, non-fungibility, authenticity, and the hosting on a blockchain network. 

First, let’s have a quick refresher on what a smart contract is. Then we’ll explore how they’re used in the NFT world. 

Smart Contracts: Benefits and Main Functions

Smart contracts are being applied to a wide variety of industries –home sales, supply chain, data sharing between multiple institutions, digital identity, banking —the list is long. 

For example, blockchain supply chain solutions counter the typical setbacks within this industry (data disparity, labor shortage, reliable shipping source, etc.) using smart contracts to automate the shipping process by keeping track of items, administrating and structuring important data, and performing specific tasks if conditions are met.

Some of the main benefits of smart contracts are:

• Transparency and trust: they facilitate transactions for multiple users in a network without them having to know or trust each other. Everything is carried out by the smart contract and not the user, and participants in a private and public blockchain can see them.

• Speed, lower costs, and accuracy: by eliminating intermediaries and paperwork and only executing actions they’re programmed to do when terms and conditions are met.

• Versatility: smart contracts can be programmed to perform a wide variety of tasks, and can be reprogrammed after being deployed on the blockchain to fix bugs or eliminate vulnerabilities.

• Security: smart contracts are highly secure programs since transaction records are encrypted.

Creating an NFT with Smart Contracts

Minting an NFT refers to the process of converting digital files, like jpegs, videos, and sounds, into an NFT recorded on the blockchain, making it available for everyone to see and purchase. When you mint an NFT, you’re playing with the underlying smart contract that defines the properties of your asset.

Most people experience minting an NFT through a designed, user-friendly website where all you do is press a button that says “MINT NOW” after connecting a wallet, but you can actually mint an NFT directly from its smart contract.

The smart contract assigns the ownership of the NFT to the buyer, but if they decide to sell it at some point, the smart contract of the NFT will automatically transfer ownership rights to the new owner —if conditions and terms are met. 

If an NFT is minted, NFT marketplaces like OpenSea would use another set of smart contracts to carry out the auction. For example, a popular auctioning method is a Dutch auction, which is usually created using an ERC721 NFT smart contract (explored below).

Minting NFTs has become much simpler than when they were introduced in Ethereum’s early days. SmartMint by Pastel Network, for example, is a no-code way to design and deploy an NFT smart contract. 

NFT Smart Contract Standards

There are several types of smart contract standards for creating NFTs; ERC-721 and ERC-1155 are the most widely common. ERC stands for Ethereum Request for Comment, and they refer to a set of technical guidelines for creating smart contracts or digital assets to run on the Ethereum network. 

ERC-721 is the first standard designed for the creation of non-fungible tokens, and it strictly requires all tokens to be non-fungible and have their own unique metadata. ERC-721 only supports NFTs, and each NFT can only be transferred in a single transaction, which tends to  cause congestion if network activity is high. 

On the other hand, ERC-1155 supports the transfer of multiple batches of NFTs and supports the conversion of fungible tokens (such as ERC-20) into non-fungible tokens, and vice versa. Typically, projects building blockchain games will use ERC-1155 to move their NFTs due to the higher level of versatility. 

Ethereum is the most popular option for creating or using NFT smart contracts. Other blockchain networks can have their own set of NFT smart contract standards. Still, a small problem is that, by not having a universal standard, NFTs created on different networks, such as TRON, for example, cannot be traded on marketplaces that support Ethereum, or Ethereum-related chains only like Polygon.

The Role of NFT Smart Contracts in the Metaverse

The metaverse refers to a digital ecosystem in which creators, artists, players, and anyone can explore virtual landscapes, play, socialize, interact with other users, buy and sell NFTs —and much more. 

The metaverse, popularized by Web3 projects like Decentraland and The Sandbox, is, therefore, an opportunity to bridge the financial world with the digital world, but the physical world also jumps in on the equation; physical real estate can be purchased as NFTs, using an underlying smart contract to carry out the process. 

NFT smart contracts in real estate eliminate the burden of intermediaries and hefty paperwork by granting (and verifying) the ownership and rights of a property to the respective party. One famous example of this is Michael Arrington, the founder of TechCrunch and Arrington Capital, who sold his apartment in Kyiv as an NFT.

Final Thoughts: NFT Smart Contracts and You 

NFT smart contracts are the technical backbone of the digital collectible industry. There are several NFT smart contract templates from different blockchains, each competing to provide the best technical guidelines and feasibility to users, NFT projects, and marketplaces.

That being said, NFT smart contracts are already playing a key role in the development of Web3 beyond PFPs of Bored Apes or digital samurais like Azukies. 

NFT smart contracts underpin a trustless and efficient pathway for everyone in the decentralized world to interact with NFTs. Blockchain gaming projects, companies and corporations from traditional industries such as fashion and food and beverage, and financial entities have taken a stab at what might be the next iteration of the internet —and smart contracts are the main pillar of the ecosystem.

If you’ve seen headlines of non-fungible tokens (NFTs) selling for millions of dollars then you may be asking yourself: why are NFTs so valuable?

The following dialogue might ensue: Is this just a really rich people thing? Are they laundering money? Is this just fake news biting on click-worthy headlines?

The answer most people will give you is that they’re pieces of art, making them intrinsically valuable. 

But, this doesn’t really give you the full picture of why someone would pay millions for essentially a .JPEG of a monkey. 

While some NFT art pieces like Pak’s ‘The Merge’ have sold for a shockingly high $91.8m, this doesn’t accurately explicate the value of collections like CryptoPunks and Bored Ape Yacht Club (BAYC), both of which have sold for upwards of six figures since their initial release. 

With that in mind, here’s why NFTs cost so much. 

What Are NFTs?

A non-fungible token (NFT) is a digital image, video, or sound recorded on the blockchain and used to certify authenticity. These assets are 100% unique from one another and cannot be physically changed once minted. Ownership, however, can be seamlessly transferred when the token is sold. 

There are many types of NFTs, including profile picture NFTs, such as those used by Cryptopunks, music NFTs that show proof of ownership of a music piece, and NFTs used for play-to-earn (P2E) gaming, which can be used for trading, gameplay, and passive income.  

In 2022 over 101 million NFTs were sold on NFT marketplaces like OpenSea and Rarible, with collections covering a range of niches such as art, gaming, fashion, sports, music, domain names, and text-based NFT collections. 

Why Do NFTs Curate Value? 

NFTs can be both extremely valuable or completely worthless, with one in three collections “retiring”, with little to no trading activity. 

What makes an NFT valuable is its ability to introduce scarcity to the digital marketplace. When buying an NFT you’re not just overpaying for a digital image, you’re buying a digital token recorded on a public ledger, known as a blockchain. 

Ownership of the NFT is completely irrefutable, which limits the total supply and “inflates” its price, thus justifying its value. While this sounds like a great way to profit from what could essentially be digital junk, that’s not exactly how NFTs work. They need to have some kind of appeal to increase their value, which we’ll cover below. 

Artistic Value

NFTs started as digital art, with the first NFT art piece “Quantum” being created by digital artists Jennifer and Kevin McCoy in 2014. The value of NFT art is similar to that of traditional art, in which artists sell their pieces for millions at art auction houses like Christie’s. The concept of such art is often difficult for everyday people to get their head around, particularly when it comes to art pieces like the “Banana art” which sold for $120,000 only to be eaten by a “hungry artist.” 

Other pieces like the Untitled [Bolsena] collection by Cy Twombly, which sold for $38,685,000 in 2020, can also be a little difficult to process, considering it looks like a few scribbles on the page. 

Cy Twombly, Untitled [Bolsena], 1969. Courtesy of Christie’s Images Ltd. 2020.

What makes these particular pieces valuable is the fact that there is only one kind in existence and usually, the art piece has been created by one of the most artistic minds within a generation. 

This can explain why the majority of expensive NFT sales have been one-of-works. Similar to Untitled [Bolsena], they are the only kinds to exist. For example, Clock, which sold for $52.7 million in February 2022 is a truly unique piece. This is because it functions as a digital counter for the days Assange (the activist who founded WikiLeaks) has been in London’s Belmarsh Prison for espionage.

NFT Utility 

Another crucial factor that impacts the value of an NFT is its utility — essentially how beneficial or profitable it is. As NFTs develop, they’re being used to create new business models and revenue streams. 

For example, a musician can sell NFTs that represent a stake in their new record. This would allow a musician to increase their initial revenue, while the NFT holder receives royalty every time the record sells. The value of the NFT will therefore rise based on the number of sales a record makes or the fame level of the musician. This potentially allows the NFT holder to make passive profits on their initial purchase or sell it for one lump sum. 

The concept of utility is also important in the gaming space, in which play-to-earn gamers are using NFTs to generate passive income. 

Within the world of gaming, players can make in-game purchases for skins, emotes and other unique features, however they don’t actually own them. With NFTs, these in-game purchases can be owned, which gives them greater value and the option to be resold. Considering the in-game purchase market is set to surpass $74.4 billion by 2025, NFTs could disrupt the entire market, allowing players to generate from in-game items instead of them being a liability. 

Community 

Some NFTs grant users access to exclusive clubs, similar to real-world clubs like Soho House. Within these clubs NFT holders can network with like-minded investors, as well as celebrities and business owners. A great example of this is BAYC. BAYC hosts thousands of investors and celebrities such as Mark Cuban, Eminem, Shaquille O’Neal, Snoop Dogg, Justin Bieber, Madonna, and Jimmy Fallon, making it the most socially valuable NFT collection worldwide. 

What Is the Future of NFTs?

There’s no way of denying it, blockchain technology is changing the future of digital assets. What were once just pictures on the internet have become unique tangible assets with the potential to generate revenue and create entirely new business models. 

Early adopters of NFTs have slowly started to dabble in the technology, with Taco Bell selling an NFT collection in 2021, and Nike selling an NFT collection known as Cryptokicks in 2022. The NBA has also started to capitalize on NFTs to create a deeper fan connection with NBA Top Shot, which sold over $800 million in NFTs in 2021. 

As blockchain technology continues to grow and evolve, NFT assets will only become more valuable, with early stage assets being more valuable due to being created early on in a new trend. In the future, it’s more than possible that you could own an NFT for your favorite movie, record or clothing, all being just as (or more) valuable than the real-world assets you currently own. 

We are excited to announce the launch of our dedicated Twitter account for our no-code NFT minting platform, SmartMint. The SmartMint Twitter account will be a hub for NFT art, NFT-focused content, and updates on all SmartMint collaborations and development upgrades.

We created this supplemental account to better serve our creator and collector community — offering them a platform to showcase their works and connect with like-minded individuals across the NFT ecosystem.

Additionally, we will be hosting regular events, giveaways, and fun contests, which will be exclusive to the SmartMint Twitter account.

Join us on our journey! Follow us on Twitter at @smartmint_ and be a part of our community of NFT creators and collectors.

Follow us on Twitter here.

Twitter handle: @Smartmint_

Learn more about SmartMint here.

About SmartMint

SmartMint is a no-code NFT minting platform where creators can easily create, manage, and mint NFTs on their own custom smart contracts. The tool also provides creators with additional peace of mind as it leverage Pastel’s infrastructure for near-duplicate NFT detection (Sense) and permanent NFT data storage (Cascade).

SmartMint enables creators to mint NFTs on Ethereum, Solana, Pastel, and more. Creators can launch NFT drops on SmartMint as their backend management platform and list NFTs for sale on their own site or secondary marketplaces like OpenSea.

About Pastel Network

Pastel Network is a fully decentralized, developer-friendly layer-1 blockchain serving as the preeminent protocol standard for non-fungible tokens (“NFTs”) and Web3 technology.

Pastel allows for the development of third-party decentralized-applications (“DApps”) to sit on top of its Network, enabling developers to enjoy the scalable registration features, storage processes, and security of the broader ecosystem. Lightweight protocols such as Sense — which was built to assess the relative rareness of a given NFT against near-duplicate metadata — and Cascade — which conducts permanent, distributed storage of underlying NFT data — can be integrated cross-chain across various layer-1 blockchains, layer-2 protocols, or other third-party apps.

Pastel is managed by world-class developers, cryptographers, and technologists, supported alongside an experienced and extensive network of marketers, influencers, and third-party agencies. Pastel is backed by key stakeholders including Innovating Capital, a prominent venture fund.

For more information on Pastel Network, visit https://pastel.network/.

From Pastel Network’s Medium Page