People from all social and economic backgrounds have placed a high value on their physical estates since time immemorial. These estates often represent a person’s entire lifetime’s wealth and success. As a result of technological advancements, a new concept has emerged that has changed how people should think about their estate plans.
Although most people own many digital assets these days, it took several estate planners a long time to realize that it’s crucial to safeguard your digital estate. The law, as usual, has yet to keep up with changes in this area and cannot be relied on to protect you, so you must protect yourself. And with the rise of innovations such as cryptocurrencies and blockchain technology, the concept of digital real estate has also emerged to the scene.
As a result, it is crucial to consider the value of both your physical and digital estate. In this post, we will discuss everything about understanding your digital estate’s value and elaborating on digital assets in an estate.
What is Digital Real Estate Cryptocurrency?
Almost everyone has heard of cryptocurrency by this point. Despite being formally introduced in 2008, cryptocurrency became a common term much later in the 2020s. These blockchain-based digital currencies have impacted every industry, including real estate. And, with the rise of digital real estate, now is the time to become acquainted with real estate cryptocurrency.
Simply put, crypto real estate is the use of cryptocurrency in real estate transactions. And these transactions take place both in the digital space (the metaverse) and in real life.
Cryptocurrency is digital money that exists on the blockchain. Most people have heard of popular cryptocurrencies such as Bitcoin and Ethereum. These cryptocurrencies have had a significant impact on payments, remittances, and currency exchange, as well as the real estate industry.
In recent years, people have started to use blockchain-based payments for regular transactions. And the real estate industry is taking notes and trying to stay ahead of this latest trend. Unlike coins and tokens, crypto real estate metaverse (sold as NFTs) proceeds to provide land investors with an immediate benefit.
Sometimes a question arises, what if this is just a phase that will die out eventually? Several technological innovations seem unreal at first. For example, when smartphones and social media platforms first became accessible in the early to mid-2000s, the general public was skeptical of their success. But, 20 years later, the world became a hub for smartphones, smart devices, and social media. The same thing can happen with cryptocurrency and digital real estate.
How Do I Buy Crypto Digital Real Estate?
You can undoubtedly use cryptocurrency to purchase real estate. Cryptocurrency-based real estate transactions are secure, efficient, and fast when merged with smart contracts. There are multiple ways to invest in real estate with cryptocurrency. Some of the most important ones are as follows.
Direct Purchases Using Cryptocurrency
Cryptocurrency can be used to buy and directly own property in the United States and worldwide. The seller of real estate must accept digital currency voluntarily and have a compatible digital wallet. Using cryptocurrency to buy international real estate can have some significant advantages.
Real estate ownership can confer residency or citizenship status in some countries, such as Montenegro and St. Kitts. Buying real estate with cryptocurrency can have tax consequences, regardless of where the property is located. Digital asset sales and transfers are generally taxable.
Tokenized Real Estate
Investors can access real estate offerings by purchasing blockchain-based real estate tokens. Investors can choose token investments corresponding to specific properties and pay for them with either digital or traditional currency.
Real estate token ownership gives investors direct ownership of the property, and investors can trade or sell their real estate tokens with few restrictions. The tokenization of real estate brings the benefits of blockchain technology, such as efficiency, transparency, and security, to fractionalized crypto real estate investing.
Cryptocurrency With Real estate Focus
Investors can add real estate exposure to their crypto portfolios by purchasing cryptocurrencies with a real estate focus. These purchases can be of coins already in circulation or real estate cryptocurrency coins that will be released soon, usually through an initial coin offering (ICO). Several emerging cryptocurrencies employ various strategies to profit from the real estate market. Here are a couple of examples:
- Propy: By developing a novel unified property store and asset transfer platform for the global real estate industry, Propy focuses on solving the problems that occur during international real estate transactions.
- RET: RET allows peer-to-peer commercial and residential real estate transactions through a decentralized rental platform.
- Quarteria: Quarteria allows a decentralized international and domestic real estate listings database. Both buyers and sellers democratically control listings on Quarteria.
How To value digital assets?
The valuation basis is crucial when determining how to value a digital asset.
The AICPA Accounting and Valuation Guide: Valuation of Portfolio Company Investments of Venture Capital and Private Equity Funds and Other Investment Companies may provide additional valuation guidance for digital assets that are most similar to a “security” or interest in a business.
In general, one or more of the following approaches can be used to determine value:
- The digital asset’s traded market price, potentially adjusted as necessary
- The market price for the underlying resource or function for a utility token
- OTC market quotations
- Metrics for determining value in comparison to other traded (priced) assets
Network Value Method: The fundamental idea that the value of a network is derived from the people who use it, as well as Metcalfe’s Law, which states that the value of a network is proportional to the square of the number of its users, is used to determine value.
Income Approach: The value of a digital asset with security-like features is determined by discounting the cash flows associated with the asset over time.
what makes a digital asset valuable?
The intrinsic value of a digital asset is what makes it valuable, and if there is no extrinsic value, it isn’t very worthy. Digital assets cannot leverage their intrinsic value without an extrinsic value, which is required to inform potential customers about them. Nobody will buy or use digital assets unless they have inherent value.
Can you inerit digital assets?
Any wholly owned and transferable digital assets can be inherited if designated in an official Estate Plan. If no specific beneficiary is named for digital assets, ownership may pass to the Executor of the Estate and, eventually, to the next of kin. In some cases, digital assets like cryptocurrencies and NFT’s may completely get overlooked, especially if the family is unaware of their existence.
Because there are so many companies in the digital space, the regulations regarding whether and how they can transfer vary slightly. Understanding the data privacy laws and criminal rules that regulate access to another person’s digital assets is crucial. As a result, including digital assets in a digital estate plan is essential.
what are the digital assets in an estate?
Here are some common examples of digital assets that can assist with estate planning:
- Email accounts – Gmail, Yahoo, Outlook.
- Social media accounts – Facebook, Instagram.
- Subscriptions – Netflix, Amazon Prime, Apple Music.
- Chat Rooms or boards – Neighborhood boards, professional boards.
- Marketplace accounts – eBay, Amazon.
- Photos – Cloud or computer.
- Books, music, or video – YouTube, iTunes, Vimeo.
- Financial accounts – Savings account, credit card, cryptocurrency.
- Blogs and websites – Domain name registrars, third-party host
What is the difference between cryptocurrency and digital assets?
Over time, the definition of digital assets has evolved from the widely known digital items to a more comprehensive definition that now encompasses entities that can be created and stored with blockchain technology, are verifiably unique and can be utilized to create value.
Different cryptocurrencies, non-fungible tokens (NFTs), crypto assets like utility or security tokens, and more are now considered digital assets. There are many options available, even though trading cryptocurrencies is one of the most popular ways to invest in digital assets.
A digital asset is a broader term, among which cryptocurrency is one of them. There are many different types of cryptocurrencies, including Bitcoin, Ether, Dogecoin and many others.
The emergence of blockchain technology marked the beginning of true digital asset innovation. Although most people associate cryptocurrency with blockchain technology, blockchain technology is increasingly being used for various digital products and functions, especially the creation and storage of digital assets.
The financial sector should accept the opportunities and challenges posed by the upcoming digital transformation and begin developing a strategy. The competition from cryptocurrency exchanges is increasing rapidly. Furthermore, these platforms quickly expand the asset offering their clients can access.
As more traditional assets and investments are digitized, these platforms will begin to provide their users with digital stocks, tokenized crypto real estate NFT, and more for their users. Institutional and retail investors will likely use whichever platform offers the most excellent variety of services and assets.
To conclude, this is just scratching the surface regarding the uses of digital assets. Numerous other categories like decentralized protocols, utility tokens, non-fungible tokens, Defi protocols, and other technologies would extend far beyond this topic. The digital future promises to allow for maximum diversity in capital markets.