If your professional existence is in or linked to the AEC sectors or built environment, I believe that a technology has arrived that has the potential to fundamentally change the game as you know it. This article provides a broad overview of the opportunities for NFTs in our built environment.
To start with, let's explore what an NFT is. NFTs are tokens that we can use to represent ownership of unique items. NFT stands for Non-Fungible Token, and this is an economic term you could use to describe things like furniture, a song file or a computer - anything that has unique properties. In comparison to fungible items is defined by their value (e.g gold, currency) rather than their unique properties.
No two building assets are the same and their property sets are unique. This makes NFTs well suited to buildings, and as we have seen with other industries like art and collectables, provides a new representation of the concept of “ownership”, which I am personally fascinated by.
Why does this matter? Our built environment is special to us all. It defines the places we live, work and play. However, the industries that currently support all transactions to do with a building are extremely inefficient, bureaucratic and cumbersome to work with. Same set of stakeholders, overly complicated processes dealing with all things to do with our planning system, our legal system, our land registry system etc. which creates (a convenient?) inertia for real progress. This results in social problems to do with things like no access to affordable housing and an estimated 40% waste which raises ecological concerns - And its not getting better.
For the first time, I see the light, coming in the form of NFTs. I have listed some properties of NFT and identified some paths of least resistance for adoption:
- The deed representing the building can be minted to an NFT. This exchange could be undertaken by an individual with an existing property or an individual could purchase the building from the traditional property market and be rewarded on taking the risk of handling the transaction to purchase the building to exchange to NFT.
- An alternative to the “Client/Owner” role on projects: The purchasing power of the market and existing mechanisms such as “initial coin offerings”, I see the potential for a landslide of existing housing stock to be purchased for market rates and upon purchase, minting an NFT as a result.
- NFTs can support fractionalised ownership. This is called “Sharding” and means that ownership of a building can be shared and the price of each shard remaining equal.
- An NFT can be operated by a Decentralised Autonomous Organisation (DAO). This DAO would be responsible for the operations of the building, tackling topics such as how revenue created by the building is shared, how spend is allocated on the building and what's really exciting is that a group of people can have partial ownership of a building/asset and make decision making is coordinated securely via the blockchain.
- The market value of each shard could be used to secure finance from the emerging market of decentralized finance(DeFi).
- Shards could be traded on marketplaces like binance and other known crypto exchanges e.g NIFTEX [https://landing.niftex.com/]
- AEC professionals could be rewarded through the use of smart contracts and shards could be a new form of incentive to create collaborative environments due to the future value of their investments.
Part owning a property democratises ownership of our built environment and market places can provide an open place to trade their value but it is not without its challenges, such as:
- What is the work that would be involved to mint NFTs for housing bonds, and are there known limitations that could cause inertia for individuals?
- What are the structures and types of relationships that the DAOs would have with the building?
- What happens to building occupiers?
- What is the context for each coin? One coin per building, locality, community, region, state or globe?
Due to scandalous behaviour of centralised bodies such as the government and banking systems in recent times, a distrust and decline in support for these organisations have created the context for a Crypto based alternative “boom”. The blockchain offers an unbreakable trust and it resonates with people. I anticipate similar waves of adoption for NFT minting of all parts of the built environment that we have seen with Bitcoin and I am looking forward to the unravelling of this technology onto the market, and the positive impact it could have on our built environment.
Please find the AecHive rooms on Clubhouse where we will be discussing this topic and would welcome your participation.