Traditional real estate investing involves significant financial commitments, long and isolated processes, and extensive paperwork.
Real Estate Investment Trusts (“REITs”) have provided a more liquid way to gain access to the real estate sector. However, the process of offering and listing a REIT is often expensive and time consuming, and not readily available to issuers with a single real estate asset or small portfolio.
Tokenizing real estate assets using blockchain technology addresses these issues by providing operational efficiencies, information transparency to real estate transactions, and bringing the added benefits of fractional ownership and liquidity to real estate investing.
Tokenization reduces entry barriers for investment by allowing ownership of a real estate asset to be more easily divided among a broader pool of investors, democratizing access.
What is tokenization how does it work in the real economy?
Much has been said and written about the potential of the blockchain in terms of reducing friction in the value of transactions, through the omission of intermediaries. Either way, a deeper application of the blockchain has emerged. It is about the tokenization of the economy, which has a lot to do with the recent phenomenon of the rise of the Initial Coin Offering (ICO, for its acronym in English). Check here the best real estate tokenization
In a recent interview with Don Tapscott, the CEO of the Block chain Research Institute, Citizen Hex CEO Benjamin Roberts offered a good appreciation of the token economy. The blockchain is known as the Internet of Value . There are several blockchain-based digital currencies, which implies an immutable and transparent way to transfer them and assign their owners. These digital currencies, or tokens , can be used to represent property over real-world objects and properties found outside the blockchain. This is what we mean when we talk about tokenization of goods and the real economy.
For tokenization to work, some kind of centralized infrastructure or institution must connect tokens on the blockchain with real-world objects. This generally involves a number of professional entities, including appraisal firms, insurance companies, fiduciaries, and law firms. Collectively, these entities verify, certify, condition, insure and value. Once this process is successful, the good can be added to the blockchain, where interested investors can bid on how many shares of the good they want to buy and at what price.
The tokenization has the potential to revolutionize the real economy. On the one hand, it can strengthen the liquidity and transparency of high-value properties, such as high-end real estate or famous works of art. The owners of these properties can also finance themselves through the partial tokenization of their assets. On the other hand, it democratizes access to these investment opportunities, which were traditionally available only to high net worth investors.
Recently, ICOs began to focus on the tokenization of the real economy. One of them is called Maecenas; It is a new online art market that offers art lovers the possibility to buy stocks of famous paintings. The name “Maecenas” comes from Gaius Maecenas, an art collector in ancient Rome who democratized art by financing poor poets. By purchasing ART tokens, investors can buy and trade stocks of masterpieces (such as a Monet or a Picasso), which are traded on the Maecenas exchange. The platform has tremendous potential to greatly expand the liquidity of the entire art market, as well as democratize it.
Another example is the assets of the token platform called LAToken. The main currency for trading assets on this platform is called LAT. By purchasing LATs, your holders gain access to an expanded universe of tokenized assets . These assets include stocks in Apple, Amazon, Tesla, and commodities such as oil, silver, and gold. Plus access to real estate and artwork.
According to research carried out by LAToken, the total capitalization of cryptocurrencies could exceed 5 trillion dollars in 2025. 80% of these, that is $ 4 trillion, could be cryptocurrencies put into real world assets (for example , stocks, real estate and artwork). The trading volume of these cryptocurrencies could exceed their market capitalization by more than ten times. That is, the volume of operations could reach $ 40 trillion in the year 2025.
All of this means that the growth opportunity that tokenization of the real economy appears to offer is truly significant. Owners of liquid and expensive assets (stocks, debt, real estate, and works of art) will be able to unlock the value and will be able to tokenize these assets on a blockchain. Ordinary investors will have access to these assets or goods through these modalities. It won’t be long until tokenization penetrates every corner of the real economy.