Interested in the Opportunities
Real Estate Tokenization: As the blockchain develops more and more industries are interested in the opportunities. That this innovative technology can provide them. Initially created as an infrastructure for Bitcoin the technology is evolving at a rapid pace.
Nearly nine years after people first heard about Bitcoin blockchain-based solutions have gone way beyond the financial industry. The immutability and security of the technology have been appreciated by banks and other financial institutions. Transport and logistics companies, the video game industry and other industries.
The governments of some countries have begun to turn to the blockchain. Many are attracted by the opportunity to use technology in real estate. For example the government of Ukraine plans to place the ownership of real estate on the blockchain by 2018. This summer Japan announced the integration of blockchain into real estate registries. In general many states treat innovation quite favorably.
Tokenization in the private sector
In the private sector numerous companies like Propy. XRED or BitProperty are looking to go even further and tokenize real estate. And although tokenization itself has been open for a long time it has become widespread right now.
In essence tokenization is a process of transformation of accounting and asset management. In which each asset is represented by a digital token. This opens up many new opportunities to increase the liquidity of assets. Provide the ability to manage assets to all participants and even apply sharing scenarios.
Some experts believe that tokenization is a new direction that has yet to develop. However, they suggest that the entire business landscape should change beyond recognition in the next few years.
“Markets are changing very quickly, cryptocurrencies have now become commonplace, and in a few years asset tokenization platforms may become as familiar as smartphones or social networks,” says Valentin Preobrazhensky, head of LAToken.
Brickblock CEO Jacob Drzajga offers a more radical view:
“The future of asset allocation is not related to asset classes; it merges digital and real assets into one through tokenization.”
New features of tokenization
In real estate, tokenization offers a whole range of new and amazing possibilities.
Investments in the real estate sector currently have very high entry thresholds that block the way for millions of potential participants. The entire industry, from home mortgages to construction, is a vast conservative realm with strict regulations. However, tight regulation does not guarantee protection against fraud or force majeure.
In the case of tokenization, people wishing to invest in real estate, whether it is an apartment in an unbuilt house or a cottage for rent, will need to purchase a certain number of tokens associated with the relevant property.
Important Point In Tokenization
A very important point in tokenization is the ability to purchase tokens for any available amount. This significantly lowers the entry threshold for potential investors.
In most cases, the tokens are transferable, meaning if you want to increase your real estate or, conversely, sell it, you just need to buy or sell tokens. This reduces the risk of falling into the sticky web of bureaucracy.
For the other side of the business – construction companies and real estate agencies – tokenization offers a much easier way to raise funds for new projects and increase liquidity.
In most cases, these models use smart contracts, another marvel that the blockchain era has brought us. Smart contracts regulate the relationship between parties automatically, securely and impartially, effectively reducing the risk of bribery or fraud.
Ryo Nomura, Project Lead for BitProperty Tokenization Platforms, says:
“Builders are excited about the prospect of connecting with the larger, global investor community and opportunity.”
However, it should be remembered that the legal framework lags slightly behind technological innovation, so this model does not have regulatory support in most jurisdictions.
For legal reasons, tokens cannot represent actual stakes in a project, although they actually do. Legislation is a very complex thing, so the process of introducing new investment options into the regulatory framework can take years.
What the future holds
Already, real estate tokenization offers a range of new investments and profit opportunities for millions of people. However, its impact is much wider, as technological innovations lead to a completely new way of interaction between people and real estate.
With the Internet of Things, which is planned to be used in the next decade, tokenized real estate objects will be able to recognize the token holders as their owners. Houses and apartments endowed with artificial intelligence will not allow people who do not have a special private key associated with their tokens to enter. And smart devices installed in such dwellings will respond only to those who have the right to give them orders.
Tokenization could go even further by making token holders the only people who can use the property they have acquired.
In a future where your pillow tells your coffee machine that you’re awake, real estate asset tokenization could become an integral part of business and society. Thus, the current trend towards tokenization can be the first step towards a futuristic environment, which we see only in science fiction films so far.
