A big deal: real state tokenization

 

By FintechNews staff

 

-Property tokenization is one of the most promising use cases of blockchain technology. With a total asset value of $228 trillion globally, real estate is a more valuable asset class than bonds and stocks combined.

-Fractionalization: fractionalizing a property’s ownership into digital shares, potentially allowing for thousands of investors to participate into a singular property investment, solves the high barrier to entry issue. These token shares are backed by the value of the apartment building and offer rental dividends on a monthly or quarterly basis. As the rental income is distributed directly to your digital wallet, owning investment property can be as simple as holding a digital token.

-Liquidity: property tokenization does not only allow a wider range of investors to access the asset class but will eventually also enable a liquid secondary market. Once the issuer has listed a token on a digital exchange for secondary trading, investors can easily resell their assets, facilitating liquidity of the assets.

-Smart contracts: the key advantage of smart contracts is that they don’t have to be individually negotiated. Their terms can be implemented automatically, which considerably reduces transaction costs and the time needed to carry out the procedure. smart contracts are able to automatically implement and enforce agreements between users without the involvement of any third parties.

-Transparency: blockchain is capable of recording each and every transaction that takes place on it. Whenever a single token undergoes a transaction, all the participants become aware of it. Therefore, investors can look at the token’s history, pricing, as well as other transaction details at any time.

-Security: the distributed ledger technology (DLT) uses advanced cryptography techniques that provide users with heightened security. Each user has their own private key that gives them access to their blockchain assets.

-Immutable nature: the most notable feature of blockchain is that after a transaction has been recorded and confirmed, it doesn’t allow anyone to make any changes and alter the transaction details.

-Asset tokenization will increase financial inclusion by opening up illiquid asset classes to a broader investor base.

-What’s being said for real estate is equally valid for other illiquid asset classes – like arts or private equity. But considering the size of the real estate market, that’s where tokenization can make a huge difference for investors, developers, and fund managers.

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