The Future of Real Estate Tokenization Using Blockchain

December 15, 2020

The Future of Real Estate Tokenization Using Blockchain

Tian Won Park
Marketing Manager
Shareable Asset

The Future of Real Estate Tokenization Using Blockchain

When I decide to invest, the new way for me to try out is the “real estate token investment”. When it comes to payday, there is only one place I want to try. It is real estate investment in the UK. I couldn't even dream of investing in real estate in the UK due to huge capital outlay, but with real estate tokenization, it is possible for me to make a split small investment.

I opened an account with an investment app called Shareable Asset and purchased 200 dollar worth of ownership fractions. Now that I own fractions of the real estate in the UK, I can receive rental income in GBP when dividends are paid out.

The era has arrived where you can trade digital assets based on blockchain. Digitally tokenized physical real estate allows direct transactions between parties on an asset trading platform. Therefore, you can avoid the risk of debt defaults, disputes, costs through intermediaries, and fraud.

The real estate investment mentioned in the previous example is the real story of 'Shareable Asset', a blockchain-based real estate investment platform [].

Shareable Asset launched a platform to issue tradable asset-backed securities (ABS) in digital form. By providing the infrastructure, Shareable Asset improves the transparency of real estate transaction information by operating the entire process from real estate registration to information fact verification when investors purchase through the blockchain technology platform.

This is made possible because of the specificity of the block chain technology. view source [1]

Real estate blockchain tokenization technology is a digitized, distributed ledger that immutably records and shares information using software protocols and advanced cryptology.

The development of blockchain-based smart contracts—self-executing software algorithms integrated into a blockchain with trigger actions based on pre-defined parameters—has made it possible for parties to automate the process of executing commercial transactions between counterparties in a more direct, trustworthy and efficient manner.

Tokenization is the process of representing a fractional ownership interest in an asset with a blockchain-based digital token. Each token represents direct ownership of an asset, such as a parcel of real estate, a share in a company owning real estate, a participation in a real estate investment fund, property-related payment rights (such as dividends, distributions or a share of profits), or any number of potential derivatives. Amid increasing interest in technology applications for real estate assets, or “Proptech,” the industry recognizes that tokenization has the potential to revolutionize real estate transactions and disrupt established business models. view source [2]

The technology would enable more flexible forms of ownership, such as fractional property rights, where only part of a property is bought or sold. And it would allow for safe, traceable and timestamped transactions along the value chain view source [3]

The Singapore-based company will get a fee from asset owners instead of the retail investors, it says. Source : SCMP
view source [4]

Real Estate Tokenization
Real estate tokenization generally follows a five-part procedure by the offeror:

  • Asset Identification—identification of the commercial real estate asset, which may involve its acquisition, financing and appraisal;
  • Smart Contract Generation—compliance with securities laws and the creation of a smart contract;
  • Token Creation—determination of the number and type of tokens and selection of an exchange platform;
  • Marketing and Distribution—advertising of the offering, confirmation of investor accreditation and listing of tokens on the exchange through a security token offering (STO); and
  • Post-Listing Support—ongoing support for investors and distributing profits or other rights to payment.

Tokenization, by reducing or eliminating the costs of intermediaries and lowering minimum investment requirements, offers the potential to unlock trillions of dollars in illiquid global real estate assets to retail and institutional investors in an open marketplace. view source [2]

Therefore, the future of the real estate industry will use a blockchain-based tokenization method to address inefficiencies in the existing market.

[1] [The world that the blockchain changes] Invest in all tokenized assets
[2] Blockchain-Based Tokenization of Commercial Real Estate
[4] Singapore platform Shareable Asset gives retail investors access to real estate available only to big players – for as little as US$122

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