Published by Hackernoon | May 20, 2024
Real estate tokenization is an innovative and fascinating way to get real estate investments done.
As someone who works with crypto assets, you likely know about Ethereum, Bitcoin, and many other names that sound as though they come from a science fiction comic book. Has real estate tokenization, nevertheless, caught your attention? You did indeed read correctly: real estate. “Since virtually all things are becoming digitized, why should real estate differ? Just chill, and get ready to delve into real estate tokenization, the real estate market of tomorrow.”
Real Estate Tokenization
What, however, is the tokenization of real estate? Said another way, it is the representation of a real estate asset as digital tokens on the blockchain or chain of blocks. Does it not sound like anything from a Black Mirror episode?
Basically, each token represents a small token of the value of the whole. Take, for example, splitting a cake, which is your property, into tokens with your friends. In addition, being able to buy and sell these tokens on an online exchange makes it easier to handle property deals.
Though the notion is not so novel, it may seem to be revolutionary. It really is similar to what businesses do when they issue stock to denote ownership of the business. What then distinguishes the tokenization of real estate? Dissecting a few of its benefits:
For ages, individuals have considered the real estate market an illiquid asset because they cannot easily convert it into cash. Tokens allow a property to be sold more quickly and readily, however, giving the owner additional liquidity.
Access: Previously limited to individuals with huge capital, real estate tokenization enables a larger number of people to engage in the real estate market by enabling the division of a property.
Transparency: Since token transactions are safe and visible because they are logged on the blockchain, fraud is less likely and market confidence is increased.
Practices of Real Estate Tokenization
You’re probably wondering, “How does this all really work in practice? It sounds fantastic in theory.” Let me illustrate. Assume for the moment that you own a downtown office tower. It is a substantial commitment in addition to being valuable property. Perhaps you wish to release some equity without selling the house outright. Here’s where tokenization of real estate becomes useful.
There are, say, a thousand tokens worth of construction value. Every token would stand in for one-thousandth of the property. A digital marketplace may then be used to sell some of those tokens. Besides, a section of a building might be bought by investors without having to pay a significant sum of money to acquire the whole structure. It is because of this reason that real estate tokenization is beautiful since it fast-tracks the democratization of the property sector.
