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One of the most important use cases of blockchain technology is asset tokenization. The possibility of turning real estate into tokens that are registered and traded on the blockchain brings about many benefits to a traditionally illiquid market. Let us take a look at some of the use cases that are related to real estate on the blockchain and how different projects tackle them.
Fractional ownership
Real estate is among the best investment opportunities available, but most smaller investors are still barred from entering this lucrative market. Building or acquiring real estate involves large upfront costs, and real estate is highly illiquid. Real estate owners cannot simply liquidate their assets, at least not without incurring large losses. These losses include having to find a buyer, middlemen that are necessary in asset transfer and other legal costs.
A possibility to alleviate this problem is to partition assets into smaller shares that are collectively owned by the shareholders. Traditionally, these investment opportunities have been called real estate investment trusts (REITs), but oftentimes, REITs are not even exchange-listed, which does not help much in terms of liquidity.
Projects like Meridio make it possible to tokenize real estate assets and issue the tokens to investors. For investors, Meridio quotes lower investment minimums, lower transaction costs and better liquidity as benefits, while real estate owners and developers can unlock additional capital by moving into a largely untapped market.
In order to comply with all regulations, Meridio uses a whitelisting solution for tokenized assets, making sure that only those investors, who are legally able to do so, can buy them.
Similarly, Slice facilitates the trading of fractional assets, and thus, investments in real estate by international investors, without the typical five-year holding period, which traditional REITs have.
Ownership transfers and rentals
Another option to increase liquidity is by making it easier to offload real estate to another owner. Thanks to smart contracts, the legal transfer of property assets can be greatly facilitated, even for full ownership rights. Thanks to Propy, properties can be instantly listed for sale internationally. Their smart contracts enable asset transfers and of course, the transfer of the purchase sum without the need for any third parties.
In a similar vein, it is also possible to utilize smart contracts for rental agreements. For example, ManageGo uses a DLT-backed solution for a comprehensive solution for all things related to rentals and leases. ManageGo tracks contracts, front desk services, rent payments and maintenance tickets, making it easier to rent out your property to others.
Issuance platforms and exchanges
Rather than creating a specific solution for real estate on the blockchain, token issuance platforms focus on the infrastructure needed for tokenizing assets and trading them. Recently, the blockchain development group HashCash Consultants has announced the development of a crypto exchange dedicated to real estate. Their exchange will not only allow for the trading of tokenized property, but also list utility tokens native to real estate blockchain projects, such as the aforementioned Propy (PRO).
Another project that falls into this category is Realio. Realio is a token issuance platform specialized in security tokens. Although the project is agnostic to the types of assets that can be tokenized, they explicitly mention real estate as their top use case. For this purpose, Realio is working together with multiple blockchain networks and makes use of either built-in blockchain features or builds their own transaction controls for compliance with international securities regulations.
With RealioX, the project also operates a decentralized exchange, while conducting KYC and accreditation checks for investors. Any investor who wants to buy assets on RealioX must get whitelisted through this process. Thus, tokenized assets can be traded decentrally, while still being in full compliance, thanks to their transaction controls.
Edda Viktor
Blockchain enthusiast learning to write and deploy my own DApp. Previously worked for the oil and gas industry as an IT administrator.
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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
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