Securitization
The global real estate market is valued at $228 trillion. Before the tokenization of real estate, only accredited and institutional investors had access to the most exciting projects. But now asset owners and developers can market their property globally to retail investors as well as institutional investors.
The Future is Now
The opportunities for blockchain in many facets of commercial real estate transactions include property and title searches, financing, leasing, purchasing and selling, due diligence, managing cash flows, and payment management, including cross-border transactions.
The basics
Ethereum.
Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether is the native cryptocurrency of the platform. It is the second-largest cryptocurrency by market capitalization, after Bitcoin. Ethereum is the most actively used blockchain.
Security Tokens.
A security tokens are created to represent fractional ownership of an asset. The total value of all tokens will be equivalent to the total value of the securitized asset. The most significant tokens is called ERC-20, which has emerged as the technical standard used for all smart contracts on the Ethereum blockchain for token implementation.
Smart Contracts.
Smart Contracts are pieces of software, that extend blockchains’ utility from simply keeping a record of financial transaction entries to automatically implementing terms of multiparty agreements. Smart contracts are executed by a computer network that uses consensus protocols to agree upon the sequence of actions resulting from the contract’s code.
Blockchain.
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.
Cryptography.
Cryptography is a method of developing techniques and protocols to prevent a third party from accessing and gaining knowledge of the data from the private messages during a communication process. Most common methods are Asymmetric-Key Cryptography and Hash Functions.
Secondary Market.
Secondary markets include all exchange and off-exchange markets that help with the circulation of securities that have already been issued through multiple purchases and sales. They fulfill important economic functions by providing liquidity, helping to raise capital, placing a value on the traded securities and serving as an economic and sector barometer.
What Experts Are Saying
"Blockchain is, simply put, a digital ledger (or a log), in which transactions made, notably in cryptocurrency, and are recorded chronologically and publicly,"
— Dr. Michael Yuan, CEO of Second State
“Commercial real estate is inherently illiquid, which means that, for example, partial sales are economically unprofitable due to procedural or organizational hurdles alone, and in certain cases liquidation is not even possible. Blockchain changes the way investors look at fractional ownership”
— Phillipp Sanders, Frankfurt School of Blockchain
“Blockchain eliminates the friction caused by so many intermediaries facilitating one real estate transaction. Tokenization will lead to dramatic cost reduction for acquisitions, management, and distributions.”