Tokenization for Real Estate is Already a Reality — Part I

Blockchain is being used in a variety of industries for different purposes. Until 2018, it was distant from the real estate industry, however, things changed when Elevated Returns, A NYC-based asset management firm, used the Ethereum blockchain to complete a major tokenized real estate deal for $18 million.

The property in question was a resort in Aspen, Colorado, known for its exotic features and location. The exquisite property and the use of a unique method quickly caught the attention of fintech enthusiasts, blockchain communities, and investors.

They saw potential in blockchain and soon we saw a bigger property — valued at $30 million — in Manhattan get tokenized by using the blockchain technology.

With this, we can say that tokenization in real estate has now arrived and here to stay.

What is Tokenization?

We can draw parallels between tokenization and company shares.

Tokenizing allows the creation of partial ownership of illiquid assets like real estate. This opens new doors for real estate investors by reducing thresholds and improving liquidity.

Blockchain plays a very vital role here. It serves as a distributed database of records of all digital events or transactions that have been shared or executed among parties.

Why is Tokenization Getting Popular?

Each transaction is verified and becomes a permanent part of the system. Blockchain is considered a reliable platform as it contains a verifiable and certain record of every transaction.

Blockchain’s unalterable framework and transparency make tokenization a safe option. The sale takes advantage of smart-contracts, a virtual cryptographic code that can only be executed only how it’s set up by the original creators.

The token shows ownership interest that also dictates its true value. Moreover, the blockchain system offers other benefits as well including automated processing and improved transparency.

A unique thing about tokenization in real estate is that a token can be used to represent different ownership interests such as cash flow generated through the asset (rent), its ownership, interest on debt, etc.