Tokenization: Bringing Blockchain to Real Estate Sector.
I will KISS(Keep It Simply Short) this. It’s no news that blockchain is impacting industries and making changes to legacy-modeled business systems and industries that are influenced by rent-seekers and middle-men which impacts cost to the end-users with unnecessary bureaucracies. Also tokenization is now becoming a buzz word. If you don’t know what tokenization/token economy is about, you might want to read my previous article here: Tokenization: Creating a Blockchain utility token economy for your business or simply keep reading this article as I gave a practical example of how to tokenize a property..
The real estate sector is a multi-billion dollar industry that involves lots of players and paper-works in order to conclude transaction between sellers and buyers especially when the principal actors are geographically apart. Propy; a real-estate blockchain startup, recently concluded its first deal of property sales using the blockchain and the property legally recorded and transferred to the new owner with the transaction id being used as a legal record by government agencies thereby displacing lots of middlemen in the process. So how can blockchain help in this industry aside being used as a secure immutable censorship resistance database? Here is how.
A Tokenized Property with a Market place
You have a property worth $1million. You looking for a buyer but no serious buyers yet. What if you convert the $1million to 1million token and each token is worth $1000. What if instead of one person paying for the property, you have a pool of buyers/investors buying a fraction of your property per token. Like a 1000 persons paying you a $1000 each and they have the ability to sell off their token that represent a fraction of your property via a token market place. $1000 multiplied by a 1000 persons gives you $1million. This makes it easy to sell-off your property aside spreading of wealth to the buyers/investors.
Now why will someone wants to buy such a token? Duh!? Properties appreciate and let’s say your property goes up in valuation from $1million to $2million, what that translates to is that a token automatically is valued at $2000 because the token is tied to a tangible asset that appreciates. After tokenizing a property, you can’t sell such property in the open market rather a holding company takes charge of such a property or land. Selling such would be tantamount to fraud because the property already have new owners.
So how do Buyers convert their token back to fiat or sell their tokens? By selling or transferring their token to another holder that wants to have it. Thanks to smart contracts blockchain like Ethereum, NEO, eos❌ (😜), hyperledger and lots more, an open market place where buyers and sellers of tokens such as this can be created.
Thanks for the Info Charles, I have a property/land so what do I do?
You can Will the property to me 😄 Setting up such a system definitely needs planning, a big fund and an experience team to put it together. Another way to go would be leveraging on systems already in place to handle such. I came across unohomes at the last Blockchain and Cryptocurrency conference held at Civic Center, Lagos Nigeria. A home grown Nigerian blockchain powered real-estate solution. Site not yet up so I can’t give much detail about their solution because I was busy looking for a wife(i) and so didn’t pay much attention to their presentation. Another solution I came across is atlant and they already have it all set up for you. You can read up on their tokenisation teaser and whitepaper for more detail. No doubt more solutions and platforms still on the way. This is just the beginning of practical use-cases of blockchain and cryptocurrencies.
In Conclusion
Erm! Kinda confused on how to conclude this or why it needs a conclusion but I think you get the message. What ever you decide to do with this knowledge, just be careful not to create a Security token and if you choose to create one, make sure you have the required government status and backing.
fin!
Charles is a blockchain solution architect, web and mobile developer with a decade experience in the IT world creating applications and running several startups. Passionate about great ideas that have “Proof of concept” and scalablilty. #Fitfam gym dude and enjoys swimming when he is not in front of his laptop, bar, cooking, playing ping-pong or snooker. hey@cryptofefe.com
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