In the music industry, an LP reaches the vaunted platinum status when total cumulative sales surpass 1 million units, signaling that the record has been a certified hit. In the newly formed world of digitized assets and cryptocurrency, one company has managed to hit a selling mark of over a million worth of tokenized real estate: RealT!
The real estate blockchain company has been revolutionizing the ways in which the average joe can invest their hard-earned money by tokenizing real estate holdings into bite-sized chunks that can be bought and sold at the owner’s discretion. This presents a number of advantages over traditional real estate, expounded upon by Richard Kastelein at The Blockchain:
“Investing in real estate and earning passive income has been seen by many as a luxury of the wealthy. RealT makes it possible to earn passive income on real estate that is fractionalized into affordable small shares, while streamlining the investment process, offering liquidity and cutting through the lengthy process and administrative requirements associated with the traditional real estate market.
Normally investors buy an entire property, barring purchasing REIT or other baskets of properties that typically have high fees and by tokenising real estate shares, RealT democratizes the industry.”
For those worried that this futuristic concept might be a little too good to be true, RealT ensures that owners of the tokenized real estate receive all the legal protections afforded to property owners going the more traditional route:
“RealT’s blockchain-powered platform also gives investors the legal rights and protections like the traditional real estate market. Ownership of each property listed on RealT’s platform is distributed across a finite number of tokens, specific to each property, called “RealTokens.”
Owners collect revenue from rent and, based on their number of tokens, vote on property decisions. RealT distributes the month’s rent into normalized daily payments, allowing property owners to immediately see a return on their investment. Properties listed on RealT’s platform are managed by a property management company, which sources tenants, collects rent, and manages repairs, so the diverse group of investors doesn’t have to.”
RealT’s success stems from the phenomenon sparked by Bitcoin’s meteoric rise in the public consciousness, which subsequently recognized the possibilities presented by digital currencies and asset digitization. With new types of cryptocurrencies and software-capable blockchains like Ethereum, the potential for new types of markets such as fully tokenized real-world assets seems inexhaustible, as RealT explains here:
“Bitcoin has proven a concept that spawned an entire industry: digitally-native assets and asset tokenization. The invention of the blockchain created the infrastructure the internet needed for hosting digitally native assets that are able to be owned, transferred, and exchanged between people.
It doesn’t stop at Bitcoin. Digitally-native assets are a new form of ownership. Land titles, stock certificates, property rights, and more are all managed by a paper-based symbol of ownership, backed by a legal system. Digital token on a blockchain follow a similar structure: a digital token that represents a symbol of ownership, backed by a legal system.”
With the blockchain, the infrastructure and bureaucratic mechanisms necessary for asset ownership are heavily reduced, making the middleman redundant and instantly reducing the cost of actual ownership of the assets. Hence, through tokenization, many forms of investiture and property ownership previously thought to be limited to the very rich are highly democratized:
“A token is a transferable unit of something. Deeds, titles, and certificates are all traditional versions of a “token,” a symbol or item that represents something else. A deed to a house represents ownership of that house. “Token” is used to refer to the digitally native asset which represents the real-world asset itself.
“Digitally native” refers to how the asset exclusively lives on the internet. Whereas traditional asset ownership like a deed, title, or certificate requires a piece of paper with legal approval, digitally native assets have ownership baked into the asset itself.
This immensely benefits both token issuers and token purchasers, by making purchasing the token as easy as possible. Because compliance can be “baked in,” token issuers can reduce the amount of friction to a minimum. Now, purchasing real estate property is no more complicated than signing up for Airbnb, Uber, or Robinhood”
Tokenization itself is possible thanks to unique forms of blockchains that are capable of running software. Ethereum, specifically, is a favorite of most companies working in the tokenized asset market space, as its relative stability as a cryptocurrency and the highly developed blockchain software make it perfect for digitizing assets:
“Asset tokenization is growing rapidly on the Ethereum blockchain. Ethereum has become a selling-point for issuing a tokenized asset; because most people are doing it on Ethereum, others will too. Ethereum has become the “Land of Tokens.” Ethereum, as a blockchain capable of running software, has the capacity to create markets that leverage many types of tokenized assets at the same time…
Ethereum is a software-capable blockchain. This means that the digital tokens found on Ethereum are programmable. They can be made to behave in a certain way, based on various inputs, to create certain outputs. For example, in the custody of a tokenized property, an owner of the property can make conditional scenarios to where the token can change owners”
As the age of the blockchain progresses, we are doubtless going to see many more companies hitting the platinum level for asset sales in fields like precious metals, bond markets, equity exchanges, and even art, each of which has already made strides in tokenizing their products. With the success of RealT in digitizing an asset so inexorably tied to the physical world, no doubt other enterprising minds are looking at every other class of asset and wondering how they can get in on some of the action.