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How Tokenization can Change Real Estate

· tokenization,real estate,blockchain,ethereum,bitcoin

In 2015, the world’s developed real estate was valued at $217 trillion. By contrast, professionally managed investments in the real estate markets represented less than 5% ($7 trillion) of those properties. This is not surprising since the market is plagued by inefficiency. The real estate industry faces multiple issues caused by fragmentation and centralization. Technology is fragmented across different protocols, and people are fragmented across different roles. Technology is also corralled into proprietary software applications that are non-interoperable. In addition, data is centralized by third parties.
One of the most glaring areas of waste are the excessive costs involved in processing transactions. Initial investments are so high that they make single building ownership much less lucrative than multiple holdings or Real Estate Investment Trusts (REITs). In addition, real estate markets are filled with middlemen who do not add much value. Blockchains are created with efficiency in mind. They cut costs by removing third parties.

Historically, real estate has lagged behind other industries in terms of implementing modern technology, one reason being that most property titles are stored locally. Property Tokenization on the Blockchain would overhaul the industry by encouraging funding while providing a cost-effective solution for transferring ownership. Investors, banks, buyers, and sellers would all benefit from assigning tokens to properties. Title transfers can be supplemented by token trading. Blockchains could be used to create and distribute digital tokens that would represent ownership of a property. The value of a particular token would be backed by physical real estate, and these tokens would be issued to each participant and owner. This would effectively transition real estate brokers into equity specialists. Buyers and sellers would have their needs met more quickly. Investors and banks would become more active since they would have more options to liquidate their positions. Cryptographically secure blockchains would also aid in automation.

A number of options become available once a property is tokenized. From legal contracts and title ownership to property inspections and administrative allocations, a real estate blockchain streamlines the process for all involved. A blockchain serves as a single medium to automate recurring aspects of transactions while simultaneously updating changes. It gets all parties on the same page. The advent of smart contracts on blockchains has led to the explosion of new initial coin offerings (ICOs), and the legal, medical, and financial markets have already discovered the benefits of smart applications for tokenized assets.

However, the true value of a proof of asset protocol (PoAP) such as this has yet to be determined. Once smart applications restructure the market, tokenized real estate assets can reach their full potential. For now, real estate pioneers can at least gain liquidity and efficiency in their operations.
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