Blockchain and real estate tokenization. Its impact on the real estate market

Merlessa Perez

A symbol is nothing more than a new term for a unit of value issued by a private entity. In William Mougayar's definition, the author of "The business blockchain", a token or token, such as those used in a bumper machine or in a casino compared to the real world, is a unit of value that an organization creates to govern its business model and allow users to interact with its products, while facilitating the distribution and distribution of profits among all its shareholders. "Among other things, it can be used to grant a right.


That being said, tokenization is defined as a method of converting the rights of an asset into a digital token. Or put another way, it is the process of converting the rights of an asset into a digital symbol in a blockchain or blockchain. Likewise, "tokens admit several layers of value inside, so whoever designs them, decides what a specific token contains", in the words of Cristina Carrascosa, lawyer and co-author. of the book: "Blockchain, the industrial revolution on the Internet".

In this sense, the tokenization of a property or a real estate tokenization platform essentially generates a token in a smart contract and gives a value to that token in correspondence with the real asset. To understand this, following a basic crowdfunding model, the property is divided into shares and the “shares” are symbolized.


Let's take a look at an example: suppose that the new Atlético de Madrid stadium, Wanda Metropolitano, has a market value of 600 million euros. Now, through a decentralized application, we create a new token that we will call WMAM and assign it a value of 1 €, with which we then have 600 million WMAM tokens that we sell. Anyone in the world can buy them and own a very small quantity of this new stadium. But what does the token entitle you to? It will give the right to what was specified in the smart contract to which the respective token is associated. Normally, a share of dividends generated by the stadium. But by no means the part that belongs to the stadium. I will return to this point at the end.

It is important now to see that the tokenization of physical assets provides immediate liquidity to the real estate market. To understand it, it is similar to the process of securing the mortgage that banks go through. In other words, banks turn illiquid assets into financing instruments, thus eliminating the risk of default through this securitization. They do nothing but sell fixed mortgages to third parties - funds, corporations, etc. - which in turn places them among investors. It was a "legal" but malicious practice that caused the subprime mortgage crisis of 2008. However, that is another story.

Interestingly, ending with the comparative example, we see that with this system, it is possible to separate the economic value - in this case, the right to mortgage credit - from the real asset, which guarantees the mortgage. Well, by definition, a symbol does the same. By creating a market for the sale of chips - which is also a pure market because only supply and demand are involved - and they are extremely divisible and universal, it will mean that if demand increases, it would significantly reduce the reduction. of illiquidity associated with reality. real estate market. There are some who give figures to these statements, let's see: the global real estate value was recently estimated at 217 billion dollars. About 25 percent of that total, or about $ 54 billion, is commercial. For the reason presented, let's say that a liquidity premium of 10% was applied to these assets when they were symbolized and could be traded freely. And that means over $ 5 billion.

Tokenization is the process by which the right to a real asset (property, debt, interest in a fund, work of art, theater ticket, etc.) on a distributed newspaper (Blockchain) is represented by a unit of accounting entries. called (more precisely, a "security" token). That is, real assets are converted to digital assets, recognizing the specific value through tokens. The process by which they are issued is called the "Security Token Offer" (STO) and has the quality of being able to be transmitted to a secondary market. These tokens are connected to a digital wallet (wallet) as a specific account, which allows you to own property and the power to transfer them freely.

The main advantage of a new token-based economy is based on reduction

Merlessa Perez
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