What does real estate tokenization mean? And, how is it different from real estate crowdfunding?

  • What does real estate tokenization mean? And, how is it different from real estate crowdfunding?

  • In short, tokenization means moving traditional non-digital securities to a digital form using blockchain technology, and real estate tokenization means enabling investments in the form of digital tokens backed by real world real estate. These digital tokens can represent equity, debt, economic interests, or revenue streams generated from the real estate asset.

    At the core of tokenization is blockchain technology, which is a type of distributed ledger which secures identical copies of data across a network of authorized stakeholders. Leveraging the secure, immutable qualities of blockchain technology, tokenization facilitates digital fractional ownership with secure transaction records and swift settlement processes. There are various advantages of tokenization, including fractionalisation which lowers barriers to entry for investments, operational efficiency, data transparency and most importantly, liquidity.

    While both real estate crowdfunding and real estate tokenization allow for fractionalisation of traditionally big-ticket investments, the main differences between them are three-fold:

    Unlike tokenized real estate, there is no liquidity in real estate crowdfunding – investors are often unable to trade these investments on a secondary market and there is no exit options for investors;
    Real estate crowdfunding does not provide for the operational efficiency enjoyed by real estate tokenization via the use of blockchain technology, for example by using smart contracts for automation of certain compliance and post-issuance process including dividend distribution; and
    Real estate crowdfunding are usually just crowdfunding of equity or debt interests of real estate, but real estate tokenization can allow for tokenization of other interests of real estate assets, such as revenue streams and economic interest from real estate assets.

    Find more: https://youtu.be/2qhZDmTozC0

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