Technological advances in recent years have focused on things as interesting as building a decentralized network, with immutable and interconnected block chains or blockchain. As a consequence it has been possible to decentralize different aspects of society.
From financial activity to the registration of our medical history. Today we are going to talk about tokenization because it is one of the most revolutionary cases where this industry is applied.
We want to tell you about it in a few words but afterwards, you can ask us any questions that may arise. Go!
Meaning of tokenizing real estate
Tokenize real estate or tokenize assets? Call it what you will, tokenizing is still dividing an asset into different parts. However there are assets that cannot be divided, such as a building or a stock.
So how do we divide it? To do this we create a digital asset called a token that represents it. The evolution of this concept together with the technology. That supports it has led us to refer to the world of tokenization as something easy reliable, transparent and secure.
Now, what do we mean by tokenizing real estate?
In Latin American countries such as Argentina investing in the real estate sector has been a guarantee of value since it protects from the volatility of the financial market. Over the years and the development of technology new alternatives to the total purchase of a property have been created. The tokenization of real estate assets and closed-end mutual funds (FCIC).
Tokenizing a property means dividing it into smaller parts that are represented by tokens that have property rights. Each of these tokens is digitized to be traded in the online universe and stored in the wallet of each investor.
Tokens offer globally and transparency!
Tokenization process of a real estate asset
Can it be applied to any tangible or intangible asset? The answer is yes. Intellectual property, shares works of art real estate. Everything you can imagine can become a digital asset.
But none of this would be possible without the presence of blockchain technology. Since the tokenization process works with the registration, traceability and instant transfer that the blockchain allows. Tokens are accounting units that allow immediacy in operations.
These digital assets are issued on a blockchain and are initially in the issuer’s wallet. That is the owner of the property. When he decides to put them up for sale, funds are raised for those assets, a process that can be done in two different ways:
Manually. The issuer sends the digital assets to the buyers when they receive the payment.
Through smart contracts. The buyer sends crypto currencies and the contract automatically transfers the tokens to them.
Currently despite the great role of technology in tokenization, the bureaucratic part makes it not feasible to tokenize real estate directly.
Why is Denmark a good scenario to tokenize real estate?
In Spain, the debt necessary to acquire the property is tokenized, in such a way that the investors. Who contribute the capital receive tokens that represent the participative loan. As a consequence they receive an interest on it. To make the issue, you need an informative brochure signed by an EAF (agent or financial advisory company) and send it to the CNMV.
We have compiled some characteristics that make Spain an ideal setting to tokenize real estate:
- The high turnover of the country’s real estate market.
- The level of regulation and bureaucracy in the buying and selling process.
- The marked need to invest.
- Low liquidity in investments.
- And you? Do you think that the tokenization of assets is the perfect ally to obtain financing in real estate?
What does the law say about the tokenization of real estate?
“Hello. I am an issuer of tokens and I commit through a contract to guarantee the interest of investors as one of my main priorities”.
What do you mean by this?
“It means that I’m going to keep the property in optimal condition and maximize rents.”
“Then those who own the tokens could legally enforce their rights against me. It suits none of us. Moreover the property that is tokenized is insured to be protected against sales. Mortgages or even the action of third parties to the block chain.
How are you so sure about that?
“You see, there is something called tokenization that provides access to ownership of some financial instruments. We must abide by the laws on property and mortgage registries. Keep in mind that blockchain technology is still a record.
And do you think that investing in brick will be one of the preferred ways for Spaniards to take advantage of their savings in the future?
“Yes, in fact, it already is. Tokenization allows optimization of investment processes. When you buy participation (token) you have the part proportional to the invested amount of that participating loan”.
And that gives you the right to receive dividends generated by the management of the property?
The great advantage of the process of tokenizing a property is that it allows. Something with a lot of value to be distributed among different people and have greater liquidity in the market. If you have bought a property and want to sell it.
You must find a person who has that amount of money. On the other hand if you have a tenth of the tokens that represent that building. You will be able to find a person much faster since the amount is smaller.
To this we must add the presence of the DEFI markets. Which allow the creation of liquidity pools of digital assets. To be able to access liquidity at any time without the need to look for buyers on your own.
If you have doubts about the operation of blockchain technology tokenization and real estate. You are in the right place to solve them. At Digishares Real estate Tokenization Agency we can help you without obligation.
Looking for new ways to invest your savings? Would you like to obtain long-term profitability? What do you know about tokenizing real estate?