Tokenization of real estate: unrealistic expectations or the bright future?

By Casper Brown
Published January 27, 2021 Updated January 27, 2021
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Tokenization of real estate: unrealistic expectations or the bright future?

By Casper Brown
Published January 27, 2021 Updated January 27, 2021

What ignites the desire for technological progress? Most of the time, it’s the need to improve, change something for the better. Every entrepreneur with the dream, sooner or later, starts looking for opportunities to get well-funded and make his dream come true. They begin to search for a way to receive lucrative investments for the prospective ideas. Blockchain-led tokenization has become a trend that brought together many projects with a unified goal. Millions of dollars poured into this field fueled the most controversial projects and helped to invent unconventional solutions. Has it lived up to expectations over the years? Unlikely. But history tells us that once a certain idea fails, there might be nothing wrong with it – the approach has to be changed to achieve success.

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Tokenized hopes for the better tomorrow

What revelations lie behind the catchy words and flashy slogans? Tokenization is the way of changing real-world assets via transition to the DLT, also known as the blockchain. This approach helps to increase liquidity, remove intermediaries across a broad range of asset classes, enhance the transparency and speed in the digital field due to the immutable, trusted nature of this technology.

Over the crypto mania-filled years when the idea of crowdfunding for blockchain-based startups, also known as Initial Coin Offering, went viral, we have observed numerous attempts to bring various real-world assets to the market with the most evident goal to capitalize on that.

Still, the Bitcoin correction and altcoin downfall froze many enthusiasts’ hearts during the severe and infamous crypto winter of 2018/2019. Since then, the number of screaming headlines also decreased. In turn, the blockchain’s firm feature to provide ultimate trust sees the growing number of use cases – for example, Ford and BMW’s infamouslatest intention to back DLT ‘certificates’ is aimed to combat used car fraud.

By 2021 it became evident that neither solid financial and corporate decision-makers nor retail users supported the mass adoption idea yet. Up to this day, the experiments continue, even gaining success. There is no shortage of ideas and the most controversial ones are coming true: for example, the tokenized single-malt scotch collection that has recently launched on the Singapore exchange. Another bizarre revelation highlighted the Rick and Morty crypto art sold for an astonishing $150,000 on the Gemini-owned platform.

Why has one of the most promising trends mostly failed so far? There have been advances almost everywhere possible – fueled by a desire to find new use cases,  blockchanization adopters tried to hit as many birds as possible with this particular technological stone. From artworks collections and securities to even precious diamonds, exotic luxury cars, sports, and real estate: the promises of DLT-field enhancements have taken over many entrepreneurs’ minds globally. The property market raised funds especially profitably since many startups managed to gain momentum, establish successful crowdfunding campaigns and achieve millions to fund the developments.

Perhaps, to rather pay for their luxurious and exotic leisure? During ICO insanity, multiple platforms gained investments that amounted to tens of millions of U.S. dollars. However, it’s become common knowledge that most promising projects turned out to be run by illicit players and fraudsters, resulting in fake platforms, exit scams, and runaways with bags full of investors’ money. In conditions where the project mostly consisted of ideas stated in the well-written documents known as the whitepaper, it was hard to evaluate the possible real-life implementation benefits.

But what dragged the idea to millions of people globally? The promise to reinvent, disrupt and reinvigorate some markets that haven’t seen advancements since the dinosaur era is undoubtedly a great thing in the XXI century. As of today, blockchain grows potential as technology, being an ultimate provider of trust in the digital world.

The usage the DLT-based services in real estate should have to outshine all the previous developments and provide users with increased liquidity, fairer prices, lower fees from eliminating the middlemen out of the equation, decreased price of paper-ownership, shorter lock-up period, and course increased transparency and a zillion other tweaks. It promised to process deals more quickly by expanding to a worldwide network of potential investors and a lower threshold for financial corruption and manipulation that takes place way too often.

But does the wheel really need reinventing? When the idea was finally wrapped into only digits and smart-contracts, it made perfect sense. Later, when it reached the markets, it’s participants found out that there is no evident proof found for the tokenization model to enhance the processes to be worth it.

Tokenization deals hit the spot for private investors initially but failed to drag it to the next level, the mainstream side. Real estate tokenization seemed to be lucrative, but the lack of user base stumbled its development for a moment. The world has not been ready for a crypto takeover yet.

Elevating the user experience

Until last year, most successful offerings were focused on private investors and even reassured some people that mass adoption is coming. Basically, nothing has changed in the process of the global crypto market. What resulted in the failure of mass adoption?

Why hasn’t YouTube been created back in the 90s? Why did social networks surface only in the XXI century? The same story here – the technology and interfaces are not perfect enough, and market infrastructure is not ready. Beyond the concept, there are also issues with the absence of globally-adopted regulatory frameworks and a lack of secondary market.

With the emergence of DeFi protocols, cryptocurrency adoption is back on track to pave the way for the mass market. What kind of infrastructure is required to bring traditional institutions to the DeFi market? A possible working solution is to allow tokenization of various assets that utilize the power of emerging DeFi protocols.

Decentralized Finance or P2P lending can provide a much-needed further cycle of acceptance, taking into account more transparency offered to the users. The new decade will undoubtedly open new possibilities to reinvigorate the promising tokenization trend, blending it with the highly-promising DeFi protocols to finally achieve the vision of a tokenized world that can really work. Bridging the gap between conventional financial and cryptomarkets can be possible due to improved interfaces and convergence with other technologies.

Many companies have been working on tokenizing commercial and residential real estate, but it became evident that only solid players and not enthusiasts can make a difference in this niche. The latest advance on real-estate tokenization business driven by the Jointer company leveraged all the best of existing market technology to offer an easy and secure entry in this market and aims to layer the future of commercial real estate syndication built upon the juncture of Decentralized financial (DeFi) based on Decentralized Autonomous Organization (DAO).

Jointer is the world’s first сommercial real estate backed DeFi, a blockchain-based syndication model that acts as an alternative to commercial real crowdfunding and REITs, leveraging a blockchain model that gives investors high returns and liquidity with low risks.

In 2021, Jointer’s first use case will be commercial real estate to solve the problem where many businesses lease properties for years and even decades allowing landlords to benefit from rent cash flow and property appreciation. Using the syndication economy, Jointer solves this by offering a joint venture partnership to current and potential commercial real estate owners by allowing them to contribute 1% of the property’s value and receive 50% ownership in the property. Jointer accomplishes this by leveraging blockchain technology to create a syndication model that raises funds from the public by offering a new type of asset class with double the returns than a REIT.

A while ago, Jointer partnered with STEX to offer unique investment capabilities. STEX is a European crypto trading platform for those who trade to earn, which provides a broad range of features to elevate user experience. With a fast-growing client base and support of 400+ trading pairs, it’s a convenient one-stop place to purchase crypto with just credit or bank cards, exchange fiat to crypto, or crypto to fiat with a few swipes on their mobile device. Founded in Estonia, STEX meets all EU regulations for cryptocurrency exchanges.

Jointer’s Auction feature will continue the daily dynamic offering, and STEX users can participate directly from their wallets. Each day carries a goal and a maximum amount of contributions possible. Investments in the Auction include 90% downside protection, allowing investors to minimize their capital risk while still benefiting from any potential upside. The Group Bonus allows everyone to benefit from a more significant JNTR discount once the auction reaches above 100%. The Individual Bonus helps large contributors to the round by offering a multiplier that incentivizes daily lead investors. The bonus is uncapped but cannot exceed the daily contribution cap of 150% so, with a limited daily supply, investors are encouraged to participate early. At the moment JNTR can only be bought at the auction and there is no secondary market.

“I expect that the latest auction can be regarded as an example to follow in our industry, and we will continue to enhance the user experience. The DeFi’s convergence with traditional finance has started, and there is a lot of ground to cover” – noted STEX founder Vadim Kurylovych.

The takeaway

Analysts praise high hopes for 2021: some expect Bitcoin sky-rocketing as institutions accumulate #1 cryptocurrency on an unprecedented scale, while others expect more from the technology development side and a further rise of DeFi.

The highly-anticipated Ethereum 2.0 acceptance will introduce more scalability, raising the bar for the many developments. Thus, the growing DeFi ecosystem will diversify the offerings, bring more features to contribute to the integration with traditional finance rails that will become one of the main cornerstones of growth in this segment.

When there will be fewer layers of friction with the onboarding experience and the user’s journey will become simplified, we can expect a huge uptick in the DeFi user base and the cryptocurrency-based projects. Tokenization still has a bright future, and it will be shaped by the market players with experience.

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Disclaimer
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
About Author
Casper Brown
381 Articles
I am an associate content producer for the news section of Coingape. I have previously worked as a freelancer for numerous sites and have covered a dynamic range of topics from sports, finance to economics and politics.

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