Real Estate & Blockchain: Tokenization in the New Economy
Recently, Silvio Micali, founder of Algorand and Turing Award winner, spoke with Bloomberg on the potential for a borderless economy, powered by blockchain technology. With its platform, Algorand provides a foundation for existing businesses and new projects to operate globally. He says: “Once you have a truly decentralized, secure, and scalable blockchain platform you are going to see a more inclusive, borderless economy rising.”
So what does a borderless economy look like? What does that mean and how will we all participate?
Blockchain is changing the way in which we utilize and think about currency and particularly investment. It has the ability to change the landscape of investment and investors in industries such as commercial real estate, opening up new markets and new pools of capital. Micali goes on to explain:
“Think about if you have an office building in Singapore and now you want to sell it. Before you could only sell to a few billionaires.. {with blockchain} I am given an opportunity to directly participate and have access to a sale that before I was excluded from.”
The concept of tokenization — the conversion of real-world assets to ‘tokens’ on a blockchain — provides an opportunity to radically alter the commercial real estate investment space, which is ripe for disruption.
Currently, commercial real estate investment suffers from an access issue. Eighty-percent of U.S. commercial real estate is controlled by institutional investors, blocking groups of potential investors and capital from entering the space. Tokenization has the power to solve this problem.
At AssetBlock we’re working to provide the technology needed to tokenize real estate securely and bring access to commercial real estate investment opportunities to a new class of investors. By generating security tokens to represent real-world assets, we’re can bring stability to crypto-based investment, while opening access to U.S.-based commercial real estate where there is strong demand but low access.
Tokenization provides a lower cost of capital for real estate professionals as well as improves liquidity for investors. Typical holding periods may be reduced, illiquidity discounts can shift, and investor choice can be improved in interesting ways. Additionally, it provide a stabilization opportunity by allowing investors to utilize crypto with tokens backed by a portfolio of predictable real estate assets that is appealing compared to volatile currency speculation today, likely drawing in new users of the technology. It allows efficient investment at the same time it lowers the cost of capital as new investors are drawn in.
The blockchain makes the borderless economy a reality. With tokenization in particular, democracy and access can be improved in the investment space. Real estate is just the first of many industries and asset classes to start to see these effects, and AssetBlock is ready to bring this vision to reality.
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