The new normal: How we are buying and selling real estate investments
Real estate has been an object of investment for decades, and that will continue as long as we desire to have a home, go to shops, and work from an office.
What is changing is how we’re buying and selling real estate.
Over the past years, the markets have become more and more liquid thanks to financial instruments. But most real estate investment is not available to the public due to their high prices, loaded paperwork, and administrative costs.
With blockchain technology and DeFi (Decentralised finance), we are now entering a new normal for real estate investment. Because real-world assets on-chain can be transparent, liquid, fractionalized, and thereby become easy to trade.
That platform is a DEX (Decentralised Exchange) and is being built right now. It is called RE.X (RealEstate.Exchange), and you can learn more about it in this article or go directly to our webpage and follow our newsletter.
Moving from illiquid to liquid tokens
The problem faced by BRICK and the real estate tokens we are planning to introduce is that they are completely illiquid before launching.
So to ensure liquidity, we need a way to tap into existing liquidity pools and connect to these. With the token sale of BRICK, a large proportion of the funds raised have been allocated to provide liquidity in liquidity pools on AMMs such as Balancer. We do this to ensure high liquidity in the market from day one when a new real estate token is issued. Since there are many real estate tokens — from many different real estate properties — there is a high risk of a particular real estate token becoming illiquid in the market, unless there is a mechanism that works to prevent this.
That mechanism is our BRICK token, as every real estate token is routed through BRICK, which is going to be a highly liquid asset in a large liquidity pool. This means that an investor will be able to swap almost any crypto-asset into a real estate token with minimal to no price impact.
As you can see above, each property has its own token but to avoid illiquidity and price push we created the token BRICK that underly every property on the platform.
Avoiding price manipulation and volatility of real estate tokens
When tokens are traded in the open market, they can be manipulated. That is a great concern that is being addressed.
First of all: Real estate tokens are different from other native blockchain tokens like BTC and ETH in the sense, that there is an underlying asset with a book value.
Our structural defence against large price impacts by setting up BRICK and real estate tokens to be highly liquid. By creating BRICK-RE pools as smart pools, we can set certain trading restrictions that we can activate if we see actors in the market trying to manipulate the price of any real estate token issued.
To safeguard price manipulation and sell-pressure below the book value of a real estate token, we provide three mechanisms that create a price floor at book value:
- BRICK reserve: Whenever a real estate token is traded below the book value of the underlying asset, the BRICK reserve will start buying up these real estate tokens. The real estate tokens are only resold to the market when the price has increased above the book value.
- Real estate developer reserve: Similar to the BRICK reserve, the real estate developer that initially issued the real estate tokens has allocated a certain amount of BRICK or other tokens raised in a reserve to buy up real estate tokens if the price drops below book value.
- Real estate investment firms: We are partnering up with real estate investment firms that are actively trading real estate tokens. These firms look for undervalued properties and hence tokens, and will start buying up real estate tokens if the price drops below book value.
Since you are already here, you are probably a first-mover by nature. If you want to be first on the RE.X platform then go to www.realestate.exchange and subscribe to our newsletter.