Real estate backed tokens? Yes, gentlemen, the future is here and it is here to stay. Everything you need to know about real estate tokenization.
First, Bitcoin arrived and it all started. Then came the ICOs (Initial Coin Offering), creating a second wave of excitement. Recently, we have seen the success of IEOs (Initial Exchanges Offering). You could say that this has been the third wave. Then the security tokens can be mentioned. However, they have not yet been able to take flight. Why? A few days ago, the German Federal Financial Supervisory Authority (BaFin) approved a real estate bond based on Ethereum. The token will be backed by properties in major German cities with an issued volume of 250 million euros. Is the great avalanche coming? Here you can see the best example of real estate tokenization
What is a security token? Well, a security token is a digital unit of value that is actually the virtual representation of an asset in the real world. Basically, it is a kind of digital property contract placed on a block chain. In fact, a security token is like a stock on the stock market, but within the crypto universe. In theory, every asset can be tokenized and placed on a block chain. We can tokenize anything. However, surely real estate and companies will be among the first tokenized assets. When we speak specifically tokens value with a root well as underlying asset, sometimes the term RET (Real Estate Token) is used.
Certainly all of this sounds extremely interesting. The tokenization of all things, this would turn the world from one great stock exchange. Suddenly, a person on the other side of the world could buy $ 20 worth of tokens from a penthouse in New York with their smartphone in just a couple of minutes. How are you? Well, my friend: Welcome to the brand new international real estate business!
German firm Fundamental Group announced that German authorities have approved the sale of its token to the public. The first company to achieve something likes this in Europe. This time, it is a bonus. This token is actually a debt security issued by a company that will invest the money obtained in German real estate. Well actually there are five construction projects, three in Hamburg, one in Frankfurt and one in Jena. The portfolio, which will include more than 63,000 square meters once completed, will feature residential, commercial and hotel properties. With the sale of these tokens, the company expects to raise 250 million euros ($ 280 million). Once purchased, its owner will be entitled to receive annual dividends of 4-7%, until July 2033, when the amount contributed at the beginning will be refunded. Investors will be able to receive their dividends in fiat currency or in ether. The token complies with the ERC20 standards of the Ethereum network. Fundamental Group took a big step here and opened a door to the future. Surely, behind them, many more companies will come.
The news also came out about the first issuance of property tokens on real estate, using the Ethereum block chain, in Luxembourg. The operation was carried out by the firm “Property Token”, based in that country. The token represents a fraction of a luxurious property in the city of Belval, giving the owner of the token rights to the dividends it generates. The minimum entry amount has been established at 1000 euros.
Last year, a property in New York City valued at $ 30 million was tokenized in Ethereum, and in January of this year, a luxurious complex in Aspen, Colorado, raised $ 18 million through a token offering. of value. There are similar projects in other parts of the world and everything seems to indicate that this will be a trend that will grow more and more. The real estate industry is still extremely new to the block chain and the unanswered questions are many, but the opportunities are certainly immense.
The real estate market has been characterized by requiring a lot of initial capital, by the enormous paperwork and by being very little liquid. So, it is presumed that fragmentation into tokens will streamline the process by providing access and liquidity. However, this, at least not yet, has not been the case. Why?
One might come to think considering their great potential that this type of tokens are issued and bought like hot cakes. However, this has not been the case. In fact, public interest has been very little. Without a doubt, the industry is moving very cautiously and the steps have been very slow. Clearly, we are not yet facing a “mega trend” as such. It is possible that due to the nature of this particular market an avalanche is unlikely. Perhaps the most appropriate metaphor in this case is the story of a builder building bridges. We would not be talking about an explosion. Instead, we can anticipate the slow building of a much slower and more progressive process. Ironically, the problem is liquidity. The trading of these tokens at the moment has an extremely low volume,
In the United States, there are only two specialized exchanges in these tokens, and the volume is minuscule. According to the last time I checked, Open finance offers only four assets with daily transactions of less than a million dollars. Zero offers only one asset. The tokens in existence are very few and the market to be able to exchange them is still too small to guarantee the promised liquidity. We are in a very early stage and there is still a long way to go. We are making progress, and we are better than before, but that is still not enough.
On the other hand, we have some technical problems that need to be resolved. What happens if my tokens are stolen? Do I lose my house? Who is the legal owner of the property? The person with the token? We must recognize that security tokens present greater practical challenges than other tokens. Obviously, the regulatory uncertainty here is much greater. It is not unwise to assume that regulators in this case will naturally impose many more restrictions and limitations. The barriers will surely be more, because the authorities will undoubtedly demand greater controls throughout the process. The public could be satisfied with being the owners of a crypto currency or a token that does not have the approval of the authorities, but in the case of a security token linked to a physical property there is no doubt that they will seek the approval of the authorities governmental. That is, security tokens have a lot of work ahead of them before reaching the masses.
Another topic around security tokens that is worth mentioning is the matter of block chain companies dedicated to this field. Currently, the actors are numbered. In fact, they are very few. In addition, it seems that the dominant spirit is that of competition and not that of cooperation, because apparently they have not managed to create a unitary bloc. At this stage, their priority seems to be on asserting themselves as leaders in a sector that has great promise. However, at this point a collective effort is probably necessary to build your foundations. Exaggerated competition can backfire at this stage. Surely working all together they will go further than working in isolation.
What is exciting about all this is the colossal size of the beast it is intended to tame. When the whole thing about security tokens takes off and takes flight, in a relatively short time we will be seeing surprising numbers. The market for goods is the largest of all markets. The start will not be easy, but the potential is huge. The Tokenization of All Things: The Future.