Tokenization is one of the most exciting innovations to emerge in the finance industry in decades, promising to totally disrupt the way financial assets are bought, sold and managed by investors. Today’s financial world provides hundreds of investment opportunities, but few can compare with the size of the real estate market, which Statista forecasts to reach $637.80 trillion in value globally by the end of 2024.
The enormous value of global real estate makes it a prime candidate for tokenization, which involves converting financial assets into digital tokens stored on blockchains. By tokenizing real estate, properties such as apartments, hotels, co-living spaces and more become accessible to a far greater number of investors, increasing liquidity in the market through fractional ownership. Tokenization also streamlines transactions, resulting in lower costs, and ensures more transparency too.
Real estate tokenization is easy to understand. Let’s say we have a luxury hotel resort in Bali that costs $20 million. Traditionally, few people could ever hope to invest in such a venture, because who has $20 million in cash lying around? Tokenization changes that, breaking that luxury hotel resort down into hundreds of thousands of small shares that can be individually bought and sold, paving the way for numerous investors to own a small stake in that property.
Given the advantages of tokenization, it’s no wonder that the concept has been getting a lot of traction lately, and today there exists a number of platforms leading the charge to transform real estate investing. Let’s take a look at some of the top real estate tokenization platforms and explore the innovative solutions they offer.
1. Blocksquare
Few projects in the real estate tokenization industry can match the vision of Blocksquare, which operates a decentralized ecosystem that has given birth to numerous tokenized real estate marketplaces that are laser-focused on specific sectors of the industry.
The cutting-edge Oceanpoint.fi protocol is an ambitious project that allows investors to seek out and participate in diverse opportunities within the real estate industry. What sets it apart from other tokenization projects is the way it combines powerful decentralized finance mechanisms with real estate to create a variety of passive income streams for real estate investors. By integrating DeFi into the mix, Oceanpoint.fi encourages investors to provide more liquidity to the ecosystem, enabling it to offer novel funding opportunities for entrepreneurs in the property sector. Through its platform, investors can provide liquidity to Uniswap’s ETH:BST pool, trade tokenized real estate with DAI stablecoins, and invest in the success of new tokenized markets.
One of Oceanpoint.fi’s newest innovations is “Marketplace Pools”, which allow anyone to create their own tokenized real estate marketplace via the RWA launchpad. Third-party marketplaces are at the core of Blockcsquare’s infrastructure and business model, in line with its vision of powering thousands of tokenized real estate marketplaces across the world.
With Blockquare’s marketplace pools, investors have a way to stake BST tokens to support new and emerging marketplaces built on the company’s infrastructure. They enhance community engagement and present significant new investment opportunities for users, while simultaneously giving marketplace operators an alternative funding source. Investors who back a specific marketplace will be able to directly influence its growth and diversity.
Some of the first marketplaces to launch pools include Pieme, an African entity that’s working to provide fractional investment opportunities in profitable African hotels, and Portio Capital, which offers investments in tokenized co-living spaces in the EU.
To execute its vision of becoming the primary infrastructure platform for global real estate tokenization, Blocksquare is now looking to expand its portfolio to encompass properties across the entire world, including Asian, European and U.S. markets. It’s also looking to foster the development of marketplaces for more segments within the real estate industry, including multifamily homes, commercial properties and even farmlands.
2. Brick Block
The two-token model of Brick Block helps this protocol to stand out as one of the more innovative tokenized real estate marketplaces, with investors able to acquire stakes in properties through both debt and equity.
Brick Block’s platform provides a wide range of financial instruments that will be familiar to traditional investors, including tokenized real estate bonds, tokenized real estate funds and even tokenized development projects.
Although it boasts some sophisticated investing tools, Brick Block is also notable for the user-friendly nature of its platform, along with its exceptional support services that are provided by seasoned real estate experts. These features make it easy for anyone to get started with investing in real estate tokens, opening the door to a diverse range of investment opportunities.
Other strengths of the Brick Block platform include its portfolio management tools, which include a dashboard for monitoring the performance of each asset. These are invaluable as they empower investors with the knowledge to make more informed decisions about their tokenized investments.
While Brick Block primarily uses NFTs to tokenize the properties on its marketplace, it also offers its native cryptocurrency token BRICK, which can be staked into a liquidity pool that acts as a treasury. Using these funds, Brick Block invests directly in various properties, paying out dividends from the rent generated by those properties. Through this, investors can earn a specified APY, based on the period they commit to locking up their tokens.
The diversity of its real estate offerings and investment mechanisms, plus its commitment to providing a seamless user experience, positions Brick Block as one of the leading real estate tokenization platforms, and it seems destined to become one of the industry’s leading players.
3. RedSwan
Unlike Blocksquare and Brick Block, RedSwan is laser-focused on commercial real estate investments, giving community members a chance to participate in fractional ownership.
Through RedSwan, prime commercial properties are transformed into tradeable digital assets that can be bought and sold through its decentralized exchange.
The platform is noted for its huge emphasis on liquidity, which ensures there is plenty of money flowing through its ecosystem. This ensures investors can quickly exit or enter their positions in any commercial real estate holding, even when trying to buy or sell large amounts of tokens. Because of this, RedSwan is an ideal platform for real estate investors who demand extensive flexibility and responsiveness to micro-manage their portfolios. The other benefit of this is the accessibility of the platform, which makes it possible for new investors to get started with as little as a couple of hundred dollars.
RedSwan makes extensive efforts to accumulate tokenized commercial real estate properties from a wide range of geographies and industries, so investors can hedge their bets and spread risk across various sectors, without being overexposed in any one. It supports sensible diversification strategies for investors, who can capitalize on the rapid growth in specific sectors of the market while protecting themselves against volatility.
Besides its marketplace, RedSwan also focused on token sales of commercial property developments, giving investors the chance to secure an allocation of tokens at potentially discounted prices by funding their construction.
The focus on a specific segment of the real estate market helps RedSwan stand out in a tokenization industry that’s getting bigger by the day, and it seems likely that its platform will remain a favorite with investors looking for a seamless entry into commercial properties.
Final Thoughts
Tokenized assets are the most disruptive innovation to rock the real estate investment industry in decades, and can prove to be even more consequential than the arrival of the first real estate investment trusts. While REITs promised to reduce the barrier to entry to real estate, they still require high minimum investments and a strict vetting process that puts them out of the reach of the majority of investors.
With tokenization, it’s possible for anyone to become a real estate investor, even if they only have what amounts to pocket change. What’s more, the integration of DeFi with tokenized real estate expands the potential income stream for investors beyond simply obtaining a share of the income their properties generate.
What’s really exciting about this emerging use case for blockchain is that it’s still in its infancy, and that means the sector will likely evolve and expand considerably in the years to come, with increased liquidity and more diverse investment opportunities on the horizon.
If you’re looking to build wealth but have never had the opportunity to do so, or if you’re a seasoned investor looking to diversify your portfolio, it’s well worth examining the possibilities enabled by fractional ownership of real estate.
