Blockchain is poised to redefine how we make transactions in the same way that the internet has redefined how we communicate and share information.
It was originally created a decade ago to support the cryptocurrency bitcoin, but has grown to be so much more. Blockchain has lead to the creation (and loss) of millions of fortunes, the launch of hundreds of new companies, billions of dollars in investor funding and, most commonly for the non-technical, a lot of confusion around its true benefits.
In its most basic form, blockchain makes it possible for the first time ever for people and companies to make major transactions without going through an intermediary. Intermediaries like credit card service companies, stock exchanges, banks and governments can make transactions expensive, slow and illiquid and may open opportunities for fraud or crime.
Access to deals, the amount of time it takes to close, property title mistakes, high fees and fraud bog down the real estate industry. It is the largest asset class in the world and has had minimal innovation in the way of increased efficiency during transactions. Blockchain poses major opportunities for innovation in real estate. Here are three innovations that will change how real estate is done for the better in 2019.
Historically, owning the most lucrative hard assets required investors to already be wealthy and have the luxury of being able to wait years to liquidate. That changes with tokenization.
Tokenization democratizes ownership of assets by using cryptocurrency to split assets into tokens that are stored on the blockchain. Someone who wants to invest in a trophy real estate project now has the luxury of being able to resell their share on the open market through secondary trading. Also, people in different geographies and tax brackets now have access to attractive investment opportunities that they previously would not. Landlords now have the ability to sell off just a portion of their property to the crowd. In 2019, I believe we will see a major migration of real estate ownership moving to the blockchain.
One of the pioneers in the space is Templum Markets, the first federally regulated marketplace for the primary issuance and secondary trading of security tokens. It recently closed what is thought to be the first digital security tokenization of a trophy real estate asset: Investors had the opportunity to invest as little as $10,000 in the St. Regis Hotel in Aspen. Unlike with most major real estate investments, owners are not locked in until the building is sold. They will be able to sell their portion on the secondary market.
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