Tokenization Links Digital and Real Worlds Together

tokenization

The hype around blockchain seems to have subsided since 2016, however, it did not die but relocated from media headlines to practical applications.

One of the most prominent trends across multiple industries these days is tokenization, i.e. the method of representing any objects and assets in the form of tokens. While there are not so many companies that use the technology, their number is still growing by the day.

One of the most remarkable features of tokenization is the opportunity to finally make the digital and the real worlds meet. Before that, blockchain generally was the lot of speculators and IT specialists, but with the emergence of smart contracts and tokenization everything has changed.

Surprisingly enough, some governments were among the first to use blockchain in real-life applications: Japan and several post-Soviet nations like Georgia and Ukraine have already rolled out blockchain-powered solutions for land / real estate title registries, or at least have officially announced their intent to do so in a short while.

This makes everything related to land titles and real estate the forefront of the merger between the real and the digital. This might explain why there are so many private companies seeking to develop a blockchain-powered solution aimed at this market.

Tokenization of real estate has certain advantages that could not be implemented on the classic markets. First of all, in most cases the price of a token is incomparably lower than the price of any real estate item. This enables anyone to buy as many tokens as they like or can afford. Given the fact that the tokens represent a real-life object, an apartment or a house in this case, they entitle their holders to own a part of said real estate in proportion to the number of tokens they have purchased.

This also enables contractors to raise funds for the future construction, and generally liberates the entire market from the constraints related to major investors and their rules.

No wonder this concept has attracted lots of up-and-coming entrepreneurs. Companies like XRED, Propy or BitProperty offer a somewhat similar solution, i.e. an investment platform for anyone. Some of them, like XRED, focus on a certain location, while the others, like BitProperty, aim to operate internationally, but most of them have to deal with the prevailing legislation that, in some cases, has run its course and cannot accommodate to the innovations empowered by blockchain.

Thus, while in fact such tokens are shares, and are treated respectively, they cannot be considered as such in legal terms. The business model offered by such projects has not seen anything like it in the past, so it generally doesn’t fit any regulatory model effective nowadays. Finally, certain jurisdictions are more friendly than the others, so making such a platform available internationally is not an easy feat.

This, however, seems to be changing slowly. Japan seems to lead the way again as it has already started adapting its regulatory frameworks to the new reality of blockchain. While this model doesn’t appeal to certain legislations, many others are likely to follow this example.

We are only in the beginning of a long way. However, considering it’s been less than ten years since Satoshi Nakamoto, whoever it is, has published their disruptive white paper, the overwhelming tokenization of everything might be a matter of a few years.

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Publication date: 
10/12/2017 - 18:30
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