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We’ve all heard the saying, "no investment is safer than property!”
Yet, in a post-pandemic world filled with high-interest rates, the supply being snapped up by large private equity companies, and prices through the roof, you are probably wondering how you're supposed to get on the real estate ladder without several hundred thousand dollars in your bank account for a down payment?
We all know the massive benefits of property ownership, such as permanent passive income from rent and favorable tax laws. Still, those benefits seem to be a distant mirage for the majority. Luckily for us, there is a solution!
Through blockchain technology, real estate can now be broken up into small pieces (aka ‘tokenized’), enabling anyone, even us, to grab a part of the pie without buying an entire property. One innovative project at the forefront of this movement is BonfireDAO.
Let’s see how they’re making that mirage a reality.
What is BonfireDAO?
Bonfire is a fractionalized real estate investment protocol on the Polygon network. It is a marketplace that will allow everyday investors to join the new real estate investment and ownership era through property tokenization. With Bonfire, income-producing real estate properties are broken up into fractions (known as tokens) that can be bought and sold by investors on the platform.
What is Real Estate Tokenization, and Why Does It Matter?
Real estate is one of the most illiquid classes of assets and requires a significant commitment of capital and a rather expensive and lengthy transactional process. That and the part where you need a large amount of money or to be an “accredited investor” (also known as a rich person) rules out retail investors entirely.
Bonfire’s tokenization process will upend this paradigm by providing a real-time marketplace powered by smart contracts and blockchain technology.
Real estate tokenization is simply putting a real-world asset on the blockchain and assigning it a token. Each token represents fractional ownership of that particular asset. For example, a $500,000 property can be represented by 10,000 tokens that sell for $50 each. A $5000 investment means 1000 tokens, which equals 1% ownership of that property.
Why does this matter?
Tokenization of properties allows anyone to invest in real estate opportunities and reap the rewards millions of millennials currently miss out on. Some of the additional benefits it provides include:
Accessibility - Anyone can own a fraction of a real estate property without qualifying for a mortgage, sitting on a large down payment, or having the background to be a professional property manager.
Portfolio diversification - Another great benefit of real estate tokenization is that it enables people to own real estate outside their area. Investors can participate in different opportunities across the world and diversify their portfolios across different asset types and geographies.
Improved security and transparency - Information on the blockchain’s distributed ledger is transparent and secure. This will solve issues related to title and also enable people to buy and sell their real estate assets in a liquid manner that has never existed before.
How the Bonfire Solution Works
The Bonfire solution will use a DAO framework (Decentralized Autonomous Organization). The marketplace will list real estate properties that have been validated and made ready for investors to jump in on.
Bonfire validates assets how Airbnb validates a host - and ensures there isn’t fraud going on and things like property taxes have been paid. Once the asset verification is complete and declared ready to be sold, the property will be divided into tokens and listed on the Bonfire platform.
Investors can then purchase these tokens via fiat or crypto, and once 100% of the tokens are bought from the marketplace, a DAO LLC is formed. DAO members can make and vote on proposals and quickly decide how best to manage their assets.
Bonfire is merely a technology protocol, but it empowers everyday people to be stewards of their assets without needing to be an expert in real estate—more on how the platform works can be found here.
What’s Coming for Bonfire?
According to their roadmap, the first beta of the marketplace will be released in October with its first sale of a $310,000 single-family rental asset. Over the coming months, they’ll complete and audit their DAO smart contract, launch their utility token, and get the next assets on their platform.
Bonfire envisions becoming a liquid exchange for property and expanding far beyond real estate into other income-generating assets currently inaccessible to average investors.
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.