Back in 2022, a Boston Consultancy Group (BCG) report estimated that the total value of illiquid real-world assets, or RWAs, would spike to $16 Trillion by 2030, or 10% of the total global economy. This includes real estate, land, fine art, commodities, public infrastructure, computing infrastructure, and private equity, etc. Real estate, in particular, is quite notorious for its illiquidity due to many factors, key of them – the lack of public markets for commercial real estate funds, the complexity of transactions and valuation, and the demand for huge capital investment. 

Notwithstanding the inability to fractionalize real estate, lack of or slow transfer of information to retail/high net-worth individual investors, restrictions to elite cliques, regulatory hurdles, complex user journeys for obtaining access (e.g. KYC and payment setups for the public market) and the lack of existing technologies to unlock the liquidity have all contributed to the never-ending problem of liquidity in RWA sectors. 

Traditional fractionalization of RWAs has helped unlock part of the liquidity but only in public markets, which are already fairly efficient and high-tech. Private markets, on the other hand, have lagged – are slow, opaque, and have high overheads – which locks initial capital opportunities for the majority of investors. Despite real estate benefiting from REITs (Real Estate Investment Trusts), the unlocking of illiquid capital remains suboptimal and expensive for most customers. 

Luckily, the advent of tokenization via blockchain technology is gradually shaping RWAs and unlocking illiquid capital, giving rise to a new way to fractionalize assets and sell them directly to the public. In the next sections, we focus on the rise of the tokenization of RWAs, the importance of blockchain technology in unlocking illiquid capital, and touch on Blocksquare, a Slovenian company that is revolutionizing the real estate marketplace for the ordinary investor. 

The Rise of Tokenization in RWA Marketplaces

The tokenization of RWAs is quickly gaining attention across the world with the prominence and global adoption rates of blockchain technology. Similar to mainstream technologies such as the internet, smartphones, and several financial tools, which started slow and witnessed rapid adoption, tokenization – especially in real estate – is expected to follow a similar path by the end of the decade. 

Real-world asset tokenization, specifically real estate tokenization, involves issuing digital tokens on a blockchain representing ownership in real estate, whether land or buildings. In the past few years, several banks, financial institutions and large companies have dipped their toes in the tokenization game, making RWAs easier for their investors to buy. 

At the forefront of this revolution is JP Morgan, which launched the Tokenized Collateral Network (TCN) in 2023, leveraging blockchain technology to transform RWAs into digital tokens. Franklin Templeton launched the Franklin OnChain U.S. Government Money Fund the same year, providing investors with the first  U.S.-registered mutual fund on a public blockchain. The European Investment Bank (EIB) also issued its first $103 million digital bond in 2021, registering and settling bonds on a blockchain, in the first huge step for real-world asset tokenization. 

The biggest news yet in the field of tokenization is Blackrock’s partnership with Securitize, a San Fransico-based company aiming to unlock alternative assets with a fully digital, regulatory-compliant platform, that caught the eye of investors globally. The partnership aims to tokenize over $10 Trillion of Blackrock’s assets in a move that will radically shape how RWAs are traded in the future. 

With trillions of dollars worth of traditional assets set to be tokenized in the coming decade, it begs the question – why is tokenization so important? 

The importance of tokenization in Real Estate RWAs

Tokenization enhances RWA markets, especially real estate, which benefits heavily from digital tokens. Here are some of the benefits tokenization brings to the real estate market: 

• Unlocking Liquidity: The tokenization of real estate helps unlock underutilized or illiquid real estate assets by fractionalizing the assets and creating innovative investment vehicles. This helps asset owners easily trade their assets and have faster turnovers of their assets. Small-time investors also get the opportunity to buy pieces of expensive assets. 
• Enhanced Transparency: By leveraging blockchain technology and smart contracts, real estate becomes more transparent through the presence of immutable ownership records on a public blockchain. Additionally, smart contracts automate the ownership transfer process, distribution of rent, and regulatory compliance processes.
• Open markets 24/7: Unlike traditional markets, digital tokenization of RWAs enables investors to trade round the clock, enabling more open trading at any time. 
• Minimizing fraud: Smart contracts leverage cryptographic security which minimizes the risk of fraud or theft. All contracts and transfers are accessible on the blockchain which safeguards ownership rights. 

How Blocksquare Is Revolutionizing The Real Estate Market

Blocksquare is a leading blockchain company that aims to secure real estate tokenization and revolutionize the property industry through notarized transactions. The company was formed to enable property owners to tokenize and unlock liquidity in the industry by leveraging smart contracts and blockchain technology. 

Since its launch, the company has made huge strides in the tokenization industry, helping tokenize hundreds of properties and land by providing regulated infrastructure for investors to participate in the real estate market. In June this year, the company launched the Oceanpoint v0.5 platform, a DeFi platform designed to help startups tokenize real estate, introducing Marketplace Pools. This is an innovative feature that allows participants who stake BST (Blocksquare’s native token) in the Governance pool to support new and emerging certified partners, enabling them to launch their own tokenized real estate marketplaces using Blocksquare. 

According to Denis Petrovcic, the co-founder and CEO of Blocksquare, the company has helped tokenize over 100+ properties including hotels and healthcare facilities in over 21 countries, totalling over $100 million worth of real estate. 

One such startup that has benefited from Blocksquare is Portio Capital. The company leveraged Oceanpoint v0.5 to create a marketplace where investors could easily buy and sell fractional shares of coliving properties. Portio Capital raised funding to cover development costs, marketing, and operational expenses in record time – selling 100,000 BST tokens in just 36 hours, with the funding campaign set to raise the same amount in 29 days. 

Recently, Pieme, a management platform for investors focused on community-owned hotel residences, also announced plans to use Oceanpoint to democratize hotel investments. Set to launch on July 30th, Pieme’s funding campaign aims to revolutionize investment in real estate in Africa, with the first residences to be built in Kampala, Uganda. 

Conclusion

In conclusion, the wave of RWA tokenization will continue to surge, and the real estate market is on the brink of a transformative change. By tokenizing the $16 trillion real estate market, investors will be able to unlock liquidity, enhance security and transparency in real estate transactions, and reshape property ownership. As a pioneer in the space, Blocksquare aims to revolutionize the once rigid and opaque world of real estate investment making it more accessible, transparent, and liquid. The success stories of startups like Portio Capital and Pieme highlight the immense potential of this technology to democratize real estate investments, opening doors for a broader range of investors.

Source : Crypto Times - Jul 23, 2024