What benefits does real estate tokenization offer?

In recent years, the transformation of technology has allowed users to become a totally active and protagonist element, going from being a mere spectator or passive element, to participating in an incipient way in collaborative projects in a totally different way than before. doing until now, a process known as the evolution from Web 1.0 to Web 2.0 and finally, and most recently, to Web 3.0.

To explain how this financing vehicle and opportunities is changing the current financial paradigm and understand what benefits the tokenization of real estate offers, we must first know what asset tokenization consists of.

What is tokenization?

Tokenization is understood as the process that allows linking the sole right of any asset -tangible or intangible- with that of a digital asset, which we call a "token", allowing its storage and fractional registration within the blockchain.

As we say, this process can be applied to any asset, such as, for example, intellectual property, carbon footprint, reputation of a citizen, financial products, real estate, etc.

The blockchain is equipped for the creation of these tokens, so, thanks to the use of this technology, tokenization has the advantages of registration, traceability and immediate transmission of its accounting units "tokens", allowing the issuance of these tokens to through what is known as Security Tokens Offering, through which users from all over the world can acquire these tokens.

These security tokens are considered digital and negotiable financial instruments, that is, a digital representation of traditional financial assets within the blockchain, such as equity , debt or fractional ownership, among others.

In this sense, possession of the token grants the holder real rights to the asset or any type of right that the token represents, such as, for example, debt recognition rights.

The tokenization of real estate assets brings a large number of benefits both to the sector and to the different actors who are involved in real estate investments and among whom is one of the main ones, the investor .

Benefits of tokenization

Before talking about the advantages offered by the tokenization of real estate, it is important to highlight that as in any investment, the most important part to achieve success is the underlying product that is the object of investment, where in this case it would be the real estate.

‍ Domoblock, thanks to its knowledge and experience, is in charge of precisely this most complex part, capturing the value of real estate and offering the best investment opportunities to the market without the investor having to worry about this process.

Once a property with great economic potential has been chosen, the application of tokenization makes sense, allowing numerous people with small monetary amounts to take part in investments in real estate projects, making them economically accessible and opening markets that previously seemed unattainable.

The possession of these tokens grants investors an economic right in the form of interest, the result of the economic exploitation of the property, through the revaluation of the property or the income generated through rental.

As we see, tokenization contributes to reducing the entry barriers to the sector and consequently the democratization of the sector . But this is not the only advantage, the reduction of friction involved in the creation, purchase and sale of tokens provides endless benefits for investors as we will see below.

Benefits of tokenization for investors

‍Improvement of liquidity levels : 

Tokenization makes assets potentially more liquid, and it is important to highlight this potentially, since, if an asset does not arouse interest among the public, even if it is tokenized, it will not become more liquid by the simple fact of digitizing it, it will always depend on the law of supply and demand, hence the importance of a good choice . In this way, the digitalization and fragmentation of the asset, the almost instantaneous settlement and the fluidity in peer-to-peer transactions contribute to the significant improvement in terms of liquidity. In addition, in an analogous way it allows the investor to sell their “shares” through secondary markets, such as decentralized exchanges -DEX-, which act as a bridge between the entire network of investors, unlike traditional systems where transactions must be concluded outside of the platform, making it difficult to find potential buyers and exposing the seller and buyer to counterparty risks.

‍ Immutability : 

As we already know, the token is capable of representing legal rights or responsibilities to its owner and since the token can only exist within the blockchain, it allows the registration and link with its owner to be immutable, which means that no one can delete it. , adding more security in favor of the investor, who at any time could consult and verify the ownership of the asset in an indisputable manner.

transparency : 

The blockchain allows the registration and traceability of transactions in real time, offering the possibility of tracking the history of the asset each time it changes hands. This allows for improved transparency and trust between the parties, as well as greater protection and effectiveness in compliance with legal regulations on the prevention of money laundering, data protection, etc. On the other hand, Domoblock will use this unique feature of the technology in favor of its investors, introducing to the blockchain in hash form the contracts and legal documents, involved in both the issuance of tokens and the development of the project that is carried out.

‍ Increased profitability :

 The fact that the blockchain is a decentralized database, and that it allows peer to peer transactions, without the need for an intermediary, reduces costs significantly compared to current rates. Unlike traditional systems, token issuers can program the behavior of the assets, as well as automate, for example, the payment of dividends or interest to their investors, which translates into a reduction in costs in the project and greater profitability . for investors.

‍ Portfolio diversification : 

 The reduction in the price of an asset by orders of magnitude, and the ability to freely choose where to invest, opens a new investment approach, endowed with greater personification and security by diversifying the portfolio in different assets, reducing the risks compared to the investment of a property without tokenization.
As we see, tokenization offers a large number of benefits, and Domoblock takes advantage of them in favour of its investors, opening a new environment of opportunities that were previously impossible to imagine.

Conclusion

In conclusion, real estate tokenization offers a range of revolutionary benefits for investors and the real estate industry as a whole. From democratizing investment and improving liquidity to transparency and the ability to split ownership, this technology is changing the way we think about and engage in the real estate market. As it continues to evolve, tokenization promises to unlock a world of opportunities and further transform the real estate investment landscape.