Published on: Apr 18Last edit: Nov 12
RWA's from Land to Ledger: Top 9 Real Estate Projects Leading Tokenization
Real Estate, one of the most coveted markets in the world has begun its ascension into tokenization. From land to ledger, Real Estate has arrived on-chain.
At an ever-increasing rate distributed technology continues to eat the world of finance, RWA Tokenization, the process of issuing digital tokens to represent the value of real-world assets has begun to permeate the consciousness of institutions and enterprises alike. Historically considered to be among the most stable and reliable asset classes in the world, an area that has been of particular interest is the digitization of Real Estate. Simply put, digitizing or tokenizing real estate is a multi-pronged process of transferring existing (paper-based) systems and processes of ownership to match the interconnected, high-speed demands of the modern world economy. We can now call this crypto real estate investing
Valued at an incredible >$325 Trillion USD and growing at a compounded annual growth rate of ~5.3%, this mammoth of a market eclipses the current digital economy ~300:1 and has the potential to redefine equity opportunities for the global population.
Tucked away behind a moat of regulation and operational inefficiencies, real estate has gone relatively unimpacted by the digital revolution of the past decades. Now, with the recent shift of the global economic environment into the exploration of de-dollarization and the exponential improvement in the capabilities of distributed ledger technologies, real estate has become a focal point for innovation.
Tokenization introduces a redesigned “operating system” for real estate that will allow a new caliber of industry participants to take over the landscape and provide a fresh perspective on solving many pressing issues.
It is no secret that the legacy system of real estate is overly saturated with rent-seeking middlemen that charge obscene fees and delay processes. Real Estate tokenization will streamline operations that were previously handled by 3rd parties and minimize the potential for human error.
Ownership of real estate has always been an all-or-nothing approach. Singular entities had to possess the whole asset and carry full liability. Fractionalizing by tokenizing real estate inverts this model and introduces the concept of micro-ownership, whereby a single property can be owned by a pool of individual entities. Given that fractionalization also lowers the barriers to entry for investors, broader portions of the population will have the chance to enter this market segment.
Due to the nature of it being a high-value asset, real estate is known to be highly illiquid. Transactions within the sector can easily take months, even years to complete. This illiquidity is the pinnacle upon which large third-party spreads and exorbitant fees have been generated. Whenever properties take on the form factor of a token, they will inherit the settlement assurances and transactional capabilities of their underlying distributed ledgers; which in the case of a network like Ethereum would condense a month-long underwriting into a 10-minute block time.
Real Estate markets have been exclusively localized, meaning that individual investors were denied the right to participate across government borders. Whenever in the form of a token, borders become irrelevant. Real estate becomes a digital asset class that is within reach of people on all layers of the economy.
While the transactional and settlement side of the equation might experience an order of magnitude of improvement, however, there still remain a slew of challenges that stand in the way of a seamless transition to a fully autonomous tokenized real estate market.
The single greatest hurdle is regulation. Traditional institutions and the largest market makers in the industry do not want to risk losing their dominance and have thus rooted their operations in the form of regulations. Billions of dollars are spent lobbying to protect their existing moats and odds are they will continue to do whatever it takes to maximize their benefits at the expense of the end consumer. Moreover, the slow-moving government organizations are still far from certain about the legal recognition of digital assets as a whole; delaying and stifling innovation.
Even though transactions may become seamless to conduct, other due diligence processes such as property inspection would still remain a high-touch human operation. As the human factor still remains prominent, there comes the unforeseen curve of educating these humans on how to interact with the new systems. Given how permanent these systems are, errors can potentially materialize in new ways that will require the introduction of yet another layer of third-party human intervention for conflict resolution.
Considering all of the drawbacks in the traditional system of real estate, credit must be given to the strength of enforcement. After an asset has transferred ownership, the next immediate question arises around the protection of that ownership. Whether via a legal/court system, physical policing, or a mixture of both, enforcement is a uniquely human function that requires the conscious awareness of the full nuanced spectrum of the human experience. Hard coding this logic into smart contracts does not satisfy the chaotic variances of human behavior.
In spite of the regulatory headwinds for tokenized real estate, the tremendous potentiality of crypto real estate investing has inspired many incredibly intelligent groups of people to pursue the development of projects in this burgeoning space. These are the top projects bringing land to ledger.
Infrastructure provider with a keen awareness of the regulatory landscape. Blocksquare acts as a business-to-business entity that works to empower other startups with the necessary tooling to get into the tokenized real estate business. Based in Slovenia (EU), Blocksquare (website) provides compliant technology to build marketplaces using blockchain as a backend management system.
An OG in this nascent sector, RealT (website) has been operating since late 2018/early 2019 and focuses on fractionalized ownership and frictionless asset transfer. While there is no massive technological breakthrough, RealT does provide a great case study on the simplistic basic implementation of tokenization. RealT acquires real estate via its Delaware incorporation, then leverages Ethereum and Gnosis Chain to digitize the paper deeds into tokenized representations and goes on to offer these tokens to investors around the world. *US residents must pass accreditation requirements
A project that is looking to provide both a front-end real estate investment interface with low minimums as well as a purpose-built blockchain (Ektachain) for providing general purpose tokenization. Hefty promises with a very wide range of services, Ekta (website) seems like a soup of great ideas. Scattered attention has resulted in most multi-purpose startups failing to attain their goals. Nevertheless, with a great vision, technological understanding, and deep industry insight, there is potential that Ekta will provide some promising solutions.
Liquid Assets Brokerage System (LABS) is approaching crypto real estate investing from the top-down, addressing every element from retail investments to property management to timeshares and everything in between. The mission of LABS (website) revolves around the enhancement of liquidity and inclusion of a worldwide audience that is interested in building real-estate portfolios.
Built on Ethereum, TheopetraLabs (website) is an extremely innovative project that caters to the full ecosystem of functionality necessary to provide shelter to the American market.
The company is working to solve the housing affordability crisis in the United States by capping rents at 1% a year, providing membership benefits, and a new outlook on what it means to rent - an easy path to home ownership and to become a sovereign individual, to truly own the land you stand on.
Mostly focused on the consumer-facing front-end portion of the real estate process, through accessibility, Theopetra partners with two other projects (T-home Capital and REAT network) to provide a membership to its community that receives better-than-market living options.
Oriented as a pseudo-non-profit protocol/organization that is focused on providing solutions to the renters market in America; REAT protocol (website) sports a novel architecture. REAT intends on leveraging the PoXL (proof of transfer-lite) consensus mechanism as a means by which to offset economic entropy. Recently, REAT consolidated into Theopetra Labs.
Parcl (website) is a Real Estate investment platform built on the Solana blockchain specifically designed for higher frequency trading activity. Parcl’s application synthesizes the grandeur of Real Estate markets with the liquidity and functionality of equity markets. Parcl provides a unique twist on traditional real estate portfolio capabilities through three major functions, micro-fractional investments (at $1 minimum), margin options up to 10x, and even allowing for inverse positions (shorting).
Robinland (website) transforms commercial real estate into tokenized assets and provides them to market participants as an alternative means for fixed income. The Robinland platform acts as a trusted intermediary connecting Real Estate developers looking to enhance their asset's liquidity profiles with passive investors looking to expand their portfolios.
Among the earliest innovators in the space, Propy (website) is a market leader that seeks to displace the entire paper trail of documentation and streamline the transactional processes in real estate by transferring all activity onto a blockchain network. Every touchpoint, including property listings, property titles, support documents, purchase sale agreements, payments, and even the deed transfer is enabled through the Propy platform.
As the world continues to tokenize, there is no doubt that crypto real estate investing will be at the forefront of the digital financial evolution.
Intuitively beneficial and alluring to new marketplace providers and investors alike, this sector will continue to grow in spite of the many incumbents who are still stuck in their old ways and attempting to resist the inevitable: Tokenizing real estate and embracing digital transformation.
Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.