- March 15, 2022
- Posted by: Bogdan
- Category: Real Estate, STO
Real estate is an asset class that is ripe for integration with blockchain technology. Security tokens cover many categories but are dominated by real estate. The Cointelegraph Research Terminal is hosting a 33-page report by Security Token Market, a data and media firm, that covers the current state of real estate security tokens and the potential for continued adoption.
If you represent a real estate firm or have a portfolio that encompasses real estate, this report has the information you need to know on this developing shift in the industry.
Blockchain is changing the real estate industry
Nonfungible tokens (NFT) have been rising in popularity over the past few years and really skyrocketed to new heights in 2021. Some of the negative press on NFTs is that they are only used for pixelated pictures of JPEGs and have no “real world” applications. Those familiar with the blockchain and crypto space know that the use of NFTs goes way beyond pixelated apes and Shiba Inu memes.
The report goes deeper into the utilization of blockchain projects currently tokenizing real estate. The report gives a general overview of the current state of the primary tokenized real estate market, 14 active projects working in this space, and how these real estate tokens are trading on secondary markets.
The perfect application of blockchain technology
The utilization of security tokens covers a wide variety of industries from fine art, wine and insurance, but none are growing as fast as the real estate sector, which makes up 89% of all traded security tokens. Breaking down that 89% further, residential real estate accounts for 87%, while commercial only takes up 2% of what has been transacted as a security token. The global real estate market in 2021 was around $3.38 trillion, and with the rise in different applications that make use of blockchain technology, it is no surprise that the crypto revolution would find its way into real estate.
Ownership of title and property is well-suited for blockchain applications, as triple-ledger accounting (who sold, who bought, and signatures) is built directly into the systems that make up the process of exchange. The verifiability and trustlessness of the technology make it ideal for removing many different barriers to transactions that plague the traditional real estate space.
An example is title searchers and the process of insuring them. It takes both time and money for mortgage lenders and buyers to go through a title search on a property to ensure that the seller has the legal ability to transfer property rights to the buyer. With a tokenized property asset, this becomes a simple task of conducting a blockchain search. This is just the tip of the real estate token iceberg. Purchase the report to find out more.
Nascent and emerging, but growing
In 2019, the first property was minted as an ERC-20 token on the Ethereum blockchain. While it may seem like a slow start to adoption, it must be noted that the real estate industry is highly regulated. Combine this factor with the growing decentralized blockchain industry, and you have a recipe for slow growth — at least initially.
The report explains that the volume of actively traded real estate tokens increased in volume by 107% in 2021 from the previous year. Active projects involve a variety of different facets, including commercial hotels, private estates, Section 8 and affordable housing, purchasing interests through a blockchain IRA account, and insurance. As seen in the chart below, the majority of activity is heavily on the residential side as opposed to commercial.
The process of tokenization adds an element of liquidity to the real estate market, which, historically, has been a known issue for the sector. Investors can also benefit from this by looking to ferret out yield generation with different fractionalization of property on the blockchain, eliminating complicated and expensive barriers to entry.
Real estate on the blockchain is coming fast
The Security Token Market real estate report is crucial for serious investors to read. Both earlier adopters and those unaware of this sea change can benefit from staying informed on the latest developments highlighted in this report. All industries change, and real estate is no exception. Anyone involved in real estate will benefit from the insights provided by this report to help keep their competitive advantage in the marketplace.
This article is for information purposes only and represents neither investment advice nor an investment analysis or an invitation to buy or sell financial instruments. Specifically, the document does not serve as a substitute for individual investment or other advice.