Blockchain & Real Estate: How Tokenization May Be a Game Changer for Investors and Owners

The real estate market represents one of the oldest and most significant investment classes. Real estate investments yield competitive returns and are particularly effective hedges against inflation, however, there have been several persistent barriers to entry, including the high cost of entry and low liquidity.

With cryptoassets emerging as a new asset class, their underlying technology - blockchain networks - have evolved to not only serve transactional systems but also confer, hold and transfer value in general.

As the industry and technology continue to develop, there is considerable room in merging the old with the new, and few areas hold potential equal to the tokenization of real estate.

Tokenization, as the name suggests, is the representation of an asset or equity, in token equivalents, which can be fractionally divided and owned.

A tokenized property would be akin to a real estate investment trust (REIT), but much more flexible and with very little middlemen fees.

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Unparalleled liquidity

Tokenized equities and real estate will witness unparalleled liquidity, given how the ease and secure settlement of cross-border transfers in tokens can take investment pools truly global.

Fractional ownership/Low cost of entry

Since tokens support fractional ownership, they considerably lower the cost of entry, further opening up the investor pool and unlocking developing regions and economies around the world.

Efficient administration/No middlemen

Tokenized securities can be further programmed for efficient administration - this is done via the use of smart contracts, which can easily send out dividends and support other functions, such as voting rights. Moreover, since all of these activities are recorded on the blockchain, management overheads are significantly reduced, middlemen are removed from the picture and costs are lowered for both investors and issuers.

Increased transparenc

Not only are blockchain networks secure, but they are also immutable and allow for increased transparency, where every transaction and value transfer is recorded on a ledger. Access to the ledger can be permissioned if required, and overall, blockchain implementations are flexible.

Current challenges to tokenization of real estate

While the prospect of tokenized real estate is quite attractive, its implementation is not without challenges.

First, there is a need for improved security practices and general awareness around the custody of digital tokens. Time and again, we see exchanges getting hacked and/or cryptocurrency owners losing their holdings due to security lapses as simple as phishing attacks and keyloggers.

Until institutional-grade custody solutions and exchanges become mainstream, the dream of tokenized real estate will be difficult to realize.

While there are several reputable platforms, such as Polymath and Swarm, they only take care of the technology end of tokenization. Before there can be any meaningful adoption, regulatory developments need to be made. Even when tokenized, real estate tokens fall under securities law, and compliance procedures need to be followed. Unfortunately, there is the feeling of a lack of clarity surrounding digital securities, and presently, industry stakeholders have adopted a “wait and watch” approach.

Promising ventures in the real estate space

Given the benefits of tokenizing securities (particularly the reduced buy-in price and increased liquidity in real estate), it is all but certain that the future will see a larger-scale adoption of digital securities, and it will be better for the industry that it happens when everyone is ready for it.

About the author:

Joe DiPasquale is CEO of BitBull Capital and has unique insights into crypto fund investment styles, diligence, and deals. Previously, he worked in investment management, investment banking, technology, and strategy consulting at Deutsche Bank, Bain, and McKinsey. Joe completed his BA at Harvard University and MBA at Stanford University.

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P2P Token Trading Platform AirSwap Discloses ‘Critical Vulnerability’

  • Peer-to-peer trading platform AirSwap claims to have identified a "critical vulnerability" in one of its smart contracts. 
  • Ten addresses have been identified so far as being at risk of exploitation. 

Peer-to-peer token trading network AirSwap has disclosed a “critical vulnerability” in a newly released smart contract. 

AirSwap's Critical Vulnerability

According to the disclosure, which was published on Sept. 13, AirSwap’s internal security team identified a potential exploit in a newly released mainnet smart contract. The vulnerability would allow an attacker to “perform a swap without requiring a signature from a counterparty.” 

AirSwap claims that the offending code was only present for twenty-four hours on the network before being identified and removed. However, users of AirSwap Instant between Sept. 11 and Sept. 12 may have been affected by the vulnerability, with the report claiming that 10 accounts have been recognized so far as being at risk. 

AirSwap has published the addresses to the vulnerable accounts, telling all other users that no further action is required. The report also outlines the step-by-step actions taken by the exchange in the aftermath of discovering the vulnerability, including an apology to its client base, 

We would like to deeply apologize to our affected users for any inconvenience these vulnerabilities may have caused, and hope that the important lessons we continue to learn throughout these processes form the basis for a more open, secure, and efficient trading environment.

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