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The internet of wealth. Tokenization, and why it’s important

tokenization. real estate. internet of wealth.

A few weeks ago, news broke that the German financial regulator BaFIN approved the sale of the country’s first tokenized real estate bond, according to a report by Coindesk. Adding a new name to the list of startups offering tokenized real-world assets. But why is tokenizing an asset so lucrative?

The $280 million token offering

Launched by German startup — Fundament Group on Ethereum blockchain, the token offering is backed by real estate assets scattered across major German cities and is reportedly valued at a whopping $280 million.

What’s interesting about the token offering, other than the fact that you can invest in real estate over the internet now, is, unlike your run-of-the-mill STO which often has severe restrictions to the scope and freedom of its token sale, Fundament group’s security offering will be available to the public. 

How?

Because the company went through the painstakingly cumbersome process of getting it approved by the financial regulator BaFIN. Marking the first time, the regulator has approved a blockchain-based real estate bond.

Why tokenization of assets is gaining popularity 

Tokenization, in essence, is the process of creating digital copies (a token) of real-world assets on a blockchain network. Each token represents a share in the underlying asset, in our case, real estate.

You can imagine why digitizing real-world assets is incredibly lucrative. It’s easier to trade digital assets than actual ones. Imagine being able to invest in a real estate asset on a different continent through the internet? While also ensuring compliance with regulatory norms. The change would be nothing short of the internet revolutionizing the way information was exchanged (Imagine using snail mail).

Why Real Estate?

So why are startups focusing particularly on real estate? Because it’s a $217 trillion asset-class that is notoriously illiquid and supports complete ownership of assets. Tokenization could change that by enabling fractional ownership, bringing down the minimum investment, and by automating certain processing using smart contracts.

How does tokenization and smart contracts enable fractional ownership? Check out our Security Token Offering Report to understand the basics.

During the first half of 2019 alone, as much as $100 million has been raised by blockchain-based real estate startups, according to Blockchain and crypto report: H1 2019.

tokenization. internet of wealth. Real estate

Blockchain and crypto report: H1 2019

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While still a small amount compared to the billions raised in the Trading and Investing sectors, it’s still a significant uptick when compared to H2 2018. And it’s not just the real estate industry that’s likely to be revolutionized by tokenization. The Art and Collectibles industry sector which has long struggled with liquidity issues is also observing an uptick in its assets being tokenized and sold on the Blockchain.

Similar to how the internet democratized access to information by making it available to everyone. Blockchain and Web 3.0 will likely democratize the access to assets and wealth, enabling virtually anyone to invest in asset classes previously only accessible only to the uber-rich.

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