Representatives in Wyoming have introduced a bill that would allow company shares to be issued and recorded on blockchain technology.
House Bill 0185, Corporate Stock-Certificate Tokens, is a cross-party bill put forth by Republican and Democrat representatives in Wyoming. If passed, it would allow stock certificates to be stored digitally on the blockchain rather than paper certificates.
“The articles of incorporation or bylaws of a corporation may specify that all or a portion of the shares of the corporation may be represented by share certificates in the form of certificate tokens.”
The tokenization of traditional assets like stocks, real estate, and even art is a growing presence in the blockchain space.
Already on the DX.Exchange platform in Europe, you can trade tokens that represent shares in Nasdaq-listed companies. The tokens can also represent a fractional ownership in the the stocks and are backed by real shares held by the exchange’s partner.
The proposal by Wyoming lawmakers would be a significant step further, allowing direct tokenized ownership of shares, issued by the company itself.
The bill proposes a date of July 1, 2019 to enter into effect.
For $21,000, you can now buy a fraction of a student residence building, The Hub, in South Carolina. In exchange for your investment, you’ll receive a digital token that represents your share of the building’s ownership fund.
It’s part of a joint effort from Convexity Properties, a Chicago-based real estate investment firm and Harbor, the all-in-one tokenization platform.
This tokenization of real estate opens up the market to investors that might not be able to afford a full property or even the high minimums of traditional real estate investment trusts (REITs).
In 2018, an asset management company, Elevated Returns, sold tokenized shares in a luxury hotel in Aspen, Colorado. Investors received “Aspen coins” to denote their partial ownership in the project. The crowdfunding campaign, via Indiegogo, started on the 8th of August 2018 and ended on October the 1st, 2018, raising $18 million.
However, only accredited U.S. investors were allowed to participate in the sale with a minimum investment of $10,000. “Accredited investors” are individuals with “earned income that exceeded $200,000 in each of the prior two years” or has a net worth of over $1 million.
These experimental projects point to a possible new future in real estate investment and blockchain technology. But how close are we to the realization of tokenized real estate? Block Explorer dives deeper into the various projects in their space, tracks their progress, and outlines the opportunities available.
Why Put Real Estate on the Blockchain?
The real estate industry experiences some massive problems.
It could reach $5.2 billion in 2018, which is significantly higher than $1.3 billion poured into the field in 2014. And blockchain technologies are named amongst the 13 real estate industry disruptors.
And it’s not surprising. Distributed ledger technologies can potentially patch a lot of holes in the industry. Firstly, it could help create a fully-transparent real estate registry. Secondly, it can create buying opportunities for financially-limited investors, through fractional ownership.
The Biggest Real Estate Blockchain Projects Right Now
Numerous blockchain startups have flocked to the space, promising easy access to real estate investment to anyone curious to get in. And not only to accredited investors. Among the most noticeable are:
Atlant offers Ethereum-based peer-to-peer rentals and tokenized real estate ownership. However, even though the prototype has existed since September 2017, and the public beta of the product was launched in October 2018, there’s still a lot of work to do. The company is still struggling to acquire all the necessary licenses and there’s not much clarity on the timeframe.
Blockimmo is striving to facilitate “an accessible, streamlined real-estate market” through tokenized real estate shares. Their recent big news is the company’s business model approval by the Swiss Financial Market Supervisory Authority (FINMA). It also launched a testnet with two property listings samples.
Real properties supposedly will be available on the platform in 2019. It’s all sounds very promising. Yet, when digging more in-depth to the current company’s website, it appears to be clear that the team has a long way to go.
Some worrying discrepancies can be found in the “frequently asked question” section. It claims that “submitted real estate properties are carefully curated by our team of experts”, but the current number of employees is four, and three of them are developers. So, those are probably not a great fit when it comes to real estate evaluation. But let’s give it some time.
jointer.io is another startup in the field. With an attractive motto “using blockchain & AI to democratize commercial real estate,” they want to go one step further and offer tokenized real estate not as a form of investment in one property but as an index, combining several properties.
Sounds great, but so far the website itself doesn’t articulate much about the progress and it hasn’t launched yet. A popup announcement saying “50 investors viewed this offer” when someone is trying to check out what the company has to offer is also quite sketchy.
Meridio also promises to “democratize real estate,” boasting lower investment minimums, reduced transaction costs, and increased liquidity. It invites you to “browse the properties,” but to do so you have to register on the platform. We’ve requested the access, though at the moment of writing there was no feedback from the team (see below). And the project’s progress, judging by its corporate blog, hasn’t been very obvious recently.
Brickblock is one of the earliest players in the tokenized real estate field and seems like they are on the right track with legal, partnerships and overall progress. It’s yet not clear if the project truly meant to expose any investor to the possibilities of owning a fraction of a real estate. While writing this piece we tried to register on the platform and there were some roadblocks on the way (despite the claims that it will only take 15 minutes to register).
The link to verification application didn’t arrive via text message as promised, the verification code to launch the identity confirmation chat wasn’t working (screenshot below). But overall it feels like an excellent start with an actual perspective of getting somewhere.
What’s Next For Tokenized Real Estate?
Even though the true “democratization” of real estate and the ease of investing in tokenized assets might solve a lot of problems, there’s a long way to go in many regards.
Especially due to numerous regulatory issues related to tokenizing real estate, notably if we are talking about the global availability of such assets.
For now, it will be difficult to usurp the traditional securitized real estate investment trusts (REITs). Realty Income Corp., offers Retail Stores REIT investment and currently trades at around $62 per share with monthly dividends of about 0,3% – 0,4%. Simon Property Group also pays out quarterly dividends of 1%-1,3% and the price of approximately $164 per share at the moment of writing.
I can purchase it with a couple of clicks using the mobile application of my bank with no legal complications and even my taxes are paid automatically from the profits received.
There’s no doubt that tokenized assets are the future and it might be much more convenient and even possibly more profitable to the holders. However, there’s still a long way ahead for it. So let’s hope that an infinite number of passionate brainiacs invading the space will have enough energy and determination to figure it out. I keep my fingers crossed.
And what do you think of tokenized real estate investment? How long will it take us to get there? Go ahead and share your thoughts in the comment section below.
To round out the year, we asked our Block Explorer writers to tell us what they’re most excited about for blockchain and crypto in 2019. In this piece, Ana Balashova looks at the startups hoping to take crypto mainstream, as well as the tokenization of assets and next-generation blockchain projects.
This year wasn’t all cuddly and fluffy for crypto. The fearsome bear entered the market and trampled everyone’s dreams of becoming a billionaire in a couple of months. And although crashes aren’t new to crypto, this year things are a bit different: many more people are involved and larger mainstream brands are embracing digital money as payment.
Banks, governments, and regulators are accepting the fact that bitcoin is here to stay. All of that makes me seriously enthusiastic about crypto in 2019. Here’s the list of the things I’ll keep my eye on:
Universal Crypto Solutions
Even though Coinbase has more than 20 million users and Blockchain.com boasts more than 31 million registered wallets, crypto is still far away from mass adoption. And the convenience of using it is still only appreciated by the more techy part of the population.
Real-life example: if my mom would like to purchase bitcoin she always has to ask me to do that. And she is quite capable of using traditional plastic cards or other financial services like money transfer through a mobile app on her phone.
So, there’s still room for improvement in creating those universal solutions, both for consumers and business. One that will work internationally and will allow seamless transactions from crypto to fiat and back. One that boasts a super intuitive interface and straightforward features. That’s why I am quite curious to follow Abra, Blockchain, Purse, Bread, Ethos, EOS Lynx, STK, Metal, PundiX, Request Network, Monetha and all the numerous projects in the field.
Securitization and Legal Clarity
Authorities of various countries are cooking up all sorts of crypto regulatory frameworks. The choice of crypto-friendly countries is growing (Malta? Gibraltar? Finland?) That alone makes the existence and the future perspectives for cryptocurrencies much more compelling.
Even without proper regulations, as much as $22 billion was raised in Initial Coin Offerings in 2018 according to Bloomberg’s numbers.
There are a lot of question marks about those projects. However, the development of the legal side of the story will most likely make a positive impact on the industry. Not to mention the whole new infrastructural solutions that have to be evolved to make it work: properly regulated crypto exchanges, platforms for legal Security Token Offerings, the whole bunch of wallets for securitized assets, etc.
That all adds up to bringing digital currencies from the world of tooth fairies and leprechauns to reality.
Making Blockchain Great Again
In spite of all the awesomeness of distributed ledger technologies, there is always someone to complain. The transactions on Bitcoin blockchain are getting too expensive, or Ethereum got all clogged again because of a popular token sale, Cryptokitties, decentralized exchanges vulnerabilities, and so on.
So all the tools and projects that are supposed to improve what we have so far and to solve all related problems – is something I am personally very interested in.
And, just to clarify, when I mention “problems”, I am talking about things like scalability,interoperability, transaction costs, blockchain developers education, etc. Some of the exciting projects working on these problems are EOS, Aion, Wanchain, Ethereum, POA network, Zilliqa, and others).
Tokenization of Assets
As we know, one of the first applications of blockchain technology was digital money. And the fact that it created so much convenience, transparency, and speed of actual ownership made “tokenization” a viable technology for other assets.
We could see gold -backed tokens (like OneGram, Goldmint, etc.), natural resources backed tokens (e.g. Petro, Venezuela’s controversial cryptocurrency backed by oil), and so much more than that.
With the further development of crypto-related regulations and taxes, more projects tokenizing real estate, pieces of art, rare cars, shares in Silicon Valley startups etc., will pop up.
And the fun has already begun. In October, Forbes announced the first tokenized real estate project in New York, ran by Propellr, the platform for digital assets management and Fluidity, the trading and tokenizing solution.
It’s already possible to purchase a share of ownership of off-campus housing for students at the University of South Carolina. The cost per share is $21,000. Currently, those are being sold by Harbor, the blockchain startup which raised $28 million of venture capital in a fully compliant security token offering earlier this year.
And if you are looking for more affordable ownership options, there’s something interesting offered by Brickblock. The project in development is a 50-unit residential property in the UK. The team is raising £3.35 million by selling tokenized shares valued at £34 per pop.
There are also some moves in the art world. 31.5% ownership of Andy Warhol’s “14 Small Electric Chairs” was recently sold at an auction run by blockchain startup Maecenas this summer. The total value of the sold tokens was $1.7 million with the total estimated worth of the artwork of $5.6 million.
Tokenization of Real Estate on Mars?
I trust that weirder things will find their way to fully compliant blockchain existence. And we might be able to purchase frozen brain cells and other vital organs, square meters and milliseconds in cryogenic cameras, a fraction of space trip tickets (or maybe partial ownership of a cozy industrial loft on Mars), and the list goes on. I can’t wait!
And what are you excited the most?Go ahead and share it in the comment section below.
Every dollar has the same value, no matter who owns it or when it was created. If I lend you a $10 bill, I don’t mind if you give me back a completely different $10 bill. Its value is no different to the original one. I can walk into any store and the owner will still accept it as ten dollars.
But if I lend you a non-fungible asset, like a baseball card, I expect the same one back. It’s one-of-a-kind.
A Working Currency Must Be Fungible
Generally speaking, this is how currencies function. The American monetary system would collapse if every dollar had a different value.
In a stable money system, the currency must be fungible. We can’t assess the unique value of each coin or note.
Bitcoin is a Fungible Asset
Like the dollar, bitcoin is also “fungible.” Every bitcoin is worth the same as any other bitcoin.
A bitcoin mined by Satoshi Nakamoto himself in 2009 is no more valuable than a bitcoin mined yesterday.
The history of a particular bitcoin doesn’t change its value either. A bitcoin used to buy drugs on the infamous Silk Road website has the same value as one in your wallet. A stolen MT. Gox bitcoin is worth the same as any other.
Ether, XRP and bitcoin cash are also fungible assets. Like any currency, a major cryptocurrency must be fungible or there would be chaos.
So where do non-fungible tokens come in?
Non-Fungible Tokens on the Blockchain
At first, blockchain was built to record currency transactions, like bitcoin. However, Blockchain is now evolving beyond money.
People are learning that blockchain can be used to track and record anything: real estate, artwork, and cartoon cats.
These assets don’t have the same (fungible) value. Each has a different price according to its unique attributes.
That’s why non-fungible tokens were created.
Let’s go back to cats. Every cryptokitty is really just a non-fungible token. They’re all tracked and recorded on the same blockchain, but now they can each have a different price.
Beyond Cats: How Will We Use Non-Fungible Tokens?
The next big use-case for non-fungible tokens is probably gaming.
Gaming already uses non-fungible items. Weapons, armor, potions and other items all have unique value in the gaming world. (Gamers often sell, trade or even bet these items over the internet).
We are slowly seeing this move onto the blockchain with tokens.
Worldwide Asset Exchange (WAX) is already working on this. Its decentralized exchange allows people to trade gaming “skins,” such as weapons or armor, using a non-fungible token.
Decentraland is another example where users can purchase virtual land using non-fungible tokens. Each piece of land has a different value based on its features.
Tokenizing the Real World
The future of non-fungible tokens, however, could go even further.
We could potentially use this technology to tokenize the real world. Your house could be recorded by a non-fungible token on a blockchain, for example. It has a different and unique value to the house next door.
You could also tokenize your car ownership, artwork, and event tickets.
This is often referred to as solving the “provenance” problem, by validating the origins of ownership.
Tokenizing Your ID and Personal Information
The same concept can be applied to people. We all have unique aspects that make us different.
Humans are non-fungible.
That means our passports could be issued as a non-fungible token. Perhaps driving licenses, social security numbers, birth certificates, or university diplomas, too.
Fractional Ownership of Non-Fungible Tokens
If non-fungible tokens are used for artwork or real estate, we can also introduce fractional ownership. In other words, each person can own a smaller piece of something bigger.
In June 2018, an Andy Warhol painting was sold using fractional ownership. 49% of the $5.6 million painting was put up for sale with people using cryptocurrency to purchase a small ownership in the painting.
Let’s say a piece of land is recorded using a non-fungible token. A group of five investors can each own a 20% share of the token (although the token itself cannot be divided like, say, a bitcoin).
The Technical Part – ERC-721 Tokens
Non-fungible tokens are most-commonly created on Ethereum. They are known as ERC-721 tokens. Cryptokitties, for example, uses the ERC-721 token standard to make it work.
ERC-721 tokens are similar to other cryptocurrency tokens. They can be traded on exchanges and held in a wallet. But they are designed to include unique features.
They are different to ERC-20 tokens which are the Ethereum standard for fungible currencies.
There are other ways to create a non-fungible token outside of Ethereum. 0xcert and Counterparty also allow developers to build non-fungible tokens.
Non-fungible tokens might have gained notoriety from a whimsical series of cartoon cats. But their potential is much larger. Non-fungible tokens may lead to the “tokenization of everything,” from real estate to art collections to our own ID.