Join the blockchain economy and automate your distributions and LP management.
The world is becoming more and more digitized, and while tokenization of assets is still in its early stages of adoption, we believe that tokenization is a tool that will help you manage your assets and your LPs more easily and efficiently. To be an early adopter of this technology is to take advantage of the benefits of tokenization when your putting together your next deal, and experiencing those benefits over time. Tokenization will empower you to transact—buy, sell, raise capital, collateralize, and reduce liquidity risk—while managing your assets in the blockchain-fuelled DeFi economy.
When we talk about tokenization, we mean the creation of digital tokens from a portion of the asset’s worth via an SPV. These tokens are encoded with a blockchain-based smart contract that records the sale and ownership of each token.
Here are the top 3 reasons to incorporate tokenization as a tool in your next real estate deal:
1. Blockchain is secure, immutable and transparent.
A type of distributed ledger technology (DLT), blockchain ensures that a token’s data cannot be tampered with and provides a secure and encrypted means of recording all of a token’s ownership details. It also assists in chronicling the books and records associated with a property, allowing transparency in viewing the details. It can also automate your distributions and LP management.
2. Unlock the liquidity of your asset.
If you’re worried about liquidity risk, tokenization is the perfect tool to allow you to unlock a portion of your asset’s worth without having to sell the asset outright. Tokens are essentially digital securities that can be bought and sold at will on a secondary marketplace. The SEC requires a one-year lockup of the capital, after which token holders can redeem their investment, if they choose, by selling some or all of their tokens. Note that most traditional real estate transactions will lock up your investment for 5 to 10 years.
3. Reduce transaction fees.
A 2020 report conducted by Finoa and Cashlink shows cost savings of 35-65% for tokenization compared to traditional securitization. They analyzed legal and transaction structuring pre-issuance; issuance services and transactions in the primary market; life-cycle management of assets (custody and asset servicing); and trading of assets on the secondary market. They concluded that due to the decentralized financial nature of tokenization, transactions do not require issuance agents or investor management to be centrally involved; peer-to-peer transactions save time and money.
No Magical Raises
Tokenization will not provide asset owners with a magical money raise. As with any aspect of real estate transactions that involve a capital raise, there is work involved in making your deal successful. What tokenization will do is give you an extra tool to entice investors, reach a wider audience of potential investors, and lessen the burden of unlocking the liquidity of your project by, passing ownership to token holders.
How Tokens are Used
Once you’ve tokenized your asset, there are many uses for your tokens. Here is a sampling of three ways that you can use them.
As trades are settled instantaneously thanks to blockchain technology, you can greatly reduce liquidity risks in any specific asset-backed fund. Tokens also allow for trading on a secondary market, decreasing the cost of maintaining liquidity or borrowing to meet redemptions.
Due to its support of peer-to-peer transactions, tokenization also reduces the costs of fund distribution by cutting out routing networks and complex, highly intermediated settlement processes.
Tokenized funds can automatically connect holdings and transactions to verified digital identities because each token has a smart contract that is written into the code of the tokens themselves. This creates a cooperative and automatic system of compliant financial due diligence that by building these checks directly into the token, lowers the risks and costs of manual checks.
Founded in 2018 and headquartered in Israel, SolidBlock is a leader in Tokenization as a Service (TaaS) for real estate. As blockchain fuels change in the way real estate is transacted, the tokenization of real world assets on SolidBlock’s platform empowers asset owners to transact differently—buy, sell, raise capital, and collateralize—and to manage their tokenized property on a secure, immutable, transparent system.
SolidBlock provides the tools that unlock the value of an asset’s liquidity and administer the records for every real estate transaction on the blockchain. SolidBlock’s real estate tokenization platform is a bridge to a decentralized financial (DeFi) ecosystem and the Web3 blockchain economy.