Značka: Real Estate

What is tokenization and how are banks tapping into its design principles?

Tokenization is the process of converting something with tangible or intangible value into digital tokens. Tangible assets like real estate, stocks or art can be tokenized. In a similar vein, intangible assets like voting rights and loyalty points can be tokenized, too. We see Avios as an example of tokenized loyalty points by the traditional credit card industry.However, when tokens are created on a blockchain, they add a level of transparency that previous iterations of tokens couldn’t achieve. There are several banks that are experimenting with tokenization. But, before diving into the use cases in banking, it would be useful to understand the qualitative advantages that tokenization brings to financial services.As major financial institutions enter the crypto space, they pay special attention to issues like custody and Anti-Money Laundering analytics and compliance. Now, with the dramatic collapse of FTX, the key qualitative benefits of tokenization are in the spotlight yet again. LiquidityReal estate is one of the most illiquid asset classes. When a property is worth a few million dollars, buying and selling the property can take time. Now, imagine a $1 million home is tokenized, with each token representing property ownership. When these tokens are available for purchase in the market, 100 buyers can each invest $10,000 to buy ownership of the property.This naturally increases the ease with which illiquid assets can be sold, as fractionalized ownership is possible with tokenized assets. Fintech firms like Yielders already implement fractional ownership of real estate without using blockchain tech. Also, illiquid asset classes like private equity and venture capital can benefit from tokenization.When an illiquid asset like real estate or art is tokenized, the entire asset class benefits from the liquidity created. It also allows for a healthy secondary market and creates more data for better valuation of these assets. Platforms like Reinno and Realt offer global investors access to tokenized real estate.As a property owner, this opens up options of selling just part of the property through tokens instead of selling the entire property. From an investor perspective, someone in Brazil with $1,000 can invest in property in Manhattan.For instance, Realt offers investors tokenized properties. While the properties listed on their platform cost from several hundred thousand dollars to a few million, they are tokenized and each token can be valued at less than $50. This makes it extremely affordable for interested investors in most places of the world.Similarly, fractional ownership of nonfungible tokens (NFT) is being rolled out for the more expensive NFT and art collections. As a result of a liquid secondary market for an illiquid asset, pricing also becomes easier due to transparent supply and demand dynamics.Liquidity risk managementIn addition to these benefits, liquidity risk management within financial services organizations can also benefit from tokenization. That benefit is a lot clearer from the FTX collapse and how tokenization could have helped there.The FTX collapse had several underlying issues, not the least of which came from its business model using the volatile FTX Token (FTT) as collateral. However, if there were checks and balances in place that were transparent for customers to see, mitigating actions could have been taken in time.Recent: Festivals in the metaverse: How Web3 projects are taking culture virtualAt no point in their journey did FTX create transparency around how much liquid assets they had to service their liabilities. As a result, FTX managed to repurpose user funds (liabilities) for their investments (illiquid assets). Tokenizing both assets and liabilities would have shown a liquidity gap in real-time and cautioned the market of the looming crisis.After the FTX collapse, there has been a rushed effort to provide proof of reserves from several centralized crypto exchanges. However, proof of reserves only shows that a firm has some assets to service its debts.An equally important capability is proof of liabilities. If a firm can transparently demonstrate that it has $1 billion in reserves/assets, but its liabilities, which could be $10 billion, are not clear for everyone to see, its solvency is under question.The challenge in creating transparency around liabilities is that, often, firms capitalize themselves through debt raises in fiat currencies. As these instruments are not tokenized, real-time solvency cannot be demonstrated. Therefore, in order to avoid an FTX-like incident in the future, exchanges will need to provide proof of assets and liabilities.One of the key qualitative aspects of tokenization that is apparent from the FTX saga is the “proof of solvency.” The transparency that tokenization brings can also help assess the solvency of a firm in real-time. If both assets and liabilities of a bank can be tokenized, on-chain analytics can be used to understand if the firm has enough assets to service its liabilities.DemocratizationThe tokenization of assets makes them more accessible to retail investors. In the example given earlier, an investor with $10,000 could own a share of a million-dollar property in a prime location and benefit from a rise in its value. Without tokenization, they wouldn’t be able to participate in big-ticket assets that offer good returns.This is particularly true with high net worth individuals who want access to products that are only available for private banking clients. In the past, products with attractive returns profiles were offered exclusively to institutional investors. Even high-net-worth and sophisticated investors would struggle to get access to these assets. EfficiencyAs financial services firms and banks tokenize their asset base, the instant finality that blockchain offers can help them see where they stand with their capital health in real-time. Settlements which used to take two days, referred to as (T+2), can now be instant. This offers both operational and capital efficiencies.Organizations can assess their precise level of capitalization and make quick and profitable decisions to deploy their capital. In times of market crisis, the same capability can help manage capital and reduce risks.With all these purported benefits, what are banks and financial services firms experimenting with tokenization? JPM CoinJPM Coin is JPMorgan’s version of a United States dollar stablecoin. JPM Coin is currently in its prototype stage and is being trialed and tested for money transfer across JPMorgan’s institutional customers. JPM Coin may be launched in other currencies should the dollar prototype prove successful.As described by the bank, institutions that participate in this exercise typically follow a three-step transaction process. Institutions open a deposit account with JPMorgan and deposit USD in it. They receive an equivalent amount of JPM Coins. Institutions can transfer JPM coins globally to other institutions that are JPMorgan clients. This can be just a currency transaction or a security transaction paid in JPM Coins.The recipient institution can redeem JPM Coins for USD.Regulators are yet to approve JPM Coin. Only after comprehensive regulatory approval is obtained can it launch for retail use.The Depository Trust and Clearing Corporation (DTCC)The DTCC is a U.S.-based organization that acts as a centralized clearing and settlement company for different asset classes.In Q4 2021, the DTCC announced a platform to streamline the issuance, transfer and servicing of private market securities through tokenization. Apart from implementing the platform, they also provide a common market infrastructure and standards across private market assets.As discussed in the qualitative aspects of tokenization, asset classes like private equity and venture capital can be quite illiquid and inaccessible. As a result, the secondary market for private securities is quite nascent. Tokenizing these securities and providing market standards could help improve liquidity within these asset classes and also help with efficiencies in settlements. The DTCC has started with the Ethereum blockchain, but the platform can be blockchain agnostic. It plans to offer both public and private blockchain support based on market demand.ADDXADDX is a Singapore-based blockchain startup that is currently pioneering efforts in tokenizing private market securities for which both accredited investors and institutional investors are eligible to participate.Recent: How stable are stablecoins in the FTX crypto market contagion?Assets include venture capital funds, private credit funds, real estate funds, ESG bonds and more. Access to such institutional investment vehicles was limited to a select few in the past. Thanks to fractional ownership through tokenization, accredited investors with a net worth of 2 million Singapore dollars ($1.47 million) can participate in these assets.The end of banks?Some claim that digital assets and Web3 are going to be the end of banks, but it is unrealistic to expect that such financial institutions will be relegated to the past. And yet, while banks are likely to remain strong, banking as we know it today is likely to change for the better.There are several elements of banking that could undergo operating and business model changes over the next couple of decades, largely inspired by digital assets and their underlying design principles.

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House on a hill: Top countries to buy real estate with crypto

The mainstream adoption of cryptocurrencies has brought immense potential to the fintech industry, and some of the capabilities have spilled over into the real estate market. Subsequently, the real estate sector is evolving to accommodate a new crop of investors who prefer making payments using crypto.The trend of investing in real estate with crypto gained momentum in 2021 following a market explosion that saw Bitcoin (BTC) breach the $60,000 mark. Today, numerous jurisdictions have amended their real estate laws to allow property purchases using crypto due to their transformative impact.Alexander Tkachenko, CEO and Founder of the VNX liquidity mining platform, told Cointelegraph that the full capabilities of crypto in real estate remain untapped.“There is still a huge demand for alternative financial and payment instruments around the world,” he said while adding that favorable regulations would go a long way in creating a more enabling environment for both industries:“Development of regulation that will create clear rules for industry players and protect investors.”Scott Scherer, CEO of Owners Unity — a company that allows homeowners to derive passive income from their assets through a decentralized finance (DeFi) model — echoed Tkachenko, telling Cointelegraph, “Investors and governments have come to accept the fact that crypto is here for the long term.” He added that investors are increasingly using cryptocurrencies to transact due to the efficiency of crypto networks as compared to conventional banks.Anastasia Kor, the chief marketing officer and board member of the innovative MetaFi ecosystem, Choise.com, told Cointelegraph that novel blockchain concepts such as real estate tokenization also appeal to global investors:“The projection that tokenization will help to make real estate more liquid is not far from the truth. Tokenization will position the luxury properties that are confined to a region and make them global and accessible to interested buyers and investors around the world.”So, which countries currently support real estate purchases with crypto?ThailandThailand was among the first Asian countries to legalize cryptocurrency use. The nation presentlyallows real estate buyers to make payments using crypto. Investors who wish to use this mode of payment are required to seek the services of local accredited real estate agencies that accept virtual currencies.While the nation had previously banned cryptocurrency trades, the ban was lifted in February 2014. Today the trading of major cryptocurrencies such as Bitcoin, XRP (XRP), Ether (ETH) and Stellar (XLM) is allowed in accordance with rules stipulated by the Thai Securities and Exchange Commission (SEC).It is worth noting that while individuals are allowed to deal in cryptocurrencies, regulated financial institutions operating in the country, including banks, are not. Consequently, buyers looking to buy property in Thailand using crypto are expected to make use of alternative money transfer systems for transaction settlement.United Arab EmiratesThe United Arab Emirates is a top business destination and is emerging as a major crypto hub, with many international crypto organizations setting up shop in the country to capitalize on the budding status. The nation’s cryptocurrency market has grown multi-fold over the past two years and is projected to grow ten-fold over the next couple of years, all conditions remaining constant.For a long time now, the nation has been a paragon of exemplary architectural marvels which have put the country on the map as a leading Middle East/North Africa real estate powerhouse. Some of the nation’s radical structures have been developed through government-led initiatives aimed at stimulating interest in the local property market.Recent: Election tally: Does blockchain beat the ballot box?The convergence of the crypto and real estate sectors has prompted the establishment to allow the synergy of the two industries in an effort to open up the real estate sector to global investors and accelerate the development of its non-oil economy.Presently,crypto users in the UAE can purchase houses, villas, apartments, and buildings using digital currencies through authorized agencies.On the regulatory front, the central bank has yet to designate cryptocurrencies as legal tender, so there are a few limitations such as the lack of crypto service provision by banks. However, crypto transactions among individuals and some regulated real estate agencies are allowed.TurkeyCryptocurrency usage is high in Turkey, with over eight million Turkish citizens owning digital currencies. Adoption is spurred by myriad factors including runaway inflation, which has led to the devaluation of the Turkish lira. The national currency has lost over 50% of its value against the United States dollar over the past two years.With more people using cryptocurrency to transact, real estate agencies in the country are beginning to accept crypto payments.Investors can acquire property in the transcontinental country through regulated real estate agencies. People who invest at least $250,000 in fiat or the equivalent in crypto in property buys also stand to acquire direct citizenship if they so desire through the Turkish golden visa program.PortugalPortugal isone of the most crypto-friendly nations in the European Union. As such, it comes as no surprise that the government has made it possible for investors to buy real estate property using cryptocurrencies. In previous years, buying real estate with crypto was allowed, but the money had to be converted into fiat for a property transfer to be finalized. This changed in April when new pertinent laws were introduced.The latest statutes allow notaries to ratify real estate deals involving crypto. Additionally, digital currencies don’t have to be converted into fiat for property ownership transfers to be valid. The new rule categorizes these types of trades as barter deals. MontenegroMontenegro is one of the most financially liberal nations in the Balkans, and when it comes to crypto, the nation has no special requirements for cryptocurrency deals, including crypto real estate purchases. Notably, the country has, in recent years, been making conscious efforts to become a major crypto center due to the potential macroeconomic benefits.In April,it awarded Ethereum co-founder Vitalik Buterin citizenship as part of a campaign to woo crypto investors into the country.Real estate investors looking to buy property in Montenegro using cryptocurrencies face few problems so long as the deal is sanctioned by a certified notary.GeorgiaGeorgia has a lot to offer to investors and has many laws that are aimed at encouraging foreign investment. Investors who wish to put their money in the country, for example, pay zero taxes on capital gains including on returns from crypto investments. There are also no currency transaction limits. While it is possible to buy real estate using cryptocurrencies in Georgia, it is important to note that cryptocurrencies are unregulated in the country, so the final purchase figures entered in the property register must be in fiat.Property purchases using crypto can only be carried out through select licensed real estate agencies that offer this service.CanadaOver 2.5 million Canadians own crypto, according to Finder’s Crypto Adoption October 2022 report. This dynamic has led to more real estate firms in the country accepting cryptocurrency payments.For investors looking to buy property in Canada using cryptocurrency, authorized real estate companies that accept cryptocurrency payments to help to ensure compliance.Recent: Is DOGE really worth the hype even after Musk’s Twitter buyout?Some property brokers also provide crypto-to-fiat conversion services to smooth out the process, as property sales in the official registry have to be in Canadian dollars.Crypto users who wish to buy property using digital coins should consult tax advisers before beginning the purchase process in order to avoid tax complications, as Canadian regulations take capital gains taxes on cryptocurrencies seriously.Cryptocurrencies have the capacity to open up the real estate market, which is notoriously illiquid. Allowing crypto real estate buys not only diversifies payment avenues but also makes it easier for international investors who dabble in crypto to acquire real estate assets across the world.

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Fractional NFTs and what they mean for investing in real-world assets

While nonfungible tokens (NFTs) are currently suffering in the bowels of a bear market, some are using this time to build and develop new concepts with the technology.Once such new concept is fractional NFTs — an iteration of NFTs that enable multiple investors to own a piece of a single token. These NFTs differ from regular NFTs in that they employ smart contracts to fractionalize the token into a number of parts predetermined by the owner or issuing organization, who then set the minimum price.When applied to real-world assets, these NFTs provide an interesting use case for investors who plan on owning valuable real-world goods.Fractional NFTs spread the cost of asset ownership over a wide range of users, making it possible for a group of investors to own a piece of a larger asset. David Shin, head of global group at Klaytn Foundation — a metaverse-focused blockchain — told Cointelegraph that they “enable more people to reap the benefits of asset ownership while reducing the amount of upfront capital required per user, creating more inclusivity for users who would otherwise have been priced out.” Tokenized ownership is not a new concept. Before the advent of NFTs, tokenization was a way for users to fractionalize real-world assets. However, fractional NFTs provide a new way for investors to divide the cost and transfer ownership of particular assets.More accessible assetsAccessibility is one of the major benefits of NFT fractionalization since it’s more affordable for investors, thus reducing the barrier to entry for owning certain assets. The collective ownership that comes with fractional NFTs allows a group of investors to own assets with traditionally high barriers to entry. For example, owning real estate or art pieces requires investors to meet particular requirements, whether a certain level of net worth or certain legal requirements. Recent: Gym owners aim to bring NFT memberships to wellness clubsBy using fractional NFTs, these hurdles could potentially be bypassed by the average person. Alexei Kulevets, co-founder and CEO of Walken — a move-to-earn blockchain game — told Cointelegraph:“No matter whether you are a builder, a collector, or a consumer, with fractional NFTs, you can co-own any fragment of an art piece or an NFT project you work on. Or, it could be something entirely different, where ownership is verified by an NFT (e.g., real estate). Think of it as an exchange-traded fund, only without intermediaries and management fees. I think it’s a beautiful concept, fully worthy of being called the new era of the internet. The era of co-creating and co-owning.”Joel Dietz, CEO of MetaMetaverse — a metaverse creation platform — echoed the sentiment, telling Cointelegraph, “It makes it easier and, more importantly, accessible. Asset fractionalization isn’t new, but it entered the NFT space not that long ago — one aspect is to make expensive tokens more accessible to different investors with different appetites — it makes it easier to set the price for NFTs and even unlocks monetization opportunities via DeFi platforms.”This accessibility could also bring additional investors into the blockchain space, Asif Kamal, founder of Web3 fine art investing platform Artfi, told Cointelegraph. “Fractional ownership is the way forward to enhance the size of the market massively and helps adoption and accessibility to a much wider audience to invest in the asset class more simply and in a much easier way,” he said. What are the use cases?Real estate is a popular use case for fractional NFTs, and the underlying blockchain technology provides an additional layer of transparency. For example, users can view previous buyers and investment activity via the blockchain explorer.Dietz said, “The usual case that everyone’s quite keen on right now regarding Fractional NFTs is the potential for an individual to transfer ownership of real estate (an IRL asset) — storing the information on the blockchain and it transferring seamlessly and immutably.” “Owning a fraction of an NFT that represents a real-world asset, investors can cash out of their crypto holdings without ever leaving the decentralized finance ecosystem entirely. Now, the hype focuses on real estate, but these fractionalized high-involvement goods could be very interesting in the manner of watches, paintings, boats, planes and more,” he continued.Play-to-earn gaming is another use case for fractional NFTs, enabling multiple players to purchase expensive in-game assets collectively. In-game NFTs can become very expensive due to demand, and enabling players to split the cost can make it easier for them to use those same assets. For example, the P2E NFT game Axie Infinity is currently testing the idea of fractionalized NFTs by selling fractions of the rarest Axie NFTs.Barriers to adoptionWhile fractional NFTs may make it easier for people to invest in certain assets, market conditions could potentially interfere with their adoption.Dietz said, “Given the market right now, though, we’re either going to see more creators and marketplaces utilizing these fractional NFTs and gain popularity through those mediums, but if things don’t change, I doubt fractional NFTs will evolve much further, for now at least. Who knows what the market will look like in the next three months, let alone three years?”Regulators and lawmakers could also slow down adoption. Since fractional NFTs let people own a fraction of an asset, they could be classed as stocks by the United States Securities and Exchange Commission (SEC). Yaroslav Shakula, CEO at YARD Hub — a Web3 venture studio — told Cointelegraph, “As an idea, fractional NFTs sound promising, but on a practical level owning them implies certain difficulties, with regulation being the most significant one. Fractional NFTs might be likened to stocks as they also confirm ownership of a share of an asset (NFT, in this case).”Shakula also says that current legislation is not clear on the legal status of fractional NFTs being used to own a share of physical assets. “In many cases, this type of NFT ownership is not clearly outlined in the legislation, and projects and users have a hard time figuring out how SEC or other authorities will deal with this ownership. So for now, fractional ownership is only valid in certain territories where relevant legislation is in place.”Shin similarly stated, “The success of fractional NFTs in allowing investors to reap benefits from real-world assets also depends on whether regulations operate in tandem. For example, dissonance will occur if fractional NFTs and traditional title deeds pose competing legal claims to real-world assets.”Due to the uncertainty behind the taxation and the legal status behind fractional NFTs, temporary ownership could be a safer bet for the short term. Recent: Could Bitcoin have launched in the 1990s — Or was it waiting for Satoshi?Shakula expanded on this, saying, “At the current point, a much more viable and doable approach is to transfer timeshare/temporary ownership through NFTs. Examples of use cases are the rights to rent a car or stay in a hotel. This way, NFT owners don’t have to decide who pays taxes or who’s handling damage costs. However, until these issues are solved, fractional NFTs look better on paper rather than have common use cases.”Regulatory concerns aside, some believe that fractional NFTs represent the values of a decentralized internet. Kulevets sees fractional NFTs as a catalyst for Web3 adoption, stating: “If you look at it closely, fractional NFTs represent the very essence of the Web3 concept. We call Web3 the next era of the internet for a reason: decentralization, security, ownership and creation without intermediaries are among its fundamentals. Everyone who shares the vision, skills and expertise can co-create and co-own the new reality and be a part of many projects.”

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How does tokenization help transform illiquid real estate ownership into a liquid one?

A few years back, the concept of owning and trading fragments of physical real estate might have seemed too far-fetched for many. But with the advent of blockchain technology, real estate tokenization is providing new opportunities for fractional ownership and investment.Blockchain technology’s long-overdue debut in real estate has made real-world asset tokenization a heavily-discussed topic in the industry. After all, tokenization ticks all those boxes that are often required to ruffle many a feather in a traditional industry — it’s digital, global, complex and future-oriented.But how exactly does real estate tokenization work, and how can it help transform illiquid real estate ownership into a liquid one? Let’s take a look.What does tokenization mean?Tokenization is the process of taking traditional assets (like real estate) and dividing them into digital tokens that can be traded on a blockchain. This makes it easier for people to invest in and trade such assets and helps create a more liquid market.In essence, tokenization is the process of converting asset ownership rights into digital tokens on a blockchain and can be used to tokenize several things, including:Tangible assets like precious metals, real estate, art and more;Intangible assets such as intellectual property rights; andRegulated financial instruments like bonds and equities.In the context of real estate, tokenization refers to the fractionalization (dividing the property into smaller parts) of property through tokens stored on a blockchain. This way, investors can directly own a piece of a token’s underlying real-world asset without having to purchase or manage the entire property.Tokenization can help make investing in real estate more accessible and liquid. Rather than purchasing an entire property, investors can now buy tokens representing a portion of the property. This makes it easier for people to invest and also helps create a more liquid market.The benefits of tokenizationTokenization has the potential to revolutionize the way we invest and trade assets by making it easier and more accessible for everyone. For example, tokenization can help with:LiquidityThe conversion of illiquid real estate assets into “tokens” implies that a direct investment in a property is treated as an indirect one. This allows issuers to secure higher liquidity, as the number of buyers is not limited to those who can afford the entire asset. In addition, tokenization also allows for fractional ownership, opening up investment opportunities to a larger pool of potential investors.TransparencyThe use of blockchain technology brings a new level of transparency to the real estate industry. Since data is stored on a decentralized ledger, all transactions are visible to everyone on the network. Completed transactions can no longer be changed, manipulated or canceled, in turn creating a more secure and trustworthy system. This increased transparency helps to build trust and confidence in the market, and reduce fraudulent activity.AutomationThe use of smart contracts can help to automate several processes involved in real estate transactions, such as title transfers, document verification, dividend payments and compliance. This can help make the process more efficient and streamlined, saving time and money for all parties involved.AccessibilityTokenization removes current limitations on the fractionalization of real-world assets, making it possible for a wider investor base to participate. Barriers to entry are removed since assets once available only to a select and privileged few can now be accessed by a larger number of people. This increased accessibility helps to democratize the market and level the playing field.Reducing geographic constraintsThe global nature of public blockchains facilitates the tokenization of assets, making them available to investors anywhere in the world. This helps break down geographic boundaries and connect global markets. For example, a real estate property in New York can now be tokenized and made available to investors in Japan, and vice versa, provided the participating blockchain complies with relevant Know Your Client and Anti-Money Laundering laws.How do you tokenize real estate assets?There are three steps involved in tokenizing real estate assets:Step 1: Deal structuringThis step involves deciding on the type of asset to be tokenized. Typically, property owners either:Form a subsidiary created by a parent company (to isolate financial risk) called a special purpose vehicle, or;Become part of a real estate fund, or funds that already exist and are focused on investing in real estate securitiesDuring this step, the rights of shareholders to dividends, partial governance and equity shares are also determined.Step 2: Choosing a platformThe next step is choosing the tokenization platform for creating the tokens. Some examples of popular platforms for tokenizing real estate assets include RealT, Harbor and Slice. The property owners’ chosen platform then uses blockchain technology to create smart contracts, which are then used to manage and automate the sale, transfer and dividend payments of the tokens. Tokens can run on different types of blockchains, such as:Public blockchains: These networks are decentralized and open-source, meaning anyone can join and participate. The best-known examples of public blockchains include Ethereum and Bitcoin.Private blockchains: These networks are centralized and permissioned, meaning only those with an invitation from the network administrator can join. Private blockchains are often used by businesses and organizations for internal record-keeping and efficient management.Hybrid blockchains: These networks are a combination of both public and private blockchains, giving users the benefits of both worlds.Step 3: Token issuance and distributionTokens are created, issued and distributed during a security token offering (STO). Much like stocks issued on the stock market during an initial public offering (IPO), security tokens are offered to investors in exchange for funding. Once the STO is complete, these security tokens are listed on a digital asset exchange, where they can be bought and sold by investors.How can the real estate market benefit from tokenization?Tokenization provides new liquidity to the real estate market by making it easier for people to trade and invest in properties. Through tokenization, investors can now buy and sell fractional ownership in a property, which was not possible before. This has created a more liquid market for real estate and is helping transform how people invest in and own property.The global real estate market is currently valued at $280 trillion. However, despite being one of the largest markets worldwide, traditional real estate remains largely illiquid and nontransparent. Critics chalk it up to many factors, including high investment costs, long investment horizons, expensive intermediaries and inefficient settlement cycles.Tokenization is helping to solve these problems by bridging the gaps between traditional real estate and blockchain technology. According to a recent study by Moore Global, if 0.5% of the total global property market were to be tokenized within the next five years, the real estate market could grow exponentially to $1.4 trillion. Simply put, even a small portion of traditional real estate could significantly improve market liquidity through tokenization.How to gain liquidity without selling your real estate assets?Traditional principles of real estate dictate that gaining liquidity can only mean one thing: selling one’s assets. However, with tokenization, this is no longer the case. Now, property owners can unlock their property’s liquidity without selling it.Blockchain technology opens up a slew of opportunities by allowing assets to be broken down into smaller pieces, representing ownership, fostering the democratization of investment in formerly illiquid assets and enhancing market fairness. This is true not only for real estate assets, but also for company shares, valuable art collections and more.For example, let’s say a property owner’s $1 million rental property is currently generating $10,000 per month in rental income. If they were to tokenize the property, they could issue 10,000 tokens at $100 each. These tokens could then be sold on a digital asset exchange to investors, who would then be able to trade the tokens and receive rental income from the property.The property owner would still retain ownership of the property and continue to receive rental income from it. However, they would also have the needed liquidity without selling their assets.The potential risks associated with tokenization of real estate investingWhen it comes to the tokenization of real estate, there are a few key risks that investors should be aware of:Regulation: Real estate tokenization is still a relatively new phenomenon, currently unregulated in most jurisdictions. This means there is a risk that laws and regulations could change, adversely affecting the tokenized real estate market.Volatility: The prices of digital assets can be highly volatile, which means that investors could lose a substantial amount of money if they invest in a property that decreases in value.Fraud: As with any investment, there is always a risk of fraud. When investing in tokenized real estate, thorough research and due diligence are important to ensure the project is legitimate. Despite these risks, the potential rewards of investing in tokenized real estate outweigh the risks for many investors. The key is to be aware of the risks and to conduct extensive research before investing.Purchase a licence for this article. Powered by SharpShark.

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Ripple's plan to tokenize Colombian land stalls amid new administration

A partnership between the Colombian government and Ripple Labs to put land titles on the blockchain appears to have stalled following the project being “deprioritized” by the new administration.The project was initially announced by the outgoing government’s Ministry of Information Technology and Communications just two weeks before the newly elected president Gustavo Petro was sworn into office. According to an Aug. 30 report from Forbes, the interim director of the National Lands Agency Juan Manuel Noruega Martínez said the project is not part of the agency’s strategic priorities for 2022, stating: “This isn’t one of the projects defined in the PETI [Strategic Plan for Information Technologies]”The shift comes as something of a surprise considering Colombia’s new president is thought to be friendly toward cryptocurrencies, and has previously tweeted his support for them.¿Y que tal que el litoral pacífico aprovechara las caídas de alta pendiente de los rios de la cordillera occidental para producir toda la energía del litoral y reemplazar cocaína con la energía para las criptomonedas?La moneda virtual es pura información y por tanto energía. https://t.co/65xdN2whuO— Gustavo Petro (@petrogustavo) October 2, 2021The partnership, which included Colombia’s National Land Agency, Ripple, and software development firm Peersyst Technology aimed to tokenize real estate on the blockchain to improve property search processes, create transparent and cheaper property title management, and more efficient processing of financing and payments.Within the peace agreement in 2016 that officially marked the end of the Colombian conflict was a directive to formalize the property titles for small and medium rural properties. According to a 2013 report, only one of every two small farmers has formal rights to their land.This lack of formality deters farmers from investing in lands and prevents land from being used as collateral when seeking credit. A blockchain ledger for real estate aimed to solve this by providing landowners with security and an incentive to invest in their property.Related: Real estate leads securitized blockchain assets in 2022 — ReportThe registry was launched on Jul. 1 as tweeted by Peersyst Technology, after having been in development for a year.On Jul. 30, Peersyst tweeted that the first deed had been added to the ledger, with the land certificate looking like any other except for the QR code incorporated into it verifying the certificate on the blockchain. The QR code can be used by anyone to find the property deed’s location on the XRP blockchain.There have been no further updates relating to the joint project. Cointelegraph has contacted Ripple Labs seeking comment on any progress but has not heard an immediate response. 

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Six reasons why blockchain makes sense for commercial real estate: Deloitte

Solutions built around blockchain technology offer several upfront benefits, including a censorship-resistant, irreversible distributed ledger. Deloitte’s study revealed blockchain’s position as a perfect fit for real estate use cases around leasing and selling.Blockchain innovations often outdo traditional systems by not only digitizing information but also introducing a near real-time trustless environment, among other features. Big Four accounting firm Deloitte uncovered six opportunities for blockchain to disrupt the commercial real estate (CRE) industry.The above infographic highlights six key pain points for CRE owners when leasing and selling their properties and maintaining complex transaction data. With this in the backdrop, Deloitte noted six opportunities for blockchain to serve the industry, which include improving processes around searching for properties and allowing people to make better decisions around leasing and purchasing. Due to paperless processes, Deloitte envisions blockchain expediting property and payment evaluations and better-streamlining cash flow management. In addition, the technology’s inherent qualities also offer cheaper means of managing property ownership history while enabling efficient processing of financing and payments.The study reveals that blockchain technology is well-positioned to take over more than 50% of the leasing and sale process, excluding steps requiring physical intervention such as property inspection and loan negotiations. Deloitte noted:“Blockchain seems to be most applicable to dynamically configurable or co-sharing spaces, which have a relatively higher number of tenants and shorter duration leases.”While Deloitte’s report reaffirms blockchain’s potential to drive transparency, efficiency and cost savings for commercial real estate owners, companies and CRE owners are advised to follow a three-step approach — educate, collaborate or create, facilitate — in determining the best way ahead for blockchain implementation.Related: Nonfungible tokens don’t live on the blockchain, experts sayWhile nonfungible tokens (NFTs) have been advertised as blockchain-based technologies, experts contradict the notion.Speaking to Cointelegraph, Jonathan Victor, the Web3 storage lead at Protocol Labs, revealed that main chains are very limited in size, which in turn makes storing data on the blockchain to be expensive. As a result, NFT ecosystems often opt for off-chain storage solutions. Alex Salnikov, the co-founder of Rarible, confirmed the above claim as he told Cointelegraph:“It is important to understand that the NFT living in a user’s wallet only points to the file it represents — the actual file itself, also known as an NFT’s metadata, is typically stored elsewhere.”Despite the revelation, both experts noted that storage for NFTs can still be considered decentralized.

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In the Economy 3.0, metaverses will create jobs for millions

Job creation is traditionally engineered by politicians desperate to get the country back to work and to be seen as stimulating the economy. From the job creation programs of the Great Depression to United States President Barack Obama’s American Jobs Act, employment schemes have a long, checkered history. Today, fostering meaningful employment for the masses remains as popular as ever with policymakers, and yet, the next great job creation scheme is unlikely to be issued as a top-down order.Rather, it will emanate from a realm that most politicians have little dominion over and few powers to control: the Metaverse. That virtual world running parallel to our physical one is not constrained by national borders, nor is it the fiefdom of social media companies cynically commandeering its name.The Metaverse comprises an interconnected series of virtual worlds in which humankind can recreate, interact and transact. As avatars, its users are free to flit between games, meeting spaces and markets, reenacting many of the tasks once constrained to meatspace.The greatest promise the Metaverse holds, however, is not the ability for humans to don lurid skins and twerk as one in virtual concert halls. Rather, it is for these same people to obtain meaningful employment in worlds, realms and spaces across the Metaverse that will form the beating heart of Web3.Related: Demystifying the business imperatives of the MetaverseMaking bank in the MetaverseGiven the amorphous nature of the Metaverse, it can be hard to envisage what a virtual world in which millions clock in and out to earn their crust might resemble. As it happens, though, there is already work being performed in fledgling metaverses the (virtual) world over.In the play-to-earn — or “GameFi” — sector, virtual pets roam freely, with their human owners petting, dressing and training them. But it’s not just about recreation: With their respective metaverses, players can collect tokens and other in-game assets that spawn and trade them for real money.Related: Crypto gaming and the monkey run: How we should build the future of GameFiWorkers from developing countries such as the Philippines earn around $30 per day for performing these tasks on behalf of owners, using the creatures to collect tokens. Owners, in turn, earn money from lending out their stable of virtual pets — without needing to concern themselves with the drudgery of collecting tokens all day.It’s a simple economy in which all participants benefit commensurate with their interests and financial expectations. How might this earning model work for Metaverse participants higher up the chain?Well, for celebrities and creators, specialist platforms enable virtual experiences to be entertained in the Metaverse. Fans can pay to interact with their favorite creators within a virtual world, whether they’re playing golf with a YouTube influencer or learning new skills through a one-on-one with a thought leader. It’s yet another example of the vast potential the Metaverse holds.Meta-work for the massesNot all of the work centered around the Metaverse will occur within it. Much of it will involve connecting the nuts and bolts that keep it turning — coders, designers, testers and developers. For the millions currently employed in offices and on shop floors around the globe, however, the ascendancy of the Metaverse will see their work transition to a virtual world not so dissimilar to that to which they are accustomed.Real estate: Virtual land is already selling for millions of dollars in metaverse worlds such as The Sandbox and Decentraland. The battle for desirable virtual real estate is fierce — flipping pixels for profit is a specialist role that will create a slew of jobs for those with an eye for a prime plot. At the same time, real-world property will also transition to the metaverse, enabling prospective buyers to “walk around” a beachfront condo on the other side of the world or ogle one that is still in spec. In a virtual world where anything is possible, “try before you buy” is the norm.Related: The Metaverse is booming, bringing revolution to real estateFashion: From Louis Vuitton to Nike and Gucci, fashion brands are clamoring to catch a slice of the Metaverse action, and it’s easy to see why. A world in which millions mingle while represented as avatars provides endless opportunities for sartorial splendor. No longer are people constrained by gender, body type and, indeed, imagination when dressing. In the Metaverse, you can assume any identity you want, with the accessories to match. Models will strut their stuff on virtual catwalks, and fashionistas will pay top dollar to dress their avatars in limited-edition threads from the hippest brands.Music: As much a boon to independent artists as it is to major labels, the Metaverse showed its worth during global lockdowns, with over 27 million fans tuning in to Travis Scott’s Fortnite concert in 2020. Enterprising artists have already experimented with Web3 technology such as nonfungible tokens (NFTs), using them to release limited-edition and exclusive albums and foster intimate experiences. The emergence of a fully immersive Metaverse will elevate this capability to a new level, providing endless ways to monetize and engage with fans.Related: The Metaverse will change the live music experience, but will it be decentralized?Movies: Technology is a double-edged sword, creating new opportunities while destroying others. Actors who’ve found their likeness being assumed by artificial intelligence and their intellectual property infringed know this only too well. But the very same tech that threatens their livelihoods can be utilized to enrich them within the Metaverse. Just imagine the capabilities presented by a world in which voice, television and movie actors can use their digitized doppelgangers to interact with fans and sell experiences that incorporate one-on-one time — without the celeb needing to leave the comfort of their Malibu mansion.As the Metaverse materializes and its promise becomes a reality, the employment opportunities it offers will lift everyone from the mechanical turk, toiling for $2 per hour, to the rich and famous. Already, there are Metaverse stores you can visit with your avatar to order everything from fast food to medical marijuana — and then have it delivered to your real-world front door. In the near future, many of those earning from the Metaverse — such as delivery drivers and food producers — may have no inkling that they owe their livelihood to a world they have yet to discover.Not all of us will play and interact in the Metaverse, but just like the internet itself, we will be more prosperous because of its existence. The sooner the Metaverse becomes a mass reality, the better we will all be.This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.Johnny Lyu is the CEO of KuCoin, one of the largest cryptocurrency exchanges, which was launched in 2017. Before joining KuCoin, he had accumulated abundant experience in the e-commerce, auto and luxury industries.

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