Blockchain technology is transforming the way various sectors work. Its use in real estate is realized in raising capital, fund allocation and in giving easier access of this sector to investors. In blockchain world, the real estate assets are converted into tokens. This process is called tokenization. Advantage of tokens is that it is secured by the impregnability of blockchain records. Secondly, they will be more readily tradeable through an alternate trading system.
Process of creating a real estate token
Tokenization of real estate means securitizing a real estate asset into tradeable parts. The sum total of each token is equal to the total value of the asset. To create a token of real world asset, two ways are followed:
- The asset is divided into shares where each share represents one sq.ft.
- In other method, the asset is divided into square inches.
A real estate token is nothing but an Ethereum-standard token that represents a part of the real estate created using any of these two ways mentioned above.
What is STO and how it differs from
Just like an ICO or initial coin offer, securitized real asset is sold through security token offering (STO). However, it is absolutely different from an ICO. In ICO, people are investing to support a project or an initiative of a company. ICO does not grant investor any ownership in the company. The appreciation in the value of investment is dependent on the way project fares. But in STO, the token bought represents the size of ownership of an asset. The buyer enjoys appreciation if the property price increases in the future.
Various assets based on tokenization
Digital assets available on Ethereum blockchain are 108 Token, aasio, Ankorus, Aqwire, Atlant. Reading more about these assets can help people understand how tokenization works and is implemented.
