The tokenization of assets as a safe haven investment (2/3)

3. But where are we now in 2020?

The need for investment today and after COVD has not disappeared, in other words, families and companies continue to generate value, savings and benefits. What's more, those investments or deposits are in a process of optimization and the search for new and better returns. So, why not address the Friction point of real estate investments:

• High capital: small investors cannot access investment.
• The obligation to maintain the investment in the long term.
• Taxes and other expenses derived from the purchase and sale.
• The waiting time between buying and selling. (very low liquidity).

But at the same time, keep the Opportunity points of investment in real estate assets.

• The guarantee of a physical asset.
• The reduced volatility in the event of a fall in the price of the real estate market.
• Business opportunities in consolidated urban land.

4. So.., how to unite supply and demand?

Since the introduction of blockchain as an element of social change and the transfer of digital value, it has been called the Internet of value, many possibilities have been opened up and the entry conditions for new players have been flattened and reduced. Blockchain is allowing:

• Reduce commissions for buying and selling digital assets
• Transparency and trust between the parties.
• Transaction speed.
• Entry to micro investments.

But in this post, I don't want to dwell on generic terms or on global improvement points, but rather to focus on what tokenization involves and the impact on the individual.

Tokenization is the digitization or virtualization of the value of a physical asset, based on the fact that the asset has a real value and that someone would always be willing to pay for themselves.

This part is perhaps the most subtle, but the most important, Value for a third party, for example, Dalí probably didn't give value to them in his first sketches, but a third certainly did and would pay for them. And today, much more (evolution of the asset price).

5. Tokenizing the real value

What can you tokenize? Anything that has value to a third party, and at this point, tokenizing something as physical as a home or property, is perhaps the easiest transition to make between the crypto world and the traditional world. Because it is something tangible, in which a large percentage of people have accepted and accept it as a safe investment.

However, there are still many limitations at the legal level on the transfer of a non-digital value to 100% digital, especially if we fall into the classification of utilities, securities, etc. Since even if technology is several years ahead of regulation, it must take more conservative forms and meet minimum requirements to be able to be disseminated and marketed.

The first valid approach is the tokenization of the rights to the real estate asset, in such a way that, since physical transmission through the land registry is not yet possible, if everything that is digitized represents that asset: in rights, income or value it provides.

Thus, real estate would be represented by a specific number of tokens, which represent the real right to it: right to rent, right to transfer, etc. Right now this type of tokenization cannot be elevated to a public decree, since they request that the right be real and existing.

But if we look at the value of a real estate asset for an investor, it focuses on two parameters: capital gain of the value in case of sale and Rent for rent. The rest of the features are irrelevant to him.

In such a way, the token, in simple words, is an automated contract, where the issuer of the tokens undertakes to pay the capital gains generated by the property or/and the rental income. Obviously, this contract stipulates that the property is for assignment or exclusive use for this purpose.

This whole process has an unprecedented speed, if you work on crypto directly. But it doesn't exclude doing the conversion process to Fiat. So every investor, whether crypto or not, is likely to enter.

In the next post, I will go into more detail about the possibilities and opportunities of this market, which, while being very traditional, must adapt to the new requirements of investors and users.

We will talk about the barriers to entry to foreign investment within a country, the need to access new small investors, the liquidity of a sector that accumulates a lot of value,... etc.

Marcos Carrera