Real Estate Tokenization: Blockchain Technology Driving Industry Transformation

The global real estate market is massive, expected to reach $634.90 trillion by 2024, with a projected average annual compound growth rate of 2.77% over the next five years. However, the traditional real estate industry faces numerous challenges, such as lengthy processes, over-reliance on intermediaries, and fraud risks.

The emergence of blockchain technology has brought new possibilities for solving these problems. Through innovative technologies such as distributed ledgers, smart contracts, and dynamic NFTs, blockchain is expected to simplify the real estate transaction process, enhance security, and create more convenient opportunities for global investors.

In the future, with the help of Blockchain and artificial intelligence technology, the real estate transaction process may be significantly shortened, potentially completed within a day. These innovations will fundamentally change the industry landscape through automated processes, enhanced transparency, and efficiency. The trends of financialization and disintermediation will bring the liquidity of real estate assets closer to that of the stock market.

Pain Points of the Traditional Real Estate Industry

1. Finding suitable buyers and sellers takes a long time, often requiring weeks or months. Buyers and sellers find it difficult to obtain accurate and complete information, relying too much on intermediaries, resulting in information asymmetry.

2. The intermediary process is cumbersome, involving multiple stakeholders, such as buyers and sellers, intermediaries, banks, lawyers, government agencies, etc. Each stage requires a large amount of paperwork and verification procedures, leading to a complicated and time-consuming process.

3. The operational workload is large, and real assets lack programmability, requiring a significant amount of operational work to ensure the execution of contracts, transactions, payments, etc.

4. High security risks, susceptible to fraud, data breaches, and other issues. According to FBI data, real estate-related complaints resulted in losses of $145 million in 2023, surpassing various other types of crime.

The Combination of Blockchain Technology and Real Estate

A real estate tokenization platform has launched an innovative product that allows users to mint digital addresses and contracts for real-world properties, with the goal of putting 1 million home addresses on the blockchain by 2025. Its features include AI-generated landmark NFT minting and a staking mechanism, aimed at creating a gamified experience that makes home ownership more accessible, secure, and interactive.

Dynamic NFT Technology

Dynamic NFTs are a way of tokenization for real estate. Owning an NFT is equivalent to owning the property, and transferring the NFT means a change in property ownership. NFTs can automatically update key data such as home improvements, renovations, and past sales information. Over time, dynamic NFTs become more valuable and can store images or videos of the property, showcasing its condition at different periods.

The platform uses a three-tier dynamic NFT:

1. Basic address minting, proving asset ownership
2. Upload the property ownership certificate to ensure that the contract is not tampered with.
3. Accelerate the buying and selling process, using NFTs as collateral to achieve 100% RWA

Simple Real Estate NFT

Represent a single property as an NFT; owning the NFT means owning the property. Transferring the NFT represents a change in property ownership. The NFT contains key data such as past sales records, address, etc. In theory, selling a house can be as simple as listing it on the NFT market, and the buyer can complete the purchase with just a few clicks.

Further tokenization: Splitting real estate assets

Use alternative Token (FT) to achieve partial ownership of real estate. Each Token represents a specific percentage of ownership, and owning all Tokens is equivalent to owning the entire property. This allows investors to build a customized real estate portfolio and enables potential buyers to gradually achieve their ideal property goals.

tokenization of real estate cash flows and asset baskets

Property owners can separate ownership from cash flow ownership. Cash flow rights (, such as monthly rental income ), can be sold in whole during a specific period. A basket of real estate assets can also be created, with tokens collectively representing all properties and cash flow, automatically distributed to holders.

This model enhances the verifiability of collateral, enables automatic payments, and increases the transparency of asset health.

Case: A Platform Collaborates with Oracle Network

In April 2024, a real estate tokenization platform integrated the automated services of a certain oracle network on the Base network for distributing staking rewards. As of September 14, the platform has had 276,284 addresses minted.

From a technical background, the smart contract function needs to be triggered externally for execution. The automated market maker (AMM) is usually initiated by the user side to wake up the contract, while other contracts use a "keeper" to monitor predefined conditions and trigger.

The automated services of this oracle network, such as decentralized trading bots, allow smart contracts to run automatically. Developers can submit custom tasks, detailing contract functions and triggering conditions. This service monitors conditions through secure off-chain calculations, triggering function execution when met.

After integration, the platform achieves highly reliable, high-performance, and decentralized automation. Even during periods of network congestion, transactions can be quickly recognized and confirmed. This helps save costs, accelerate scaling, and unlock new use cases.

Currently, the oracle network securely supports over $16 trillion in on-chain transaction value.

Challenges and Future Trends of Tokenization in Real Estate

Challenge

1. Regulatory Compliance: Must comply with the laws and regulations of different jurisdictions.
2. Technical Implementation: Involves issues such as liquidity, market infrastructure, and data security.
3. User Education: Strengthening community participation is necessary to enhance awareness of Blockchain technology.

Future Trends

1. Diversification of asset classes: expand to commercial real estate, industrial real estate, real estate financial assets, etc.
2. Scalability enhancement: Integrating DeFi elements to create more liquidity and space for financial innovation
3. Expansion of asset scope: may include commodities, artworks, intellectual property, etc.

In the future, the speed of real estate transactions is expected to significantly increase, potentially being completed within a day. Asset management will accelerate its digital transformation. Financialization and disintermediation will bring the liquidity of real estate assets closer to that of the stock market, driving the industry into a new phase.