Alexei Dulub is the founder and CEO of PixelPlex, an R&D company powering meaningful digital transformation across industries.
Though tokenization isn’t a novel concept, recent years have witnessed a resurgent interest in it. As businesses increasingly align with the Web3 paradigm, entities ranging from financial institutions to asset managers are exploring tokenization’s potential.
In essence, tokenization involves creating a digital representation of a conventional asset using blockchain. It is projected that by 2030, tokenized digital securities will reach almost $4 trillion.
Previously, tokenization faced setbacks due to technological scalability constraints, the lack of a regulatory framework, market volatility and complexity for average users. However, as blockchain technology evolves, many of these issues are gradually being fixed.
Currently, we observe progress in cash tokenization projects. Numerous regions—including the European Union, Japan, Singapore and the United Kingdom—have introduced regulatory guidelines for digital assets. There’s also an enhanced understanding of the technology among market participants.
While tokenization’s applicability spans diverse assets and sectors, I’ve found real estate tokenization especially promising, having overseen numerous asset tokenization projects at my firm. In 2022, the market size for real estate tokenization was $2.7 billion, and it’s projected to surge to $18.2 billion by 2032.
Business Benefits Of Real Estate Tokenization
The real estate sector, traditionally a magnet for investors, has to deal with some notable challenges, such as low accessibility and liquidity, security issues, and the lack of transparency. Tokenization offers solutions to these challenges.
Turns Illiquid Assets Into Liquid Ones
Historically, realizing the value of real estate assets necessitated selling the entire property. However, tokenization allows for fractional ownership, which means that an individual can own, for instance, 10% of a property. By breaking the asset down into smaller, more affordable pieces, it’s easier to find buyers and sellers.
Allows For Easier Market Accessibility
Tokenization democratizes real estate investments. By dividing properties into tokens, it reduces the capital threshold, extending investment opportunities to a wider audience.
Removes Intermediaries
Traditional real estate transactions involve numerous intermediaries (brokers, agents, legal representatives), which each adds to the cost and complexity. Tokenization eliminates these middlemen and provides more cost-efficient procedures.
Ensures Transparency And Security
Blockchain guarantees transparency and equal access to asset information with its immutable ledger. It’s also difficult to tamper with the data stored on the blockchain, meaning that investors can be sure that ownership records and transaction data remain trustworthy.
Pro Tips On Successful Implementation Of Real Estate Tokenization Projects
Crafting a real estate tokenization solution, just like any other project, requires formulating a clear vision and strategy, selecting the right tech stack and constructing a robust solution architecture.
You should also choose between a ready platform and developing your own. In my opinion, while ready-made platforms for real estate tokenization provide a convenient start, they often fall short in terms of customization and scalability. Though developing your own solution requires more initial effort, it ensures flexibility, allowing you to tailor it to your specific needs.
However, in the realm of tokenization, there are certain distinct factors that drive a project’s success. Based on our experience gained from tokenization projects, I would say that these factors are robust tokenomics, carefully planned token sale rounds and impactful marketing materials.
By focusing on these elements, you can set the stage for a successful real estate tokenization project.
Robust Tokenomics As The Key To Project Success
To invest in the project, individuals must clearly understand the value of the token. A well-structured token economy fosters transparency and investor trust, which is crucial since real estate investments require significant capital.
To create a successful project, you need to define the following.
• Token use cases – Determine the utility of your tokens and articulate it to investors.
• Token distribution – Plan how your tokens will be distributed. This includes allocations for team members, advisors and the public. Make sure it’s equitable to maintain project credibility.
• Staking rewards – They will incentivize token holders to keep their tokens and stabilize their value.
• Vesting and cliff periods – A vesting period refers to the process where an individual gains access to their tokens incrementally over time, while the cliff period is a duration during which no tokens are accessible. Implementing vesting and cliff periods helps you ensure that project stakeholders, advisors and team members remain committed to the project for the long term.
• Token burning – Implement a mechanism to periodically burn a predetermined number of tokens. This helps maintain a balanced token economy by aligning the token supply with market demand.
Carefully Planned Token Sale Rounds To Secure Initial Capital
Conducting several funding rounds enables projects to gather the essential starting capital for their operations. As these rounds progress, the token’s price should begin at a lower rate and increase with each phase, benefiting early investors.
Typically, the project should include three types of sale rounds.
• Private sale – Tokens are usually priced lower than in public sales or presales. This reduced price acknowledges the investor’s early commitment to the project.
• Pre-sale – The token price is usually set lower than in the public sale, rewarding participants with a discount for their early engagement.
• Public sale – Accessible for a wider community interested in the projects; this is the final sale round, so the tokens should be unlocked simultaneously.
Impactful Marketing Strategy For Better Community Engagement
Crafting a successful tokenization project requires more than just a technical foundation; it necessitates clear communication. You need to regularly engage with your investors and community through marketing materials. These include:
• Comprehensive whitepaper. This cornerstone document will explain your project specifics, including goals, challenges it addresses, technical details and a roadmap.
• Interactive visual materials. These include infographics, presentations, and other materials that promote your idea.
• Community channels. Regularly update potential investors and the broader community on project advancements. Platforms such as Medium, Discord and Telegram will help you ensure open communication.
Overall, I believe that real estate tokenization has great potential for both creators and investors. With meticulous preparation and effective communication, these ventures can not only achieve their objectives but also deliver outstanding results to stakeholders.
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