Despite being such a massive industry (valued at $3.8 trillion in 2022), real estate has lagged in automation and liquidity. Still, some exciting developments are taking shape.
Blockchain company Ripple Labs recently announced an innovative pilot program combining “tokenization and finance lending protocols” — to enable users to tokenize real estate assets and utilize them as collateral for loans.
Tokenization is the process of representing an asset or a right on a blockchain as a digital token. This can be done for both tangible and intangible assets, such as real estate, art, or intellectual property.
Digital tokens can be thought of as real estate shares. When a token is sold, any investor who purchases it gets fractional ownership of the property, which they can use as collateral for loans.
Ripple’s pilot program comes when Wall Street is pouring billions into the private lending space to reduce the cost of capital.
Silicon Valley is also going big with blockchain technology that connects the source of capital to the real estate borrower for a more streamlined lending process that cuts out middlemen.
These two trends create more transparent lending practices, easier-to-understand-private lending, and an excellent environment for healthy lending.
Tokenization is not well embraced in the commercial lending space, but it “democratizes lending,” giving a piece of action to big and small players.
If real estate tokenization overcomes regulatory challenges and security concerns over tokenized assets, we could see massive improvements in liquidity, market reach, and transactional speed as humanity enters a new era of finance.
On the date of publication, Andy Mukolo did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
