Data entry was revolutionized first with the type-writer. Imagine the quantum leap that a fleet of typewriters could have on corporate communication: speed, efficiency, and consistency. Digital record keeping faced even greater push-back but offered an even greater hyper-jump in file capacity, indexing, and accessibility. Somehow, the real estate industry has never moved past 1980’s style progress. Cloud computing hardly constitutes progress when the entire system is still so bureaucratically stifling to participants in the marketplace. The transfer of property ownership still takes 30 days in seemless, cash transactions because brokers, escrow companies, title agencies, inspectors and every red-tape distributor in between wants to inspect ink-signatures and read mountains of paperwork.
Enter Etherium. Smart contracts are changing the way contracts are upheld and assets move for those fields progressive enough to adopt the emerging innovation. It is not a challenging mental exercise to consider a piece of property changing hands without 4 regulatory bodies physically scanning paperwork to (unreliably) verify an asset has changed ownership. With that step solved, the remaining problem is
The capability of an asset to be fractionalized (referred to as a tokenized-asset) means that a property can be segmented into nearly infinite fractions of its previous self. Each of these fractions can then be individually owned. Rather than a traditional titling process, these fractions of a property are converted into blockchain-secured tokens available for purchase. Every step in this tokenization process cuts out numerous red-tape inefficiencies and streamlines the path from real estate investment to profitable return from rent.
Here’s an excerpt from one innovator RealT’s progress on the subject:
The benefits of ‘tokenization’ have largely just been theorized. In theory, tokens are more liquid. In theory, they cost less to issue. In theory there is a global supply of potential customers. How has the promise of a tokenized world stacked up to the vision?As the 2017–2018 ICO bubble ended with a deafening silence, there was a resurgence in the interest of potential “Tokenized Securities” or “Tokenized Assets”. This is because of the belief that the innovation of tokenization was real, even if the ‘ICO’ was not.
What are the Theorized Benefits of Tokenized Assets?
- Liquidity — Global marketplace = more liquidity, right?
- Fractionalization — Infinitely divisible, opening access to anyone
- Settlement times — Tokens move at the speed of Ethereum
- Compliance — Can be ‘baked in’, reducing bureaucracy costs
- Costs of Issuance — Asset issuers will prefer tokens due to their low-cost
Breaking a World Record of Issuance Time
RealT has executed the world’s fastest real estate purchase-to-asset transfer time, ever. No other platform in the world lets you sign-up, and then receive ownership of real estate in under 3 hours.
What enables us to do this? What theorized benefits of tokenization have we realized?
What We’ve Learned About the Realities of Tokenized Assets:
First, is that settlement times, compliance, and cost of issuance are all intertwined with each other. The benefits of each help establish the benefits of the others.
Compliance on RealT is a simple form that takes 2 minutes to fill out (30 seconds, if you already have a photo of your ID ready to go). The back-end confirmation of a users KYC form takes roughly 15–30 seconds. Users’ Ethereum address is then appended to the RealToken whitelist, allowing them the ability to send/receive tokens.
This ‘baked-in’ compliance improves both settlement times, and costs of issuance. Due to the whitelist, all compliance diligence is done once. After that, this task is outsourced to Ethereum. Humans no longer have to have continued exchange oversight; Ethereum does that for us. For RealT, this brings the costs of exchange down to 0. For RealToken holders, the costs of exchange is the price of gas ($0.01), and the speed of exchange is the Ethereum block-time (12 seconds).
Which brings us to settlement times. A user can arrive on RealT.co and receive a share of property just a few hours later. This is made possible by the benefits of the above innovations that tokenization enables. Compliance is a ‘one-and-done’ event, and the settlement times are seconds. The longest part of the process is signing the legal documents involved, which come in the form of a Docusign email, and involve no more than 4 fields to fill out.
The best part about this is: we’re not even done automating. RealT’s goal is to reduce the purchase-to-settlement time down to 15 minutes by the end of 2020. Our vision for the future of RealT is that investors can arrive on the website, purchase a share of real estate, and have it in their Ethereum wallet within 15 minutes, and immediately begin accruing rent for its owner.
The process of real estate investment is becoming less of an exclusive pool of swirling wealth guarded by bureaucrats and autocrats and more of a digital river of freely flowing assets.