As the world emerges from the pandemic, central banks around the world are aggressively printing currency to stimulate their economies. It looks like inflation is ramping up, and real estate has long been recognized as an investment that serves as an inflation hedge. In addition, investors in real estate can also benefit from what is the real world equivalent of yield farming — stable passive income flows derived from renting out a productive asset. However, there are some disadvantages to real estate investment, including:

• Lack of liquidity — Unlike other investments, it can take a long time to invest into and divest from a real estate property.
• Poor access — The minimum real estate transaction size is usually one entire property, and transaction fees can be high, all of which serves as a barrier to entry to many would-be investors — especially in the case of commercial property.
• No composability — Leveraging a real estate property for additional use cases is difficult and getting a line of credit based on your property involves tons of paperwork and bureaucracy. Processes are not transparent, resulting in greater risk for the entire system.

Through the years, real estate has remained a stable asset class that hasn’t been upgraded through innovation. Most people still buy an entire home or small business storefront through a local real estate agent, while large corporations and real estate investment trusts go through the same process on a larger scale. Meanwhile, the problems listed above continue to limit the potential of real estate as an investment asset.

The emergence of Blockchain technology and Decentralized Finance has given rise to an entire economy of tradeable digital tokens. What if there was a way to tokenize real estate on the Blockchain? Each token would represent fractional ownership of some portion of a real estate property existing somewhere in the real world, and these tokens could be freely traded to anyone who wants exposure to that property. Holders of the token would also be able to access a portion of the income stream provided by the property. A well designed system like this would retain the stable cash flow and inflation hedging character of traditional real estate investments, but would improve upon it in the following ways:

• Ample liquidity — Using Decentralized Finance Liquidity Pools as Automated Market Makers would allow anyone anywhere to access the tokens and add fractional real estate holdings to their portfolio, any time they want — without the hassle of agents and intermediaries.
• Accessibility — By allowing the tokens to correspond to fractional ownership of a property, the high costs and fees of traditional real estate investing are no longer a barrier to entry, empowering an entire new class of real estate investors.
• Composability- By using a Blockchain native asset bearer property token, this token can also serve as a foundation for a plethora of innovative DeFi primitives, such as collateralized loans, futures, indexes, real estate backed stablecoins, etc.
• Ease of use — Investors in the crypto community are empowered to add real estate to their portfolio without needing to navigate cumbersome and restrictive local land laws.

For generations, real estate has rightfully been perceived as a valuable investment, albeit one that is limited by a lack of liquidity, high barriers to entry, and the significant risks associated with those two issues. These problems can be solved by tokenizing real estate into digital assets representing fractional ownership, and truly unlocking the value of real estate.

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Disclaimer: The information contained in this communication is based on sources considered to be reliable, but not guaranteed, to be accurate or complete. This communication should not be relied upon or the basis for making any investment decision or be construed as a recommendation to engage in any transaction or be construed as a recommendation of any investment strategy