Blockchain Technology Driving Transformation in the Real Estate Industry: The Potential and Challenges of Tokenization Projects

The global real estate market is massive, expected to reach $634.90 trillion by 2024. However, the traditional real estate transaction process has many issues, such as lengthy procedures, excessive reliance on intermediaries, and fraud risks. With the rise of Blockchain technology, this pattern is facing disruption.

Blockchain significantly improves the efficiency, transparency, and security of real estate transactions through innovative technologies such as distributed ledgers, smart contracts, and dynamic NFTs. These advancements are expected to simplify property ownership processes, reduce fraud, and create more convenient investment opportunities for users worldwide.

In the future, the application of Blockchain and artificial intelligence technology may significantly shorten the real estate transaction cycle, potentially allowing transactions to be completed in a single day. These innovations are fundamentally changing the industry by automating processes, increasing transparency, and enhancing efficiency at every stage. Financialization and disintermediation will bring the liquidity of real estate assets closer to that of the stock market.

Challenges Facing the Traditional Real Estate Industry

1. Long transaction cycle: It often takes several weeks or even months for buyers and sellers to complete a transaction.

2. Information asymmetry: Buyers and sellers find it difficult to obtain complete and accurate information, relying too heavily on intermediaries.

3. Complicated intermediary process: involves multiple stakeholders, such as buyers and sellers, intermediaries, banks, lawyers, government agencies, etc.

4. Heavy operational workload: Real assets lack programmability and require a lot of manual operations.

5. High security risks: prone to fraud, data breaches, and other security issues.

Blockchain technology in the real estate sector

Dynamic NFT technology

Dynamic NFTs are a way to tokenize real estate assets. NFTs can represent property ownership, and their transfer signifies a change in property ownership. Dynamic NFTs can automatically update key data, such as information on home improvements, renovations, and past sales, providing buyers with a more comprehensive property history.

A certain project has adopted dynamic NFT technology and has set up three levels:

• Level One: Basic address minting, proving asset ownership.
• Second level: Upload property ownership proof documents to enhance asset security.
• Level 3: Accelerate the transaction process, using NFTs as collateral to achieve 100% RWA.

Simple Real Estate NFT

Representing a single property as an NFT means that owning the NFT is equivalent to owning the property. In theory, property transactions could be as simple as placing an order on the NFT market, significantly shortening the traditional transaction process.

Segregate real estate assets

Use alternative Token (FT) to achieve partial ownership of real estate. Each Token represents a specific proportion of ownership in the property, allowing investors to purchase a small part of the property and lowering the entry threshold.

tokenization of real estate cash flows and asset baskets

Property owners can separate ownership from cash flow rights (such as rental income). They can also create a basket of real estate assets, with tokens collectively representing multiple properties and cash flows, enabling automated distribution of profits.

Case Study: Collaboration Between a Project and the Oracle Network

A real estate project has integrated oracle automation services on a specific network for distributing staking rewards. As of recently, over 270,000 addresses have been minted for this project.

This collaboration has achieved:

• Highly reliable, high performance, and decentralized automation
• Reduce the cost of internal automation infrastructure
• Reduce DevOps resource consumption
• Improve transaction speed and efficiency
• Expand the business more quickly
• Unlock new use cases and features

Challenges Faced by Tokenization of Real Estate

1. Regulatory Compliance: It is necessary to comply with the laws and regulations of different jurisdictions.

2. Technical challenges: issues such as liquidity, market infrastructure, data security, transparency, standardization, and interoperability.

3. User Education: There is a need to help real estate professionals and ordinary clients understand Blockchain technology and its potential.

4. Behavior Change: Encourage users to adopt new trading methods and asset forms.

Future Development Trends

1. Diversification of asset classes: Expand into commercial real estate, industrial real estate, real estate financial assets, tokenization funds, etc.

2. Scalability improvement: Integration of DeFi elements such as staking, derivatives, indices, and hedging strategies.

3. Expansion of asset scope: It may cover products such as commodities, artworks, intellectual property, and even ETFs/ETPs.

4. Improved transaction efficiency: Expected to complete property transactions within 1 day.

5. Digital Asset Management: Such as the popularization of warehousing information management.

6. Market structure transformation: Financialization and disintermediation will enhance the liquidity of real estate assets, bringing them closer to stock market levels.

With the development of these trends, the real estate industry will enter a whole new stage of development, bringing more opportunities and conveniences for investors and users.