Whether the real estate market will crash or not is of no consequence to this discussion. The simple fact of the matter is that most of the world is shut out from real estate ownership. Even if it is available to the majority in the developed world, in developing and poorer nations, it is a pipedream.
Therefore, we see another avenue where exclusion is par for the course.
Is this something tokenization can alleviate? After all, cryptocurrency is all about access. In the question to democratize our financial world, real estate should be included.
Opening up real estate to the masses could radically alter the financial landscape for much of the global population.
$325 Trillion Market
When people ask how big the cryptocurrency market can get, it is vital to think in quadrillions. This is baffling to people until one considers that the worldwide real estate market is over $300 trillion.
Residential makes up the largest component by far. This according to the research by Savillis Research:
As we can see, the money we are discussing is enormous. Even if there is a major market pullback, the total amount is still a healthy sum. In short, it is a lot of money to spread around.
Now let us consider the fact that the overwhelming percentage of humanity is exempt from this value. They cannot participate for a number of reasons. The first is capital. Most people lack money for the basics in life, let alone putting together enough for a down payment.
Also, with real estate, the system is rigged against people. The majority of the planet does not have a credit score that makes purchasing possible. We should also cite how a lack of education in this area is present too.
Therefore, when we see major runs in the real estate, we know that the overwhelming percentage of humanity is only suffering. This shows up in the form of rent to most. Only a small sliver are able to enjoy the financial benefits.
Can we democratize real estate in a way that allows everyone to participate. With tokenization, that is going to happen.
Every Asset Is Cryptocurrency
By now we all heard the saying the tokenization of everything. This is worthy of a deeper look. Many wonder how big cryptocurrency will get. That is the wrong outlook. Stating this believes cryptocurrency is a separate asset class. It is not.
Instead, all assets will be cryptocurrency. The tokenization of everything means we create a digital representation. This takes things to an entirely different level.
That means that, over the next decade or so, real estate will be completely tokenized. Of course, we have a lot of hurdles to overcome with that since it is heavily regulated and governments have their hands in most phases of the process. Nevertheless, when we look at an industry full of friction, real estate fits that perfectly.
Tokenization provides a number of benefits. The first is fractional ownership. This is available to a degree for large real estate projects yet, as mentioned, is exclusionary. The numbers that people deal in are outlandish.
The second change is liquidity. Real estate is non-liquid. Anyone who tried to sell a property knows what this is like. It only gets worse when dealing with multi-million projects. Tokenization solves this by offering a market where the "ownership" assets can be traded.
We can probably add a 5%-10% premium to the total value of real estate by making it liquid. Non-liquid assets usually trade at a discount. Simply adding liquidity to the entire market will add another $30 trillion or so.
Source
Expansion Of Web 3.0
When people think of Web 3.0, they consider the idea of tokenization social media or gaming. While this is a part of it, it is only a fraction of what we are going to see.
Ultimately, Web 3.0 is the merging of our physical, digital, and biological worlds. In other words, everything is going to be data. We will have digital representations for everything. This allows for value and wealth creation to spring in many different directions.
Here is a mental exercise:
Ponder the idea of being able to earn tokens within an ecosystem like Hive. One can get them for engaging in social media activities or playing games. Those proceeds then can be taken and invested in real estate in New York or London. Individuals can buy a few square feet in some of the most expensive areas in the world.
This is the potential that we are looking at.
Web 3.0 is Decentralized Finance (DeFi). Here again, most look at this as a separate industry. Rather that framing it in that manner, think about the fact that DeFi is going to be interwoven through everything. Tokenization will penetrate all aspects of our lives.
Going back to real estate, let us start with the construction. At present, developers go to banks (or other money agents) and get loans. This enables them to build on the property whereby the units are sold to individuals, who also go to a money agent to get a loan.
If this process is tokenized, $50 million can be raised through individuals. Getting $50 from 1 million people is still $50 million. This provides the development costs with the individuals "becoming the bank".
When the process switches from development to sales, the units can also be funded through the tokenization process. Through the use of a smart contract, another set of token holders can fund the individual unit, say for $250,000. This helps to provide a return to the original token holders while the second group acts as the mortgage holder. They get paid each month (or whatever interval) just like a bank.
Beyond First Generation
It is essential to move beyond the first generation of this transition and the need to hang onto our reference points. Whenever something new is introduced, we tend to frame it against what we already know. For this reason, the early personal computers were thought of as merely advanced typewriters. Obviously, those people could not envision the smartphone idea.
By the token, we are simply looking at Web 3.0 against what we already know. This is where we comprehend the idea of social media and gaming. It is easy to see how this is interwoven.
However, pulling these ideas into an industry like real estate gets rather difficult. We can even go further by discussing automation, adding in the idea of tokenizing the equipment and construction process itself.
Ultimately, tokenization is going to provide access where it is presently non-existent. At the top of the list is real estate. Consider what that industry will be like when 7 billion people can take part. Couple that with the fact that tokenization removes a great deal of the friction from the industry and we can see how this could ascent like the stock market did over the last 40 years.
We can certainly expect another level of "network effect" to take place.
Once again we see how cryptocurrency can help to democratize wealth. It is the foundation we are putting into place today.
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Once again we see how cryptocurrency can help to democratize wealth. It is the foundation we are putting into place today.
In that aspect I see nothing stopping it to progress more than the achievement is has before in changing situations
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That is how I see it. There is so much taking place that opens things up to all.
For many, it starts with getting a bit of money coming in. This is what a place like Hive can offer. With the different reward pools, people get "cashflow". Then, when a lot of this stuff is built out, people will be able to get into investments they were previously exempt from.
This is where the change is going to take place. Everyone needs to focus upon life changing money.
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Where I’m from, it’s not uncommon for people to wait decades for the state housing agency to randomly select them (and home ownership via the private sector is nearly impossible at the average income level). Once the fear of blockchain technology subsides I could see what you’ve described really taking off worldwide.
It is going to be a challenge. The infrastructure will be in place long before the acceptance is. We are going to see the establishment fight against it. This is likely going to require a change in generation, out with the old, in with the younger.
We will see how much resistance there is. It is something we are battling right now.
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Yeah, I know at least one person who thinks anything related to cryptocurrency is not just risky but inherently evil so I doubt anyone with a similar perspective will be interested in real estate tokenization anytime soon. On the bright side, the need for home ownership and the difficulty most people have acquiring it through traditional means will probably help some of the more open minded ones to jump onboard as soon as they have the chance.
It just shows how beliefs can be fatal to one's financial future. That person will realize how wrong he or she is when the masses start to embrace it.
Do not forget, many felt similar to the Internet. I can still remember people proclaiming they would never put their credit card online.
Technology moves faster than humans desire to embrace it. This is something I learned long ago. Hence the opportunity to profit from being an early adopter.
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I can even empathize with him because I struggle to embrace change too but it’s not a struggle you can allow yourself to give up. Saying, “The future scared me so I closed my eyes” won’t do anything about what’s coming next but it will make you less able to benefit from the new opportunities that those changes bring.
I dont think humans are really conditioned to change that much, especially in today's modern world. Comfortable is what many people are, even if they are in crap.
Change is difficult to embrace. However, with technology, either we embrace it or get run over by it.
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Yeah, that sounds about right.
Hard to even imagine where all of this leads. As you mentioned, Web 3.0 and DeFi will be heavily involved in this transiton allowing us to bend and twist money and property like never before. It's hard to grasp until you really get beyond "the first generation" and completely reimagine real estate markets, gaming, and social media.
We keep forgetting this.
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It is hard to imagine. The advancement that takes place over a 15 year period creates something totally foreign. The early days of the Internet, to most, could not foresee audio and video. Certainly mobile was beyond the grasp of most.
Who could see a URL being worth hundreds of billions but that is exactly what Facebook.com and Google.com are worth? What are those companies without that?
That means, if we try to project out into the mid 2030s with this, we are likely to be wrong. Yet we can see a path/direction it is all heading. The key is to skip what we know and try to just ahead a generation or two from where we are in the development curve.
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I have no idea where we are headed but I can certainly see a future where web3 handle like @taskmaster4450le costs more than Facebook.com for many different reasons.
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That might be true.
Of course, Facebook might be on the way to crashing so there is that. LOL
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Speaking of real estate that reminds me of a question i had for you. I assume you know who Grant Cardone is.
I was wondering what your thoughts are on this man?
I know who he is, don't follow him at all so cant really give an honest answer.
Like many in the training field, they have some good stuff, and some not so good stuff. Their goal is usually to enrich themselves first, not necessarily a bad thing. However, much of what is taught is available for free online when you think about it.
Either way, it always comes down to the actions taken by the individual. No matter who is the coach/trainer, if the individual does nothing, all the material is useless.
It is like Hive, we can tell people what to do all day long but how many are willing to put the time and effort in to actually succeed on Hive?
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Thanks for the excellent answer. Use, in a good way, others to empower yourself. I will run with that. 😀
Yes. Coaches and trainers can be great because they have knowledge. Of course, if one does not apply it, the value is not there.
They also can help with motivation. Often the best way to ensure one does something is to write a big check.
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There are already developers using a token system for funding purposes allowing investors to get involved. I find this exciting as the opportunities are endless of what is possible. This I can see happening and gaining momentum very quickly.
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There are some platforms however regulatory issues are still in place. For example, most of these are barred in the US.
But it is starting to open up and that is the first step.
If the regulation doesnt slow things down, it could move quickly.
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I have always had interest in venturing into the real estate business but each time, I consider the capital needed, I tell myself that I'm not yet ready. In the future, all things being equal, investing in real estate will be part of my diversification plan.
Tokenizing the real estate industry would be a huge development as this will give more people the opportunity to join the business.
What will make it more interesting is the illustration here...
Referring to the challenge I aforementioned, we see how tokenization would take that hurdle away.
However, the impending challenge could be finding people that would be willing to crowd fund.
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It will be an opening for everyone to get into real estate. This is what cryptocurrency is all about. We are seeing crypto giving access to people that they previously did not have.
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No doubts about that. Crypto has given many the opportunity to make fortunes.
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Yes, for real estate in particular there is so much opportunity. I have brokers asking me about this regularly as they see things in the news about properties being bought with crypto and more so as NFTs with that new company Proply.
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I researched this for a post once, and found companies which specialize in this niche. Perhaps it will become a real estate investor niche. It would be a way of solving one of the dilemmas you have recently write about, and spoke about during the round table; that of no track record for defi and no way to know if the income you are earning this month will be the same next month. When we rent a property we know if it’s positive cash flow, it will always be positive and nuisance raises will grow this positive cash flow. But with defi you don’t know. An investor that made their money on the Tokenization of real estate would have a share of the appreciation and no mortgage, but only cash flow when they close deals. It would become more like real estate Hodling.
But I suspect it could be structured to give the payout in stables over time.
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It is really going to be interesting how the establishment embraces it. How lot does it take for tokenization to replace titles? Eliminate closings? An accepted form of funding?
There is a lot of regulation with real estate which is going to be an uphill climb. Other than paying with BTC over USD, I dont see it changing anytime soon. It will be a process.
Of course, the SEC is always lurking with the "selling a security" idea, so there is that.
It will change completely, just a question of how soon.
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"Ultimately, Web 3.0 is the merging of our physical, digital, and biological worlds. In other words, everything is going to be data. We will have digital representations for everything. This allows for value and wealth creation to spring in many different directions." I did not get this until you put it in like you did in your post. I am a slow learner and it takes time for me to see things. I am now looking at my home in a different way.
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You will look at your body different also. It is a data generating machine. We will be able to monetize that too.
Tokenization is really an enormous game changer. We are going to see the tentacles extending in every direction.
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This is really great to ponder and bring to reality. Just imagining this makes me so excited, and would really love something like this to develop into success.
!1UP
The tokenization of real estate is going to allow people to buy a stake just like we do with other Hive-Engine tokens.
That is how this is envisioned. We are going to see liquidity added to a degree we never say before. As stated elsewhere though, it will take some time before this all unfolds.
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Fantastic to see you use Listnerds to promote the post, you will tell us about the result.
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Well I can tell you my first email was sent to 930 people, over 90 were opened and 40 upvotes on Listnerds to qualify for payout on there. Not sure how much more impact it had on the post itself.
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wow! They are good data, especially in votes in favor.
Yes it was a good first one. We will see how the second one turns out. It is starting off rather well.
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One of the big hurdles for real estate is simply proving ownership of a property in many countries.
The bureaucracy is so thick in some countries that the process can take a decade just to prove that someone has the right to sell a property. Obviously this slows down the process of real estate exchanging hands. Tokenization of ownership would help immensely with this.
In general, I think even in the world of crypto we’ll see most wealth in the hands of the few… because that seems to be the nature of things. For instance… distributions tend to follow a fractal (Mandelbrotian) distribution rather than a “normal” (Gaussian) distribution (or bell curve) for most things in our world.
(Basing these ideas on Nassim Nicholas Talebs work - specifically the book Black Swan)
For example, 80% of the traffic happens on 20% of the roads.. of that 20% of roads… 80% of THAT traffic will happen on 20% of THOSE roads… etc…
Or take trees for instance - 80% of the mass of the tree is found in 20% of the limbs.
There are some things that follow a normal distribution (like height, weight, etc…) but things like wealth have followed a fractal distribution through all of history as far as I can tell.
The benefit that Crypto brings to the table to me is that hopefully less of the “luck” of where you were born will be the determining factor for one’s ability to create wealth. Crypto allows a more equal distribution of opportunity - even if not an even distribution of results.
That might be true. But in a world where things can go in any direction, that could be changing. After all, anyone can now create an economy. We will have to see how much things spread out over time.
As far as I can tell, the wealth is spreading out across the entire industry. When newer projects go on a huge run, that puts enormous wealth in those people's hands. Look at what Splinterlands did for hundreds on Hive the last couple years. I would doubt many are Bitcoin or Ethereum whales.
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It’ll be interesting to see :)
One thing I think it will definitely help with is raising the standard of living across the board.
Time will tell if crypto ultimately rebalances wealth in a new way, or if the distribution stays similar… but in different hands.
There’s absolutely a shifting of wealth for sure. We’ll just have to see how things look once the dust settles.
I am very optimistic that the end result is at least more of a meritocracy and less based on peoples luck. Im also optimistic that the whole world measurably benefits even if the distribution percentages don’t change much.
The fact we are seeing growth slow globally tells me the importance of cryptocurrency is all of this. Contrary to what many espouse, we are suffering from a shortage of dollars. The Eurodollar system contracted a great deal over the last two decades. This is one of the major reasons why we are seeing things stifled.
Hopefully we can generate enough crypto and put it towards productive purposes.
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Oh! Also, I heard on a recent episode of Cryptomaniacs that you want to be able to share your screen for charts and stuff.
Loom.com and Tella.tv work well for this.
If you want to be able to do a livestream then you might want to look at something like Streamyard or learn OBS
But prerecorded stuff Loom and Tella are good options that are simple to do :)
Thanks for that. I mostly just want to do a video using a screenshot of what is on my computer. OBS is one option I looked into but it seems rather complicated for my non-techy brain. I guess I will have to look at it again.
I will check out Loom and Tella. Thanks.
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This reminds me of the summer of 1984, my Father bought a PC with a printer, software, and a bunch of manuals. That was the summer I discovered the Binary number system. 0 and 1 those two digits can represent anything in the world, especially now with VR.
Now anything in the world can be Tokenized, giving the worldwide masses the opportunity to accumulate wealth by owning percentages of assets that were previously unattainable.
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It is going to be very interesting to see what people come up with over the next few years. There is so much going on right now it is mind boggling. We are going to see things in 5-7 years that will blow us away.
This is a major step forward, in my view, for all of humanity. We can essentially tokenize anything and turn it into a market.
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I had another thought, I researched this for a post once, and found companies which specialize in this niche. Perhaps it will become a real estate investor niche.
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So this is the biggest idea about Web 3.0!
If this will happen, this talk about inclusive global economy will finally have flesh and blood.
If that will be the case, I can do it at least 10x of that!
!PIZZA
!gif thanks
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Real estate will also tokenize, I'm more than sure. Good article as always. One of the projects I've heard about is Propy, PRO token
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Imagine losing your house to a hack lol at least we might get people into the habit of taking security more seriously
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I think fractional ownership is a bit weird and it may cause issues if the rules aren't laid out beforehand. Like what happens if someone wants to buy the entire house and live there, but a few people don't want to sell their shares?
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You did again, @taskmaster4450! Always making us understand more clearly how crypto and tokenization can make the world better. And thanks for pointing out the barriers in owning real estate. My sister went house hunting early last year and she even had to put the property in my Mom's name since she didn't have a bunch of government documents as she's a freelance artist.
Anyway, just wanna ask if a real estate is tokenized, what happens if the borrower defaults on the loan?
Personally, I think it may still lead to KYCs to assure lenders it isn't risky and can still add barriers to entry but at least there's so much less paperworks.
Been using RealT.co for a few years now and it really is a powerful concept.
Such an 'aha' moment for me and....Guess what...Right now, a use case for Ethereum for me LOLOL
Thanks for promoting this post via ListNerds good sir!
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I've been silently following your blog for a very long time and I must say you're a man of great wisdom and understanding. I am always very excited to read your blog.
I've been wondering how this could work and..how the powers that shouldn't be will try to turn this to their advantage. Your article has given me cause for optimism
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I saw your mailer in my LIstNerds inbox and thought it sounded like an interesting idea. I think there are a couple of points that feel odd to me. The first is that big gap between those who can own real estate and those who cannot. Tokenization will not necessarily close that gap unless it feeds community-driven co-construction. The next big wave of people who want real estate are not looking for investments, they are looking for stable housing. Tokenization cannot provide that, so people without enough assets to buy real estate for housing also do not have enough money to by tokenized real estate for housing. That means real estate will be an investment class for that big chunk of the world left out. I can't see that a huge amount of the savings and investment funds of people will go toward tokenized real estate. But I can see it providing a kickstarter-like path to real estate development for already somewhat wealthy people, which is interesting. Thanks for getting us thinking about this!
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Fractional ownership...hmmm...pondering the possibilities.
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Everything can be tokenised and profited against, we're seeing a girl sell farts in a can to people and making millions...
When it comes to housing though this is a concern and cause significant financial volatility leading to housing crises depending on how it plays out. Imagine the worlds financial focus on one real estate market or perhaps certain high profile areas. The flow on impacts on economic participation at an ever growing real estate bubble. There is actually no value in a house other than potential that also includes real estate as a whole.
COVID has proven this now with the workforce migrating out of cities so too is all that value crippling many. As soon as things get too expensive people just move to another location think of it as a slow form pump and dump.
There are also security risks give what we have seen with some nations buying up plenty of strategic real estate would tokenized assets make this easier?
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If real estate is tokenize,is going to make sense. It going to help alot of people to raise money for the real estate business.
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This is exactly what Dig Chain was designed to do https://digchain.org/ . It was setup on the cosmos network and launched recently. They are at the phase in their timeline of getting some of those real world projects on board.
Hi @taskmaster4450
I see you, is a phrase used in some cultures to mean I hear your words, I see your emotions and I feel your meaning.
I very much see you with regard to the tokenization of real estate. The most abundant asset in the world, yet the most illiquid. In a world full of people land rich and cash poor on one side and people land hungry but cash limited on the other side, Tokenization is the perfect middleman. It brings people together for a win-win situation. It’s already big snd only going together better.
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