Blockchain Benefit 2 - Reduced Liquidity Premium

Buying real estate isn’t like buying an equivalent value in shares in the stock market. It isn’t even like buying a car. In the real estate industry, transaction costs are high, which means that liquidity is low.

Approximately $44 trillion of real estate assets are locked up due to market inefficiencies. This is derived from illiquidity discounts of 20-30% in an industry valued at $217 trillion.

Where Blockchain Technology Comes In

Real estate is “tokenized” using blockchain, by turning real world assets into a digital token. Think of this as as an efficient and low-cost method of asset securitization, where a usually illiquid asset is transformed into a security.

Once the asset is tokenized, the digital nature of the security makes it easier to exchange partial interest of the real estate between buyers and sellers. Because we have transformed this asset into digital form, real estate purchases and settlements can happen immediately with almost no geographic restriction or time delay. One day, we can expect fractions and whole real estate assets being bought and sold at the rate of stocks on the NYSE, facilitated by blockchain technology.

Fast-forward 10 years, and you won’t have large real estate transactions handled only by a small, exclusive group of people anymore. Blockchain and tokenization means that barriers of entry for investors will be just as low as they are for a stock listed on the NYSE. We’re talking about a “new” global capital pool of investors who now have access to a skyscraper in New York, or an apartment complex in Austin. This opens a new group of buyers and sellers in the real estate market and the potential for more trade and market depth, and the opportunity for liquidity of real estate.

But in the present - adoption is already happening as we pave the way for this new wave of “tokenized” investing.