Real estate investment is going on blockchain (DRW)
A luxury student complex in the US will soon see its value moved onto a blockchain, reports Fortune. Investors in the US will be able to purchase a piece of the complex, owned by Convexity Properties, in the form of blockchain tokens. The redistribution of the value of an asset this way is called tokenization.
Convexity, a subsidiary of DRW, one of the biggest proprietary traders in the US, has priced each of the 955 tokens at $21,000, which equates to about $21 million in total. Buyers of the tokens, which amount to securities representing a piece of the campus, will eventually be able to trade them on crypto exchanges. Convexity has partnered with blockchain startup Harbour, which is backed by investors including Andreessen Horowitz, to produce the tokens for the sale.
The tokenization of property indicates a prominent future use case for cryptos. Investing in real estate, while lucrative, can be very hard — not least due to the typically high cost of entry. And it can be cumbersome to sell part of a building from the owner’s perspective, Don Wilson, founder and chief executive of DRW told The Financial Times.
Tokenizing assets allows for fractions of an asset to be traded, with ownership recorded on an immutable ledger. This could open the market to a wider audience, while making previously illiquid assets liquid, Harbor chief executive Josh Stein told Fortune. Moreover, because the securities are tokenized, the process has fewer transaction costs, such as lawyers’ fees, that are typically associated with property sales.
We’re likely to see tokenization mushroom over the next few years. That DRW is heavily involved in this latest project is indicative of the institutional interest in adapting cryptos for traditional financial services use cases. And other firms, including Coinbase and Goldman Sachs-backed Circle, as well as Swiss Exchange SIX, are all planning to trade security tokens.
Despite the recent crypto selloffs that have made many question whether the nascent asset class has had its day, these developments suggest interest in digital assets remains strong. While current cryptos may continue to struggle, we’re likely to see the emergence of a new type of institutional-backed digital asset class emerge in the future.