A report published by Boston Consultancy Group (BCG) in 2022 predicts that the total value of illiquid real assets (RWA) will soar to $16 trillion by 2030, or 10% of the entire global economy. This includes real estate, land, fine art, commodities, public infrastructure, computing infrastructure, private equity, etc. Real estate in particular is notoriously illiquid due to many factors, including the lack of a public market for commercial real estate funds, the complexity of transactions and valuations, and the demand for huge capital investments.
Inability to divide real estate, lack or slow communication of information to retail investors and high net worth individuals, restrictions on elites, regulatory hurdles, complex user journey to gain access (e.g. KYC and payment setup for open markets), lack of existing technology to unlock liquidity – all these contribute to the never-ending liquidity problem in the RWA sector.
Traditional RWA carve-outs have helped free up some liquidity, but only in the already fairly efficient and high-tech public markets, while private markets are lagging behind, slow, opaque, expensive, and limiting early capital opportunities for the majority of investors. Real estate has benefited from REITs (Real Estate Investment Trusts), but freeing up illiquid capital is suboptimal and costly for most clients.
Fortunately, the advent of tokenization through blockchain technology is gradually enabling RWAs to take shape, freeing up illiquid capital and creating new ways to fractionalize assets and sell them directly to the public. In the next section, we will focus on the rise of tokenization of RWAs, the importance of blockchain technology in freeing up illiquid capital, and touch on Blocksquare, a Slovenian company that is revolutionizing the real estate market for retail investors.
The Rise of Tokenization in the RWA Marketplace
Due to the popularity and global adoption rate of blockchain technology, RWA tokenization is rapidly gaining traction around the world. Just as mainstream technologies such as the internet, smartphones, and various financial tools started slowly and were rapidly adopted, tokenization (especially real estate) is expected to follow a similar path in the next decade.
Tokenization of real-world assets, particularly real estate tokenization, involves issuing digital tokens on the blockchain that represent ownership of real estate such as land, buildings, etc. Over the past few years, several banks, financial institutions, and large corporations have entered the tokenization space, making it easier for investors to purchase RWAs.
At the forefront of this revolution is JP Morgan, who launched their Tokenized Collateral Network (TCN) in 2023, leveraging blockchain technology to convert RWAs into digital tokens. Franklin Templeton launched the Franklin On-Chain US Government Money Fund the same year, offering investors the first US-registered mutual fund on a public blockchain. The European Investment Bank (EIB) also issued its first $103 million digital bond in 2021, with the bond registered and settled on the blockchain, taking the first major step towards real-world asset tokenization.
The biggest news so far in the tokenization space has caught the attention of investors around the world with BlackRock’s partnership with Securitize, a San Francisco-based company that aims to unlock alternative assets on a fully digital, compliant platform. The partnership aims to tokenize over $10 trillion of BlackRock’s assets, a move that will fundamentally change the way RWAs are traded in the future.
With trillions of dollars worth of traditional assets set to be tokenized over the next decade, it begs the question: Why is tokenization so important?
The Importance of Tokenization in Real Estate RWA
Tokenization will strengthen the RWA market, especially the real estate market, which will benefit greatly from digital tokens. Here are some of the benefits tokenization will bring to the real estate market:
Unlocking Liquidity: Real estate tokenization helps unlock underutilized or illiquid real estate assets by fragmenting assets and creating innovative investment vehicles. This allows asset owners to easily trade their assets and speed up asset turnover. Small investors also have the opportunity to buy a piece of a high-value asset. Increased Transparency: Leveraging blockchain technology and smart contracts increases transparency in real estate as an immutable record of ownership exists on the public blockchain. Additionally, smart contracts automate the ownership transfer process, rent distribution, and regulatory compliance process. 24/7 Open Market: Unlike traditional markets, digital tokenization of RWA allows investors to trade around the clock, allowing for more open trading at any time. Minimizing Fraud: Smart contracts leverage cryptographic security, minimizing the risk of fraud and theft. All contracts and transfers are accessible on the blockchain, which protects ownership rights.
How Blocksquare is revolutionizing the real estate market
Blocksquare is a leading blockchain company with the goal of revolutionizing the real estate industry through secure tokenization of real estate and notarized transactions. The company was founded to leverage smart contracts and blockchain technology to enable property owners to tokenize and unlock liquidity in the industry.
Since its inception, the company has made great strides in the tokenization industry, helping to tokenize hundreds of properties and land parcels by providing a regulated infrastructure for investors to participate in the real estate market. In June of this year, the company launched the Oceanpoint v0.5 platform, a DeFi platform designed to enable startups to tokenize real estate, and introduced Marketplace Pools, an innovative feature that allows participants who stake BST (Blocksquare’s native token) in governance pools to support new accredited partners and launch their own tokenized real estate marketplaces with Blocksquare.
Blocksquare co-founder and CEO Denis Petrovsic said the company has helped tokenize over 100 properties, including hotels and healthcare facilities, in over 21 countries, with a combined value of over $100 million.
One startup benefiting from Blocksquare is Portio Capital, which leveraged Oceanpoint v0.5 to create a marketplace where investors can easily buy and sell shares in co-living properties. Portio Capital raised capital to cover development, marketing, and operational costs in record time, selling 100,000 BST tokens in just 36 hours and expects to raise the same amount in 29 days in its funding campaign.
Recently, Pieme, an investor management platform focused on community-owned hotel residences, also announced plans to democratize hotel investing with Oceanpoint. Pieme’s fundraising campaign, scheduled to launch on July 30, aims to revolutionize real estate investing in Africa, with its first residences set to be built in Kampala, Uganda.
Conclusion
In conclusion, the wave of RWA tokenization will continue to grow and the real estate market is on the brink of transformation. Tokenizing the $16 trillion real estate market will enable investors to unlock liquidity, increase security and transparency in real estate transactions, and reshape real estate ownership. As a pioneer in the space, Blocksquare aims to transform the once rigid and opaque world of real estate investment, making it more accessible, transparent, and liquid. The success stories of startups such as Portio Capital and Pieme highlight the huge potential this technology has to democratize real estate investing and open it up to a wider range of investors.
