Chainlink Revolutionizes Trillion Dollar Market with Innovative Real Estate Tokenization

Chainlink (LINK) has in a recent blog post explained plans of revolutionizing the real estate market with tokenization. Without a doubt, the real estate industry is connected to several parties and is highly inefficient and illiquid.

Through the blog post, Chainlink noted that it takes weeks to find a counterparty in the real estate industry. Additionally, its transaction can take weeks to be completed in addition to the price fluctuations which occur within a range. Finally, transactions require many service providers to be facilitated.

Despite these known challenges, the industry was valued at $29 trillion in 2021. This means the market has a huge potential of growing even more when the process is streamlined.

Chainlink with the solution

In the post, Chainlink explains that the process can be unlocked through tokenization. With this, real estate properties or cash flow would be represented as a blockchain token. This will ensure that liquidity is increased, processes are streamlined, and digital ownership is enabled

KPMG said this about tokenization:

tokenization is ideal for owners of a single asset or a small portfolio of assets, due to the significant reduction of time and cost in offering investors the right to participate in fractional ownership and subsequent secondary trading.

Chainlink Explains Some Benefits and Challenges of Tokenization

The post explains that tokenizing real estate demands that there is a firm and an underlying physical asset. Chainlink, therefore, falls within this objective as a Web3 services platform that supports developers and entrepreneurs seeking to bridge the gap between blockchains and real-world assets. One example of this initiative is representing a single real estate property as an NFT

According to Chainlink, the tokenization process can be further enhanced by dynamic NFTs

One interesting use case of real estate tokenization is fractionalization, and this approach uses fungible tokens. Its features include the representation of ownership of a property using individual tokens. This means owning all the fungible tokens represents owning the property. There are also the Tokenized Real Estate Baskets and the Tokenized Real Estate Cash Flows possibilities

Another important benefit of real estate organization is the removal of unnecessary barriers to real estate transactions such as third parties while lowering the price barrier to entry. This increases liquidity. Fractionalized real estate tokens also ensure that the market discovers a fair price for different real estate assets. It also lowers costs and reduces fraud. However, there are technical challenges that need to be overcome to unlock global adoption

According to Chainlink, all the attempts to tokenize real estate were not able to create a scalable solution that solves the problem and limitations of the market today.

One other challenge captured in the article is how to get tokenization to work on a global scale.

Making a fundamental change to the backend architecture and processes of a $29T market is difficult. Any successful implementation of real-estate tokenization at scale will require open standards, an immense number of tests and pilots, and the coordinated efforts of Web3 projects, governments, and businesses alike.