Diversifying your portfolio by investing in some digital assets is a great opportunity. You get to choose how much to invest, through a couple of clicks, 24/7, and easily keep track of how your investment is evolving. The Internet has been around and accessible for the last two decades; however, digitalizing assets, especially real estate, is only now becoming ubiquitous. Has anyone not seen the real estate market potential before? Why just now? Those are fair questions, and the answer involves a highly secure new technology that mitigates risk, decentralizes control, and is compliant with current regulations. Allow me introduce you to blockchain.
In the words of Primavera de Felippi, author of the pioneer book Blockchain and the Law; blockchain is a decentralized database, maintained by a distributed network of computers. The system is immutable, and transparent by design.¹ Wow, too much tech, isn’t it?! No worries, we can explain it to you.
Decentralized – the data is allocated to an open network as opposed to a database, which means no one owns the data. For instance, a Facebook user who has shared their love for cats to interact with other like-minded people will be for sure receiving tons of marketing related to that content. The reason why is that Mark Zuckerberg's team can use your data in the way that best addresses their interests. In a decentralized system, this can’t happen as there is no single agent who owns the database; it belongs to the network as a whole.
Immutable – once the transaction is executed within a blockchain system, it’s a done deal; there won’t be a turn-back. The user can’t change, adjust or delete it. The idea is very similar to marital status: the person is single until they get married and they will never be single again. They can go for divorcee or widow, or for sure, remain married. The marital status will not revert from married to single again.
Transparent – anyone can assess whether a given account was involved in a transaction, such as interacting with a smart contract. Very similar to a notary service, where everyone can walk in, pay a fee and assess a public property record for example.
The world heard about blockchain for the first time in 2009, when Satoshi Nakamoto released a bitcoin white paper, explaining step-by-step how blockchain worked. It became known world-wide in 2014 and around 2015, when Patric Byrne 2, CEO of Overstock.com created a blockchain-based securities system. Byrne’s system combines the settlement and clearing process, serving as critical infrastructure for the proper functioning of securities markets. It was the first sign of Security Token, which became very popular around 2018. The idea combines finance market regulation and blockchain applications. Where bitcoin is highly disruptive, security token can be considered more conservative as it resonates with finance market rules and does not seek to change the status quo.
Over the past year, security token has become widely used, as an alternative to risk mitigation, cost reduction, and accessibility, especially in the real estate investing arena. It is now possible to digitalize an entirely high-class commercial property, comply with all regulations applicable to land and building trades, and operate an initial public offer on an online platform. Every step is added into the blockchain network and an investor can access real-time investment and monitor how things have evolved.
Digital real estate investing has come a long way to get to the point where you can stably invest through your fingertips. While it relies on the top cybersecurity technology available, it still aligns with existing regulations and best practice. Without question, the entry of digitalized assets to the market is making real estate investing easy, secure and affordable, and most important, for everyone.