Your House on the Blockchain?

As a HackerNoon reader, it’s about time you ask yourself: Can I put my house on blockchain and sell parts of it while I live my life?

Let me be clear before we dig in: This might not be the brightest idea for most of you.

First of all, cash comes with a price: You’re no longer the absolute owner of your house, so you better be aware that by selling parts of your home, you will now be paying rent to the other owners (and yourself) in addition to the mortgage, tax or whatever you have to pay to own the house.

The case is different for professional landlords looking for business partners, capital, or spreading their portfolios. In this case, tokenization of property might be the most significant technological breakthrough in years.

Before we get to the 4-step guide you might think real estate on the blockchain is cool. But one question should arise in your head: Why real estate - on blockchain - now?

Real estate will be the first ‘real-world asset’ on blockchain:

In the country where I live, Denmark, the ideas and problems solved by the blockchain date back to the 11th century when the old landscaping laws demanded that transferring of the property had to be approved by the central government.

So every time a property was traded a new block was created in the central administration’s archives. This type of bureaucracy is known for its highly time-consuming, cost-expensive, and illiquid assets. But it was better than not having any proof of ownership.

Today we have decentralized, digital blockchain ledgers such as Ethereum or Ravencoin. Every time a token is traded on the machine a new block is created on a transparent virtual computer chain. This is available for everyone to access, and see on Etherscan, and makes you able to check the former transactions (and prices) of the assets represented by the token, it also doesn’t require a lot of money, and you now have an asset, that you can post on any online or offline marketplace.

All it requires from you is to decide whether you want to HODL or sell your tokenized asset:

This is why tokenization is no longer a monopoly of the government’s central administration anymore. Several blockchain ledgers do the job decentralized, cost-efficient, and securely!

The 4-step guide to tokenizing real estate on the blockchain:

Step 1: Picking the asset

Determine the specific property or properties to tokenize and consider jurisdiction, types of shareholders, and the relevant regulations.

Now is the time to be specific. What property, in which legal area, and how much of the property will be sold?

Step 2: Legal Structure

Determine the legal structure. Various options are available, and the owner can choose to tokenize the equity of a Special Purpose Vehicle (SPV), a debenture, or another form of participation right such as revenue or profit.

This is the part where you need juridical advice or be on a tokenization platform that makes sure you act right according to your best interest, the law, and tax authorities.

Step 3: Appropriate Technology

Choosing Blockchain protocol, Token configuration, KYC/AML questionnaire. Setup token custody solution with a custody provider and choose the right blockchain network for token creation.

You have now moved way ahead of keeping your ETH or BTC in a hardware wallet.

This is serious business, and you should consider which blockchain protocol makes the most sense for your project (Gas fees, security, flexibility, etc.), and you have to make sure that you don’t partner up with North Korean money laundering activities.

Step 4: Token Creation & Distribution

Creating a distribution plan and payment methods for potential investors to purchase the token. You can see the number of funds you have raised in real-time on your dashboard.

This is the fun part: Most administration is taken care of. Now it’s all about marketing your asset and watching the forces of the market do their job.

Take your research one step further

Since you are here, you probably know the fundamentals of crypto and real-world asset tokenization. If not, your research begins with #tokenization. Also, check out my former HackerNoon piece about tokenization: https://hackernoon.com/what-is-tokenization-the-standards-explained

I’m here to build a community around tokenizing real estate that is a safe, educating, and welcoming environment for everyone.