The Dark Past and Bright Future of Real Estate Tokenization

Ever since Satoshi’s whitepaper, people have discussed whether it’s possible to tokenize real estate on the Blockchain. The benefits of Real Estate Tokenization have always been readily apparent: the Blockchain would unlock the true potential of real estate assets by providing greater liquidity, composability, and seamless transactions from anywhere in the world. But since then, the history of Real Estate Tokenization has been an uphill journey facing challenges after challenges.

Most of these projects categorically suffered from three obstacles: lack of a mature DeFi ecosystem, regulatory limitations, and liquidity limitations. The lack of a mature DeFi ecosystem refers to the public’s still-evolving understanding of concepts like DeFi yield and NFTs. Regulatory limitations refer to the lack of a legitimate mechanism to enable a real estate token holder to claim the title deed to the underlying real estate in a trustless structure. And last but not least, liquidity limitations refer to the lack of overall liquidity that was available on-chain in the past, as well as a lack of secondary liquidity in the real estate marketplaces. This situation leads to a high degree of volatility in the value of real estate tokens.

Examples of notable specialized real estate tokenization projects that have achieved varying level of success includes:

• Aspen Coin — First legitimate CeFi real estate tokenization project with a prime asset, St Regis Aspen. However, the project experienced scalability and liquidity challenges in the secondary market
• RealT — First semi-scalable CeFi real estate tokenization project which experienced liquidity challenges in the secondary market.
• Labs Group — CeFi project which pivoted into a time/revenue-sharing model, which experienced challenges enabling the real estate token holders from redeeming the underlying title Deed and lacked in the secondary market liquidity.

What’s different today?

As we approach the end of 2021, the Blockchain universe continues to grow and evolve at a rapid pace. Each of the three obstacles (immature DeFi ecosystem, regulatory limitations, and liquidity limitations) which hindered previous real estate projects matured rapidly over the past year.

• The DeFi space has grown significantly, with over $112 billion in total value locked (TVL) as of Nov 2021. Multiple decentralized exchanges have arrived on the scene, and concepts such as yield farming, Automated Market Makers, and liquidity pools have become familiar to the entire cryptocurrency community. In addition, the large values being commanded by NFTs such as CryptoPunks lead to mass understanding and adoption of this new asset class.
• Up-and-coming Blockchain projects are pioneering new legal structures which allow token holders to gain ownership of the underlying real estate which their tokens are linked to.
• The rapid growth and mass adoption of new DeFi instruments such as Automated Market Makers, Liquidity Mining, and Staking have opened up new ways to enable all-important Secondary Liquidity Markets for real estate tokens. Concerns about inflation in the post-Covid economy led to more capital being moved into on-chain assets, leading to more liquidity throughout the entire Blockchain ecosystem.

Welcome to the Renaissance Age — Image created by upklyak

A Bright Future for Real Estate Tokenization: CitaDAO

CitaDAO is the first and only Real Estate Tokenization platform which allows real-world listed real estate to be redeemed by digital tokens. By doing so, CitaDAO users possess both legitimacy of ownership of their assets, and valuation parity when moving their assets from the on-chain world of tokens to the off-chain world of physical real estate. CitaDAO will utilize Automated Market Makers to provide 24/7 liquidity for their tokenized real estate, ensuring valuation transparency and at the same time enabling an all-important Secondary Liquidity Market to exist.

CitaDAO incentivizes landlords to independently list their real estate on the platform and mint the rights to this property into NFTs. This model is easily scalable as an unlimited number of landlords throughout the world can simply tokenize their real estate on CitaDAO. Contrast this with other projects which must raise money to purchase specific properties before they are tokenized, leading to situations in which a lack of capital limits how fast the platform can grow.

CitaDAO also leverages its native platform token to incentivize DeFi composability. By leveraging the value captured in CitaDAO real estate tokens, additional innovative DeFi projects can be created on top of the CitaDAO platform. Potential primitives include options, collateralized loans, and real estate index funds (just to name a few). These projects will both rely on the value of the real estate tokens, and also increase the value of the real estate tokens by creating new applications for their value, creating a virtuous cycle that powers the entire CitaDAO ecosystem. This allows CitaDAO’s real estate token holders to achieve stable double-digit APY instead of the single digit APY available to them through traditional finance.

Renaissance Age of Real Estate Tokenization

The many past attempts to tokenize real estate on-chain have were challenged bythree major impediments: an immature DeFi ecosystem, regulatory limitations, and liquidity limitations. Now, in 2021, both the explosive growth of DeFi and revolutionary new innovations overcame these obstacles. With projects like CitaDao leading the way, we can finally move past the Dark Ages of Real Estate Tokenization into a Renaissance as stable time-tested value is moved on-chain.

About CitaDAO
CitaDAO.io is a Decentralized Finance (DeFi) platform for Real Estate to be tokenized on-chain, built on the Ethereum ecosystem. CitaDAO aims to solve the lack of liquidity, access limitation, and lack of composability in existing real estate ecosystem by creating interoperability with other DeFi applications/primitives that operate on the Ethereum protocol. Real estate token allows the community to diversify their portfolio on-chain to generate stable yield through real-world assets that have constant liquidity through AMM.

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Disclaimer: The information contained in this communication is based on sources considered to be reliable, but not guaranteed, to be accurate or complete. This communication should not be relied upon or the basis for making any investment decision or be construed as a recommendation to engage in any transaction or be construed as a recommendation of any investment strategy