Cryptoeconomics: does it has a future in Real Estate?

Cryptoeconomy Real Estates Cryptocurrencies

Let’s say that now the Real Estate can be financed without banks or pre-sales. The tokenization of products of the real estate industry breaks what has hitherto been known.

When we read the word “crypto” it is immediately associated with cryptocurrencies, to later infer volatility, risk and/or ignorance, which, for many, activates a negative cognitive bias for everything that is tried to transmit from that perception.

This could be justified given that everything is very young in the world of digital currencies. But it turns out that Cryptoeconomics as a much more comprehensive concept would be like a family in which cryptocurrencies is only one of its children, although very unruly and therefore the one that attracts the most attention.

Cryptoeconomics represents the greatest revolution that the human being has raised in relation to the hegemony of centralized systems. We are experiencing the greatest ordered anarchy thanks to mathematical certainty, since now we can interact among peers without a central authority that guarantees or intermediates to “give confidence” to what happened. It has been replaced by technology, emerging the Blockchain as the new banner of freedom.

Another of its children – with a good present, and with a bright future – is tokenization, or digital representation as tokens or tokens of an underlying asset or project of the real economy. It should not be confused with a cryptocurrency, since behind it there is only a concept or idea born directly in 2D, whose potential, capitalization and price is given by the market by supply and demand. The main reference is Bitcoin, being the most “veteran” of the currencies (only 12 years of life), although still exposed to high multifactorial volatility (from an attack by the central government of China on miners, to a simple Tweet of Elon Musk).

And this simply because its price is of expectation, which shows that there is still a pending path of consolidation.

As a counterpoint, tokenization is the digital representation of something existing in the real or 3D world. Here is the major articulation between the cryptoeconomy and the Real Estate industry, since now we are talking about the internet of value since representative tokens of shares in different real estate projects existing anywhere in the world can be transferred.

We are talking about the democratization of access to investments, from small amounts of investment, expanding the base of the pyramid of those who aspire to put their savings on bricks.

Tokenization with a public offering enables a new source of project financing, in a disintermediated way, without banks; and without frictional costs of intermediation to which we were subordinate.

Now is the era of “p2p” (peer to peer), or direct relationship between peers – in this case investor and developer – but de-stressing the need to have the implicit capital in a presale from the well, presale or “off plan” as They call it in Spain.

With the Blockchain we speak of a planetary notary public, the one who provides public faith that what is agreed or informed will remain immutable, transparent to be consulted when desired; and traceable given the time stamp implicit in this tooling.

This allows the issuance of tokens or regulated negotiable securities (in the case of obtaining the status of public offering), for small amounts and in such a way as to be able to design investment vehicles that can be designed to the exact measure of the need of the project to finance.

Let’s say that now the Real Estate can be financed without banks or pre-sales.

The tokenization of products of the real estate industry breaks what has hitherto been known, and its design must be based on:

  • Solid fundamentals of the business to be tokenized. The money will not appear just for implementing a tokenization – either by public or private offering – since it is a necessary but not sufficient condition. An unviable tokenized business will remain unviable without anyone being motivated to acquire those tokens.
  • High complexity tokenomics (token design). What is offered to the market emerge from a deep study of the market. This is the case of the first real estate development in the city of Malaga that will be financed through a tokenization by public offering, in which debt securities were structured through a double token system, since part of the potential demand aspired to a fixed interest rate backed by bricks, the other being that of a potentially demanding public for remuneration associated with pre-sale real estate investment. For this reason, two types of debt tokens were established – discarding the equity option – to raise the necessary capital to finance the project. One pays a fixed rate and the other variable, assimilated to the price range between the launch and the deeds.
  • Liquidity mechanisms. A quality token to facilitate the exit of the investment during the journey. For this, another of the great disruptions of the cryptoeconomy – Decentralized Finance or “DeFi” – which enables the creation of Liquidity Pools, which will operate as AMM (Automatic Market Maker), by having autonomous and perpetual liquidity of the tokens as throughout its useful life. Sell ​​the token without there being a buyer, since it is not sold, but is exchanged against the existing liquidity in the Pool. A true revolution in the conceptualization of investment financial products.
  • Crypto marketing. To the well-known digital marketing and management of the sale and distribution of tokens, an additional “layer” must be added since something is being sold for the first time, which requires an artisanal design of commercial and communication management that for this product requires apply a concept that surpasses traditional marketing.

What is clear is that we are facing the greatest disruption in business models so far known. We are only scratching the surface of this new reality that enables the cryptoeconomy, making it clear that Real Estate implies a fertile field for creativity in the design and applicability of this tool.

The known can no longer be sustained. The new came to be installed, showing the exhaustion of the sustainability base of our industry.