Breaking Records Via Tokenization
The benefits of ‘tokenization’ have largely just been theorized. In theory, tokens are more liquid. In theory, they cost less to issue. In theory there is a global supply of potential customers. How has the promise of a tokenized world stacked up to the vision?
«We’ve gotten it so low, that we’re breaking world records for property transfer times. And we’re not even done.»
What are the Theorized Benefits of Tokenized Assets?
- Liquidity — Global marketplace = more liquidity, right?
- Fractionalization — Infinitely divisible, opening access to anyone
- Settlement times — Tokens move at the speed of Ethereum
- Compliance — Can be ‘baked in’, reducing bureaucracy costs
- Costs of Issuance — Asset issuers will prefer tokens due to their low-cost
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Breaking a World Record of Issuance Time
RealT has executed the world’s fastest real estate purchase-to-asset transfer time, ever. No other platform in the world lets you sign-up, and then receive ownership of real estate in under 3 hours.
What enables us to do this? What theorized benefits of tokenization have we realized?
What We’ve Learned About the Realities of Tokenized Assets:
First, is that settlement times, compliance, and cost of issuance are all intertwined with each other. The benefits of each help establish the benefits of the others.
Compliance on RealT is a simple form that takes 2 minutes to fill out (30 seconds, if you already have a photo of your ID ready to go). The back-end confirmation of a users KYC form takes roughly 15–30 seconds. Users’ Ethereum address is then appended to the RealToken whitelist, allowing them the ability to send/receive tokens.
This ‘baked-in’ compliance improves both settlement times, and costs of issuance. Due to the whitelist, all compliance diligence is done once. After that, this task is outsourced to Ethereum. Humans no longer have to have continued exchange oversight; Ethereum does that for us. For RealT, this brings the costs of exchange down to 0. For RealToken holders, the costs of exchange is the price of gas ($0.01), and the speed of exchange is the Ethereum block-time (12 seconds).
Which brings us to settlement times. A user can arrive on RealT.co and receive a share of property just a few hours later. This is made possible by the benefits of the above innovations that tokenization enables. Compliance is a ‘one-and-done’ event, and the settlement times are seconds. The longest part of the process is signing the legal documents involved, which come in the form of a Docusign email, and involve no more than 4 fields to fill out.
The best part about this is: we’re not even done automating. RealT’s goal is to reduce the purchase-to-settlement time down to 15 minutes by the end of 2020. Our vision for the future of RealT is that investors can arrive on the website, purchase a share of real estate, and have it in their Ethereum wallet within 15 minutes, and immediately begin accruing rent for its owner.
RealTokens pay their owners rent on a 24-hr basis; reducing settlement times adding to this magic. Buy RealTokens today, receive rent tomorrow!
One Improvement at a Time
The theorized tokenized world that came out of the 2017–18 mania was kept alive by a few core beliefs.
Faster trade settlements are in part a byproduct of higher liquidity. The increase in speed is also derived from blockchain technology. Cryptocurrencies can typically settle in minutes, these tokens are far more simple than asset-backed security tokens, but serve as a benchmark for what’s possible in trade execution times.
✅ — RealT’s got this one
One of the largest headaches when dealing with securities is ensuring compliance across all regions or jurisdictions that an asset is traded in. Most regions have their own regulatory body with its own set of rules and guidelines. Through tokenization, compliance can be automated through smart contracts and coded into the asset itself.
✅ — We’ve got this one too
The “illiquidity discount” is the price a user has to pay for trading an illiquid asset, and is typically around 20–30%. The opposite of an illiquidity discount is a liquidity premium, the increase in value derived from the higher liquidity of an asset. Tokenizing an asset opens up the potential investor base to a much larger audience by lowering the barriers to entry and making the process of buying and selling securities more accessible.
❎ — RealT is currently working on our solution for enabling liquid Real Estate. Stay tuned for our next announcement!