What Are Property Tokens in a nutshell?

A Cash Flow Generated by Real Estate and Backed by Real World Assets

Introduction

As the decentralized finance (DeFi) space grows, so does the revolutionization of traditional markets. One such transformation is the tokenization of real estate through non-fungible tokens (NFTs). To appreciate this transformation, let's unpack the concept behind NFTs and how tokenization works.

The first use case of NFTs

At present, NFTs are primarily linked with digital art, collectibles, and in-game assets. The essential concept of NFTs is that having one in your digital wallet verifies and displays ownership of an image (data recorded on-chain), be it static or dynamic. This has led users towards a new form of digital ownership, where storing a token in a wallet signifies ownership of the metadata recorded within it.

Interesting fact, Digital artist Mike Winklemann, also known as “Beeple,” created the notable NFT “EVERYDAYS: The First 5000 Days” from 5,000 daily drawings, which sold for a record $69.3 million at Christie's auction in 2021.

However, the scope of possibilities with NFTs extends far beyond digital art and is considerably broader. An NFT isn't merely about the attached image; it can represent any type of data attached to it and can be updated over time. This includes mutable, nested, or composable NFTs. 

How NFTs Can be Utilized in Real Estate? Property Tokens

Contrary to other digital assets or cryptocurrencies like Bitcoin and Ethereum, which are fungible (each token carries the same functionality and utility and can be replaced with each other), NFTs are non-fungible or unique, with each one differing from the others. The non-fungible feature allows to create unique digital assets representing a particular metadata (such ownership, location, type of accommodation or basically any data recorded).

Asset tokenization refers to the concept of leveraging smart contract and blockchain technology to embody ownership or rights to an asset (or liability) in a tradable, on-chain token.

In regards to real world assets (RWAs), asset tokenization transforms offchain assets into a token format. This process has innate efficiencies in storing, updating and transferring assets amongst multiple parties. Furthermore, it simplifies creating liquid markets around these assets.

The path to tokenization varies widely depending on the nature of the asset. Assets like cash are pure digital and need a bridge between traditional systems and blockchain networks. Other assets, like gold, demand a third-party custodian to store the physical asset, ensuring that each token represents a specific amount of the stored asset. 

The Role of NFTs in Real World Assets

NFTs are particularly suitable for unique assets that can't be entirely represented by fungible tokens. Consider tokenized real estate, for instance. Each property is unique in terms of size, age, location, and other characteristics.

Most importantly, by utilizing blockchain, we process data (such as rental distributions, market appreciation, management fees), record it on a blockchain, subdividing it into a certain number of Property Tokens and distribute amongst holders within the dEquity app.

Owning one of these Property Tokens and storing it in a digital wallet represents digital ownership of a portion of an apartment that gives users access to earning interest from rental fees.

At dEquity, we are currently focused on the Miami real estate market. Long-term rental of residential apartments, particularly prevalent in Miami, is well-regulated, overseen by shareholders, and managed by third parties under maintenance contracts.

This provides a strong foundation for Real World Assets (RWA) use cases. In the ever-evolving landscape of blockchain and digital assets, NFTs and asset tokenization redefine how we perceive ownership and trade. It's not just a technological evolution; it's a shift in how we relate to and interact with the assets that power our economies.

About dEquity

A platform where income-producing real estate is just a few clicks away! Starting at just $100, we provide everyone the chance to experience the benefits of owning real estate-backed assets, such as ABC (Assets-Backed Crypto), offering passive income, inflation hedge and market appreciation.

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