Real Estate and Web3 / Mar 19, 2023

Exploring the Potential of Real Estate Tokenization & Digital Twins

As a result of blockchain’s introduction to the real estate industry, the sector is undergoing a dramatic transformation. It has made it easier for people to hold property in the digital realm, allowing those who had the financial means to do so before to participate while masking problems such as a lack of trust and transparency.

Prospects of Real Estate Tokenization

Real estate tokenization has surfaced as an alternative investment vehicle in recent years, and it offers benefits to real estate issuers and investors. The tokenization of real estate is the process of converting the value of real estate into a digital token that is then kept on a blockchain. This opens the door for digital ownership and transfer of the real estate. According to data provided by Atlas One, a digital securities business located in Canada, the real estate industry now accounts for around 40% of the market for digital securities, approximately two hundred million dollars.

Under the conventional system, selling real estate is usually a hassle. Prior to the advent of digital real estate ownership, the liquidity issue afflicted real estate and gave investors pain. Due to liquidity issues, many investors were simply unprepared to engage in the real estate market. To increase the value of any asset, its lack of liquidity must be eliminated, and tokenization has offered the means to do so. The fractionalization of real estate during tokenization increases its liquidity. Instead of selling the whole property at once, the owners of tokenized sections may swiftly sell their tokens, resulting in a speedy transfer of ownership.

Real estate is often seen as an investment opportunity for affluent individuals. Conversely, tokenization has enabled small-scale investors to participate in real estate. The high price of real estate assets sometimes discourages investors with limited financial resources from entering the market.

Exploring the Advent of Digital Building Twins

It is anticipated that twins will be the next significant step towards a digital construction and built environment. This will make it possible to optimize the performance of built assets in real time. It is believed that the use of building information modeling (BIM), which refers to the consistent utilization of digital building models over the whole of the facility’s lifespan once it has been constructed, would serve as the foundation for this change.

In contrast to digital twins, most digital building models do not yet include any type of automatic data interchange between the actual thing and the digital object. Nonetheless, when the Internet of Things (IoT) is connected to BIM, the digital twin may be updated to reflect changes in the building’s actual condition. Furthermore, users can gather sophisticated data from various sources at scale and model future effects with the help of urban digital twins (e.g. carbon emissions, temperatures, energy usage, pedestrian flow, traffic, and financial revenue).

Indicating the proliferation of this technological breakthrough, the digital twin market was estimated at $3.1 billion in 2020 and some project that it will increase exponentially until 2026, reaching an estimated USD 48.2 billion1. In addition, by 2026, more than 500 cities’ day-to-day functioning will depend on digital twins. Cities will be able to save $280 billion in design and development expenditures because of the use of digital twins during the next five years.

Uncovering the Current Opportunities for Real Estate Investors

Nowadays, there are several avenues for those who want to leverage the potential of blockchain to enhance their real estate investments. This section will uncover some of the main enterprises that facilitate these services by discovering their differences and advantages.

  • Cityzenith

Citizyneth represents one of the available options for those who aim to create their own sets of twins. They can construct software tailored to meet their requirements through their Digital Twin Software Creation Kit. The Urban Digital Twin has a framework that uses graphs to represent the many relationships between its constituent parts, enabling various use cases to be analyzed and used when using the digital twin. Furthermore, it is possible to create programmes and share them with other users of SmartWorldOST.

Users may build their own server-side and client-side Python applications to automate processes, analyze your Urban Digital Twin, and build their own data products to better inform your decision-making. Besides, Cityzenith offers a network of service providers that can sell their goods and services through SmartWorldOSTM, including energy monitoring, traffic flow analysis, contact tracking, and other similar services.

  • Tokenizz

Provide shareholders and other equity stakeholders the opportunity to convert their equity capital into a security that is fractionalized, liquid, tradable, and leverageable. The security, also known as a security token offering or STO, may provide the stakeholders with the flexibility to keep control of the company and a portion of the ownership while also giving them the option to convert some or all of the equity into a token offering that can be traded and is liquid.

By transforming this illiquid stock into a vehicle that can be traded, Tokenizz boosts the asset’s value by establishing a liquidity premium while simultaneously enabling stakeholders to access capital that they may invest in other areas. This platform determines the property or assets that will be tokenized, considering the jurisdiction, the different categories of shareholders, and the restrictions that apply.

With Tokenizz, there is a wide range of choices, and the owner can tokenize the equity of a special purpose vehicle (SPV), a debenture, or another type of participation right, such as income or profit. Alternatively, the owner may choose not to tokenize any of these alternatives. Subsequently, the Blockchain protocol is chosen, the settings of the tokens are determined, and the KYC/AML is finalized.

  • Magma

Magma arises as a straightforward and facile Platform as a Service that allows you to experience a one-of-a-kind four-dimensional digital twin (3D Space + Time Model) of your building. This digital twin features the ability to record all the contractual and architectural documentation validated by the building’s stakeholders. By minting the Magma NFT’s, Magma generates a new digital asset for its owners, the digital twin token (DTT), and encourages all stakeholders to contribute to the platform by providing an incentive through token rewards.

In this context, the digital twin that Magma creates is a replica of your real-world structure but in the form of a computer model. The model in its basic (or rudimentary) form is  derived from a 3D boundary representation then layers can be added such as 3D scans for more realistic experiences, which can then be easily turned into BIM for even more connectivity. Stakeholders have the ability to manage objects to display relevant data or create smart contracts for predictive maintenance or operational management.

The Magma Index is obtained after reaching minting levels (representing elements of the building) by assessing the quality of the data provided, the ability to connect to digital services, the energy performance of the building, the recyclability amongst other criteria. When fully deployed the Magma model is a real-time transaction tool between owners, asset managers, verified service providers, and renters. The most advanced level of Magma enables users to build immersive experiences, either privately or within a metaverse. When these connections are made, Magma becomes the digital standard for real estate wealth management, giving increased liquidity for buildings, B2B and B2C transactions, and inheritances.

Consequently, the value of your model will grow, so it is possible to transform a building model into an indispensable digital asset that can be used as a documentation vault or a work management tool and to build a display by strategically integrating the model into smart contracts stored on a blockchain.

Bottom Line

Through the advent of blockchain, tokenization and digital twins, real estate property management becomes more agile, facilitates a streamlined collaboration between stakeholders, and provides an immutable and traceable data storage and interactive 3D viewer of the building.