Property tokenization: what is it and why is it needed?
What is tokenization?
Tokenization is a conditional division of any property, an asset into digital parts, which confirm the ownership of a certain part of the asset. By tokenizing real estate, you divide it into any number of parts, each of which is a share in this real estate.
A token can act as a fraction of anything, any object that can be split. And, in this regard, it is the most effective tool, since universal tokenization will get rid of a large number of actions taken to acquire property.
Benefits of tokenization
Universal tokenization will simplify the investment process tenfold and, thereby, attract more investments.
The advantage of tokenization is primarily liquidity, and specifically, the acceleration of the implementation of purchase and sale transactions. At the moment, the acquisition of real estate is accompanied by a lot of actions taken by the parties to complete this transaction. Investors, wishing to preserve and increase their investments, carry out a comprehensive check of the property, attract third parties for this, which increases the timing of the transaction.
The second advantage follows from the first, namely, the transparency of the transaction. All information about the property is contained in the token, where you can track all changes to the token, its owner is indicated, and the token is unique, which makes it impossible to double sale or clone the token.
Then, transactions with tokenized property on the blockchain are safe. Distributed ledger technology excludes any opportunity for anyone to influence the blockchain. From here, the owner of the token can be confident in the safety of their asset.
Based on the foregoing, we get the immutability of the token, since after the transaction, the transaction in the blockchain, the corresponding record cannot be changed. The immutability of the token gives the investor a clear understanding that any falsification by potential fraudsters is impossible.
Legal aspects of tokenization
Speaking about the technical implementation of the transfer of ownership by purchasing a token, one should not forget about the legal side of this issue. Any tokenization must first of all comply with the rules of law. At the moment, the transfer of ownership simultaneously with the purchase of a token is not legally regulated. Therefore, additional regulation of these legal relations is necessary. At the moment, as a solution to the problem, namely the transfer of ownership of the original object together with the acquisition of the token, firstly, the blockchain documentation developed by the Terms and Conditions, where the transfer of exclusive and other rights will be prescribed when purchasing NFT. Also, a potential solution to the problem could be regulation through a smart contract, namely, a smart contract must contain all the conditions for the transfer of ownership.
Thus, universal tokenization is currently an extremely promising line of business, but this requires proper legal regulation. If you have any questions or need help, the lawyers of A4 Law Firm will assist you in this matter.
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