Bringing DeFi Features to Tokenized Real Estate
Real estate tokenization, the process by which real estate assets are represented by tokens on the blockchain, has the potential to revolutionize real estate investment. One of the primary advantages of tokenization over other forms of fractional real estate investment is the fully liquid nature of the investment — shares of real estate can be bought, sold, traded, or other utilized as would any other token on the blockchain.
As the DeFi landscape has matured over time, we have seen a number of components of traditional finance find their way into the world of cryptocurrency — loan platforms, ETFs, leveraged trading, futures, and insurance, just to name a few. As of now, there are limited opportunities to leverage these features for security tokens. Landshare aims to solve this by providing investors with DeFi features centered around Landshare Asset Tokens.
Asset Token Loans
Many DeFi veterans are familiar with decentralized loan platforms such as Compound and Venus. These platforms allow users to act as lenders or borrowers, creating a fully decentralized loan platform. However, these platforms are currently not equipped to accommodate security tokens.
Landshare intends to offer the ability to temporarily exchange asset tokens for a percentage of their value in BUSD. This offers Asset Token holders the ability to access liquid funds without selling their Asset Tokens. Borrowers accumulate LAND interest over time that must be repaid when purchasing the asset tokens back. All LAND interested accrued by the platform is burned.
This feature gives Asset Tokens holders the ability to raise capital without the need to sell their asset tokens and without any loss of rental income. One common use of this feature would be gaining BUSD for staking or trading in between rental payouts.
Asset Token Funds
A fund provides exposure to a number of assets with a single investment — spreading risk between multiple assets and simplifying the decision making process. Rather than buying a number of different coins individually, a fund represents the total value of all coins within the fund. A number of crypto ETF platforms, including our friends at BiShares, offer crypto-based funds or “baskets” which provide exposure to a number of assets represented by one token.
As the Landshare platform develops and a number of assets are tokenized, we intend to provide an asset token fund, providing exposure to a number of properties in a single investment. These funds will consist of bought back or unsold tokens held by the platform. The rental shares of all of these properties will be pooled and paid out to the investors of the fund.
Users can purchase a share of the asset fund represented by a token. The fund token’s value is collateralized by the Asset Tokens in the fund. The fund tokens can also be used as collateral in the loan feature of the Landshare platform. Fund Tokens, like Tokenized Assets, will be purchased with a combination of BUSD and LAND.
Auto compounding, or “yield-optimizing” platforms such as Auto Farm and Beefy Finance allow users to automatically compound their yield farming rewards, increasing returns and optimizing investments.
Landshare intends to provide the ability to auto-compound the rental yields of a property, automatically buying more Asset Tokens which will, in turn, increase rental yields over time and asset exposure over time.
In order to realize the full potential of asset tokenization and real estate on the blockchain, the same features provided to regular cryptocurrencies must be offered for Asset Tokens. Landshare’s vision of bringing real estate to the blockchain includes offering features found in the DeFi ecosystem to holders of asset tokens. This features laid out in this article are just the beginning — the potential use cases for tokenized real estate are as great as the potential for cryptocurrencies as a whole.