The Singapore-based blockchain startup REIDAO announced their intention to create digital assets tied to real estate by leveraging DigixGlobal’s gold-backed DGX tokens.
REIDAO aims to digitize real estate ownership by giving investors the opportunity to purchase digital tokens that represent a share in a real estate investment. The digitization of property investing has many benefits over traditional real estate investment models.
Firstly, investors will no longer be required to invest a significant amount into one property. Instead, investors can purchase a range of digital tokens linked to different property and, thereby, diversify their real estate exposure into smaller holdings.
Secondly, digitizing real estate investment alleviates the real estate market’s biggest issue, which is illiquidity. Selling a property or a share in a property is a lengthy process due to the real estate market’s illiquidity. By holding digital tokens that represent shares in real estate, however, a comparatively liquid market can exist for these tokens potentially making property investing a liquid asset class for the first time.
Thirdly, since real estate investment through REIDAO will be set up as DAOs (Decentralized Autonomous Organizations) key issues, such as when to sell the entire property, for example, will be voted on by all token holders.
REIDAO aims to provide solutions to the three challenges mentioned above in the real estate investing space through digitizing and tokenizing property ownership by employing smart contracts functionalities on the Ethereum blockchain.
“The blockchain allows for the ’tokenisation’ of the real estate into tokens, which can be distributed to practically anyone and anywhere in the world to participate in the ownership of the real estate. The tokens are backed with the physical real estate. Hence the values are maintained by the underlying asset. It also involves the process of securely storing pertinent asset information onto an immutable distributed ledger. These tokens can then be traded in a trustless peer-to-peer (P2P) markets,” REIDAO states in its white paper.
Darvin Kurniawan, CEO, and co-founder of REIDAO stated:
"Token holders will be the legitimate owners of the said property. Any income derived from the property such as rental income will be distributed back to token holders. Because these are Ethereum-based ERC20 tokens, they are freely traded on the blockchain."
REIDAO identifies three potential use cases for digitized tokens linked to a property investment; a store of wealth and inheritance, collateral services, and secondary market transactions.
Through the digital tokenization of real investments, a property investment can be broken down into multiple fractional digital assets. Digitizing property ownership, in turn, makes the transfer of inheritance much easier than under the current scenario where legal ownership of a property is very fragmented, which can cause a deadlock situation among owners when one party inherits their share in the property.
The digital tokens can also potentially be used as collateral when acquiring new assets as they represent a share in a provable physical asset.
Furthermore, since the value of the digital tokens will increase as the value of the property increases, REIDAO will build an exchange that will allow investors to trade their tokens, creating a liquid secondary market for real estate investments.
REIDAO Partners with DigixGlobal to Use DGX as Stablecoin
For REIDAO to create tokens that represent digitized real estate ownership, the startup has decided to work with DigixGlobal to use its gold-backed digital stablecoin, Digix, which was designed to be used to link value to any digital asset.
REIDAO required a stablecoin to conduct fundraising and to safeguard investors against extreme currency fluctuations. After looking into several available stablecoin options, REIDAO decided to go with DigixGlobal’s DGX stablecoin.
"We considered many stablecoin options and decided that gold-backed DGX is our best option yet. We need something simple for our target users, so synthetic stablecoin will not work. With DGX we can now tell our users that on our platform we are using gold as our currency," Kurniawan said.
Digix's CEO, Kai Cheng Chng, stated, "We are happy to be able to support REIDAO in their fundraising effort for the properties. DGX was designed and built for that – for other decentralized applications to use it in their processes whenever a relatively stable value is desired."
DigixGlobal burst onto the scene in 2014 with the aim of being the “gold standard in peer-to-peer digital assets” by enabling investors to purchase physical gold, which is represented by gold-backed DGX tokens using bitcoin and Ethereum’s ether. This way, users can own, save and transact in a digital currency without volatility as the token’s value is linked to the price of gold. Furthermore, DigixGlobal enables startups that want to link a digital asset to a stablecoin to do so by linking their tokens to its gold-backed DGX coin as the case of REIDAO demonstrates.
REIDAO and Digix are both based in Singapore and are part of SGInnovate, a new Singapore government-owned organization that provides support to science and technology startups.
"We hope with SGInnovate's help, and the blockchain community here, we would be in a better position to introduce what we are building to the public. It is all about building an ecosystem together," added Cheng Chng.
With its new partnership with DigixGlobal in place, REIDAO has ambitious expansion plans for the future and the noble goal to allow anyone to invest in real estate including those who only possess a small amount of investable capital.
"As REIDAO grows, we will be listing multiple types of real estates from cities around the world, enabling you to diversify your investment to many regions that you traditionally would not have access to. Digitizing property ownership creates opportunities for anyone with any budget to invest in real estate," Kurniawan said.
By allowing small investors to purchase a share in property investments that they would otherwise not have access to, REIDAO is democratizing real estate investing. Another great example of how blockchain technology is decentralizing markets and making the investment world more accessible and democratic for everyone.