Pontem Network is a product studio building for the Aptos blockchain; it is known for its popular Aptos wallet and the Liquidswap DEXI. To mark the new partnership with Propbase, one of the first RWA projects on Aptos, Pontem’s Chief Growth Officer Alejo Pinto hosted a Twitter Space with its CEO Kevin Goos. The experts discussed the burgeoning tokenized real estate industry and the future of real world assets on-chain.


The three problems addressed by RWA tokenization: capital requirements, fees, and liquidity


Goos and Pinto first discussed the trend of real world asset (RWA) tokenization, which has been a hot topic in the crypto space for the last six to eight months. Propbase itself is a tokenized fractional real estate platform, where users can buy and sell shares in properties in Southeast Asia. Goos summarized RWA tokenization this way:


“Real world asset tokenization is simply creating a representation of the physical asset on-chain. We're bringing real world assets, such as a hotel, a luxury car, stocks etc. on-chain. The representation of that asset on-chain can be displayed through smart contract interaction, through a token.”

Pontem’s Alejo Pinto then asked which real-life problems can be solved through real estate tokenization. Goos named three: high barriers to entry, fees, and liquidity.

  1. High barriers to entry. Investing in real estate has traditionally been a time consuming process and required a lot of capital. But now through fractional ownership and tokenization, capital requirements become less of a barrier, making the total addressable market (TAM) for this type of investments much larger.
  2. High fees. When you put together traditional brokerage fees, escrow fees, and everything else, you're looking at 8 to 10% of the total property value, which is “insane”, according to Goos.
  3. Liquidity. When investing in real estate assets the traditional way, one has to wait for 7 or 10 years for the asset to appreciate enough to make selling it practicable, because of high transaction fees. By contrast, RWA platforms make it possible to spend as little as $1,000 or even $100 on a fraction of a property, purchase it within 5 minutes, and sell it the next day if one so desires.


Why Southeast Asia could become an RWA hotspot


Pontem CGO and Propbase CEO also discussed what makes Southeast Asia a promising market for RWA platforms. Apart from being home to 650 million people, the region boasts crypto adoption rates that are double the rest of the world. For instance, Vietnam has 20% market penetration (meaning 20% of the population uses crypto) and Singapore has 15%.


Politics and economy play a role, too. Thailand has a pro-crypto prime minister who recently announced a $1 billion tax break for all investment tokens. Additionally, the fast growth of Southeast Asian cities like Singapore, Ho Chi Minh City, and Bangkok creates steady rental incomes and value appreciation.


Alejo Pinto next addressed the practicalities of bringing a real world asset onto the blockchain. Goos broke down the process in detail as it works at Propbase:

  1. Partnering up with qualified real estate property developers who are building commercial or residential assets, such as condos, large housing developments, hotels, or resorts, and who have a good track record - 25 years in some cases.
  2. Working with the partner’s legal team to ensure compliance. Real estate companies are often publicly traded and subject to strict regulatory requirements. Their properties can’t be fractionized and listed on an RWA platform by just any user - only by the platform’s team itself.
  3. Qualifying the underlying asset in terms of third party due diligence (such as a report by a reputable auditing firm, but also in terms of adequate pricing and attractiveness to on-chain investors.
  4. Placing the asset into a legal entity called an SPV (Special Purpose Vehicle), which retains ownership of the property. The RWA platform then securely stores all of the documents on IPFS with a hash directly tied to the smart contracts of that asset’s tokens. This gives investors proof that their tokens constitute shares within the SPV.


Accessibility: can tokenized real estate become as standard as stablecoins?


Pontem Network CGO Alejo Pinto compared real estate tokenization to stablecoins, which were the first example of a real world asset brought on-chain. He lauded the RWA sector for improving “access to global markets, allowing users all over the world to not be locked out of financial institutions, and lowering barriers for entry and fees.”


Goos responded that increasing accessibility to real estate investment globally is indeed the main goal of RWA platforms like Propbase: getting “as many participants to invest in real estate is just an inherently good thing.” He went on to explain the benefits of real estate investment and how tokenization widens access:


  1. Real estate is the most proven asset class - perhaps together with Bitcoin.

  2. It’s a good long-term inflation hedge: a property which was valued at a few thousand dollars 80 years ago can now be worth a few million dollars.

  3. Real estate yields are qualified and accountable - thanks to the presence of reputable management entities that operate globally.


Tokenizing real estate, stocks, and other types of RWA is complex from both the technical and regulatory points of view. And yet, real-world assets are promising to become an important part of the next crypto cycle, with some tokens of RWA platforms already trading on DEXes like Liquidswap by Pontem Network.


The complete podcast is available on Spotify.


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