Blockchain-Based Crowdfunding: The Future of Property Development?

In Manhattan's East Village the world's first blockchain-based crowdfunded condominium has been established. The building is the very first major asset to be tokenized on the Ethereum blockchain.

The property — a completed 12 unit construction with 1,700 square feet units in the East Village — has recently been estimated at more than $30 million. Nothing special in regards to the strong real estate market in Manhattan. Yet, the entire building was crowdfunded through blockchain tokenization. Tokenization is the process of representing the ownership of real world assets digitally on a blockchain. This method of financing real estate avoids unruly pressure of traditional bank financing, making project development more stable for the project and all of the stakeholders. Tokens represent the condo unit’s debt and can be traded as private security.

The two Brooklyn-based companies Propellr and Fluidity partnered up to offer products and services for the creation, distribution, and transfer of digital securities. They claim that their method could depict a better alternative for the project and investors. Conventional security structures and issuance frameworks have not evolved in a long time. With the usage of blockchain technology, a transparent and trustless ecosystem can start to solve the information asymmetry that hinders the market’s potential for liquidity.

Maybe this method truly is paving the way for a new forefront in real estate development. As Stephen McKeon, a finance professor at University of Oregon, says: “One day you might be able to buy $10 of a single commercial real estate asset like the Empire State Building, or invest $100 in the development of a LEED-certified housing project.”