SolidBlock CMO Yael Tamar recently sat down with the hosts of the Bad Crypto podcast and chat about what drew her to blockchain, and specifically, to applications of blockchain in real estate. You can listen to the whole podcast at the Bad Crypto site, but we wanted to share just a few highlights that underscore what SolidBlock is about – and the potential behind security tokens that drives all our business activities.
What was the vision that initially drew you to blockchain?
I used to do real estate back in the day. I was working for a fund and doing funds and trading and all that good stuff for Wall Street and so on.
I always had the idea that this market was not open enough. It’s not democratized, it’s very complex, it’s very slow. Yet everybody’s just dream seems to be you know, I want to I want to kind of move on to the next level.
The ground floor, is investing in real estate. So that’s the dream. So I wanted to kind of democratize this space, and blockchain seems to be perfect for it.
The real estate space, in general, is like a slow moving animal, like an elephant. It’s big, it’s massive, and it walks slowly. What blockchain does for this space is turns this elephant into a cheetah. The fastest animal on the planet.
There are all kinds of things that slow down a transaction: intermediaries, brokers, all kinds of all kinds of things, especially if you’re doing it internationally. If you want to buy an apartment in Amsterdam, it’s going to be tough.
With blockchain, you can create a land registry, provide notary services and verification of ownership; payment transfers, obviously. Blockchain enables smart contracts that allow you to buy a piece of real estate, either a fraction or all of it. And smart contracts facilitate escrow, simplifying the entire process.
When you talk about democratization, what really powerful use cases stand out for doing good?
Somaliland is a small country next to Somalia that actually split off from Somalia 20 years ago, they’re self-operating, democratic, but nobody’s recognized them, to this day.
What we’re doing there is creating a consortium to build a real estate land registry, which is crucial there, because this little country of 4 million people doesn’t even have paper money.
They don’t have financial infrastructure, banking is a disaster. So we want to come in and start by establishing who owns pieces of land, because if you don’t know who owns pieces of land, then conflicts break out. Imagine if you couldn’t prove that your house was yours!
We’re establishing cooperation with the government there to create a blockchain-based land registry, and also a decentralized blockchain-based ID for people, because many of them don’t have birth certificates to prove who’s who.
What are some of the factors holding tokenization back in other countries?
Well, SolidBlock did an amazing project, a smart contract for the St. Regis Hotel, a Marriott brand in Aspen, Colorado. And they raised $18 million. It was the first commercial real estate project that had a security token offering (STO) and enabled fractional investment in real estate.
But that project, specifically, was done through Regulation D, exemption 506, which basically allows you only to market this product to accredited investors. So it doesn’t really go along with the vision that I described earlier, where we have an average Joe investing in, say, the Chrysler Building. But at the moment, this is the only regulation that allows allows to issue security tokens, blockchain-based security tokens in the US.
That’s not to say that the deal wasn’t groundbreaking in other ways. Indiegogo participated in this deal, and they offered it to investors within their corporate investment fund.
And there were accredited investors from all over the world. So it enabled global exposure of the product, which is fantastic, and one of the major advantages. It also enabled liquidity, so after a lockup period of a year, which again is a stipulation of Regulation D, they will be able to potentially trade these assets.
There’s also a little cool off towards blockchain because of the association with the crypto market. But I think we’re going to come back to it and and really implement blockchain in most facets of our society. I think that most people, and most governments, already realize the potential of blockchain.
So you still believe in the potential despite recent setbacks in regulation and the courts?
Absolutely. Here’s another great example.
Let’s imagine there’s an area where you want to build a new school, a new park, a new skating rink facility, maybe one that will actually generate income.
So technically, you could get the citizens, the local residents, to put the money together using this tokenization approach, and actually get that built, then receive the profits from that asset.
So potentially, I think that’s what we’re going to be seeing within the next hopefully three to five years, that residents themselves will be able to do this. And that, in turn, will increase the care they put into living there, maybe it will create a more stable environment. We’re working with some municipalities here in Israel to apply this model to creating sports facilities.
Up until now, the model was selling lottery tickets, and using part of the lottery profit to build these facilities. This isn’t a sustainable model, making so many people unhappy and depending on these lottery sales. Instead, just let them invest directly into these facilities. If I could say, “Hey, I want to own part of the stadium, that would be pretty cool.”
Feeling inspired? Check out the full recording at the Bad Crypto podcast and let us know what you think about all these developments and the future of tokenization in the comments.