Imagine a world where you can own a fraction of a luxury apartment in New York, a piece of a famous artwork, or even a share of gold, all at the tip of your fingers. This is the essence of the tokenization revolution — which is reshaping finance and providing exciting opportunities for investors.

The Current State of Tokenized Assets

Tokenization represents the process of creating digital tokens that are linked to real-world reference assets. The key feature of tokenization is the potential for a legally enforceable ownership claim over the reference asset. As we’ve seen, this concept extends to various asset classes, from real estate to precious metals, and even traditional financial securities.

Let’s dive into this fascinating world and explore the potential costs and benefits of tokenization and gain an understanding of the market’s landscape.

The burgeoning tokenized market of RWA’s (real world assets) includes tokens issued by both decentralized protocols and traditional companies like Centrifuge and J.P. Morgan but with the majority of emerging applications being built on permissionless blockchain networks.

At LiquidProp, with our real estate marketplace being a first-to-market decentralized application for the everyday investor — allowing users of our platform to invest in fractional shares of rental properties in the U.S. that can be traded on a permissionless marketplace without affecting the underlying real-world asset — it’s important for us to stay informed about the latest happenings and keep our users up to date.

Potential Benefits of Tokenizing Diverse Reference Assets

First, let’s talk about how tokenization enables the creation of our own fractional real estate market.

Tokenization brings several advantages to real estate investors, primarily by introducing smart contracts. LiquidProp’s primary marketplace sells shares of properties at $100 that are issued as tokens to users who invest in the initial sale of a property. Tokens are digital representations of shares of property used to facilitate blockchain transactions, such as trading, through the execution of smart contracts.

Okay, wait. What is a smart contract?

• A smart contract is a contract that is written into the code of a blockchain and executes automatically when terms are met. Solana and a few other protocols can execute smart contracts, but some blockchains — notably Bitcoin — cannot.
• Think of a regular contract, such as a housing lease agreement. You pay rent in exchange for a place to live. If you don’t pay rent, you’ll be kicked out. If your lease is up and you no longer have a place to live, you stop paying rent. Regular contracts depend on humans to enforce the terms of the contract. Tenants and landlords monitor each other to be sure the other party fulfills their obligations of the lease.
• With a smart contract, however, that execution is hardcoded in software, and software determines when conditions are met. This allows people to build some really cool, efficient functionalities within decentralized applications, or dApps — like the LiquidProp platform.

Here is a brief list explaining the benefits of tokenization for LiquidProp’s users:

• Marketplace Creation: Sets the stage for our digital marketplace where shares of properties can be bought, sold, or traded
• Intermediary Reduction: Reduces the number of middlemen involved in real estate transactions
• Increased Liquidity: Enhances the liquidity of assets that are traditionally hard to sell quickly
• Lower Entry Barriers: Enables fractional ownership, allowing more people to invest with less capital
• Trust and Security: All transactions, documents, and contracts are stored on a public and digital, tamper-resistant distributed ledger
• Peer-to-Peer Efficiency: Transactions can occur directly between individuals — instantly
• Risk Diversification: Spread risk across multiple properties and reallocate on your terms
• Micro-payments for Rent: Cost-effective micro-payments for rental income distribution

Tokenization is not limited to a specific asset class. It encompasses a wide range of reference assets, including:

1. Agricultural Commodities:

• SOYA, CORA, and WHEA tokens represent soybeans, corn, and wheat, respectively, in a pilot project by Santander and Agrotoken in Argentina. These tokens are designed to be robust enough for collateral uses.

2. Precious Metals:

• Tokenized gold boasts a market capitalization of approximately $1 billion as of May 2023, with Pax Gold (PAXG) and Tether Gold (XAUt) dominating this market. These tokens are redeemable for underlying gold, albeit subject to specific restrictions and fees.

3. Real Estate:

• LiquidProp tokenizes residential properties, allowing fractional ownership through membership interests in LLCs. This innovation is aimed at domestic and international investors looking to invest in US real estate.

4. Financial Securities:

• Tokenized stocks, bonds, and ETFs provide investors with exposure to traditional financial assets. These tokens trade 24/7 and offer unique features, such as programmability and composability.

Governments worldwide are closely monitoring this transformative trend, and aim to strike a balance between encouraging innovation and safeguarding investor interests.

Below we will summarize the Federal Reserve Board’s current perspective on the tokenized market and touch on J.P. Morgan’s recent achievements with their Tokenized Collateral Network.

Financial Stability Implications of Tokenization

The Federal Reserve’s research paper explores the interconnections between traditional finance and tokenization. It discusses the potential for volatility from crypto asset markets to transmit to the markets for the crypto token’s reference assets. The Fed believes that at sufficient scale, a fire-sale of tokenized assets could trigger ripple effects in traditional financial markets, leading to price dislocations and increased volatility.

Another concern raised in the research paper is the risk of runs on the issuer of tokenized assets, which could mirror the challenges faced by collateralized stablecoins.

Timing mismatches in trading hours between crypto and traditional markets are also highlighted as a potential source of unpredictability during stress events. The research paper suggests that greater liquidity in crypto markets might improve liquidity in the markets for the underlying reference assets, but it could also transmit volatility from crypto markets to traditional financial markets.

Furthermore, as tokenizations grow in size and scale, traditional financial institutions may become more exposed to crypto asset markets, either through direct ownership of tokenized assets or by using tokens as collateral for other financial instruments. This increased exposure may introduce new interconnections between the digital and traditional financial systems.

J.P. Morgan Achieves Milestone with Tokenized Collateral Network

J.P. Morgan Chase recently announced a significant milestone achieved through its Tokenized Collateral Network (TCN). The network successfully facilitated its first collateral settlement for an over-the-counter derivative transaction for a live client. This development signals a significant step in the world of tokenized assets and blockchain technology.

BlackRock and Barclays are the pioneering clients to go live on TCN, operating on J.P. Morgan’s Onyx Digital Assets platform, a private blockchain tailored for tokenized asset movements and collateral settlements.

Ed Bond, J.P. Morgan’s Head of Trading Services, commended this groundbreaking development, stating, “The Tokenized Collateral Network is a significant investment in the future of collateral markets. This first transaction with BlackRock and Barclays demonstrates the power of tokenized assets, particularly in a collateral setting. MMFs can now be mobilized and utilized in a more efficient way, unlocking new pools of liquidity to be used for margining.”

This achievement underscores J.P. Morgan’s commitment to embracing blockchain and tokenization in the realm of traditional finance. As of April, the bank had already processed nearly $700 billion in short-term loan transactions via the Onyx platform, a permissioned version of the Ethereum blockchain.

Tyrone Lobban, Onyx Program Head, shared a compelling insight, “We think that tokenization is a killer app for traditional finance. If you think about private markets — private credit, private equity, and private real estate — they are pretty much double the size of public markets, but many orders of magnitude less liquid, so there’s this huge disparity.”

In the broader context of the financial industry, this achievement by J.P. Morgan reflects the growing recognition of the transformative potential of blockchain technology and tokenization, as the sector continues to explore the possibilities offered by distributed ledger technology.

With the financial industry moving closer to unlocking the full potential of blockchain technology, Daniel Field, Global Head of Blockchain at UST, expressed, “There’s a huge global trend going on right now into exploring the intricacies, complexities, difficulties, and benefits of leveraging blockchain technology for the financial system.”

On a similar note, Mastercard Chief Digital Officer Jorn Lambert emphasized, “The true intrinsic value of blockchain, which is around programmability of transactions, immutability of transactions, and the ability to do delivery versus payment and always-on types of payments, has yet to be unlocked.” This suggests that the financial world is on the cusp of a significant transformation in how transactions are conducted and assets are managed.

In conclusion, it’s essential to acknowledge that the tokenization landscape is still in its early stages. As the market continues to evolve — regulators, financial institutions, and investors will need to carefully navigate the risks and benefits of this transformative financial innovation.

J.P. Morgan’s recent achievement underscores the increasing adoption and utilization of blockchain and tokenization in the world of traditional finance, signaling an evolving landscape where new forms of assets are created and financial processes become more efficient.

Stay tuned for more updates on the exciting world of tokenization!

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Blockchain technology has long been hailed as a game-changer in the world of finance and payments. Yet, for years, the challenge of scaling these networks to support secure, high-throughput, and low-cost transactions has persisted.

In the last year, Visa has closely monitored the technical innovations in blockchain scalability, and they’re increasingly optimistic about the progress made on the Solana blockchain.

Enough so, that earlier this month Visa expanded their stablecoin settlement pilot to Solana to see if the blockchain can support the demands of modern corporate treasury operations — and published an article explaining their decision making.

Visa is looking to harness the power of blockchain networks to enhance their own existing infrastructure and create new products for commerce and money movement.

The Solana blockchain network has caught their attention for several compelling reasons — below is a summary of their analysis — where they come to the same conclusions that motivated us to build LiquidProp on Solana in the first place.

Transaction Throughput

As a global payments network, Visa can execute over 65,000 transactions per second. Solana, while not yet at Visa’s scale, averages 400 user-generated transactions per second and can surge to over 4,000 during peak demand. This impressive throughput makes Solana a viable candidate for testing and piloting payment use cases, in contrast to Ethereum’s 12 TPS and Bitcoin’s 7 TPS.

Parallel Transaction Processing

Solana’s unique architecture allows for parallel transaction processing. Transactions impacting separate accounts can be executed simultaneously, enhancing network efficiency. This parallel execution extends to smart contracts, or “programs,” enabling non-conflicting transactions to run concurrently. Unlike Ethereum’s single-threaded model, Solana’s multi-threaded approach prevents congestion in one part of the network from affecting overall performance.

Low and Predictable Transaction Costs

Solana stands out with its affordable and predictable transaction fees, usually less than $0.001. In contrast, Bitcoin and Ethereum experience fluctuating fees driven by transaction demand. Predictable costs make Solana an attractive network for exploring efficiencies and cost savings in payment operations.

Cost Predictability through Localized Fee Markets

Solana’s localized fee market is a novel approach. It allows transactions that don’t overlap to execute on separate threads, akin to vehicles on separate roads. This design ensures that congestion in one account doesn’t impact others, creating a fee market that responds to specific use case demands. This stability contrasts with networks where congestion can lead to soaring fees for all users.

Transaction Finality

Solana targets rapid transaction finality with a slot time of 400 milliseconds, compared to Ethereum’s sometimes lengthy wait times during congestion. Solana uses “optimistic confirmation” to achieve finality quickly, considering a block finalized if validators representing more than two-thirds of delegated stake validators have voted on it. This mechanism dramatically reduces transaction confirmation times.

Availability

Availability is crucial for a payments network. Solana boasts an impressive 1,893 active validators, along with 925 additional nodes. A high number of nodes enhances network resilience and redundancy, ensuring continuous operation, even in the face of technical challenges. Solana’s diverse node geography and infrastructure-provider distribution further fortify its stability.

Multiple Validator Clients

Solana is one of the few chains with multiple independent validator clients, reducing the risk of a single software flaw crippling the network. This diversity enhances network stability and performance, as evidenced by the introduction of the Firedancer validator client, capable of achieving 600,000 TPS.

Meeting Modern Demands

Solana’s technological advantages, including high throughput, low costs, and resiliency, make it an enticing platform for payments. Visa’s decision to expand its stablecoin settlement pilot to include Solana demonstrates their confidence in its capabilities to meet the demands of modern corporate treasury operations.

In conclusion, Visa’s exploration of blockchain scalability has led them to Solana, a network offering remarkable speed, scalability, and low costs. Solana’s innovative features, combined with its transaction predictability and rapid finality, position it as a formidable candidate for revolutionizing payment systems.

As blockchain technology continues to evolve, Solana stands at the forefront of the payments ecosystem, promising a more efficient and accessible future for global commerce. The future of payments is evolving, and Solana is leading the way.

It’s encouraging for us at LiquidProp to see players like Visa coming onto the scene — less than a month before our platform goes live — reassuring us that we are indeed in the right place, at the right time.

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A recent survey of over 5,000 people conducted by CNBC and Momentive unearthed some interesting insights into the modern investor’s mindset. It found that 23% of respondents believed real estate to be the best way to increase personal wealth, while 39% saw it as the ideal method for earning passive income. Yet, their actions did not reflect these beliefs. Instead, 21% were investing in individual stocks, 13% in crypto, and only 12% in real estate.

So, why is there such a dissonance between belief and action when it comes to real estate investment?

The answer lies in the hurdles that modern-day investors face in accessing the real estate market. A combination of skyrocketing property prices, lack of funds, and a shift in lifestyle has created a barrier to entry for many would-be investors. The typical responsibilities associated with property ownership, such as property management and long-term mortgages, no longer align with the increasingly fluid lifestyles of the modern day investor.

In a world where time is a valuable asset and geographical flexibility is increasingly important, these traditional investment methods seem outdated. It’s clear that there is a pressing need for investment methods that adapt to this new wave of investors. They seek accessibility, ease, and liquidity in their investments, much like they find in stocks and cryptocurrencies.

This is where LiquidProp steps in, endeavoring to redefine real estate investing in a way that caters to the evolving investor profile. Our aim is to make real estate investing as convenient and accessible as possible, meeting the needs and preferences of the modern investor.

LiquidProp is revolutionizing the way people invest in real estate by providing a platform where investors can get the financial benefits of real estate without the headaches and hurdles of property ownership. We are not only increasing accessibility to this profitable asset class but also providing the much-needed liquidity that was previously lacking.

The goal is to bridge the gap between belief and action, allowing more people to harness the power of real estate investment, irrespective of their financial capacity or lifestyle preferences. This aligns with our mission to democratize real estate investing and help investors unlock wealth and create passive income streams.

As the modern investment landscape continues to evolve, so must the opportunities we offer investors. By making real estate investing more accessible and in tune with modern lifestyles, LiquidProp is providing a solution to a problem many didn’t even realize they had. We are empowering the modern investor to take control of their financial future in a way that fits their lifestyle and goals.

In conclusion, the dissonance between investors’ beliefs and actions when it comes to real estate investment points to a deeper issue — the inaccessibility of traditional real estate investing methods. It is clear that the future of real estate investing lies in adaptability, accessibility, and understanding the needs of the modern investor. Here at LiquidProp, we are proud to be leading the charge in redefining the real estate investing landscape.

Investment methods must evolve to reflect the needs and lifestyles of modern-day investors. The mission of LiquidProp is to redefine real estate investment to provide greater accessibility, ease, and liquidity, allowing more people to benefit from this lucrative asset class.

Let’s redefine real estate investing together.

Based on the results of a survey conducted among 5122 participants, focusing on Millennials and Gen Z investors.

We are ecstatic to announce the birth of LiquidProp — a revolutionary platform poised to liquify the process of real estate investing by bridging real-world assets on-chain.

LiquidProp is the product of myself and my co-founder Odai Ammar, who I had the pleasure of meeting at a Bitcoin meetup back in the day. Our shared background in real estate and startups, coupled with a fervent passion for the untapped potential of blockchain, sparked an immediate connection. That chance encounter marked the beginning of a dynamic partnership and the inception of a transformative idea: LiquidProp.

Over the past three months, Odai and I have been hard at work in the Solana ecosystem office in Chicago, turning our vision into reality. The Solana ecosystem’s vibrant energy and innovative spirit have fueled our determination and inspired us to build a solution that enhances access, transparency, and liquidity in real estate investing.

So, what is LiquidProp all about?

Our mission is to unlock access to the wealth-building power of real estate by reducing barriers to entry and enabling the benefits of property investing — minus the hassles. With LiquidProp, anyone, from anywhere in the world, can effortlessly invest in rental properties.

At its core, LiquidProp aims to unleash the full power of real estate. By bridging assets and transactions on-chain, we’re not just eliminating friction in the typical real estate investment process — we’re revolutionizing it.

As we embark on this exciting journey, we invite you to join us. Your support will fuel our drive to redefine the real estate investment landscape and bring our vision to life. Stay updated on our progress, be among the first to access our platform, and become part of the transformative journey that LiquidProp promises to be.

We envision a future where real estate investing is as simple as buying stocks or cryptocurrencies–a world where fractional ownership, instant liquidity, and cross-border investments become the norm. We’d love to have you along for the ride.

To join us, visit our website at www.liquidprop.xyz and sign up for our waitlist.

Onward and upward,

Samer Elshafei and Odai Ammar