Digishares The Real Estate Tokenization System
The discovery of crypto currencies has often gone hand in hand with the discovery of investment methods and the learning of financial culture. This discovery came mainly through trading and investing but we realize that there are other pillars such as real estate or entrepreneurship.
Today we make cryptocurrency and real estate interact since I present to you Digishares, a real estate tokenization system on the Ethereum platform
What is Digishares?
Digishares is a project to tokenize the ownership of real estate in the United States in order to democratize investment in this sector.
In fact, it basically makes it possible to become an owner for a few hundred euros, without borrowing. This happens through Ethereum tokens and companies that hold this real estate. The owners of the tokens do not directly share the property, but a company which owns it.
In France it is mainly SCPIs, as carried out by the Equisafe project that I presented this summer, and in the United States, it is LLC.
The tokens thus used, the Digishares Tokens, are simply ERC-20. Very standard tokens in the ecosystem. The latter each represent a part of the company knowing that the company only has possession of the real estate in question. We can extrapolate by presenting these tokens as effectively a part of the building. But if you are the co-owner of the property.
Digishares takes care
You don’t have to worry about issues related to rental management since Digishares takes care of it. Indeed the company offers its services related to rental management such as maintenance of houses as well as the recovery of rents.
Digishares also wants to solve the real estate market liquidity problem mainly by increasing the number of potential buyers. It is indeed easier to find a hundred investors at several thousand dollars than a single larger investor.
But tokenization also helps reduce friction when investing in real estate. Indeed, investors no longer have the obligation to go through notaries, for example, since it is the Digishares team that deals with these issues.
Today the company offers real estate located in the United States available for investment for citizens of many countries. Including Europe. Digishares wishes to develop and offer these customers European real estate from the year 2020.
Requiring in particular greater administrative rigor. In addition to benefiting from a larger catalog, customers will benefit from European protections in terms of investments and the fight against money laundering.
Facilitate real estate investment
Digishares wishes to reduce the difficulties associated with real estate investment. Although sera provide extremely powerful leverage this type of investment generally requires access to a mortgage. And these are not so easy to obtain depending on your status: students, entrepreneurs freelancers or employees on fixed-term contracts struggle to obtain mortgages.
Reducing the entry ticket to this type of investment allows people who have not had the opportunity to participate. To do so until now. Even on smaller amounts it can be formative and can help develop passive income in a new way.
Buying Digishares tokens with its ethers facilitated the investment, but removed this leverage effect.
The DeFi ecosystem could tell us otherwise, using lending systems such as Maker DAO for example. You block your ethers in the protocol and get Dai with which you invest without using your original funds. These decentralized loans are also easier to get if you have enough Ether for collateral.
Today the costs related to these loans as well as the need to over-guarantee its loan makes the solution rather unattractive. On the other hand, the systems are only improving and it will be possible to see these mechanisms develop in the future even if already used by certain users.
How does tokenization work?
We have seen that Digishares allows us to buy Ethereum tokens representing shares of a company that owns real estate. This way of proceeding is called the tokenization of the asset in question that is to say that a token directly represents an underlying asset and their values are fixed in relation to the latter.
Tokenization brings many advantages in terms of the transmission of goods between sellers and buyers as well as reducing friction during the creation and exchange phases of the latter.
As part of the Ethereum ecosystem or other smart-contracts platform this also brings many possibilities as to the functionality of these security tokens.
Smart-contracts bring transparency and globalization to the exchange of valuable goods while benefiting from the security of the platforms on which they are deployed.
In the context of Digishares it is the trust in the project that defines the value of the tokens. There are also other systems to digitize assets that have other characteristics like synthesizing through debts.
Direct tokenization makes it possible to represent the underlying while providing the rigidity of traditional procedures.
Tokenization versus REITs
REITs (also called SIICs in French) are companies dedicated to real estate investment. They use their investors’ money to buy property and rent it out. Shareholders obtain these rents through interest which is distributed more frequently than conventional companies.
Indeed it is not uncommon to receive dividends monthly or quarterly. Buying REIT shares is simple and accessible now through the use of different brokers.
So what is the value proposition of tokenization system like Digishares against already existing REITs? Well there would be many for users. Digishares makes it possible to invest directly in a specific property and not in a park selected by a REIT.
A first experience in Detroit
For the first time, real estate was tokenized by Digishares in 2019. Estimated at 60,000 dollars, the ” 9943 Marlowe Digishares ” house was shared between a hundred investors with security tokens with a unit value of $63.
These landlords share the $30 in rent on a daily basis, for an annualized return of 13%. Now several Detroit properties are available directly on the platform. Each of these buildings has a different yield and the linked tokens have a unit price that differs from those linked to the other buildings. You can freely find the catalog available on the Digishares website without connection.
Invest with Digishares
If you want to invest through Digishares you will have to go to the available platform to find the catalog of available real estate. You will find different homes in Detroit in the United States, available for sale or for sale soon.
The purchase of a share of ownership is done in the same way as a purchase of classic tokens on an exchange platform. You can also use PayPal in US dollars and other more personalized means on request with the team.
You can also recently trade these tokens on Uniswap. They are not directly available in the tokens panel, but you will have to add them manually by the address of the token (a good example of the synergy between the actors of the ecosystem dedicated to facilitating the use of this last).
Finally, you will not be able to swap Digishares tokens with all the tokens available on Uniswap, but only a selection of them.
Once the tokens of a Digishares property in your possession, you will automatically obtain the rents of the dwellings.
Digishares and Uniswap
As I presented to you in the previous paragraph, Digishares tokens are available on Uniswap. This provides additional access for potential investors, but also an opportunity for Digishares token owners. Indeed Uniswap, requires liquidity to operate and therefore depends on users who provide it in exchange for rewards.
So, you can bring that liquidity to get those famous rewards from protocol transaction fees. You will need Digishares tokens of course but also an amount of the same value in ethers in order to balance the trading pair. Each real estate token requires a unique trading pair which will limit liquidity.
The risks of Digishares
As always in investment, it is essential to properly assess the risks in order to implement your strategy. Despite all its advantages, investing in real estate through the Digishares platform involves certain risks. Indeed, the platform is based on Ethereum smart-contracts and their security. In order to spare you the usual talk, I invite you to read our article on the subject.
Digishares also depends on American law, a parameter not to be overlooked when investing large amounts. In general, only invest what you are capable of losing.
Do you want to learn more about the Digishares project before investing in real estate? A community of enthusiasts around the project meet on a Telegram channel to answer questions and share their opinions about Digishares.
That’s all for this presentation of Digishares, a system for investing in tokenized real estate. Receive rents in stable coins on a daily basis, a dream come true? Are you thinking of investing in these Digishares tokens in order to obtain passive income through real estate? Have you ever set up passive income through your cryptocurrencies?