As someone with a strong interest in and advocacy for blockchain technology and its use cases, I recently had a discussion with a friend on how the real estate industry can be revolutionized by tokenization, particularly through NFTs. According to McKinsey (2023), the volume of tokenized digital securities will reach $5 trillion by 2030, with real estate tokenization significantly contributing to this growth.
Blockchain technology is transforming the real estate industry by introducing tokenized ownership of physical assets through standards like ERC-721 and ERC-998. These innovations allow individuals to hold NFTs that represent a physical property, potentially simplifying the process of buying, selling, and managing real estate properties.
ERC-721 defines how to build unique NFTs on Ethereum. Each ERC-721 token is distinct, making it ideal for tokenizing real estate. It enables digital verification and transfer of property ownership, whether representing entire assets or fractional shares. This offers flexible investment opportunities. Building on this, ERC-998 allows NFTs to “own” other NFTs or tokens, creating a parent-child relationship. An ERC-998 NFT could represent a property and include nested assets like rental agreements or ownership shares. This hierarchical structure simplifies complex ownership models, ensuring coherence during transactions.
ERC-998’s key features are ease of transferability and hierarchical ownership. Entire assets composed of multiple NFTs and tokens can be transferred in a single atomic transaction, ensuring all components move simultaneously and preventing discrepancies. Hierarchical ownership allows the creation of intricate asset structures—for example, in real estate, a building (parent NFT) could own individual units (child NFTs) like apartments or offices, each with specific attributes.
I believe that ERC-998 has the potential to revolutionize how we manage assets. As blockchain technology and NFTs continue to advance, they are set to transform several industries, including real estate.
References
McKinsey & Company. (2023). Tokenization: A digital-asset déjà vu? Retrieved from: https://www.mckinsey.com/industries/financial-services/our-insights/tokenization-a-digital-asset-deja-vu
Ethereum Foundation. (n.d.). ERC-721 non-fungible token standard. ethereum.org. Retrieved from:
https://ethereum.org/nl/developers/docs/standards/tokens/erc-721/
Ethereum Foundation. (n.d.). ERC-998: Composable Non-Fungible Token. ethereum.org. Retrieved from:
https://eips.ethereum.org/EIPS/eip-998
