Table of contents:

• Why Real Estate Tokenization now?
• What is a token? What is a tokenization?
• How to set up the initial price for your token?
• What Blockchain really is?
• What is the blockchain?
• Which blockchain is best for asset tokenization?
• What is Token and Smart Contract?
• What is the token?
• How to ship your own token?
• What the heck is a smart contract? Do we need it?
• How to make Token IPO?
• How to make profits distribution to stakeholders? Right to share in profits.
• Ok, let's talk about costs of this project for you? How much does tokenization costs?
• How to do cost estimation right?
• How apps are built?
• How the custom software application is made?
• 1. Product ideation and Scoping Workshop
• 2. Wireframes + UX
• 3. App Development.
• How to list your token on Crypto Exchange? Centralised and Decentralised Crypto Exchange
• What is a Centralized Crypto Exchange?
• What is a Decentralized Crypto Exchange?
• How to list your Real Estate Token on exchange?
• Want to build your tokenization app? Have more questions? Want to discuss your specific needs?
• Let’s talk. Fill the form and we will get back to you within 1-day.

Why Real Estate Tokenization now?

Real estate tokenization is an emerging trend representing the convergence of real estate investing and blockchain technology. Tokenization helps asset or fund owners raise capital more efficiently, and gives investors unprecedented access to private real estate investments, transparency, and liquidity.

What is a token? What is a tokenization?

You can think about tokens as shares of your investment (real estate property). Let's say you want to build a nice condo in Miami and need US$100,000,000 to make it happen. Let’s assume that you will create 100mln tokens, and in the IPO every token will be worth 1 USD.  1 token is equal to 1 USD. It means that I can invest $10,000 buying 10,000 tokens from you and collecting them in my crypto wallet. Simple? Yes, this is very simple and easy to do from a technology point of view. Blockchain technology allows us to do it.

How to set up the initial price for your token?

We hear this question very often. What should be the price of my token. To answer this question we have to divide it into two phases:

Phase1: IPO - Initial Public Offer.

Initial token price will be written in Smart Contract (literally Blockchain Engineer will set it up in the piece of code). And during the IPO phase every investor could buy your token for this price. Let’s make an example calculation:

Phase2: Token listed on the crypto exchange.

At some point you would want to list your token on a public crypto exchange to make it available to a wider space of investors (you can find more details about listing tokens on crypto exchanges later in this article). On crypto exchange the price of your token will follow the market desire. If people start to buy your token, the price will rise (from the initial price). If the people start to sell your token then the price will be going down.

What is the initial coin offering?

How to enter the exchange?

Do you have to do KYC (Know your customers)?

Couple of things you have to get familiarized about tokenization:

To tokenize your property we will need to create a token and make some operation on the tokens.

Let’s start from the beginning.

What Blockchain really is?

What is the blockchain?

There are many definitions of the blockchain however we like this one. The blockchain = Think of it as a cloud provider, kinda like AWS, Google, Microsoft but it's owned by no one. It's run by compute power from mining machines all over the world (community). Usually these people are called miners and we pay (gas) them to run our code! Simple? Yes! We love to simplify things :-)

Which blockchain is best for asset tokenization?

There are a couple of blockchain we can use for tokenization: Ethereum, Tezos, Cardano, Solana, Hyperledger etc. All of these blockchains are featured with smart contracts (f.e. Bitcoin blockchain doesn’t have smart contracts - we can’t use it). Smart contracts give the ability to create own tokens. We pick Ethereum as the most advanced and developed blockchain and also very popular.

Glossary:

Gas and fees - Gas refers to the unit that measures the amount of computational effort required to execute specific operations on the Ethereum network. F.e. Creating a token, transferring a token between two users (seller and buyer) etc.

Miner - person who uses their time and computation power to process transactions and produce blocks. We have to pay (gas) them to run our code on the blockchain.

What is Token and Smart Contract?

What is the token?

A token is a blockchain-based asset with similar functionality to bitcoin or ether. It can hold value and be sent and received. It can represent a tradable asset or utility and allows the holder to use it for investment or economic purposes. Tokens can represent virtually anything:

• reputation points in an online platform
• skills of a character in a game
• lottery tickets
• financial assets like a share in a company
• a fiat currency like USD
• an ounce of gold
• assets like a share in real estate
• equity interest in a legal entity
• ownership of the collateralized debt
• and more...

You can also find the name for our token as security token.

To summarise once more: Tokens are essentially digital, liquid contracts for fractions of any asset that already has value, like real estate, a car, or corporate stock. Using security tokens means investors can expect that their ownership stake is preserved on the blockchain ledger.

How to ship your own token?

Coin vs Token. What is the difference? Do we create a coin or a token?

Let’s explain.

A crypto coin is, so to speak, the main currency on a blockchain. For example, Ether (ETH) is the underlying currency on the most popular blockchain called Ethereum. Every blockchain needs a crypto coin acting as money to fund transactions and any other interactions with a blockchain.

In addition to having coins, advanced blockchains like Ethereum, Tezos, Cardano or Binance Chain, also support tokens (also called cryptotokens). These tokens can be issued by anybody according to a blockchain’s standards. Of course you need to have coding skills to create a smart contract which issues a token.

There are a couple of token standards (marked as ERC-20, ERC-721, ERC-777 and ERC 1155). The most useful and popular for asset tokenization is ERC-20. The ERC-20 introduces a standard for Fungible Tokens, in other words, they have a property that makes each Token be exactly the same (in type and value) of another Token. For example, an ERC-20 Token acts just like the ETH, meaning that 1 Token is and will always be equal to all the other Tokens.

Extra peace of knowledge: You probably heard of Non Fungible Tokens (NFT). Instead of Fungible Tokens, NFT is a way to represent anything unique as an Ethereum-based asset, like a piece of art. Imagine that you have digital certification (token NFT) that proves ownership of Mona Lisa art. There is only one original Mona Lisa and it can only have one official owner.

So, to tokenize your real estate we have to use Fungible Tokens (ERC20). What else do we need?

What the heck is a smart contract? Do we need it?

A smart contract is a program (piece of code written by a blockchain developer) that runs in the blockchain network (in our case - Ethereum). Smart contracts will help make tokenization happen. We have to create a couple of smart contracts. First smart contract will be responsible for token creation and initiation of a token IPO (Initial Public Offering).

Token represents share in your property. Our token will work with wallets and crypto exchanges. You want to have the possibility to transfer and trade your tokens.

How to make Token IPO?

An initial public offering (IPO) is a process in which your company sells crypto assets (tokens) of its real estate to the public in new issuance. The process allows your company to raise capital from public investors. This is a very important step because we have to work together to figure out a couple of things. We have to create a new smart contract and set the following parameters inside the contract:

• We have to create an established quantity of tokens (f.e. 1,000,000 tokens)
• We want to allow buying tokens for ETH (user sends us ETH and in return gets our real estate tokens)
• You can START/STOP selling tokens at any moment [only admin/owner can do this]
• You can BURN / WITHDRAW unsold tokens [only admin/owner can do this]
• You can change the price of the token at any moment [only admin/owner can do this]
• You have to establish token price (for example: 1 token = $10)

Multisig Wallet for IPO

Why do we need it? The purpose of multisig wallets is to increase security by requiring multiple parties to agree on transactions before execution. Transactions can be executed only when confirmed by a predefined number of owners.

Using a multisig wallet is essential to make an IPO. We can use an open source wallet like Gnosis. It will be your company crypto wallet and

How to make profits distribution to stakeholders? Right to share in profits.

This is optional but I guess you would like to incentivize your investors to buy your tokens. If your property business annual ROI is 5% you can share this with your crypto investors. How? We will create another smart contract responsible for this operation.

Assumption: We want to pay a dividend only for people who bought tokens and keep them for at least a year (it might be also 3 or 6 months - up to your specific business case). We use one of the blockchain mechanisms - staking. Simply put, staking is the act of locking a token (or cryptocurrency) to receive rewards. We create a service to offer staking to our users. How does it work?

As we mentioned - by creating a new smart contract (piece of code executing on the blockchain).

All stakeholders will have an option to stake tokens. It means that they have to transfer tokens to a smart contract address (like sending to the wallet). When they get the right to get a dividend then they will have the option to withdraw tokens plus dividend. There will also be another option for investors, which is to keep tokens in staking and withdraw only dividends.

User Interface - web application (tokenization platform)

What user (crypto investor) can do in the web portal:

• Users will have the ability to buy tokens on IPO phase (set exact amount of tokens + secure ETH as a fee for paying the gas).
• Application will ask to connect with the user's crypto wallet (Metamask etc.)
• User sees how much tokens bought (and the total amount of tokens user has)
• Stake tokens for dividend
• Can withdraw tokens with the dividend (system shows the number of stacked tokens and the dividend available for payment)

As administrator you can do Start/Stop IPO, change the IPO price, pay dividend (in ETH).

Some technicalities: App will be build in the testnet blockchain, deployed on the mainnet, verification will be done by etherscan.io

We assume that in the first iteration of the platform you can add only one property for tokenization (one token creation).

Ok, let's talk about costs of this project for you? How much does tokenization costs?

How to do cost estimation right?

Client always: “How much does it cost?” ….

And the best answer is “It depends”.

Because it really depends.

You can think about building your tokenization like building a house. It depends how many bedrooms you want, how big the kitchen should be, if you want to have a garage ect. The same is with the software. To help clients build awesome apps software engineers invented the concept of MVP (Minimal Viable Product). A MVP, is a product (app) with enough features to attract early-adopter customers and validate a product idea. It is the version of a new product that allows a team to collect the maximum amount of validated learning about customers with the least amount of effort.

A company might choose to develop and release a minimum viable product because its product team wants to:

• Release a product to the market as quickly as possible
• Test an idea with real users before committing a large budget to the product’s full development
• Learn what resonates with the company’s target market and what doesn’t

Here you can check xls file with costs of Real Estate tokenization app development:

https://docs.google.com/spreadsheets/d/1sUmOdBZP9ZIQfKfMEabQ2rtLBokyrBv_uY7Mzj1hmAw/edit?usp=sharing

Ok, so let’s dig dipper. The next thing we need to explain is:

How apps are built?

A tokenization app on the web is just a type of web application, same as Gmail or Twitter. Pretty  much all applications out there exist in this paradigm of frontend and backend. Traditionally, here’s how the split works:

• The frontend is what you see and interact with as a user: text, shapes, links, and all of that. It’s usually built in some combination of HTML, CSS, and JavaScript.
• The backend is the data and logic that powers that frontend: APIs, business logics, database, integration with Blockchain (Ethereum, Tezos, Cardano, Solana, Polygon, Etc). It’s usually built in a language like JavaScript, Python, Go, C++, etc.

To better explain, let's break down an example. Let’s take a look at Twitter.com, which you can load in your browser (skipping over the mobile apps for now):

• Twitter’s frontend is the UI elements you see on the screen and how you interact with them. It’s built in Javascript, React etc.
• Twitter’s backend stores all historical tweets, who you follow, what topics are trending, and anything data related. The frontend gets that data to you via API endpoints.

Frontend isn’t just shapes and colors though; there’s plenty of important logic in there that interacts with the backend (like making API requests to get data). The reality is that the border between these two things isn’t exactly scientific, but it’s a useful framework for thinking about apps. It’s also how job postings are (sometimes) split:

• Frontend engineers will work on the app’s UI, and use API endpoints that other engineers have already built
• Backend engineers work on building and maintaining API endpoints, the database, and other behind the scenes application or infrastructure logic
• Blockchain Engineer - write a smart contract, integration with Blockchain (Server) and connecting crypto wallet to store your tokens.
• Full stack engineers do both! (the whole stack, however is super hard find a developer who is equally good in Frontend and Backend, why? because there is a lot of different technologies, programming languages and most of them are a kind of T-shape specialist)

Like Twitter, your Tokenization Platform will have a frontend and a backend side.

Let’s think through the kinds of data that we’ll need to store to power our, uh, tokenization app. There are a couple of “concepts” that need to exist:

• A user – email, full name, address, payment information
• A token – price, amount etc
• An order – buy tokens

These may be decoupled in the actual database – e.g. we may want to store payment methods in a separate table than users – but the general theory holds.

We don’t want our frontend writing directly to the database (blockchain), so applications usually have API endpoints that sit in the middle. We might have one called `createOrder` (buying tokens) that takes a few parameters – order value, time – and adds a new row to the `orders` table. There might also be endpoints for authentication, so that you can sign into the store and not have to add your shipping address every goddamn time.

So,

How the custom software application is made?

Mostly in three steps:

1. Product ideation and Scoping Workshop

Strategic brainstorming session and project scoping, usually in the form of 1-day workshop (4-6hours). You come to us with your idea. In this meeting we have: Business person (you), and our team: Designer, Business Analytic, Blockchain Developer, Delivery Manager. The session is held either in our office or on your site, depending on what works the most for you. It can also be a virtual workshop – if that is what suits you.This is the time to show how we can adjust our experience and resources to build your product. We define the Initial Project Scope, outline the MVP draft. After this session you will have:

Outcomes from this stage:

• Deep understanding of your idea, including your personas and project’s pain points,
• The solution – what can we do to make your project succeed,
• Tailor-made technological stack to fully support your needs,
• Potential cost estimates, suggested way of project delivery,
• Epics, gathering the data we obtained during scoping session, prioritizing steps in the project development process,
• Cooperation plan, our contribution and suggested order of delivery – an optimal course of project milestones to optimize the process.

2. Wireframes + UX

A wireframe is a simple visual guide that represents the skeletal framework of a website or app. Think of it as the blueprint for final design. Wireframes are most often created by designers (person who combines skills of Graphic & User Experience specialist). We create page structure and layout, information architecture, user flow, functionality. Wireframes can be created digitally in apps like Figma, InVision, AdobeXD.

3. App Development.

Now it’s time to actually build your application. Developers (Front-End and Back-end) start working. We also have a Project Manager to help coordinate the work.

How to list your token on Crypto Exchange? Centralised and Decentralised Crypto Exchange

As you might realized there are two types of crypto exchanges:

What is a Centralized Crypto Exchange?

In these types of exchanges, a third party is used to monitor and secure the transactions on behalf of the user. The blockchain system does not track these deals. The centralized cryptocurrency exchanges require their users to verify their personal information before using the tools provided by them. The verified users on these exchanges get to enjoy a higher withdrawal quota along with other customer support in case of any technical error.

Most popular centralized crypto exchanges are Coinbase, Binanace, Kraken etc

What is a Decentralized Crypto Exchange?

A decentralized crypto exchange (DEX)  is very similar to a centralized crypto exchange but without third-party intervention. These exchanges do not rely on any third party, The funds in the exchange are stored on the blockchain. Peer-to-peer trading (P2P) is also allowed by these exchanges that require the use of an escrow system or proxy tokens.

Most popular decentralized exchanges are: Airswap, Uniswap, Pancakeswap.

How to list your Real Estate Token on exchange?

To list your token on a centralized exchange you have to pay them to list your token on their exchange.  Every centralized crypto exchange has their own terms and conditions which we can check on their support page, if you want to enlist your token on their crypto exchange. Others require that your token should be working and have a specific daily volume, enlisted on coin market cap.

When it comes to decentralized exchange (DEX) you can list your new token easily. We will support all the process with the following DEX: https://app.uniswap.org/#/swap

Here is a short video how you can do it:

Want to build your tokenization app? Have more questions? Want to discuss your specific needs?

Let’s talk. Fill the form and we will get back to you within 1-day.

Or contact us through the email: projects@cryptozark.io