Many Blockchain Start-Ups are currently promoting the tokenization of real estate. This is backed by a big promise: assets are to be transferred just as cheaply, quickly and securely via the blockchain as information is to be transferred via the Internet. Bitcoin Blockchain, with a daily trading volume of several billion euros, provides initial proof of the suitability of the technology. Various projects (e. g. Propy, LAToken, Atlant, Real and others) have made it their business to bring real goods to the blockchain.

Tokenization of physical objects

Trading cryptocurrencies on a blockchain is simplified compared to real assets, because money does not necessarily require a physical carrier. Whether gold coins, banknotes or digital tokens - the value of a currency is not material, but is based on its acceptance as a means of exchange. A digital coin can therefore act as well as a piece of paper as money if a society just wants it. The situation is different with material objects: First and foremost, a car is to be driven, a plot of land is to be built on and inhabited, a milling machine is to be milled. Of course, a token can't do anything of all this. So why tokenize real estate?

The benefits are evident in the investment and credit markets: tokens allow the separation of economic value and material substance. It is conceivable, for example, to depict ownership shares or exploitation rights by means of tokens and to act completely emancipated from physical ownership. Such transactions are of particular interest to investors and lenders, since they use relevant items as speculative objects or loan collateral in any case. Currently, the market uses property registers or securitisation to provide the corresponding services. A block chain solution would probably be cheaper, faster and more timely overall.

No legal recognition of ownership tokens

The block chain also has potential for real goods trading. In the meantime, however, word has spread: Code is not (!) law! Neither in Germany nor in any other legal system do tokens impart any material rights to their owners. In this country, ownership is transferred exclusively in accordance with the provisions of the German Civil Code and not in accordance with the rules of any blockchain. Neither the owner nor the best technology can change that. For example, the acquisition of rights to a property requires registration in the land register. tokens, there is no acquisition of title without an entry in the land register. Unlike is often suggested, tokens are therefore not property splinters that can be traded on the blockchain independently of legal requirements.

Guarantees by special purpose entities

And yet, a large number of different platforms advertise real estate trading on their blockchains. How is that possible? The sobering answer is: not at all. A glance at the corresponding white papers reveals that the initiators of the respective platforms are also aware of this. In order to solve the legal issues, intermediary companies are usually used to manage the individual transactions and ensure that the real value is covered.

For this purpose, the intermediate company initially acquires ownership of the objects; only then are tokens generated and traded. It must be emphasized that even in such models, it is not the token owner who holds the property rights, but an intermediary. Buyers and sellers have no choice but to rely on the promises of the middleman. The original purpose of the block chain, the rationalization of middlemen through decentralization, is thus lost.

State recognition of the Blockchain

The declared long-term goal of all platforms is the state recognition of their blockchain; under this premise, real values could actually be traded decentrally via corresponding tokens. However, it seems highly unlikely that one of the existing platforms will actually become a government-approved property register. In most countries there are separate land registers for the real estate trade, which will certainly not give way to a privately organised blockchain.

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