Moving away from the Hype: The story behind our decision to forget about tokenization and focus on core value

By Miguel Linera Alperi

 

From an extraordinarily disruptive new technology thousands of companies and startups emerge promising to change forever your life and the world as we know it. Does this sound familiar to you? I guess yes. And no, we are not talking about the Dot Com Bubble, we are talking about the Blockchain Revolution, but we can clearly see how a lot of the previously seen patterns repeat over time.

Going back in time, concretely to the summer of 2017. We were working in London and I remember ourselves studying the Blockchain technology and the innumerable applications that it could have, specially in the Real Estate world. Our initial premise was more or less the following “If we are able to divide the value of Real Estate assets into tradable tokens a whole new market would be born and the possibilities for the creation of new financial instruments would be endless” In fact our project was born out of a social concern. People wouldn’t have to be evicted from their houses if they could share the property of the asset with a financial entity in some kind of new more flexible legal structure that allowed them to keep on paying while still having the right to live in their houses.

With this tokenization idea in mind we presented our project to the Proptech Challenge by CBRE 2018 and, after the evaluation procedure, we received the amazing news that we had won the contest it in the category of Disruptive Idea. Now it was clear, our idea made sense and it had been validated by one of the biggest companies in world. It was just a matter of sitting and putting it into action. But things weren’t as easy as we expected…

After we quit our jobs and went full time into the project we realized that our idea of an “efficient, liquid and transparent Real Estate market” was good enough be considered a winning Disruptive Idea, but not to make the company able to provide value and monetize in the short/medium term. When we presented our product to all the different stakeholders we always got the same answer “I love the idea, but this is not for me”. Investors didn’t want to invest in tokens, the regulator didn’t have a specific framework developed for this kind of instruments and big corporates weren’t able to implement our tokenized solution into their traditional processes.

If no right to the property could be embedded into the smart contract because there was no regulatory framework, how could this be useful to the market? In other words: our disruptive idea was of no value itself both for the market and AREX. That reality made us think and realize that in order to make AREX a successful company in the long run, we couldn’t live out of the “crypto hype”. We needed to solve real problems, we needed to pivot.

And that is what we did, we started breaking down the grand vision of AREX into its component parts. Were tokens really necessary for the problem that we were trying to solve? No, if our focus is to solve the problems of illiquidity and low accessibility in the Real Estate market Blockchain at its core (without any cryptos or tokens involved) was of extraordinary value to all our stakeholders. This analysis resulted into a clear and scalable idea, if we wanted to turn the Real Estate markets into what the stock markets are nowadays, a liquid and efficient market, we first needed to build strong foundations that could support it.

Does this mean that we are against tokens? Not at all, we believe that when the market is ready, including regulators, investors and corporates, tokens will provide the most liquid and cost-effective structure ever seen. In the meantime, there is still a lot to do in order to prepare the market for when that moment arrives and that is what we are focusing on. The goal is the same, we just needed to change the path that will get us there. We can’ t expect to get to a frictionless, liquid, global Real Estate market without taking some prior steps first. We can say that nowadays we are in a blue ocean that needs to be filled with companies willing to start digitalizing their processes on the Blockchain.

The moral of the story is that taking advantage of the hype of a new technology is only positive when you can provide true value to your stakeholders, in other words, when you can deliver. If not, a startup will live out of expectations. It will be able to live in the short/medium term out of news on the internet, interviews, conferences and investors buying the story, but in the long run will be doomed. That is why we in Arex we think that the most disruptive approach is not following the hype, but going against it in order to find the true core value of the technology we are offering. Short term money serves for nothing if it is not supported by a long term strategy, it will just make your death slower and more painful as people progressively lose faith in your solution.


As with the Dot Com Bubble, the Blockchain technology can be as disruptive as the Internet was at the beginning of the millennia, but, as it happened with the Dot Com, only the companies and startups that are able to move away from the hype and focus on providing real value will be the ones that last and have a positive impact on tomorrow’s world. With the Real Estate sector this is even more important as the potential for disruption in the sector in the next few years is massive. For this, big players in the Real Estate world, startups and regulators must cooperate in order to be able to progressively adapt to the enormous change that is coming to the market, a change starts by building strong foundations, not by focusing on short term gains.

 

Miguel Linera Alperi

CEO and Co-founder of AREX Real Estate.

 

 

Graduated in a double bachelor in law and business administration at ICADE University in Madrid, he was in the team that won the CBRE Proptech Challenge in 2018 and that gave rise to AREX Real Estate. In everything related to Blockchain technology, he has actively been giving conferences in several universities and institutions for the past 2 years. Now, he’s also actively involved with FIBREE, the Foundation for International Blockchain and Real Estate Expertise, as Regional Co-chair in Spain.

 

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