The Genesis Token Theory

The general concept of this theory is to utilize blockchain technology to create unique digital representations (tokens) of real estate properties, aiming to enhance transparency, security, and efficiency in real estate management and transactions.

By establishing tokens based on standards like ERC-721 and ERC-20, this model proposes a system where:

Token-0 (analogous to ERC-721) uniquely and indivisibly represents the property on the blockchain via its cadastral number (IPC). This non-fungible token ensures that each property remains singular and immutable.

Token-3 (comparable to ERC-20) reflects real rights over the property, such as ownership or mortgages. As a fungible and divisible token, it allows for the transfer of these rights without affecting the property itself.

The proposed system offers a comprehensive approach to recording each transaction immutably on the blockchain, from the initial offer (Token-1), acceptance of the offer (Token-2), to the final registration of rights (Token-3). Each action and change related to the property is transparently and immutably recorded.

This approach has been designed to address common issues in traditional real estate management, such as the lack of transparency in transactions and the risks associated with centralized registries, which can be altered or misinterpreted. Additionally, blockchain technology enables comprehensive tracking of the property’s transaction history, reducing intermediaries and increasing trust for both buyers and sellers.

While the text introduces technical blockchain terms, it outlines how tokens and smart contracts can be leveraged to manage real estate transactions on a decentralized platform.

Tokenizing real estate on blockchain represents a groundbreaking approach to managing and transacting real estate assets, offering greater transparency, efficiency, and security to the market. Monica Elizabeth Pagano, an author, consultant, and expert in this field, proposes a model illustrating how properties can be identified, tokenized, and commercialized through blockchain. This model uses tokens linked to the cadastral registry of the property and associated real rights, providing a unique and traceable digital representation of each property on the blockchain.

A crucial initial decision in this model is the selection of the cadastral reference number (IPC) as "Token-0," the principal blockchain identifier for each property. The CRU/IDUFIR number (a number used in property registration) was considered previously but dismissed for two significant reasons. Firstly, properties in different zones might share identical numbers, creating confusion. Secondly, registration is not mandatory for all properties, meaning some may remain unregistered, complicating the use of this identifier. In contrast, the cadastral registration is obligatory, ensuring that each property has a unique IPC number, making it the most reliable choice for digitally representing a property on blockchain.

Using the IPC as Token-0 provides a unique blockchain identifier for each property, similar to an ERC-721 token on Ethereum’s network. Known as NFTs (non-fungible tokens), these tokens are unique and unalterable, ensuring that each specific property retains its digital identity over time, without the possibility of being divided or replicated. In this way, Token-0 functions as the property’s "digital fingerprint," guaranteeing that it is always recognized as a singular unit within the blockchain ecosystem.

Real rights associated with a property, such as ownership or mortgages, are tokenized through "Token-3." This token combines the CRU/IDUFIR and the IPC of the property, generating a hash that is stored on the blockchain, functioning similarly to an ERC-20 token. Unlike Token-0, Token-3 is divisible and fungible, meaning it can represent fractional rights, such as a mortgage or a share in a real estate project. This combination enables the physical property (Token-0) and associated rights (Token-3) to exist separately yet interlinked on the blockchain, facilitating transactions while preserving the uniqueness of the underlying asset.

An interesting feature of this model is the possibility of recording liens on the blockchain. Although liens affect the property, they are not represented as Token-3, as they are personal rather than real rights. However, they could be recorded on the blockchain using a specific address, ensuring that this information is available transparently and verifiably without interfering with the unique identity of the property.

The distinction between ERC-721 and ERC-20 tokens is fundamental to understanding the logic behind real estate tokenization. ERC-721 tokens are indivisible and unique, while ERC-20 tokens are divisible and interchangeable, making them ideal for representing asset fractions or associated rights. This distinction is particularly relevant in scenarios such as real estate crowdfunding, where issued tokens do not represent direct property ownership but rather a financial right with the managing entity. Investors purchase these tokens with the expectation of dividends or future gains, without holding actual property rights.

Tokenizing the IPC as ERC-721 offers various advantages. Property owners, both individuals and organizations, can manage their assets more efficiently and transparently on the blockchain. Relevant information about the property, such as usage changes, contracts, payments, or construction progress, can be recorded on the blockchain, much like an accounting ledger. This ensures that each modification is immutably registered, providing a clear and comprehensive view of the property’s history without relying on traditional intermediaries.

Regarding the process structure, the first step in property tokenization is creating the initial block in the chain, where Token-0, which includes the property’s cadastral reference, is established. From this point, the sales process can move forward. If a buyer expresses interest in acquiring the property, a Token-1 is generated to represent the purchase offer. This token is recorded in a new block, containing all offer details, such as the proposed price and outcome (accepted or rejected).

If the property owner accepts the offer, a Token-2 is created, functioning as a smart contract to formalize the sale. This contract validates both the seller’s ownership rights and the buyer’s financial capacity, ensuring the transaction is legitimate. As the process progresses, Block 3 will contain this sale contract, while Block 4 will reflect associated real rights, such as notarized deeds or mortgages, ensuring that all essential data is permanently and verifiably recorded.

Another intriguing possibility within this model is transaction-based tokenization. In this approach, each action related to the property is represented as a message or transaction. Each property has its own blockchain address, and it is possible to derive multiple addresses for a single asset, such as in cases involving construction sites with multiple units for sale. These addresses may be public or private, depending on transparency or privacy needs.

The records and transactions related to the property are stored immutably on the blockchain, guaranteeing the authenticity and uniqueness of the data. Only transactions from authorized senders, such as contractors or notaries, are considered valid. This ensures that while a contractor can add technical data about a renovation, they cannot alter the property’s ownership.

In summary, this property tokenization approach offers an advanced and secure system for managing and transacting real estate. By creating different types of tokens, it is possible to represent both the physical property and associated rights, facilitating a more transparent and efficient process compared to traditional methods. Furthermore, through collaboration with blockchain experts like Marco Crotta, this model is designed to provide practical applications that allow interested parties to access key information on the property’s history, such as the number and price of offers, directly on the blockchain.

The complete tokenization model is detailed in the book Blockchain, Tokenomics & Real Estate and is registered under intellectual property rights in the Central Registry of Intellectual Property with the registration matrix: 00/2021/4726.

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