Introduction
A profound shift is underway in how we think about ownership, investment, and value creation. Tokenization—the process of representing real-world assets (RWA) as digital tokens on secure, programmable networks—is rapidly moving from concept to practice. In the construction and real estate world, an RWA can range from the entire building to just a fraction of it, or any other form of ownership or legal claim on a building- or process-related asset. It promises to make markets more efficient, more inclusive, and more transparent, while opening entirely new opportunities for both investors and institutions.
This paper is written to inform and engage industry professionals and anyone interested on a basic, but comprehensive level how blockchain technology can boost the construction and real estate sector. It is also written in preparation for the launch of the FIBREE Product Database on October 16, 2025, the leading annual market-research highlighting the State of Blockchain in Real Estate. The research is this year conducted for the 7th consecutive time. Click here to register for this online release event on October 16th, starting at 4:30pm CET.
From Traditional Finance to Blockchain-Enabled Assets
In traditional financial systems, access to investment opportunities is often limited by geography, high transaction costs, and rigid infrastructure. Capital is abundant, yet flows inefficiently. Tokenization changes this dynamic.
By embedding ownership rights into blockchain-based tokens, assets become programmable, instantly transferable, and accessible across borders. This enables:
- Near-zero settlement costs, removing layers of intermediaries.
- Programmability, where rights and obligations are coded directly into assets.
- Global reach, with markets operating around the clock.
The result is a structural departure from “one-size-fits-all” products. Tokenization enables tailored financial instruments and real asset investments, adaptable to diverse investor needs.
These developments are being reinforced by governments worldwide experimenting with and preparing for the introduction of central bank digital currencies (CBDCs)—with blockchain technology seemingly being used primarily for centralized rather than decentralized purposes—and by crypto investors increasingly seeking stablecoins and other safe havens to mitigate the volatility risks still present with traditional cryptocurrencies. These developments underscore the rapidly growing attention to how blockchain solutions are gradually becoming more mainstream, and the construction and real estate industry is no exception.
What Tokenization Really Means
It is important to understand that tokenization goes beyond simply digitalizing records. Whereas digitalization converts paper contracts or ownership titles into electronic formats, tokenization turns these, by applying blockchain technology, into programmable digital assets that can interact across systems and platforms.
This new functionality unlocks possibilities that traditional systems cannot match. Properties or infrastructure can be divided into fractional shares, allowing far more investors to participate. Markets can operate continuously, rather than being bound by trading hours or batch settlement cycles. And compliance rules or contractual conditions can be built into the tokens themselves, ensuring that transactions follow regulatory or contractual requirements automatically. This makes tokenized assets more versatile than their traditional counterparts, offering liquidity and transparency at scale.
Categories of Tokenized Assets
Tokenization spans a wide universe of asset classes. The most prominent categories related to real estate include:
- Real Estate – Unlocking liquidity for properties by dividing them into digital shares.
- Funds and Equities – Making institutional products such as ETFs or money market funds instantly tradable and accessible.
- Escrow & Debt Instruments – Embedding repayment terms and risk profiles into programmable, transparent tokens.
- Alternative Assets – From commodities, via digital twins to rental contracts or circular construction materials, a wide range of traditionally inaccessible assets becomes investable.
By transcending asset classes, tokenization positions itself as a foundational layer for future financial and real estate markets.
Tokenization is not limited to a single sector; it reaches across a wide universe of asset classes. Real estate is one of the most promising, as it transforms traditionally illiquid properties into tradable shares, opening access to new investor groups. This demonstrates that tokenization is not a niche development, but rather a foundational layer for the financial and real estate systems of the future.
Why Adoption Is Accelerating
The rapid adoption of tokenization can be explained by the structural benefits it offers. Transactions that once required multiple intermediaries can now be completed with greater speed and far lower costs. This all brings several structural innovative benefits to the traditional real estate industry which explains why tokenization is gaining global traction:
- Efficiency: Lower transaction and settlement costs compared to legacy systems.
- Transparency: Immutable ledgers create verifiable histories of ownership and transfer.
- Liquidity: Illiquid markets gain dynamic secondary trading options.
- Accessibility: Lower entry points bring in new categories of investors.
- Innovation: Programmable assets allow entirely new forms of financial products and services.
Each of these drivers addresses a critical shortcoming of traditional capital markets. Together, they illustrate why tokenization is seen as more than an incremental upgrade: it is a market transformation.
Transparency is built into the system, with immutable ledgers creating verifiable records of ownership and transfer. Liquidity is enhanced by enabling secondary trading in markets that were previously closed or illiquid. Tokenization of Real World Assets, combined with the innovation of programmable assets, paves the way for entirely new forms of financial products and services.
Real Estate Tokenization and DeFi
One of the most dynamic intersections lies between real estate tokenization and decentralized finance (DeFi). Tokenized properties are increasingly being used as collateral within DeFi protocols, enabling property-backed lending, borrowing, and yield-generation mechanisms. This marks a major step in bringing tangible, real-world value into digital financial ecosystems that have so far relied mainly on crypto-native assets.
The tokens themselves play a dual role. On the one hand, they represent legally recognized ownership rights to a physical property. On the other, they serve as programmable instruments that can interact with smart contracts, enabling automation and financial innovation. The gains are evident: real estate investors can unlock liquidity without turning to traditional bank financing, while DeFi participants gain access to more stable, asset-backed tokens that diversify risk.
Challenges, however, should not be underestimated. Legal recognition of tokenized property rights must be secured across jurisdictions, and mechanisms must be developed to prevent over-leveraging of inherently illiquid real estate. Furthermore, secure interoperability between DeFi protocols and regulated financial markets remains an ongoing concern. Yet despite these hurdles, the convergence of real estate and DeFi is widely seen as one of the most promising pathways for bridging traditional and decentralized finance.
Blockchain Foundations and Network Choices
To understand how tokenization is evolving, it is important to recall the foundations of blockchain itself. The technology began with Bitcoin, which introduced the concept of decentralized, immutable digital records. Ethereum expanded the model by enabling smart contracts, opening the door to programmable assets and decentralized finance (DeFi). Since then, a wide range of blockchain networks has emerged, each designed with different priorities in mind: scalability, cost efficiency, security, or governance.
Blockchain networks can be categorized in several ways. They may be public or private, permissioned or permissionless, and they are typically distinguished between Layer 1 (base networks such as Bitcoin, Ethereum, or Cardano) and Layer 2 solutions (scaling frameworks like Polygon, Arbitrum, or Optimism). Each category carries trade-offs between decentralization, speed, and control.
In practice, most real-world asset (RWA) tokenization projects in the world rely on Ethereum, given its strong developer ecosystem and broad adoption. Polygon has emerged as a leading Layer 2 choice, offering lower transaction costs and greater scalability while retaining Ethereum’s security benefits. Other networks such as BNB Chain, Solana, Avalanche, and Tezos are also used, particularly in projects that prioritize speed or interoperability. For enterprise-grade or regulated use cases, permissioned frameworks like Hyperledger, R3 Corda, or Quorum remain relevant, as they can offer higher privacy and compliance controls.
Ultimately, the network chosen depends on the priorities of the project—whether that is transaction speed, cross-chain connectivity, security, or long-term reliability.
Regulation and Institutional Engagement
The global momentum behind tokenization is reinforced by increasing regulatory clarity and institutional adoption. Policymakers are developing frameworks that balance innovation with investor protection, often through regulatory sandboxes that enable experimentation in controlled environments.
Meanwhile, leading financial institutions—banks, asset managers, and custodians—are investing in infrastructure to support tokenized assets. From compliant marketplaces to custodial services, this institutional push signals that tokenization is firmly on the path to mainstream adoption.
Challenges to Overcome
The transition is not without obstacles. While the promise of tokenization is significant, several challenges must be addressed before the market can reach maturity. Key challenges include:
- Scalability
- Interoperability
- Regulatory uncertainty
- Educating Decision Makers
Scalability remains one of the primary barriers: most blockchain networks are still constrained in the number of transactions they can process efficiently, which limits the feasibility of large-scale adoption.
Interoperability is another pressing issue. Real estate assets and their data are often siloed across multiple platforms, and without seamless cross-chain connectivity, the potential for global liquidity is curtailed.
Regulatory uncertainty compounds these technical challenges. Different jurisdictions take divergent approaches to security tokens, property rights, and investor protections, creating friction for cross-border transactions.
User adoption of blockchain technology is slowed by complex interfaces and the urgent need to educate decision makers, investors and stakeholders so they can better understand the choices they can make and their impact. Establishing comprehensive blockchain and Web3 education programs at all levels—from secondary school to postgraduate studies—is strongly recommended.
Overcoming these hurdles will determine whether tokenization fulfills its promise as a universal standard or fragments into disconnected solutions. As digitalization accelerates, all aspects of society, including urban systems and the built environment, will become increasingly digital. Digitalization will only continue to advance, and therefore, tokenizing RWA, including real estate, is expected to have significant market potential. Time will tell to what extent and at what pace the numerous opportunities this presents will be seized.
Conclusion and Outlook
Tokenization has in recent years moved far beyond a theoretical concept. It is now shaping real markets, attracting institutional engagement, and unlocking new ways of managing ownership, liquidity, and risk. Real estate, traditionally one of the most illiquid and capital-intensive asset classes, stands to benefit greatly as programmable, fractionalized assets create opportunities for broader participation and more efficient capital allocation.
The outlook is promising, but the trajectory will depend on how effectively the industry addresses the challenges ahead—particularly scalability, interoperability, and regulatory harmonization. Just as importantly, education and awareness will determine whether decision makers, investors, and users can fully grasp the benefits and responsibilities of this shift.
Over the coming years, tokenization is set to redefine how we perceive ownership and value in the built environment. If current momentum continues, the combination of real estate and blockchain will not only transform capital markets but also play a decisive role in shaping more transparent, inclusive, and resilient economies.