If you have been investigating blockchain technology and real estate investing, CinderBlox is one of the most intriguing platforms to get to know. CinderBlox is a proptech firm. It was formed in late 2018 by Jafer Baig and Tammer Riad. The company is situated in Los Altos, Calif.
The platform is a combination of the 2012 JOBS Act and blockchain technologies. These tools together make global commercial real estate more accessible. Specifically, CinderBlox makes this feasible through the usage of security tokens.
In layman’s terms: ordinary people, not just rich institutions, can purchase fractional ownership in commercial assets. And they can do it with either digital or traditional currencies. Then they might sell those shares on the secondary markets.
What is CinderBlox?
CinderBlox’s mission is to open up commercial property ownership to everyone, not just the rich. So, it breaks out the real estate assets. This procedure takes ownership shares and converts them into blockchain-based security tokens. This opens previously closed markets to a far bigger pool of investors.
The platform falls under the 2012 JOBS Act. That law introduced legal ways for corporations to offer securities through crowdsourcing. CinderBlox does not work outside of financial monitoring as a result. Instead, it uses existing U.S. securities law to unlock a traditionally closed market.
And the people at CinderBlox have some pretty impressive credentials. Its personnel are comprised of veterans from Fortune 500 businesses, Wall Street, and Silicon Valley. Advisors also have knowledge in blockchain, regulatory compliance, and international real estate.
How CinderBlox Works
Real Estate Asset Tokenisation
Tokenization is at the core of CinderBlox. Someone walks a business asset onto the platform. Let’s pretend it’s a luxury high-rise. Then the platform divides ownership of that property into security tokens. Each token is a fractional ownership share. It’s like investing in a corporation, but it’s real estate.
Investors can purchase the tokens using fiat money or digital currency. It all depends on the investor’s inclination and what possibilities are provided for each offering. Investors can buy and exchange the tokens on CinderBlox’s platform. They can also trade globally on compliant security token exchanges.
This method offers a new approach for property owners to unlock liquidity. The traditional sales of properties are long and complicated processes. On the other hand, tokenisation enables a partial departure without the need to locate one buyer for the entire property. Meanwhile, investors can buy a slice of big commercial real estate without owning the whole thing.
First Asset Milestone – May 2019
CinderBlox entered up a memorandum of understanding with Chicago-based KR Developments in May 2019. Together, they agreed to tokenise a premium high-rise skyscraper. This milestone took CinderBlox from idea to active operation. It also shown that tokenisation works in genuine commercial property deals.
Who can use CinderBlox?
Retail Investors
Democratisation is the biggest selling feature of CinderBlox. Commercial property has traditionally been owned by institutional investors, high-net-worth individuals and REITs. CinderBlox’s tokenised model drastically lowers that hurdle. “People can now buy parts of commercial properties, they don’t have to buy the whole thing.”
Owners Seeking Liquidity
Owners of real estate have a fundamental problem: huge assets are hard to depart from in part. CinderBlox goes right at this. It enables property owners to tokenize their assets and sell fractional ownership. So they don’t need a single buyer for the whole property.
Crypto Investors
CinderBlox also appeals to users of digital currencies. It specifically provides a mechanism to hold assets secured by real commercial property. And those assets are paying dividends from real cash flow. This has made security tokens a more concrete alternative to unpredictable cryptocurrency investments.
Real Benefits of CinderBlox Model
The case for accessibility is actually rather convincing. Commercial real estate has been a source of great riches for a long time. But big capital requirements prevented most individual investors from getting access to it. CinderBlox’s tokenization technique speaks to that gap directly.
Another big factor is the liquidity benefit for property owners. Traditional commercial deals are slow, costly, and rigid. On the other hand, tokenization allows for partial departures and secondary market trading. That’s something traditional real estate can’t match for flexibility.
Plus, the JOBS Act regulatory basis lends legitimacy. Many blockchain investing platforms are operating in legally murky zones. But CinderBlox is operating under the well-established US securities laws. That difference is quite important for the long-term reliability of the platforms.
Practical Limitations to Consider
CinderBlox is still a small company, with between two and 10 people. It is at an early operational phase. It therefore has the usual risks of any proptech startup at this level—limited track record, evolving regulatory interpretation, and market adoption issues.
Moreover, the world of security token exchanges is still in its infancy. The secondary market liquidity that makes tokenized assets conceptually desirable may not yet be completely realized in practice.
Prospective investors should always perform their own due diligence. All offering documentation should be carefully reviewed. It is also strongly recommended that you get the advice of an independent financial consultant before investing funds.
Summary
CinderBlox lies at an interesting crossroads of blockchain technology, securities legislation, and real estate finance. It has something really valuable for two types of people. First, private investors looking for commercial real estate exposure without institutional-level resources. Second, property owners looking for additional liquidity options.
The platform is still in its early stages. The secondary market is still in its infancy. And real estate is always its own risk. But the basic concept of CinderBlox is a true, longstanding problem of access in one of the world’s greatest asset classes.
Frequently Asked Questions (FAQs)
Q1: What kind of attributes does the CinderBlox tokenise?
CinderBlox is a commercial real estate firm. The first contract it signed was with KR Developments for a high-rise luxury building in Chicago. The technology is designed to support a variety of commercial property types globally.
Q2: Can international investors trade CinderBlox?
Yes. CinderBlox allows global investors to buy security tokens using fiat or digital currencies. However, regulations differ by country and type of investment, so investors will have to check local regulations first.
Q3: How do CinderBlox investors make money?
Security tokens represent ownership interests in underlying real assets. Returns are paid out as dividends, based on cash flow from the property (e.g. commercial rental income) rather than pure speculation based price appreciation.
Q4. Is CinderBlox licensed?
Yes. CinderBlox is a licensed crowdfunding offering under the 2012 JOBS Act that allows securities to be offered to a larger group of investors. It is a U.S. securities infrastructure, not an international one. That obviously separates it from uncontrolled investment scams based on blockchain.
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