Tokenization: The Future Of Real Estate

Karolina

29 Aug 2023
Tokenization: The Future Of Real Estate

The real estate market is undergoing a significant transformation with the emergence of tokenization, a process in which real estate assets are converted into digital tokens stored on a blockchain, allowing for digital ownership and the transfer of fractional shares. With a market size of around $200 million, real estate tokens account for nearly 40% of the digital securities market, making them an increasingly popular investment option.

Read our article about the Real Estate Market

The Process of Real Estate Tokenization

Incorporating blockchain technology, real estate tokenization is a groundbreaking method that combines the conventional real estate sector with modern advancements. The procedure takes place as follows:

1. Choosing an Asset

Initially, a particular real estate asset must be chosen for tokenization. This may include any type of property, such as residential houses, commercial buildings, or even vacant land.

2. Assessing Value

Professional real estate experts and appraisers undertake a comprehensive analysis of the property to establish its market value, ensuring accuracy in the process.

3. Establishing Legal Structure

Due to the intricate nature of real estate transactions and the novelty of tokenization, a legal framework is implemented. This could encompass the creation of a Special Purpose Vehicle (SPV) possessing the real estate asset, which then issues tokens symbolizing ownership shares in the property.

4. Generating Tokens

With the legal structure in place, blockchain technology is utilized to produce digital tokens. Each token signifies a portion of the property's ownership; for example, if a $1 million property generates one million tokens, each token represents $1 of the property's value.

5. Implementing Smart Contracts

These coded agreements on the blockchain automate and adhere to contract terms. In real estate tokenization, smart contracts may automate procedures like distributing dividends to token holders (if the property produces income) or defining conditions for selling or transferring tokens.

6. Token Sale or Allocation

In an initial offering comparable to a stock market IPO, investors can buy tokens or property shares. In some instances, these tokens can also be exchanged in secondary markets, offering liquidity for investors.

7. Managing Property

Even though properties are tokenized, essential management tasks remain necessary, such as dealing with maintenance, leasing, and other routine real estate functions. Token holders receive revenue distribution based on their shares (e.g., rent), with smart contracts streamlining the process.

8. Trading and Liquidity

Tokenization's main advantage is the possibility of enhanced liquidity. Once the initial token offering is complete, investors can trade tokens on secondary markets, enabling more accessible buying and selling of real estate shares, resulting in a more liquid investment than traditional real estate.

9. Exiting and Redemption

Investors seeking to leave their investment can sell tokens in the secondary market. Moreover, provisions may exist for selling properties, with proceeds being distributed among token holders according to their token count.

10. Security and Transparency

An unalterable and transparent ledger of all property-related transactions is maintained on the blockchain. Coupled with blockchain technology's security features, this ensures that the integrity of tokenized real estate investments remains intact.

Pros and Cons of Tokenized Real Estate

The fusion of technology and traditional property investments is embodied by real estate tokenization, which brings its own unique advantages and hurdles:

Real Estate Tokenization Perks:

  • Liquidity: Tokenization offers enhanced liquidity by allowing investors to trade their tokens on secondary markets, in contrast to the general illiquidity of conventional real estate.
  • Fractional Ownership: By breaking properties into smaller units or tokens, multiple investors can partake in property ownership, increasing accessibility to large-scale investments.
  • Worldwide Participation: Tokenized real estate reduces border constraints, enabling global investors to put money into properties elsewhere as long as they comply with local regulations.
  • Transparency: The blockchain's open ledger guarantees that all transactions are documented, fostering trust among investors.
  • Efficiency: Numerous processes are automated via smart contracts, lessening the necessity for intermediaries and expediting transactions.
  • Cost Reduction: Fewer intermediaries and automation can result in decreased transaction expenses and management fees.
  • Diversification: Without requiring substantial capital expenditures, investors can broaden their portfolios by investing in numerous tokenized properties.

Tokenized Real Estate Challenges:

  • Regulatory Ambiguity: Being a novel field, rules surrounding tokenized real estate are still evolving, potentially causing uncertainty for investors.
  • Adoption Pace: Traditional investors may be reluctant to embrace this new model due to unfamiliarity or skepticism about blockchain technology.
  • Security Worries: Even though blockchain is fundamentally secure, concerns relating to smart contract vulnerabilities or platform hacks might discourage potential investors.
  • Market Development: Being a nascent market, tokenized real estate might present limited choices and liquidity for early adopters.
  • Integration with Established Systems: Integrating tokenized assets with conventional real estate systems and practices can be intricate.

Small Investors' Benefits from Tokenized Real Estate

Tokenized real estate is creating fresh opportunities particularly for small investors. Here's how:

  • Accessible Entry Points: Instead of purchasing an entire property, minor investors can acquire tokens that signify a portion of the property, thus lowering entry barriers.
  • Diversified Portfolio: A lower investment threshold makes it more convenient for investors to diversify by acquiring various property tokens or even in distinct geographical regions.
  • Liquidity: Tokenized real estate can be traded on secondary markets, facilitating small investors' efforts in cashing out investments compared to traditional real estate.
  • Transparency: A public ledger records all token transactions, affording investors a transparent overview of the property's transaction background and fostering trust.
  • Decreased Transaction Fees: Blockchain and smart contracts enable a streamlined process, which often results in lower fees, especially advantageous for small investors more sensitive to these expenses.
  • Global Possibilities: Small investors are no longer restricted to local markets and can explore worldwide properties that might have been inaccessible due to significant investment minimums or complicated international transactions.
  • Return Potential: As with any investment, there's the potential for returns. Tokenized real estate provides small investors the opportunity to grow their investments through property appreciation, rental income distribution, or both.

Potential Risks

  • Regulatory Shifts: Investments could be affected by regulatory changes as governments seek to understand the impact of tokenized real estate.
  • Vulnerabilities in Smart Contracts: Imperfectly designed smart contracts might contain weaknesses that can be exploited by ill-intentioned individuals.
  • Value Volatility: The worth of real estate tokens, like other cryptocurrencies, may be subject to fluctuations.
  • Misunderstanding Liquidity: Tokenization provides better liquidity than traditional real estate, but instant liquidity is not guaranteed. Factors such as market maturity, demand, and platform reach will determine the ease with which tokens can be sold.

Conclusion

As real estate and blockchain technology merge, tokenized real estate emerges as a potentially groundbreaking development. Offering transformative benefits such as liquidity, accessibility, and transparency, it also presents novel challenges and risks. Adopting this innovation necessitates a balanced approach, recognizing its limitations while maximizing its potential. As the real estate sector continues to evolve, tokenization may significantly alter our perception and interaction with property investments in the digital era.

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AI-Driven Frontend Automation: Elevating Developer Productivity to New Heights

Gracjan Prusik

11 Mar 2025
AI-Driven Frontend Automation: Elevating Developer Productivity to New Heights

AI Revolution in the Frontend Developer's Workshop

In today's world, programming without AI support means giving up a powerful tool that radically increases a developer's productivity and efficiency. For the modern developer, AI in frontend automation is not just a curiosity, but a key tool that enhances productivity. From automatically generating components, to refactoring, and testing – AI tools are fundamentally changing our daily work, allowing us to focus on the creative aspects of programming instead of the tedious task of writing repetitive code. In this article, I will show how these tools are most commonly used to work faster, smarter, and with greater satisfaction.

This post kicks off a series dedicated to the use of AI in frontend automation, where we will analyze and discuss specific tools, techniques, and practical use cases of AI that help developers in their everyday tasks.

AI in Frontend Automation – How It Helps with Code Refactoring

One of the most common uses of AI is improving code quality and finding errors. These tools can analyze code and suggest optimizations. As a result, we will be able to write code much faster and significantly reduce the risk of human error.

How AI Saves Us from Frustrating Bugs

Imagine this situation: you spend hours debugging an application, not understanding why data isn't being fetched. Everything seems correct, the syntax is fine, yet something isn't working. Often, the problem lies in small details that are hard to catch when reviewing the code.

Let’s take a look at an example:

function fetchData() {
    fetch("htts://jsonplaceholder.typicode.com/posts")
      .then((response) => response.json())
      .then((data) => console.log(data))
      .catch((error) => console.error(error));
}

At first glance, the code looks correct. However, upon running it, no data is retrieved. Why? There’s a typo in the URL – "htts" instead of "https." This is a classic example of an error that could cost a developer hours of frustrating debugging.

When we ask AI to refactor this code, not only will we receive a more readable version using newer patterns (async/await), but also – and most importantly – AI will automatically detect and fix the typo in the URL:

async function fetchPosts() {
    try {
      const response = await fetch(
        "https://jsonplaceholder.typicode.com/posts"
      );
      const data = await response.json();
      console.log(data);
    } catch (error) {
      console.error(error);
    }
}

How AI in Frontend Automation Speeds Up UI Creation

One of the most obvious applications of AI in frontend development is generating UI components. Tools like GitHub Copilot, ChatGPT, or Claude can generate component code based on a short description or an image provided to them.

With these tools, we can create complex user interfaces in just a few seconds. Generating a complete, functional UI component often takes less than a minute. Furthermore, the generated code is typically error-free, includes appropriate animations, and is fully responsive, adapting to different screen sizes. It is important to describe exactly what we expect.

Here’s a view generated by Claude after entering the request: “Based on the loaded data, display posts. The page should be responsive. The main colors are: #CCFF89, #151515, and #E4E4E4.”

Generated posts view

AI in Code Analysis and Understanding

AI can analyze existing code and help understand it, which is particularly useful in large, complex projects or code written by someone else.

Example: Generating a summary of a function's behavior

Let’s assume we have a function for processing user data, the workings of which we don’t understand at first glance. AI can analyze the code and generate a readable explanation:

function processUserData(users) {
  return users
    .filter(user => user.isActive) // Checks the `isActive` value for each user and keeps only the objects where `isActive` is true
    .map(user => ({ 
      id: user.id, // Retrieves the `id` value from each user object
      name: `${user.firstName} ${user.lastName}`, // Creates a new string by combining `firstName` and `lastName`
      email: user.email.toLowerCase(), // Converts the email address to lowercase
    }));
}

In this case, AI not only summarizes the code's functionality but also breaks down individual operations into easier-to-understand segments.

AI in Frontend Automation – Translations and Error Detection

Every frontend developer knows that programming isn’t just about creatively building interfaces—it also involves many repetitive, tedious tasks. One of these is implementing translations for multilingual applications (i18n). Adding translations for each key in JSON files and then verifying them can be time-consuming and error-prone.

However, AI can significantly speed up this process. Using ChatGPT, DeepSeek, or Claude allows for automatic generation of translations for the user interface, as well as detecting linguistic and stylistic errors.

Example:

We have a translation file in JSON format:

{
  "welcome_message": "Welcome to our application!",
  "logout_button": "Log out",
  "error_message": "Something went wrong. Please try again later."
}

AI can automatically generate its Polish version:

{
  "welcome_message": "Witaj w naszej aplikacji!",
  "logout_button": "Wyloguj się",
  "error_message": "Coś poszło nie tak. Spróbuj ponownie później."
}

Moreover, AI can detect spelling errors or inconsistencies in translations. For example, if one part of the application uses "Log out" and another says "Exit," AI can suggest unifying the terminology.

This type of automation not only saves time but also minimizes the risk of human errors. And this is just one example – AI also assists in generating documentation, writing tests, and optimizing performance, which we will discuss in upcoming articles.

Summary

Artificial intelligence is transforming the way frontend developers work daily. From generating components and refactoring code to detecting errors, automating testing, and documentation—AI significantly accelerates and streamlines the development process. Without these tools, we would lose a lot of valuable time, which we certainly want to avoid.

In the next parts of this series, we will cover topics such as:

Stay tuned to keep up with the latest insights!

The Ultimate Web3 Backend Guide: Supercharge dApps with APIs

Tomasz Dybowski

04 Mar 2025
The Ultimate Web3 Backend Guide: Supercharge dApps with APIs

Introduction

Web3 backend development is essential for building scalable, efficient and decentralized applications (dApps) on EVM-compatible blockchains like Ethereum, Polygon, and Base. A robust Web3 backend enables off-chain computations, efficient data management and better security, ensuring seamless interaction between smart contracts, databases and frontend applications.

Unlike traditional Web2 applications that rely entirely on centralized servers, Web3 applications aim to minimize reliance on centralized entities. However, full decentralization isn't always possible or practical, especially when it comes to high-performance requirements, user authentication or storing large datasets. A well-structured backend in Web3 ensures that these limitations are addressed, allowing for a seamless user experience while maintaining decentralization where it matters most.

Furthermore, dApps require efficient backend solutions to handle real-time data processing, reduce latency, and provide smooth user interactions. Without a well-integrated backend, users may experience delays in transactions, inconsistencies in data retrieval, and inefficiencies in accessing decentralized services. Consequently, Web3 backend development is a crucial component in ensuring a balance between decentralization, security, and functionality.

This article explores:

  • When and why Web3 dApps need a backend
  • Why not all applications should be fully on-chain
  • Architecture examples of hybrid dApps
  • A comparison between APIs and blockchain-based logic

This post kicks off a Web3 backend development series, where we focus on the technical aspects of implementing Web3 backend solutions for decentralized applications.

Why Do Some Web3 Projects Need a Backend?

Web3 applications seek to achieve decentralization, but real-world constraints often necessitate hybrid architectures that include both on-chain and off-chain components. While decentralized smart contracts provide trustless execution, they come with significant limitations, such as high gas fees, slow transaction finality, and the inability to store large amounts of data. A backend helps address these challenges by handling logic and data management more efficiently while still ensuring that core transactions remain secure and verifiable on-chain.

Moreover, Web3 applications must consider user experience. Fully decentralized applications often struggle with slow transaction speeds, which can negatively impact usability. A hybrid backend allows for pre-processing operations off-chain while committing final results to the blockchain. This ensures that users experience fast and responsive interactions without compromising security and transparency.

While decentralization is a core principle of blockchain technology, many dApps still rely on a Web2-style backend for practical reasons:

1. Performance & Scalability in Web3 Backend Development

  • Smart contracts are expensive to execute and require gas fees for every interaction.
  • Offloading non-essential computations to a backend reduces costs and improves performance.
  • Caching and load balancing mechanisms in traditional backends ensure smooth dApp performance and improve response times for dApp users.
  • Event-driven architectures using tools like Redis or Kafka can help manage asynchronous data processing efficiently.

2. Web3 APIs for Data Storage and Off-Chain Access

  • Storing large amounts of data on-chain is impractical due to high costs.
  • APIs allow dApps to store & fetch off-chain data (e.g. user profiles, transaction history).
  • Decentralized storage solutions like IPFS, Arweave and Filecoin can be used for storing immutable data (e.g. NFT metadata), but a Web2 backend helps with indexing and querying structured data efficiently.

3. Advanced Logic & Data Aggregation in Web3 Backend

  • Some dApps need complex business logic that is inefficient or impossible to implement in a smart contract.
  • Backend APIs allow for data aggregation from multiple sources, including oracles (e.g. Chainlink) and off-chain databases.
  • Middleware solutions like The Graph help in indexing blockchain data efficiently, reducing the need for on-chain computation.

4. User Authentication & Role Management in Web3 dApps

  • Many applications require user logins, permissions or KYC compliance.
  • Blockchain does not natively support session-based authentication, requiring a backend for handling this logic.
  • Tools like Firebase Auth, Auth0 or Web3Auth can be used to integrate seamless authentication for Web3 applications.

5. Cost Optimization with Web3 APIs

  • Every change in a smart contract requires a new audit, costing tens of thousands of dollars.
  • By handling logic off-chain where possible, projects can minimize expensive redeployments.
  • Using layer 2 solutions like Optimism, Arbitrum and zkSync can significantly reduce gas costs.

Web3 Backend Development: Tools and Technologies

A modern Web3 backend integrates multiple tools to handle smart contract interactions, data storage, and security. Understanding these tools is crucial to developing a scalable and efficient backend for dApps. Without the right stack, developers may face inefficiencies, security risks, and scaling challenges that limit the adoption of their Web3 applications.

Unlike traditional backend development, Web3 requires additional considerations, such as decentralized authentication, smart contract integration, and secure data management across both on-chain and off-chain environments.

Here’s an overview of the essential Web3 backend tech stack:

1. API Development for Web3 Backend Services

  • Node.js is the go-to backend runtime good for Web3 applications due to its asynchronous event-driven architecture.
  • NestJS is a framework built on top of Node.js, providing modular architecture and TypeScript support for structured backend development.

2. Smart Contract Interaction Libraries for Web3 Backend

  • Ethers.js and Web3.js are TypeScript/JavaScript libraries used for interacting with Ethereum-compatible blockchains.

3. Database Solutions for Web3 Backend

  • PostgreSQL: Structured database used for storing off-chain transactional data.
  • MongoDB: NoSQL database for flexible schema data storage.
  • Firebase: A set of tools used, among other things, for user authentication.
  • The Graph: Decentralized indexing protocol used to query blockchain data efficiently.

4. Cloud Services and Hosting for Web3 APIs

When It Doesn't Make Sense to Go Fully On-Chain

Decentralization is valuable, but it comes at a cost. Fully on-chain applications suffer from performance limitations, high costs and slow execution speeds. For many use cases, a hybrid Web3 architecture that utilizes a mix of blockchain-based and off-chain components provides a more scalable and cost-effective solution.

In some cases, forcing full decentralization is unnecessary and inefficient. A hybrid Web3 architecture balances decentralization and practicality by allowing non-essential logic and data storage to be handled off-chain while maintaining trustless and verifiable interactions on-chain.

The key challenge when designing a hybrid Web3 backend is ensuring that off-chain computations remain auditable and transparent. This can be achieved through cryptographic proofs, hash commitments and off-chain data attestations that anchor trust into the blockchain while improving efficiency.

For example, Optimistic Rollups and ZK-Rollups allow computations to happen off-chain while only submitting finalized data to Ethereum, reducing fees and increasing throughput. Similarly, state channels enable fast, low-cost transactions that only require occasional settlement on-chain.

A well-balanced Web3 backend architecture ensures that critical dApp functionalities remain decentralized while offloading resource-intensive tasks to off-chain systems. This makes applications cheaper, faster and more user-friendly while still adhering to blockchain's principles of transparency and security.

Example: NFT-based Game with Off-Chain Logic

Imagine a Web3 game where users buy, trade and battle NFT-based characters. While asset ownership should be on-chain, other elements like:

  • Game logic (e.g., matchmaking, leaderboard calculations)
  • User profiles & stats
  • Off-chain notifications

can be handled off-chain to improve speed and cost-effectiveness.

Architecture Diagram

Below is an example diagram showing how a hybrid Web3 application splits responsibilities between backend and blockchain components.

Hybrid Web3 Architecture

Comparing Web3 Backend APIs vs. Blockchain-Based Logic

FeatureWeb3 Backend (API)Blockchain (Smart Contracts)
Change ManagementCan be updated easilyEvery change requires a new contract deployment
CostTraditional hosting feesHigh gas fees + costly audits
Data StorageCan store large datasetsLimited and expensive storage
SecuritySecure but relies on centralized infrastructureFully decentralized & trustless
PerformanceFast response timesLimited by blockchain throughput

Reducing Web3 Costs with AI Smart Contract Audit

One of the biggest pain points in Web3 development is the cost of smart contract audits. Each change to the contract code requires a new audit, often costing tens of thousands of dollars.

To address this issue, Nextrope is developing an AI-powered smart contract auditing tool, which:

  • Reduces audit costs by automating code analysis.
  • Speeds up development cycles by catching vulnerabilities early.
  • Improves security by providing quick feedback.

This AI-powered solution will be a game-changer for the industry, making smart contract development more cost-effective and accessible.

Conclusion

Web3 backend development plays a crucial role in scalable and efficient dApps. While full decentralization is ideal in some cases, many projects benefit from a hybrid architecture, where off-chain components optimize performance, reduce costs and improve user experience.

In future posts in this Web3 backend series, we’ll explore specific implementation details, including:

  • How to design a Web3 API for dApps
  • Best practices for integrating backend services
  • Security challenges and solutions

Stay tuned for the next article in this series!