The emergence of fractional ownership of real-world assets represents a turning point in investment paradigms. This shift has had a pronounced impact on Gen Z and new investors, who face distinct economic challenges. Young people struggle with significant student loan debt or face the risk of lower initial earnings.
Over 40% of Americans under 30 say they barely manage to get by, while only 16% report doing well or very well. It’s clear that traditional investments, such as real estate, collectibles, and fine art, are beyond the reach of this group, as per Harvard Youth Poll.
Even considerably well-off individuals might hesitate to make a large purchase, especially if they don’t have much experience with investments. The widening gap between resources, expertise, and investment opportunities disproportionately affects younger investors, intensifying economic disparities.
Blockchain brings transparency to fractional RWA ownership
According to the 2024 edition of a survey by WiseX, a real estate investment platform, 60% of investors favor the fractional ownership model for investing in commercial real estate. Blockchain provides a guarantee for the validity and transparency of this model and offers security on an unprecedented scale. It achieves this through a decentralized and immutable transaction ledger that ensures the integrity of asset ownership records. The ledger enhances trust among investors and mitigates the risk of fraud.
Fractional ownership allows investors to acquire a share of high-value assets that would otherwise be out of reach due to their exorbitant prices. Assets such as collectibles, fine art, and real estate are highly suitable for the model. Fractional ownership is possible through numerous mechanisms, including cryptocurrency tokens like Raphael Coin (RAPH), an asset within the Gleec blockchain ecosystem.
RAPH distributes ownership of the masterpiece “Recto: Study for the Battle of the Milvian Bridge” by Renaissance artist Raphael. The token project enables public participation in cultural heritage through blockchain technology, where each token holder owns a part of cultural history.
Overcoming the challenges of traditional art investments
The prohibitive cost of valuable artwork is not the only challenge. The art market is often intimidating and impenetrable to outsiders. Without connections in the art world, one is plagued by uncertainty when making investment decisions. Lack of transparency and objective information are key challenges, and the art market’s unregulated nature also scares potential investors.
On the other hand, art has been attracting interest from investors seeking profit and diversification since the emergence of specialized investment funds, notably the British Rail Pension Fund in 1974. The fractional ownership model is an extension of the desire to widen access to the art market and tap into a new customer base. Blockchain has become the link between the need to overcome the challenges of traditional investments, the appreciation for quality art, and the demand for higher yields.
Digital asset bank Sygnum and investment fund pioneer Artemundi partnered to tokenize Picasso’s ‘Fillette au béret’ in 2021, marking the first time a regulated bank registered ownership rights to art on a public blockchain. Investors could buy and trade art security tokens, which represented shares in the artwork.
A safety guarantee underlying a frictionless user journey
Users who are interested in owning part of Raphael’s “Recto” register on Gleec BTC or Mandala Exchange and buy RAPH tokens representing their share. Ownership records are securely maintained on Gleec’s blockchain, supporting the custody of the physical piece. The tokens are impossible to steal, misappropriate, or lose, and the owners can hold or trade them freely. Fractional art ownership enabled by Gleec eliminates the rigidity associated with traditional investments and ensures cultural preservation by giving more people a stake in the historic artwork.
The 21st century is fertile ground for scammers, given the omnipresence of the internet; however, scams involving asset ownership predate the web by far. George C. Parker’s Brooklyn Bridge sale scam in the 19th century was relatively simple: he would approach immigrants who’d recently arrived in New York City, convince them he owned Brooklyn Bridge, and sell it, sometimes for up to $50,000.
His unsuspecting victims set up toll booths and tried to charge people for access to the bridge. They realized they’d been duped after police shut down their attempts to control the road. Eventually, processors at Ellis Island began distributing written warnings stating that one couldn’t “buy streets or public buildings.”
Real estate scams have proliferated since the days of Parker’s Brooklyn Bridge sale, highlighting the core weakness of traditional asset transactions: lack of verifiable ownership, provenance, and transparency. Despite blockchain being a core feature of just one fractional asset ownership model – tokenization – it should be adopted across the board. Once an asset is tokenized and its ownership is recorded on blockchain, that record is timestamped and publicly verifiable, and it cannot be altered.
Blockchain maintains a transparent history of all transactions and ownership changes. A potential buyer can verify the current owner’s legitimacy. Smart contracts only allow valid transactions, such as transfers from the legitimate owner, and can integrate with legal registries.
How blockchain can protect against forgery
Distinguishing an artwork counterfeit from a genuine piece is not straightforward without expertise in art, but true experts are often costly. Investors can use Android smartphones to verify the authenticity of artwork by accessing the respective certificate on Ethereum. An artwork image and metadata representing the physical artwork are stored in an IPFS and minted as an ERC721 NFT to a smart contract deployed in an Ethereum testnet.
Developers have created a mobile app that generates a certificate of authenticity for each NFT retrieved through the OpenSea Testnet API. Users scan a communication tag embedded in the artwork to access this information. The respective artist and agent responsible sign the content of the tag through their Ethereum wallet accounts.
Based on a recent Deloitte report, over a fifth (21%) of art collectors are interested in the fractional ownership model, which goes up to 43% for collectors under 35. The pandemic appears to have catalyzed the shift in the approach to art investments, as the popularity of this model has consistently increased in its wake.
Conclusion
Blockchain offers the transparency, security, and accessibility needed to make fractional asset ownership a trustworthy and inclusive investment model. By reducing barriers and eliminating fraud risks, it empowers younger and first-time investors to own shares in high-value assets—redefining wealth creation through verifiable ownership, smart contracts, and decentralized transaction records.
