Enhancing Fractional Ownership With Blockchain-Based Assets

Fractional ownership has emerged as a popular collaborative investment strategy, allowing multiple investors to team up and acquire a stake in high-value assets, such as an upscale vacation property, a private jet, luxury yacht, vintage bottles of wine and luxury artworks. 

It’s a great way to democratize investing in elite markets. With the fractional ownership model, each investor gains specific ownership rights and entitlements based on the proportion of their stake in the underlying asset. 

To illustrate, if an investor buys a fractional ownership stake in a holiday home, they might be entitled to use that property for a limited number of days or weeks each year, or else receive a stake of the rental revenue it earns, depending on the agreement. It’s a great way for someone with limited funds to enjoy the benefits of owning a premium real estate asset, without paying the full cost to acquire it, even if they do have to share those benefits with others. 

Fractional ownership provides other benefits too. Sticking with the real estate example, the investor will receive deeds that stipulate their stake in the property, and if the value of that home increases in subsequent years, the value of their share will increase in proportion to those gains. Thus, they can sell their share of the home for a profit later on. In addition, fractionally owned properties relieve investors of the burden of managing that asset. Such properties usually fall under the control of a trust, which takes care of its upkeep, paid for by the fractional owners. 

The fractional ownership model has proven to be quite popular. In a 2024 survey by the Indian real estate investing platform WiseX, 60% of respondents said they’d prefer to split an investment in commercial real estate, as opposed to buying it outright. 

Downsides To Fractional Ownership

Although the fractional ownership model is popular, it’s not without risks to investors. One of the challenges is that fractional real estate investing platforms such as Pacaso are highly centralized, and investors rely on the company to hold the deeds to the properties they invest in. While there’s no suggestion that Pacaso does anything illegal, it’s not clear what protections investors would have if the company were to experience financial problems and go into bankruptcy. 

Fractional ownership investments could also be easy targets for scammers. The real estate industry has long been a target of fraudsters, with one of the most famous crimes being the legendary “Brooklyn Bridge Scam”, where the con artist George C. Parker sold one of New York’s most famous landmarks several times to blissfully unaware immigrants. 

On one occasion, the purported “buyer” of the Brooklyn Bridge proceeded to try and erect a toll booth and charge pedestrians a small fee to cross the bridge on foot. It was only then that they realized that the only thing they had acquired was fraudulent paperwork, but not the actual bridge. 

There are other potential issues with fractional investments too. For instance, in assets such as real estate and fractionally-owned private jets, it can be challenging for co-owners to agree on a schedule for using those assets, leading to conflicts and disagreements. There may also be disputes over how the asset is managed, and investors may become frustrated by the fact they only have limited control over decision-making processes. 

Solving These Challenges

Blockchain technology can solve a lot of the problems associated with fractional ownership and perhaps even expand the model to new asset classes. With blockchain, high-end assets such as buildings, private jets and art masterpieces can be represented as digital tokens, with each one counting as one share of the asset. 

This allows investors to become co-owners with only a minimal capital investment, broadening access to new asset classes. It also provides a guarantee of the validity of the underlying asset, because the immutable and decentralized ledger hosts the records that prove asset ownership. Moreover, it enhances democratic decision making. Each fractionally-owned asset can create a blockchain-based decentralized autonomous organization, where any investor can suggest a proposal regarding the asset, giving everyone the chance to vote on it in a democratic way. 

‍With blockchain, investors will also be able to view the entire history of an asset’s ownership as it records every transaction. In turn, this means token holders can verify they are the legitimate owners of an asset. 

Simplified Access

Almost any kind of asset can be represented as digital tokens and traded on blockchains. A case in point is Raphael Coin, known as RAPH, which is an asset that represents a share in the ownership of the Renaissance artist Raphael’s masterpiece “Recto: Study for the Battle of the Milvian Bridge”. 

The Raphael Coin project is designed to support public participation in efforts to preserve a valuable piece of cultural heritage, with each token holder owning a share of the underlying masterpiece, giving them a say on how it’s preserved and exhibited publicly. 

Blockchain offers a great way for novices to verify art investments. Generally, it’s very difficult for most people to distinguish between a counterfeit work of art and the real thing, and hiring an expert to do this for them can be very expensive. But with Raphael Coin, users have a simple way to verify that “Recto: Study for the Battle of the Milvian Bridge” is legitimate by checking its associated certificate on the Ethereum blockchain. 

To buy a share of “Recto: Study for the Battle of the Milvian Bridge”, investors can sign up to the Gleec BTC Exchange or Mandala Exchange and buy RAPH tokens with just a couple of clicks. Their ownership of RAPH will be securely recorded on the Gleec blockchain, and they can choose to sell the asset at any moment. It’s a far cry from the traditional way of buying art, which involves getting paintings authenticated and filling in various documents and processing payments. 

Investors' options aren’t just limited to art. The blockchain-based wine cellar, called BlockCellar, enables fractional investment in hundreds of bottles of vintage wine. Its marketplace allows users to rapidly trade digital tokens backed by verified, physical bottles of wine that have strong potential for price appreciation.  

Better With Blockchain

Fractional ownership is not new, but with the arrival of blockchain it’s likely to become much more common. With blockchain, we can significantly improve the transparency, security and accessibility of fractional asset ownership, eliminating the risks associated with fraud and reducing the potential for disputes among co-owners. It’s an extremely promising development that can help to empower more investors to start exploring the world of high-value assets and increase their wealth.