What The Bitcoin Halving Means For DeFi, RWAs, And Fractionalized Real Estate Ownership

The long-awaited Bitcoin halving event has finally come, sending an already tumultuous market roiling and creating an electric and uncertain atmosphere in the crypto community. While many investors are euphoric, others are reacting with trepidation after last week’s market meltdown liquidated billions in options.

Halving events are major milestones for crypto’s landmark currency, representing a 50% reduction in Bitcoin mining rewards. These miners utilize a mix of hardware and software to solve the equations that make up a block, with a successful solution releasing a set number of Bitcoins.

With each halving, the number of coins released by mining a block is reduced, with the initial reward dropping from 100 to 50 in 2012, 25 in 2016, 12.5 in 2020, and now 6.25 in 2024. The halving was programmed into the protocol to reduce the possibility of inflation and create a set number of coins in circulation, each of which is infinitely divisible.

The excitement caused by halving is primarily due to its effect on the market. In short, halving events are usually followed by a monstrous bull run that can last up to a year or more. 2020’s halving event led to a massive inflow of cash into the crypto space, sending Bitcoin from under $10,000 to well over $60,000 and launching a number of altcoins into valuations in the tens of billions.

The halving event in 2016 is what turned many eyes onto crypto, as Bitcoin suddenly hit a 5-digit valuation and created thousands of millionaires overnight. A community of developers saw the potential of the novel blockchain technology Bitcoin represented and began laying the groundwork for what would be called Decentralized Finance, or DeFi.

DeFi’s purpose was twofold: create a financial network for crypto investors to use their crypto to make more crypto, and create a purely online system of wealth management and accrual that was not controlled by the major players on Wall Street. While the success of the second goal is TBD, they made solid progress on the first, with a huge network of community-driven lenders providing liquidity pools and lending options for new projects and degen investors.

A major use case for the DeFi community is providing hedges and safe harbors for investors looking to take profits and exit the highly volatile crypto marketplace while still maintaining liquidity. A variety of alternative investment options exist, the most interesting of which is the Real World Asset (RWA) marketplace.

RWAs sound like an oxymoron – how and why are real-world assets on the blockchain? The “why” is simple – real-world assets tend to have much less volatility, meaning they are a stable bet when deciding to put your money, and a digital asset is much easier to buy or sell than an actual physical object.

The how is a little bit more complex. The assets are first purchased by the holding company, which then takes the value of the asset and digitizes it into one or more tokens. Each of these tokens represents a set percentage value of the asset, so as it increases or decreases in value, so too does the value of the token.

There are dozens of types of RWAs, from precious metals to art and even real estate. RealT is a DeFi company operating in the RWA space that offers fractional ownership of rental properties all over the United States and beyond.

Each RealT token gives you access to both a share of ownership in the property and that share’s proportion of the rental income. That means you earn money on both the property’s inflating value and a monthly passive income in the form of rent.

The market is an unpredictable beast, and as last week proved, downturns can come at any time. By investing in crypto real estate assets like RealT, you can place your winnings in a safe harbor and make some extra income in the meantime. Happy investing!