# How Tokenization Work

Real Estate Tokenization involves the conversion of real estate assets into digital tokens on a blockchain. The process begins with the creation of a Special Purpose Vehicle (SPV), which is a legal entity that holds the real estate asset. The SPV then issues digital tokens that represent ownership of the real estate asset. These tokens are stored on the blockchain, where they can be bought, sold, and traded in a decentralized and transparent manner.

The Initial Real Estate Offering ([IRO](https://horizondao.gitbook.io/docs/faq/glossary)) is the process by which real estate assets are tokenized. During the IRO, investors can commit funds to purchase the tokenized real estate asset. If sufficient funds are committed, the real estate asset is tokenized, and the tokens are distributed to investors. Investors can then trade these tokens on decentralized exchanges, providing greater liquidity and easier access to investment opportunities.

Real Estate Tokenization also enables the use of smart contracts, which are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. Smart contracts automate the management of the tokenized real estate asset, eliminating the need for intermediaries and providing greater security and transparency.
