Crypto has already begun to create new opportunities for fractional ownership / transfer of real estate, on-chain collateralisation (DeFi lending) and DAO collective ownership of property.
Feb 2, 2022·edited Feb 2, 2022Liked by Justin Shee
Very interesting Mr Shee.
A question around the Defi lending against physical property example - how do the lenders enforce security in the real world if the lender defaults? Presumably without being integrated into other systems (i.e. the land registry and legal system in the UK) owning the NFT that represents the land wouldn't be sufficient for the lenders to take ownership of the property?
Hey Spoons - you raise a good question. In the case of the development loan, there is a robust real world legal structure that sits behind this all atm. The NFT contains all of the data that the legal documents around the real estate loan contain. They take all of the legal charges over the asset and bundle them up into an NFT, which can then be held on a vault on a DeFi protocol. The purpose of the NFT here is to translate the legal documentation that exists in the real world into a format which can be understood on the blockchain. If the developer goes bust, then the legal structure around the development loan remains. The NFT doesn't add any reinforcement, it just contains the data stating what would happen to the asset (collateral) in the case of default.
This is the most complicated bit of the whole process. DeFi works well when digital assets are interacting with digital assets. It's much harder when that digital ecosystem has to interact with physical assets. But it's getting there slowly.
Great article Justin! I was just discussing this idea of collateralising property with an NFT in a DeFi protocol in order to borrow against it - just as one can with crypto asset. I am wondering if any progress has been made on something like this in the UK? I'd love to understand what the barriers are to making this happen in the UK.
Very interesting Mr Shee.
A question around the Defi lending against physical property example - how do the lenders enforce security in the real world if the lender defaults? Presumably without being integrated into other systems (i.e. the land registry and legal system in the UK) owning the NFT that represents the land wouldn't be sufficient for the lenders to take ownership of the property?
Hey Spoons - you raise a good question. In the case of the development loan, there is a robust real world legal structure that sits behind this all atm. The NFT contains all of the data that the legal documents around the real estate loan contain. They take all of the legal charges over the asset and bundle them up into an NFT, which can then be held on a vault on a DeFi protocol. The purpose of the NFT here is to translate the legal documentation that exists in the real world into a format which can be understood on the blockchain. If the developer goes bust, then the legal structure around the development loan remains. The NFT doesn't add any reinforcement, it just contains the data stating what would happen to the asset (collateral) in the case of default.
This is the most complicated bit of the whole process. DeFi works well when digital assets are interacting with digital assets. It's much harder when that digital ecosystem has to interact with physical assets. But it's getting there slowly.
Great article Justin! I was just discussing this idea of collateralising property with an NFT in a DeFi protocol in order to borrow against it - just as one can with crypto asset. I am wondering if any progress has been made on something like this in the UK? I'd love to understand what the barriers are to making this happen in the UK.