In 2017 I bought a condo apartment in Kiev, Ukraine. This wasn’t a normal purchase – I used the then-nascent Propy protocol to make the purchase and have the property title recorded, for the first time ever, to a blockchain. I also paid for the condo in Ether. These days, property title transfers on Propy are an everyday occurrence. The Wall Street Journal, Newsweek and others covered the news.
Today Propy announced a new first – that same home, which is owned by a U.S. domiciled LLC, is being auctioned and sold as a NFT. The auction begins on June 8, 2021 (a couple of weeks from now).
The auction information page is here.
This isn’t a gimmick – but it is a proof of concept. Ownership of the NFT will allow that owner to claim ownership of the property via the LLC.
Why is this interesting? This NFT, backed by real world property, has value. NFTs are already being inserted into DeFi protocols, allowing, for example, people to borrow against the value of the NFT. In the real world, we can use mortgages. They take months, require the approval of a middleman, and are extremely difficult to get in some countries, particularly if you aren’t a resident of that country. With DeFi, none of that matters.
From the Coindesk article: “We are increasingly excited about the role of NFTs in DeFi,” Arrington said. “With homes and really anything in the real world being tokenized, you can plug that physical item into DeFi, assuming the legal niceties are ironed out, and that’s fascinating.”
I made similar comments to TechCrunch:
Arrington added: “Coming at this from a crypto angle, we’ve seen what happens how DeFi gets plugged into credit markets. If I have an NFT or any DeFi asset I can then borrow against it, without a middleman. Right now, if I have a real piece of real estate, there is no way for me to borrow against it, without a middleman, because I have to go through a bank and get a mortgage or whatever. And it’s also the friction, all of the costs in terms of speed and how long it takes.
“If we can find a way to plug real estate and other real-world assets into DeFi, I think that the amount of credit that can be created around that is in the trillions, eventually. And so I think that has to happen. The questions around this are legal and regulatory… The legal stuff around this is tough, and so Propy has done a lot of work with that. But if they do, I think that the idea of an NFT representation of a real-world asset purely from the point of view of ease of trade and ease of access to credit markets is a big idea.”
If you are interested in participating, details are here.