Many industries are starting to be penetrate by cryptocurrency. Disruption is occurring, something that seems to be accelerating.
Because of this, it is important to keep an eye on where things are going.
One of the largest industries is real estate. Globally it amounts to hundreds of trillions of dollars in value. Suddenly, real estate transactions are occurring using cryptocurrency. This opens up the door to enormous possibilities.
A few months back we discussed Access To Real Estate Through Tokenization. While this is still something in the future, we are seeing the potential of what is shaping up.
Real Estate is fairly straight forward when it comes to financing. Typically, the two options are to pay cash or get a mortgage. While there are all kinds of nuances to the latter, the basic premise is to get a loan secured by the property. This is how real estate worked forever it seems.
Of course, to prevent default, the homeowner simply made the payments each month. Over the years, that would reduce the balance owed (unless the property was refinanced), ultimately leading to true ownership.
Due to the total value of the properties, another huge industry formed, one that dealt in mortgages. This form of secured lending is worth billions of dollars annually.
Cryptocurrency is now entering the mix. But how is it doing this and will it be revolutionary?
Bitcoin loans are nothing new (relatively speaking). They are a part of Decentralized Finance (DeFi) for the past few years. Essentially, the idea is to put up Bitcoin to receive a loan against it.
This was done by one engineer who bought his mom a home. Instead of the house serving as collateral, the Bitcoin is the asset at risk. If the payments are made, the Bitcoin is safe.
We do have an additional layer of risk. If the price of Bitcoin falls, relative to the loan value, some more collateral could be required.
This does not exist with a traditional mortgage. The home value only applies upon initiation of the loan. Outside of refinancing, it has no bearing.
How will the situation change if we switched to unsecured loans? This is how credit cards operate. There is no collateral backing the money lent. Hence, if default occurs, we see a loss.
DeFi is introducing new innovations in the lending world. We already witnessed the first evidence of this.
An Austin apartment was sold for $680,000. This was purchased with a $500,000 unsecured loan. How was this structured?
The buyer put up 20% as a down payment. USDC was used as payment, sending 500K over the Polygon network. The interest rate was set at 5.5%.
Here is where innovation enters the picture. The down payment was staked, allowing the earnings to be used to pay down the mortgage. According to this article, that amounts to 68% of the loan repayment.
The financing was secured using nothing other than a credit score and analysis of online activity. Obviously, the fact that the down payment is farming yield helps to reduce the risk to the lender.
Hopefully people are starting to see the potential of a stablecoin coupled with yield. By increasing utility, the potential expands due to innovation. When cashflow is built into the models, like was done here, a host of possibilities open up.
We discussed the Hive Backed Dollar and what is can offer. Here is another example how building out use case would foster greater adoption of the token.
Too many focus upon the speculation aspect of things. In this instance, we see $500K worth of commercial business carried out in a single transaction. If this were done using HBD, the down payment of $180K could be placed into the Hive Savings Program, earning 20%.
This could even be taken one step further and tied to a time locked vault, such as a 30 year. Here we see the lock up period matching use case. This would, of course, be at the base layer, meaning we remove some risk from the equation. Many wonder why anyone would lock up HBD for that long? Here is a prime example. The HBD, under this scenario, is used to match a longer term debt obligation. With this transaction, the "security" comes from the cashflow being provided by the staking of cryptocurrency.
In fact, an entire bond tree could be built to satisfy different use cases.
Here is why we see so much potential in the stablecoin market.
To fully realize what is possible, we have to adopt an entirely new mindset. What this essentially means is starting to think like bankers.
It is no secret that the banks run the world. This was the case for the past 70 years. Once they fully go hold of the money making machine, their power grew exponentially. By operating outside the reach of any government, or even central bank, the international bankers were able to amass power that is unrivaled.
Cryptocurrency along with its associated tentacles has the ability to combat that. Since we now see the ability to create money, we are able to apply the same ingenuity as they do. By moving into different sectors, we can see the transactions occurring in cryptocurrency increasing.
It is in this way that cryptocurrency can become the true threat to the international banking cartel. When see the possibilities, it is eye-opening.
Ultimately, it all revolves around the idea of creating pristine collateral. This is the opportunity that is afforded the cryptocurrency industry.
And as we can see, it can add up to some big money very quickly.
Cryptocurrency is now making moves into real estate. This is a realm worth hundreds of trillions of dollars. We are seeing the innovation just getting started. Over the next few years, this will likely expand.
Expect to see more articles along these lines detailing expansion in this area. There simply is too much money on the line.
What are your thoughts? Let us know in the comment section below.
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