“Landlords grow rich in their sleep.” – John Stuart Mill
Owning real estate is a lucrative way to put your money to work and often it is considered as an inflation hedge. The presence of real estate also diversifies a portfolio of assets and balances it. There are mainly three ways to make money from real estate – property value appreciation, rental income and business activity from the real estate. Despite the sector’s ability to consistently create wealth, it has remained outside the reach of common people due to high entry barriers. Real Estate Investment Trusts or REITs were formed in different counties to give easy access to people to large-scale diversified portfolios of income-generating real estate and they definitely addressed some issues by providing better accessibility, liquidity, transparency and scalability but further mass adoption scope is there. In the past decade, we witnessed the rise of technology in every sphere of our life. AI, Big data and cloud computing changed our day-to-day lives and significant advancements happened in the field of blockchain technology that astonished the world with various meaningful and rapid innovations in fintech. The disruptive effect of technology is anticipated to bring revolutionary changes in real estate too. CitaDAO is a project that has created a nice buzz with its promise to use blockchain technology for making tokenized real estate accessible to everyone.
High angle view of New York cityscape: photo by Quintin Gellar from Pexels
During the ICO mania of 2017-2018, the idea of real estate tokenization got momentum and many projects came up with tokenized real estate projects. Crossing the regulatory hurdle was really difficult for them and many of them failed. Linking the property deeds with the tokens was also a crucial barrier and the secondary market was not prepared. Real estate remained in the grasp of TradFi or traditional finance and excluded the retail class. The rise of DeFi or decentralized finance is challenging the centralized nature of TradFi today. The participatory nature of AMM (automated Market Maker) based DEXs has redefined yield generation and opened up opportunities to tokenize various real assets. The immutable blockchains are acting as decentralized trust sources and smart contracts are acting as financial robots. The liquidity of the secondary market is expected to be far better now for such assets. CitaDAO wants to ride the DeFi wave to bring real estate to the masses.
The outrageous volatility of cryptocurrencies is a known issue. The green candles quickly turn red and the local bottoms become local tops. The diversification aspect of the crypto portfolio is of utmost importance. Many people like to hold stablecoins in their portfolios due to this reason. But are stablecoins really stable? Stablecoins like USDT, USDC etc. are pegged to the US dollar. The asset backing of these stablecoins is often questionable. USDT is a stablecoin issued by Tether Holdings Limited and it is the 3rd largest cryptocurrency as per market capitalization at present. Tether has always remained controversy’s favourite child and many critics have depicted it as a systemic risk to the cryptocurrency ecosystem. On 9th August 2021, Tether published an independent accountant’s report which stated that the consolidated group’s consolidated assets exceeded its consolidated liabilities. A bank run can happen in the financial sector when financial institutions issue fixed-value liabilities that are backed by assets with uncertain or dubious value. As more people start withdrawing their money, the probability of default increases. Oh! What a risk we are exposed to! Even if we are convinced about the asset backing of our favourite stablecoins, we can convert these to a currency whose purchasing power has only eroded since inception. The central banks are on a money printing spree after the emergence of the pandemic. Neither dollar nor any other central bank-controlled currency can be considered stable. A real-life asset like real estate can protect our portfolio from the infinite supply of money. A token tied to the value of a real estate can hedge against inflation as the property has the ability to generate income. Currency devaluation increases the rental income of the property. CitaDAO’s platform is going to offer easily accessible real estate tokens with superior stability. These real estate tokens will offer a hedge against inflation on-chain while maintaining low volatility.
CitaDAO’s genesis IRO (Introducing Real Estate On-chain) will be held soon for Crypto Natives to commit their interests in ERC20 real estate tokens (RET). RET token holders have the right to buy out other RETs to claim the NFT representing the property and redeem the title deed as well as the assets of the Special Purpose Vehicle (SPV). Crypto Natives can participate in this event by staking USDC in the commit pool. Once the soft cap target is achieved, the IRO will be completed. At the end of a successful IRO, all participants will be able to claim the RETs. There is also an IRO reward pool to reward IRO participants of a successful IRO, especially those who committed early to the IRO pool. The IRO and the reward pool will only last for 10 days. After the IRO, users can stake their RETs to earn CitaDAO governance token Knight. These RETs can be used in different DeFi platforms too. Pumping liquidity in real estate token pairs on AMM DEXs is going to be a very attractive way to earn trading fees. Decentralized ownership of real estate tokens and participation in the liquidity pools can really be a game-changer in the real estate sector. CitaDAO has lined up a total of $240m worth of real estate for tokenization by Q4 2022. Every real estate will go through the IRO process and only the properties that receive sufficient commitment from the community will be tokenized. If for whatever reason the IRO is not successful, all participants will be able to claim back their original commitment in full from the IRO pool. In this instance, no IRO reward will be distributed.
Source - IRO mechanism of CitaDAO
CitaDAO is reinventing the potential of the real estate sector with help of DeFi. They have also brought true innovation in linking the property deeds with the tokens. Buyout of the property is possible here. A RET holder can determine the buyout price, price per token and initiate the process. Other community members are free to make counterclaims in the buyout. The whole process is transparent and designed to maintain proper price floors. It is very important to note that CitaDAO wants to become completely decentralized down the line. Their governance token Knight is live now and it is available on Uniswap. It powers the community to build a decentralized ecosystem involving real estate. DeFi is destined to challenge TradFi in every domain. ConstituitionDAO’s participation in the bidding battle for securing a first-edition copy of the U.S. Constitution at a Sotheby’s auction has shown us that the world is ready to take the institutional giants head-on. The real estate sector is going to witness high voltage mass participation now. CitaDAO will be the catalyst!
Check out CitaDAO Discord if you have any queries and follow their Twitter to get regular updates!
Note: The article was first published here.
Follow Me
👉 Twitter @paragism
