Decentralized wealth — NFTs and the future of my $10 million dollar flat
To read a great post about what NFT’s are — use google translate to read this post by my friend Judith Wolst.
// and so the story begins…
There is this apartment available on the Stockholm market. It is really awesome. Two stories, 7 rooms, and a freaking private patio on top of the roof. All this for the very fair price of slightly more than 10 million dollars.
And I want it!
The only problem is, I don’t have 10 million dollars. Actually, I don’t even have the 2 million dollars I need to give the bank its necessary securities to lend the other 8 and change. And even if I would have had the 2, I would most likely not be able to afford the mortgage payments on the 8 with the salary I earn today.
Bummer!
What if there was another way in which I could get this apartment. If not right now, at least in the near future.
As it turns out.
There is.
It’s built on blockchain and it will revolutionize banking, shareholding, and real estate in the coming years. But more importantly. It will decentralize wealth.
It is known as NFTs.
The decentralization of wealth and the promise of stability
I think we have all seen the movie “The big short” that so very nicely explained how greed and negligence combined with lack of transparency created the crash of the financial markets in 2008.
The idea of being able to put tranches of bad credit on top of each other to build diversified investment products that were then possible to gamble on using a system of synthetic CDO’s and gamble against them using credit default swaps.
The bill of the eventual crash was mainly paid by taxpayers, homeowners, and pension funds whilst bank executives thrived.
In the movie, the CDO’s are explained as “dogshit wrapped in catshit” as the construct took several really bad loans and bundled them together until the portfolio became big enough to be considered diversified.
In the case of NFT’s the opposite takes place.
High-value assets are broken down into purchasable bits using either fractionalizing them or using an AMM. Making diamonds into smaller pieces of diamonds.
So HOW can this be of any value to poor people?
So how is this of any value?
Well. For this, you have to add some ideology into the mix by agreeing to the idea that some assets are simply too expensive for poor people to ever afford to buy. If they were able to save in these high valued assets that increase in value over time — they would be able to make their way out of poverty.
The unjust issue with today’s society is that poor people — even averagely middle-class people — don’t have more than a few bucks to save each month. In order to buy higher valued assets, they have to take a loan — adding an interest burden to their lives.
And quite frankly. That su**s!
And although there might be arbitrage in the difference between the interest and the value increase in the asset. The added risk is simply not anything that a poor person EVER needs in their lives.
By being able to split the actual ownership (not derivatives, betting products, or other layered instruments) of the actual thing (apartment, gold, art), you are able to create scenarios where anyone can save in the asset “real estate” — holding actual bits of real estate.
Enabling even the poorest of the poor to gain access to asset markets and savings opportunities that previously were only available for the rich.
How can this be of value to rich people?
At the same time, this is highly beneficial for crypto-dense rich people in the web3 world as they hold assets that lack underlying value in the web2 world.
At the same time, this is highly beneficial for crypto-dense rich people in the web3 world as they hold assets that lack underlying value in the web2 world.
Or in other words. Crypto is valued because we believe in its potential of it for the future. It is an EXTREMELY HIGH-risk asset. And just like the first casino in Vegas was a bit of a gamble, so is the belief that the future of crypto holds a promise of a connection to things that people will value in their lives.
And although the existing NFT-markets are cool with its monkeys, NBA-players, and cryptopunks — it is pretty much all built on vanity.
The technology of smart contracts combined with the NFT marketplaces, however, does not stop there. The application is much bigger.
Which, in the case of me wanting to buy a ten million dollar apartment, actually offers a real opportunity to those who already have a bit too much risk on their shoulders.
When the digital ownership of my living room becomes a safety net against risk
Instead of going to the bank to get a loan for my $10 million apartment, I chose to issue an NFT. The NFT is fractionalized into bits of 1 dollar per token — meaning that people can take some of their cryptocurrency and buy a non-fungible bit of my apartment for as little as 1 dollar.
I exchange the crypto I get into fiat money and buy the apartment.
As I issued the NFT I made some conditions in my smart contract explaining the circumstances associated with owning a single fraction of my apartment.
Such conditions could be that I pay rent every month. I convert the rent into tokens that are issued equally amongst the NFT holders. Thus they get some fraction of currency every month.
If I would default on my payments, some conditions would be set under which the NFT holders would have some voting rights as to whether or not I should have to sell the underlying asset or not (which actually would be more suitable if I had turned it into a DAO… but that’s for another post). Which in turn would depend on what the real estate market would look like at the time.
The highest value for the investor however is that they will have secured the value of their nominal crypto in some non-crypto asset. Much like what a stable coin does today when locking the price of the crypto asset to the US dollar or the Euro.
However, in this case, the added value that the asset they have tied their crypto to is — at least historically over time — protected against inflation.
Thus, they would at least get the increased value in fiat when I sell my apartment in the future + the incremental, recurring rent payments (unless I default).
So how is this different from today?
Well. You cut out the banks.
When you put your money in a savings account today, it is very rare that your interest rate is higher than the current inflation rate. Thus — you actually lose money every day from saving money.
Add to that the many fees you have to pay to move your money between banks or when you pay for goods — having money in the bank is a ripoff.
By tying it to a real asset (such as an apartment), you are able to at least get the interest equal to the inflation rate. Add the recurring payments to that, and you have a great deal — comparatively speaking.
And if you need the money — sell the NFT at a market price.
So, back to my apartment!
Naturally, I won’t get the 10 million dollar apartment that I want, at this point in time. For such thing as what I’ve explained above does not yet exist. HOWEVER, the promise and technology of NFT’s show me that it is possible for the future.
And I KNOW that the banks, politicians, and main investment firms see this already. Ie. those who are already rich and in power.
And perhaps… with the understanding that they will lose their privilege… that’s why they are doing their best at opposing the natural evolution into web3, crypto and future that I can tell you looks far more promising than the existing one.
If you do not believe the potential. Then have a look at some of these resources.
