DAI stablecoin used in real estate Security Token Offering
Fluidity Factora has released a real estate token called FACTOR-805, which will offer investors the option to use the DAI stablecoin to make payments and receive interest, Forbes reports.
Fintech firm Fluidity and Propellr, a platform for creating, managing, and servicing digital assets with Propellr Securities, an integrated FINRA-registered broker dealer, recently combined to become Fluidity Factora.
FACTOR-805 is a new, near-completion 37-unit residential condominium building with retail space at 805 Washington Avenue in Brooklyn, NY, situated two blocks from the Brooklyn Botanic Garden. The expected yield of investments in the token is 13.24 percent. According to a Factora news release, the FACTOR-805 token is the first real-world asset that can be tokenized and have distributions paid in DAI or fiat.
FACTOR-805 is a Security Token Offering (STO) — a form of Initial Coin Offering (ICO) that is intended to be fully compliant with regulations. “As well as offering the potential for legally compliant ICOs, advocates argue that STOs allow companies to put existing securities such as stocks and bonds on to a cryptographic blockchain,” notes Yahoo Finance. “This would allow people to trade these securities without the need for a middleman.”
The Fluidity FAQ defines a tokenized security as a security that is represented as a blockchain token, noting that tokenization “has the potential to significantly impact financial markets by lowering transaction costs, introducing programmable compliance, reducing settlement time and increasing potential liquidity.” Tokenized securities are regulated by the Securities and Exchange Commission (SEC) like traditional securities.
Some assets, and in particular real estate assets, are expected to benefit from tokenization “because their current markets are plagued with inefficiencies in the transaction processes, limited accessibility, and poor liquidity.”
Security Token News, a publication dedicated to STOs, notes that “[along] with STOs, stablecoins have commonly been noted as a hot trend for 2019 onward.”
“This development further cements that notion. DAI is a stablecoin, representing the hard work of issuer MakerDAO. This stablecoin will allow for the efficient onboarding of investors, in addition to a new avenue for dividend distribution.”
Fluidity Factora CEO Todd Lippiatt said:
“We believe in the DAI stablecoin and are pleased to incorporate it specifically into FACTOR-805. MakerDAO is noteworthy in the space for presenting a creative solution to the conundrum of volatility in stablecoins backed by other cryptocurrencies.”
MakerDAO co-founder and CEO Rune Christensen added:
“FACTOR-805 is a breakthrough. It’s a powerful example of how to unlock more value from investments by bringing real world assets to the blockchain. With DAI, investors get the speed, security and efficiency of a cryptocurrency without the volatility that typically defines the space.”
This seems to make a lot of sense. STOs are financial products aimed at mainstream investors, who often prefer to stay away from “dangerous,” hyper-volatile cryptocurrencies. From the point of view of the promoter, a blockchain-based platform able to run smart contracts is needed, but keeping reserves in a volatile cryptocurrency is a risk.
Therefore, an Ethereum-based stablecoin like DAI seems the best bet, able to combine the advantages of fiat (relative stability) and crypto (efficiency and programmability) currencies.
In general, this development seems to confirm that stablecoins represent a shift in the crypto market, away from historical volatility of cryptocurrencies, and toward mainstream adoption, as emphasized by Forbes.
Cover image from Google Maps.
