Next week, Tangible Baskets will deploy, a culmination of months of development in our attempt to solve the liquidity challenges of the ERC-721 (NFT). While many protocols have provided solutions to this issue, most recently with the novel new ERC-404 standard, none have attempted it with the specific focus on making high-valued, yield-generating real estate liquid and accessible for anyone, anywhere.
Tangible Baskets are permissionless, rebasing ERC-20 tokens — 100% backed by tokenized, yield-generating real estate — that distributes yield back to token holders via daily rebase.
Basket.sol is the ERC-20 contract that facilitates the transition of TangibleNFTs (TNFT) into Basket tokens, allowing users to mint their NFTs into ERC-20 tokens. Baskets can be created by anyone who holds a TNFT. A new basket can be deployed via the Basket Manager.
BASIC OPERATIONS
Tangible Baskets are a simpler, safer way to own tokenized real estate, giving owners access to a focused selection of high-yield properties all through one, rebasing token. Baskets remove the risks of single-property exposure while giving holders access to the full range of DeFi composability.
Prices and Valuation:
The value of each ERC-20 is based on the true value of the real estate assets in the basket, divided by the number of tokens in circulation. The market price of Baskets is soft-pegged to the True Property Valuation (TPV) of the assets in the pool and will fluctuate based on market demand and the activity of arbitrageurs.
Token prices may fluctuate based on demand, but the TPV used in mint/redemptions help ensure token prices will find their correct asset-backed value as market makers can arbitrage the spread.
The real estate TPV is calculated using independent, third-party valuations collated and distributed through a decentralized oracle. At this time, 20% of the property values are updated monthly via third-party API, with the updated figure reflected in the TPV. This percentage will continue to grow as recent purchases are updated in the provider’s database. The remaining properties will get updated appraisals from certified sources on an annual basis.
Yield:
As rental yield accrues in the Basket, a daily rebase distributes additional tokens to users to reflect this increase in total vault value. There is no need to stake or claim yield, the Baskets balance in your wallet simply grows over time.
Once enough rental yield has accrued, that cash is converted into a new property for the pool. Compounding gains into new real estate assets ensures the yield remains consistent over time. Any yield not reinvested into real estate will reduce the returns of the vault.
10% of the incoming Baskets rent is distributed to veRWA holders. $RWA is the governance token for re.al, the first permissionless L2 for tokenized RWAs, home to Tangible. All protocols on the chain receive liquidity incentives in exchange for sharing a portion of protocol revenue with the ecosystem.
Mint:
Baskets allow any Tangible NFT holder to deposit freely in exchange for Basket tokens. Users will receive ERC-20s equivalent in value to the TNFTs they minted with. A 0.5% mint fee is applied to all Basket mint transactions. Users can mint TNFTs into existing Baskets or create a completely new Basket with their TNFT.
New Baskets can be created using a range of sub-category criteria to focus the scope of the asset. The sub-categories are already tagged in the TNFT and users may mint a Basket using as many sub-categories as desired as long as the options aren’t mutually exclusive.
NOTE: The more narrow the Basket, by number of sub-categories selected, the fewer future assets will be eligible to be minted into it and the thinner the liquidity for the Basket tokens as a result.
We built Baskets to work seamlessly in a future where institutions and investors might:
- Mint a Basket of only Euro denominated properties to farm with a Euro stablecoin, minimizing FX risk.
- Mint Baskets focused on narrow regions to speculate on markets expected to increase in value disproportionately to their surrounding areas.
- Mint a Basket of global properties with one use-case or build category based on maco trends
Redeem:
At any time, users can burn ERC-20 basket tokens and redeem them for an equivalent value of real estate NFTs. Any accumulated rental yield not yet converted into a new property will remain in the vault.
Only one property is available for redemption at a time, with a new property becoming available for claim after the previous property TNFT has been redeemed. Redemption properties are generated at random using Gelato VRF. Redemptions are only available for whole properties, and the value of Basket tokens being redeemed must match the TPV of the full property being redeemed. Reminder that “token value” is fixed to the value of the underlying assets, however market price may trade above or below this figure.
Future redemption mechanics may include auctions or bidding on specific properties in the vault.
BENEFITS
The benefits of investing in real estate are well known. Baskets compliment these benefits to yield the most liquid and composable real estate backed asset in the history of DeFi.
Value Accrual:
With few exceptions, the price of real estate appreciates over time. In part, this is easily attributable to the expansion of monetary supply. The more money in circulation, the more things cost, including real estate. This doesn’t factor into account the scarcity and value creation of real estate. While not completely insulated from temporary declines in value, real estate has been one of the most dependable asset classes in existence.
When the real estate held is yield-generating, it becomes a substantially more powerful asset. Take this example below using the seasonally adjusted Case-Shiller U.S. National Home Price Index. The blue line represents real estate value accrual in the U.S. since 2000. Property values are up 3x in that time.
However, when factoring in a 6.5% compounded annual yield on top of the real estate value accrual, the gains are nearly 12x in that time on a relatively low-volatility asset. This is the power of Baskets, returning long-term value to holders in safe, permissionless, highly-liquid asset.
DeFi Integration:
As an ERC-20, Baskets integrate into nearly any facet of DeFi infrastructure. Combined with the rebasing, value-accruing nature of the token, this gives holders many more ways to maximize their earning potential.
Basket tokens can be paired with other ERC-20’s (stablecoins or other Basket tokens) and farmed to earn emissions on Pearl, often outgaining the native yield accrued just to the Basket token itself. This incentivized liquidity becomes the base for the deep, concentrated liquidity traders and institutions now have to move in and out of tokenized real estate with ease while using Baskets as collateral for other DeFi activities on re.al.
On Stack, Baskets can be borrowed against at a high LTV given the quality of the underlying collateral with the option to leverage up to earn even more yield. The low volatility and deep liquidity for Baskets helps reduce the liquidation risk vs other types of crypto. We view one-click leverage on yield-generating real estate to be a product with extremely high demand and expect this to drive significant growth in product TVL.
Demand for one-click borrowing and leverage isn’t only limited to DeFi yield seekers and on-chain funds. Tangible plans to work directly with property owners to offer white-glove tokenization services, helping these new users maximize the value of their assets through on-chain DeFi primitives.
CONCLUSION
We believe that Baskets solve a critical issue in how tokenized RWAs can be utilized on-chain. While NFTs (ERC-721) do a great job of representing ownership to a specific, non-fungible asset, they have limited composability with the most popular DeFi tools, limiting liquidity.
Our solution to vault similarly categorized ERC-721s, creating ERC-20s representing that basket of NFTs gives new asset functionality to RWAs, as these ERC-20s can now be farmed, swapped on major DEXs or borrowed against. Further, the diversified backing of the Basket allows users to invest in a focused category while also hedging the risk of owning any single property.
