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Using Cryptocurrency Smart Contracts to Sell Shares of My House

84 points by thisisit 9y ago

proaralyst 9y ago
I think the greatest barrier here is in verifying the real world house price at exit on the blockchain. I, as an investor, would have to trust someone to verify this for me. At which point it may as well not be on the blockchain.
- toomuchtodo 9y ago
  The problem I see is that ownership on the blockchain isn't going to be honored by the legal system (similar to deeds, liens, land title, etc), whereas a corporate entity with shares sold would be.
  - optimuspaul 9y ago
    I'm sure you could use legal instruments to make the legal system honor the blockchain, but at that point what value is the blockchain providing? More importantly this is venturing into the realm of securities and futures, which is highly regulated.
    - toomuchtodo 9y ago
      Exactly. Until distributed ledgers or blockchains are considered as part of "the law of the land", they have no standing in ownership matters.
      - omarchowdhury 9y ago
        https://newmedialaw.proskauer.com/2017/08/02/delaware-authorizes-stocks-on-blockchain/ https://newmedialaw.proskauer.com/2017/08/02/delaware-author...
        toomuchtodo 9y ago
        I stand corrected when scoped to Delaware corporate entity law. "Not just any blockchain-based ledger, however, will suffice. For one, electronic corporate records must be capable of being converted into legible paper form within a reasonable time. Second, like all other Delaware stock ledgers, a blockchain ledger must be able to (i) be used to prepare a list of stockholders entitled to vote, (ii) record information required by the DGCL to be maintained in the ledger and (iii) record transfers of stock pursuant to Article 8 of the Delaware Uniform Commercial Code." So a blockchain or distributed ledger technology can be used, but it could just as easily be done using a relational database or paper records.
- tom_mellior 9y ago
  > I think the greatest barrier here is in verifying the real world house price at exit on the blockchain Also, verifying any of the following on the blockchain: - whether an exit has taken place - whether the person claiming to own a house actually owns it - whether the house even exists - anything concerning the real world, really
- thisisit 9y ago
  Ethereum's smart contracts can read external data under some conditions using something called Oracles: https://ethereum.stackexchange.com/questions/11589/how-do-oracle-services-work-under-the-hood https://ethereum.stackexchange.com/questions/11589/how-do-or...
jameskegel 9y ago
Why is every sentence a new paragraph?
- ghostbrainalpha 9y ago
  Because they are basically bullet points, or a conversation he is having with himself with a bunch of questions. If you put those sentences together into a paragraph as if they are are continuation of a single idea or topic it would sound insane.
thecolorblue 9y ago
This is an interesting idea. I believe this already happens with real estate but I can't find what it is called. Another problem I could see coming up, if you do not get the full benefit of making improvements to your house, you will have less incentive to make improvements to your home. You would also have to figure out how to grant permission to make any improvements as investors would want to make sure any changes to the house would increase the value. If you needed a new water heater, who would pay for it? Could you convince the investors to buy into a high efficiency heater, even if it did not add any value to the house over a regular heater?
- TheReveller 9y ago
  I guess you would have an ICO to pay for improvements :)
- votepaunchy 9y ago
  > This is an interesting idea. I believe this already happens with real estate but I can't find what it is called. Are you thinking of a land lease?
  - oldsklgdfth 9y ago
    I've heard of that with farms and land. Is this a thing with assets, like buildings and houses?
  - thecolorblue 9y ago
    I was thinking of REITs (https://www.investopedia.com/terms/r/reit.asp https://www.investopedia.com/terms/r/reit.asp) but in actuality, they work a little differently.
TheReveller 9y ago
Why doesn't he create a company with 100 shares that owns the house, transfer the house into the companies ownership, then just sell shares in the company? I don't understand: - How someone would value the 'tokens' he is selling on his house unless they came and looked at the house. - How the 'owners' of his tokens could preserve their investment. He might just decide to trash the place since he sold most of it for 'liquidity'. - Why he wouldn't then just sell the house and take all the money for himself. He'd have sold it twice! How's some crypto geek in Russia who bought his house token going to make a claim on that money?
- pishpash 9y ago
  I suppose he could do all of these things, depending on how the contract is written. Some of these problems occur with real contacts, too. A smart contact just gets rid of a subset of the issues relating to money transfer and escrow. It sounds like a proof of concept.
- bradleyjg 9y ago
  Yes, there's absolutely no reason to use tokens here. It doesn't solve any the problems with the idea, of which there are several. If you want to invest in the residential real estate sector the best way to do that is invest in a REIT that owns a portfolio of houses and rents them out. Not buy some shady smart contract token that may or may not entitle you to anything at all legally speaking and has god-only-knows what tax consequences. Also: I'm not really interested in having capital tied up in real-estate, but a lot of people are. And it makes sense as a middle ground investment - more conservative than stocks or crypto, but more aggressive than bonds or CD's. This is laughable. Compare the Case-Shiller index of home prices: https://en.wikipedia.org/wiki/Case–Shiller_index#/media/File:Case%E2%80%93Shiller_Index.svg https://en.wikipedia.org/wiki/Case–Shiller_index#/media/File... to real s&p 500 prices: https://2us9vjrl2kf1np7bx397xl07-wpengine.netdna-ssl.com/wp-content/uploads/2015/06/sp-500-inflation-adjusted-returns-since-1871-2015-long-term-chart.jpg https://2us9vjrl2kf1np7bx397xl07-wpengine.netdna-ssl.com/wp-... And consider that real estate is typically owned with quite a bit of leverage while stocks typically aren't.
  - 9y ago
strgrd 9y ago
When the level of discourse surrounding "blockchain technologies" boils down to the following, it makes you wonder how long it is until you wake up to find the bubble has popped: "Someone who wants to own a % of a real estate asset in this city could just buy a % share of mine. Smart contracts via crypto make this super doable."
fokinsean 9y ago
Sounds interesting, but what're are the rules about living in the house? Does he have to retain >50% ?
free_everybody 9y ago
I'm no real estate expert, but I can confidently say this is a very poor idea. Or more specifically, this will turn out poorly for anyone except the person who collects all the cryptocurrency and runs away.
- dullgiulio 9y ago
  What else to expect from a person who thinks he has invented the concept of a financial institution buying a property to rent it. Except he made the terms convenient for himself. Lunatics.
Dolores12 9y ago
There are so many risks associated with owning the shares of single house in a specific place, now including the risk of badly written smart contract where a hacker can get all of your shares, or all shares could be locked up.
- pythonaut_16 9y ago
  It might be interesting to see this concept used for a distributed housing collective. A group of homeowners across the country pool the value of their houses to buffer against economic downturns in any particular market.
ph0rque 9y ago
Would this allow me to short my house if I thought it was priced too high?
keyboardmonkey 9y ago
where is the authority of ownership?... as in, if someone else or group of people own tokens, where's the authority that will back them up if they want to force residency on the property?... if you take your tokens to the police, will they help you evict someone?... no. until there's common authority somewhere, tokens are useless for ownership of physical property.
deleted 9y ago
[deleted]
dbatten 9y ago
What happens when you refuse to do any repairs/upkeep and the house goes to pot over 10 years? What happens when you don't maintain insurance coverage and you burn it down? Etc.
- s73ver_ 9y ago
  Hell, what happens if the "smart contract" is poorly coded, and someone exploits it?
tfha 9y ago
The hard part is getting the government to acknowldege the blockchain tokens as actual ownership. And then they'd also have to agree to honor all stolen tokens. Cryptocurrency really doesn't work unless you let the blockchain be the final arbiter of ownership, which means it would theoretically be possible to steal someone's home.
- noddy1 9y ago
  Exactly. If he tokenizes his house and then a russian hacks his laptop and steals all his tokens, what happens then? Will he move out and send his keys to moscow? Ownership ledgers are significant because they have a legal basis and state enforcement to back them up.
will_brown 9y ago
It’s very obvious what the author wants to accomplish, but I would ask how smart contracts make this “super doable”? >I could sell shares of my house such that they confer only ownership of the economic value of the house at time of exit (sale, my death, etc.) or the shares could be re-sold to someone else if the housing market here gets hotter, etc. but I maintain ownership of the right to occupy the house. So assuming you create the asset backed tokens via smart contract...when you sell the house and pocket 100% of the proceeds (nothing personal, just hoping for the best and planning for the worst), how am I to enforce my asset backed token in court? What’s the jurisdiction? Where the house is or where I am (the injured is)? It would be very inconvenient for me to have to bring suit in your jurisdiction not mine. What if I sell the token and you don’t pay out the buyer am I joint and severally liable to the buyer? Assuming there is standing and personal jurisdiction, how does the court know what type of ownership the token creates or created if any at all? You claim it’s an economic interest, but how is the court to decide the ownership/rights over say: fee simple, fee simple defesable, with condition subsequent, joint tenancy, tenancy in common? Also, maybe the token is not enforceable because it violates the statute of frauds (real estate contracts must be in writing... is a smart contract/code/token a writing that’s satisfies the statute of frauds?), or does the smart contract violate the law of perpetuity? It’s definately “super doable” to create a token on Ethereum via smart contract (I’ve made multiple tokens myself), but I think it’s anything but clear a asset back token can be created to represent ownership in real estate claiming it’s a simple economic interest without addressing a quagmire of legal issues and enforceability. Even then it’s all theory until it gets tested in the courts and precedent is set.
- wsinks 9y ago
  Hey Will Brown, I'm curious about the implementation of creating a token on Ethereum. Have you written anything about that? And I completely agree about the courts needing to decide. A bizarre idea - should we generate a lawsuit as performance art? To establish precedence? That's a scary world if it's possible.
  - nemild 9y ago
    See: https://www.ethereum.org/token https://www.ethereum.org/token Look up ERC 20 - it's the standard token contract spec. Should be easy to understand if you program other languages. Also, I wrote a Solidity tutorial (pull requests welcome as the language has changed a bit since I wrote it): https://learnxinyminutes.com/docs/solidity/ https://learnxinyminutes.com/docs/solidity/
natalyarostova 9y ago
You would have to pay proportional rent to the token holders, as they are entitled to it for owning a % of your house, otherwise they are letting you stay there rent free.
- UncleEntity 9y ago
  Dude's plan is to live there rent free until he eventually sells it and then the 'owners' get a return on investment -- kind of like buying shares in a corporation that doesn't pay dividends I suppose. Solves the 'getting priced out of the market' bit brilliantly assuming he can find enough suckers to fall for this grand scheme. --edit-- It's actually a double-plus brilliant plan. If he manages to pull this off he sells the house for full price then buys back the tokens at a fraction of the value once the investors realize what a bad investment it is to let someone live for free in their house.
gjem97 9y ago
I don't think the core problem here is solved by the application of a distributed ledger. The problem that you will need to solve is this: residential real estate loses value fast if not maintained, and furthermore can vary a lot based on things like the presence of appliances, heating/cooling systems and other improvements. Investors that hold a small percentage and have no ability to enforce upkeep can find themselves losing money on this even in a rising real-estate market.
paradygm 9y ago
> I'm not really interested in having capital tied up in real-estate....I want to live in my house and not be kicked out by a third party owner, but I don't want my assets tied up in it....I want to sell shares of my house. This article would be more compelling if he explored (or at least mentioned) the existing mechanisms for leveraging his home's value (e.g. cash out refinance and HELOCs) and why they don't meet his needs. Instead, he wants to sell fractional ownership and control of his home?
femto113 9y ago
Putting aside the fact that REITs are already a thing, there's a fundamental misconception here: I'm not really interested in having capital tied up in real-estate, but a lot of people are. Nobody wants their capital "tied up", they want it performing. The reason real estate is such a popular (and often successful ) investment is because of 3 factors: - income (via rent) - leverage (via a mortgage) - appreciation (via time and luck) Leverage is made possible because the income from a property can cover some or all of the cost of the interest on the loan, meaning that all that's tied up is the downpayment, so the appreciation enjoys a multiplier effect (say 5x if you put 20% down). Offering a contract that only allows the investor to participate in the appreciation without any leverage or income just doesn't make sense (for the investor).
dragonwriter 9y ago
Smart contracts don't actually make that “super doable”, because the underlying events and property are off-chain with no way for a smart contract to either react to or direct them. It's also doable without smart contracts: form a corporation where you are the sole initial shareholder, sell the property to the corporation while reserving yourself a life estate, and then privately sell as much of the stock as you wish. It's heavily regulated, since you are dealing with both real estate and securities laws, but it's doable, ad smart contracts don't avoid the complexity because ultimately you still need to deal with all the meatspace legal issues. OTOH, the really big problem with the idea is separating decision-making about the property (which drastically impacts future value) from financial interest in future value. Your aren't investing in the property market, you are investing in the person managing the property, and people who aren't suckers aren't going to want to do that at arm's length without due diligence on the individual and some oversight of their management of the property. (And the ones that are suckers are going to get fleeced quickly and then not be available to invest.)
sandworm101 9y ago
I don't think anyone here realizes what this would do to a property. This sort of encumberment, splitting ownership between possibly hundreds of people, is a huge headache. Try getting a proper mortgage when you have dozens of owners. See what happens when one of those owners goes into bankruptcy proceedings and that piece of your property gets tied up. And as an investor, get ready for a city/state to come after you should the primary owner walk away and stop paying taxes. And let us not forget the laws in many countries that require interests in land to be registered. The only way to do this practically would be to put ownership of the property into a corporation and sell shares in that corp. But that gets you out of the personal property market, no more owner-occupier status for mortgages or insurance.
bb88 9y ago
Dear Isaac, Super interesting idea, and I have some cash I might be able to spend towards it. But can you ensure the following will be enforced by your smart contract? 1. Tenant agrees to upkeep property, including mowing of lawns, plumbing, electrical, structural. 2. Tenant agrees not to sell, sublet, or abandon the house. 3. Tenant agrees not to do anything illegal that might cause the forfeiture of the house by law. 4. Tenant will give me a key to the property and house, so I can check in on it from time to time. I probably have some other requirements for the tenant. But I'm super interested in how this might be accomplished via a smart contract. Looking forward to conducting this via this newfangled smart contract mechanism. Yours Truly, R
njarboe 9y ago
I would like to get some (10%-20%) equity out of my house. Not with a loan against it but selling equity. I looked around some and this company[1] facilitates exactly this scenario. Unfortunately when I called them a few months ago they said they take 25% of the upside value and pay you only 10% of the house value. The majority owners still have to pay for/do all the maintenance. This seems like too much of a giveaway and is for people who need cash, but for some reason can't git a home equity loan. It seems that the blockcoin space has decided that it can be used as a workaround for many financial rules, similar to how Uber/Lyft could work because calling a limo was legal and technology finally made calling a limo like hailing a cab. I am not deep into the ICOs and blockchain tech but am quite interested in working in this space. I live and own a home in the Bay Area to possibly use as a test bed and have programming experience. I'd enjoy chatting over coffee with someone with similar interests. Username at gmail for contact. [1]https://point.com/ https://point.com/
jasonlaramburu 9y ago
Basically all the comments are about how this can’t be done, which aren’t super helpful. What if they created a smart contract that held a signed pdf of the title deed (turning over the property to the token-holders) in the event of default? The OP could then pay a fixed amount each month into the contract to compensate the token holders. If the OP fails to meet his monthly obligations (or whatever they are), the executed title gets sent to the token holders. As long as he pays them, they can’t access it. Thoughts?
- root_axis 9y ago
  > Basically all the comments are about how this can’t be done, which aren’t super helpful Because it very obviously cannot be done. > in the event of default How does the contract know a default occurred? The answer is that some entity or individual has to be trusted to input that information into the contract, at which point the smart contract aspect becomes totally useless (and in fact, demonstrably worse than a centralized solution).
  - jasonlaramburu 9y ago
    I disagree that it very obviously cannot be done. It may carry more risk for the token holders than an REIT but I see no technical reason why it couldn’t be done. As long as the payment is made in ether (or tokens) directly to the contract wallet address the contract will immediately ‘know’ whether or not a payment has occurred. You can easily write a smart contract to require a payment of X ether every Y days. You could even make the contract payment requirements dynamic based on the home’s value over time (ie it could scrape data about other sales in the area from Zillow etc). If the owner misses a payment, perhaps that triggers an email warning, with appropriate escalation thereafter (reminders, phone calls etc). If the owner misses a prenegotiated number of payments, then the contract considers it a default and automatically releases the documentation. I think the harder problem is if the owner defaults, and a % of the home’s ownership transfers to the token-holders, what then? Presumably they would be minority owners, so they could not force a sale.
    - 9y ago
efoto 9y ago
The concept you described is what LAToken guys are working on. https://latoken.com https://latoken.com
matthewsinclair 9y ago
What are you going to do about stamp duty? And from a tax perspective, who is the beneficial owner? Are there any VAT/GST implications? I'd love to know the answers to these kind of questions, because this concept of "atomising" a larger asset is a really interesting use case for decentralised apps.
nisse72 9y ago
Why would I choose to invest in something like this as opposed to (say) units in an property fund, ETF or similar?
SecretTrees 9y ago
Hello ladies and gentlemen! Sorry for the interference, but as far as I am looking for a similar situation, I got something bigger to offer! My name is Ilvers and here i come. First of all Honestly! We are young parents, to our nine months old daughter. Secondly We own a unique 22ha plot next to the longest lake (9km) in Latvia, the EU. The situation is as follows. In our 22ha we rent to about 100 retired people who have built garden houses and cultivate various agro-crops, which we also do not mind! We also do not conclude contracts because we are reliable people and trust! But! Every year the land tax price rises and we can not even collect 8 EUR IN SEASON from the retired people! We have come to the conclusion with my wife! We must use the land appropriately, otherwise, we will degrade it! Then, as far as I am a crypt enthusiast, then I began to explore what are the possibilities for financing the land and in general try to make some business on it! We have found a solution !!! We decided to create a Crypto Holidays Camping site for the whole community! Researching the current situation associated with assets and the general attraction of real estate for funding is a very big problem due to SEC US and Australian laws. Third. Then look, Write this down, because you will never read this again and you will not see it until you won't come down by your self! All this project is based on our cleanest conscience and our own wish and trust! ME: I'm 32 years old and I have done nothing, life is starting to scare me. So I'm not here for a scam or call it whatever you like! For 18 years of my life, I have been working in 8 hard workplaces since my 14 years of age I helped my mother maintain my two wonderful sisters. I know what is a hard job! You won't be the one who will judge me on my self-esteem! By my Linkedin profile, you're definitely gonna choke. Who am I to show you what can I do. I never planned to be a millionaire! I just want to take care of my wife and dear daughter. Here's what I have outlined and offering to you. Forget the SEC and all the regulations that you know! JUST STOP IT !!! We offer half of our property = 11ha Divide him into 10,000,000 shares, if you even want physically presenting a registered LLC / LTD when the company's capital is a real estate that is distributed. We Create token, ICO, shares or whatever you want! I will call it Secret Trees Garden trust So, each of these parts STG Trusts is sold at 0.50, - EUR cents for you, founders. the total amount is 5 000 000 EUR! Forth. We offer all 22ha! also, the remaining part of our own which will not be divided, but separated from the detailed plan! We invest these funds in the capital by placing x30 from dubldom.ru! 2.65 designed cottages for rent, tourism, rest, holiday houses! The idea is to add all sorts of extras for profit as well Hot Tubs, Saunas, Active Sports, Water Sports, All that can bring us Profit! Create Crypto Holidays Camp! Our property is located in the city's territory and our municipality supports us in creating tourism. Payouts. Twice a year paying dividends. from total NETO from all profit makings. We pay 70% of the earnings to each token holder of the STG Trust. 30%, we continue to invest in the capital, to raise the 11ha by buying neighbor's property's and add it to the founders. Thinking about Token, ICO Value and its Usage? I do not care how much this coin will be worth after! Although 0.01 euro cents! STG Trust will be just as valuable to me! Why?! So when I paid back the same amount that I bought! She will be just as worthwhile as possible to get into contact with us, as well as locals - 40,000 will be of the same value as 0.50 Cents sold locally. Consider it as a member of the club who makes more cash by owning more of them! I understand you cant realize this project and know what it will take! I plan to work on this project for rest of my life and I don't think of letting it down! Try to Understand the property after 30 years been profitable x2 profit and if, however, you decide to sell, please! 11h +, which was split into some of the current moment of the token that everyone owns by hes % to divide it into dividends! We can even sell for each individual parts! We can make even trust due to date, 30years? I suggest you work with me to be in the team to create such a project. I repeat I do not have a doctorate or a lawyer, a programmer's diploma! here you can find all the data, planings and my contacts. leave your skepticism for shitBMW clubs! It's hard to believe but to do is harder! Trust is it.
deleted 9y ago
[deleted]

84 points by thisisit 9y ago

I think the greatest barrier here is in verifying the real world house price at exit on the blockchain. I, as an investor, would have to trust someone to verify this for me. At which point it may as well not be on the blockchain.

toomuchtodo 9y ago
The problem I see is that ownership on the blockchain isn't going to be honored by the legal system (similar to deeds, liens, land title, etc), whereas a corporate entity with shares sold would be.
- optimuspaul 9y ago
  I'm sure you could use legal instruments to make the legal system honor the blockchain, but at that point what value is the blockchain providing? More importantly this is venturing into the realm of securities and futures, which is highly regulated.
  - toomuchtodo 9y ago
    Exactly. Until distributed ledgers or blockchains are considered as part of "the law of the land", they have no standing in ownership matters.
    - omarchowdhury 9y ago
      https://newmedialaw.proskauer.com/2017/08/02/delaware-authorizes-stocks-on-blockchain/ https://newmedialaw.proskauer.com/2017/08/02/delaware-author...
      - toomuchtodo 9y ago
        I stand corrected when scoped to Delaware corporate entity law. "Not just any blockchain-based ledger, however, will suffice. For one, electronic corporate records must be capable of being converted into legible paper form within a reasonable time. Second, like all other Delaware stock ledgers, a blockchain ledger must be able to (i) be used to prepare a list of stockholders entitled to vote, (ii) record information required by the DGCL to be maintained in the ledger and (iii) record transfers of stock pursuant to Article 8 of the Delaware Uniform Commercial Code." So a blockchain or distributed ledger technology can be used, but it could just as easily be done using a relational database or paper records.
tom_mellior 9y ago
> I think the greatest barrier here is in verifying the real world house price at exit on the blockchain Also, verifying any of the following on the blockchain: - whether an exit has taken place - whether the person claiming to own a house actually owns it - whether the house even exists - anything concerning the real world, really
thisisit 9y ago
Ethereum's smart contracts can read external data under some conditions using something called Oracles: https://ethereum.stackexchange.com/questions/11589/how-do-oracle-services-work-under-the-hood https://ethereum.stackexchange.com/questions/11589/how-do-or...

jameskegel 9y ago

Why is every sentence a new paragraph?

ghostbrainalpha 9y ago
Because they are basically bullet points, or a conversation he is having with himself with a bunch of questions. If you put those sentences together into a paragraph as if they are are continuation of a single idea or topic it would sound insane.

thecolorblue 9y ago

This is an interesting idea. I believe this already happens with real estate but I can't find what it is called. Another problem I could see coming up, if you do not get the full benefit of making improvements to your house, you will have less incentive to make improvements to your home. You would also have to figure out how to grant permission to make any improvements as investors would want to make sure any changes to the house would increase the value. If you needed a new water heater, who would pay for it? Could you convince the investors to buy into a high efficiency heater, even if it did not add any value to the house over a regular heater?

TheReveller 9y ago
I guess you would have an ICO to pay for improvements :)
votepaunchy 9y ago
> This is an interesting idea. I believe this already happens with real estate but I can't find what it is called. Are you thinking of a land lease?
- oldsklgdfth 9y ago
  I've heard of that with farms and land. Is this a thing with assets, like buildings and houses?
- thecolorblue 9y ago
  I was thinking of REITs (https://www.investopedia.com/terms/r/reit.asp https://www.investopedia.com/terms/r/reit.asp) but in actuality, they work a little differently.

TheReveller 9y ago

Why doesn't he create a company with 100 shares that owns the house, transfer the house into the companies ownership, then just sell shares in the company? I don't understand: - How someone would value the 'tokens' he is selling on his house unless they came and looked at the house. - How the 'owners' of his tokens could preserve their investment. He might just decide to trash the place since he sold most of it for 'liquidity'. - Why he wouldn't then just sell the house and take all the money for himself. He'd have sold it twice! How's some crypto geek in Russia who bought his house token going to make a claim on that money?

pishpash 9y ago
I suppose he could do all of these things, depending on how the contract is written. Some of these problems occur with real contacts, too. A smart contact just gets rid of a subset of the issues relating to money transfer and escrow. It sounds like a proof of concept.
bradleyjg 9y ago
Yes, there's absolutely no reason to use tokens here. It doesn't solve any the problems with the idea, of which there are several. If you want to invest in the residential real estate sector the best way to do that is invest in a REIT that owns a portfolio of houses and rents them out. Not buy some shady smart contract token that may or may not entitle you to anything at all legally speaking and has god-only-knows what tax consequences. Also: I'm not really interested in having capital tied up in real-estate, but a lot of people are. And it makes sense as a middle ground investment - more conservative than stocks or crypto, but more aggressive than bonds or CD's. This is laughable. Compare the Case-Shiller index of home prices: https://en.wikipedia.org/wiki/Case–Shiller_index#/media/File:Case%E2%80%93Shiller_Index.svg https://en.wikipedia.org/wiki/Case–Shiller_index#/media/File... to real s&p 500 prices: https://2us9vjrl2kf1np7bx397xl07-wpengine.netdna-ssl.com/wp-content/uploads/2015/06/sp-500-inflation-adjusted-returns-since-1871-2015-long-term-chart.jpg https://2us9vjrl2kf1np7bx397xl07-wpengine.netdna-ssl.com/wp-... And consider that real estate is typically owned with quite a bit of leverage while stocks typically aren't.
- 9y ago

strgrd 9y ago

When the level of discourse surrounding "blockchain technologies" boils down to the following, it makes you wonder how long it is until you wake up to find the bubble has popped: "Someone who wants to own a % of a real estate asset in this city could just buy a % share of mine. Smart contracts via crypto make this super doable."

fokinsean 9y ago

Sounds interesting, but what're are the rules about living in the house? Does he have to retain >50% ?

free_everybody 9y ago

I'm no real estate expert, but I can confidently say this is a very poor idea. Or more specifically, this will turn out poorly for anyone except the person who collects all the cryptocurrency and runs away.

dullgiulio 9y ago
What else to expect from a person who thinks he has invented the concept of a financial institution buying a property to rent it. Except he made the terms convenient for himself. Lunatics.

Dolores12 9y ago

There are so many risks associated with owning the shares of single house in a specific place, now including the risk of badly written smart contract where a hacker can get all of your shares, or all shares could be locked up.

pythonaut_16 9y ago
It might be interesting to see this concept used for a distributed housing collective. A group of homeowners across the country pool the value of their houses to buffer against economic downturns in any particular market.

ph0rque 9y ago

Would this allow me to short my house if I thought it was priced too high?

keyboardmonkey 9y ago

where is the authority of ownership?... as in, if someone else or group of people own tokens, where's the authority that will back them up if they want to force residency on the property?... if you take your tokens to the police, will they help you evict someone?... no. until there's common authority somewhere, tokens are useless for ownership of physical property.

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dbatten 9y ago

What happens when you refuse to do any repairs/upkeep and the house goes to pot over 10 years? What happens when you don't maintain insurance coverage and you burn it down? Etc.

s73ver_ 9y ago
Hell, what happens if the "smart contract" is poorly coded, and someone exploits it?

tfha 9y ago

The hard part is getting the government to acknowldege the blockchain tokens as actual ownership. And then they'd also have to agree to honor all stolen tokens. Cryptocurrency really doesn't work unless you let the blockchain be the final arbiter of ownership, which means it would theoretically be possible to steal someone's home.

noddy1 9y ago
Exactly. If he tokenizes his house and then a russian hacks his laptop and steals all his tokens, what happens then? Will he move out and send his keys to moscow? Ownership ledgers are significant because they have a legal basis and state enforcement to back them up.

will_brown 9y ago

It’s very obvious what the author wants to accomplish, but I would ask how smart contracts make this “super doable”? >I could sell shares of my house such that they confer only ownership of the economic value of the house at time of exit (sale, my death, etc.) or the shares could be re-sold to someone else if the housing market here gets hotter, etc. but I maintain ownership of the right to occupy the house. So assuming you create the asset backed tokens via smart contract...when you sell the house and pocket 100% of the proceeds (nothing personal, just hoping for the best and planning for the worst), how am I to enforce my asset backed token in court? What’s the jurisdiction? Where the house is or where I am (the injured is)? It would be very inconvenient for me to have to bring suit in your jurisdiction not mine. What if I sell the token and you don’t pay out the buyer am I joint and severally liable to the buyer? Assuming there is standing and personal jurisdiction, how does the court know what type of ownership the token creates or created if any at all? You claim it’s an economic interest, but how is the court to decide the ownership/rights over say: fee simple, fee simple defesable, with condition subsequent, joint tenancy, tenancy in common? Also, maybe the token is not enforceable because it violates the statute of frauds (real estate contracts must be in writing... is a smart contract/code/token a writing that’s satisfies the statute of frauds?), or does the smart contract violate the law of perpetuity? It’s definately “super doable” to create a token on Ethereum via smart contract (I’ve made multiple tokens myself), but I think it’s anything but clear a asset back token can be created to represent ownership in real estate claiming it’s a simple economic interest without addressing a quagmire of legal issues and enforceability. Even then it’s all theory until it gets tested in the courts and precedent is set.

wsinks 9y ago
Hey Will Brown, I'm curious about the implementation of creating a token on Ethereum. Have you written anything about that? And I completely agree about the courts needing to decide. A bizarre idea - should we generate a lawsuit as performance art? To establish precedence? That's a scary world if it's possible.
- nemild 9y ago
  See: https://www.ethereum.org/token https://www.ethereum.org/token Look up ERC 20 - it's the standard token contract spec. Should be easy to understand if you program other languages. Also, I wrote a Solidity tutorial (pull requests welcome as the language has changed a bit since I wrote it): https://learnxinyminutes.com/docs/solidity/ https://learnxinyminutes.com/docs/solidity/

natalyarostova 9y ago

You would have to pay proportional rent to the token holders, as they are entitled to it for owning a % of your house, otherwise they are letting you stay there rent free.

UncleEntity 9y ago
Dude's plan is to live there rent free until he eventually sells it and then the 'owners' get a return on investment -- kind of like buying shares in a corporation that doesn't pay dividends I suppose. Solves the 'getting priced out of the market' bit brilliantly assuming he can find enough suckers to fall for this grand scheme. --edit-- It's actually a double-plus brilliant plan. If he manages to pull this off he sells the house for full price then buys back the tokens at a fraction of the value once the investors realize what a bad investment it is to let someone live for free in their house.

gjem97 9y ago

I don't think the core problem here is solved by the application of a distributed ledger. The problem that you will need to solve is this: residential real estate loses value fast if not maintained, and furthermore can vary a lot based on things like the presence of appliances, heating/cooling systems and other improvements. Investors that hold a small percentage and have no ability to enforce upkeep can find themselves losing money on this even in a rising real-estate market.

paradygm 9y ago

> I'm not really interested in having capital tied up in real-estate....I want to live in my house and not be kicked out by a third party owner, but I don't want my assets tied up in it....I want to sell shares of my house. This article would be more compelling if he explored (or at least mentioned) the existing mechanisms for leveraging his home's value (e.g. cash out refinance and HELOCs) and why they don't meet his needs. Instead, he wants to sell fractional ownership and control of his home?

femto113 9y ago

Putting aside the fact that REITs are already a thing, there's a fundamental misconception here: I'm not really interested in having capital tied up in real-estate, but a lot of people are. Nobody wants their capital "tied up", they want it performing. The reason real estate is such a popular (and often successful ) investment is because of 3 factors: - income (via rent) - leverage (via a mortgage) - appreciation (via time and luck) Leverage is made possible because the income from a property can cover some or all of the cost of the interest on the loan, meaning that all that's tied up is the downpayment, so the appreciation enjoys a multiplier effect (say 5x if you put 20% down). Offering a contract that only allows the investor to participate in the appreciation without any leverage or income just doesn't make sense (for the investor).

dragonwriter 9y ago

Smart contracts don't actually make that “super doable”, because the underlying events and property are off-chain with no way for a smart contract to either react to or direct them. It's also doable without smart contracts: form a corporation where you are the sole initial shareholder, sell the property to the corporation while reserving yourself a life estate, and then privately sell as much of the stock as you wish. It's heavily regulated, since you are dealing with both real estate and securities laws, but it's doable, ad smart contracts don't avoid the complexity because ultimately you still need to deal with all the meatspace legal issues. OTOH, the really big problem with the idea is separating decision-making about the property (which drastically impacts future value) from financial interest in future value. Your aren't investing in the property market, you are investing in the person managing the property, and people who aren't suckers aren't going to want to do that at arm's length without due diligence on the individual and some oversight of their management of the property. (And the ones that are suckers are going to get fleeced quickly and then not be available to invest.)

sandworm101 9y ago

I don't think anyone here realizes what this would do to a property. This sort of encumberment, splitting ownership between possibly hundreds of people, is a huge headache. Try getting a proper mortgage when you have dozens of owners. See what happens when one of those owners goes into bankruptcy proceedings and that piece of your property gets tied up. And as an investor, get ready for a city/state to come after you should the primary owner walk away and stop paying taxes. And let us not forget the laws in many countries that require interests in land to be registered. The only way to do this practically would be to put ownership of the property into a corporation and sell shares in that corp. But that gets you out of the personal property market, no more owner-occupier status for mortgages or insurance.

bb88 9y ago

Dear Isaac, Super interesting idea, and I have some cash I might be able to spend towards it. But can you ensure the following will be enforced by your smart contract? 1. Tenant agrees to upkeep property, including mowing of lawns, plumbing, electrical, structural. 2. Tenant agrees not to sell, sublet, or abandon the house. 3. Tenant agrees not to do anything illegal that might cause the forfeiture of the house by law. 4. Tenant will give me a key to the property and house, so I can check in on it from time to time. I probably have some other requirements for the tenant. But I'm super interested in how this might be accomplished via a smart contract. Looking forward to conducting this via this newfangled smart contract mechanism. Yours Truly, R

njarboe 9y ago

I would like to get some (10%-20%) equity out of my house. Not with a loan against it but selling equity. I looked around some and this company[1] facilitates exactly this scenario. Unfortunately when I called them a few months ago they said they take 25% of the upside value and pay you only 10% of the house value. The majority owners still have to pay for/do all the maintenance. This seems like too much of a giveaway and is for people who need cash, but for some reason can't git a home equity loan. It seems that the blockcoin space has decided that it can be used as a workaround for many financial rules, similar to how Uber/Lyft could work because calling a limo was legal and technology finally made calling a limo like hailing a cab. I am not deep into the ICOs and blockchain tech but am quite interested in working in this space. I live and own a home in the Bay Area to possibly use as a test bed and have programming experience. I'd enjoy chatting over coffee with someone with similar interests. Username at gmail for contact. [1]https://point.com/ https://point.com/

jasonlaramburu 9y ago

Basically all the comments are about how this can’t be done, which aren’t super helpful. What if they created a smart contract that held a signed pdf of the title deed (turning over the property to the token-holders) in the event of default? The OP could then pay a fixed amount each month into the contract to compensate the token holders. If the OP fails to meet his monthly obligations (or whatever they are), the executed title gets sent to the token holders. As long as he pays them, they can’t access it. Thoughts?

root_axis 9y ago
> Basically all the comments are about how this can’t be done, which aren’t super helpful Because it very obviously cannot be done. > in the event of default How does the contract know a default occurred? The answer is that some entity or individual has to be trusted to input that information into the contract, at which point the smart contract aspect becomes totally useless (and in fact, demonstrably worse than a centralized solution).
- jasonlaramburu 9y ago
  I disagree that it very obviously cannot be done. It may carry more risk for the token holders than an REIT but I see no technical reason why it couldn’t be done. As long as the payment is made in ether (or tokens) directly to the contract wallet address the contract will immediately ‘know’ whether or not a payment has occurred. You can easily write a smart contract to require a payment of X ether every Y days. You could even make the contract payment requirements dynamic based on the home’s value over time (ie it could scrape data about other sales in the area from Zillow etc). If the owner misses a payment, perhaps that triggers an email warning, with appropriate escalation thereafter (reminders, phone calls etc). If the owner misses a prenegotiated number of payments, then the contract considers it a default and automatically releases the documentation. I think the harder problem is if the owner defaults, and a % of the home’s ownership transfers to the token-holders, what then? Presumably they would be minority owners, so they could not force a sale.
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efoto 9y ago

The concept you described is what LAToken guys are working on. https://latoken.com https://latoken.com

matthewsinclair 9y ago

What are you going to do about stamp duty? And from a tax perspective, who is the beneficial owner? Are there any VAT/GST implications? I'd love to know the answers to these kind of questions, because this concept of "atomising" a larger asset is a really interesting use case for decentralised apps.

nisse72 9y ago

Why would I choose to invest in something like this as opposed to (say) units in an property fund, ETF or similar?

SecretTrees 9y ago

Hello ladies and gentlemen! Sorry for the interference, but as far as I am looking for a similar situation, I got something bigger to offer! My name is Ilvers and here i come. First of all Honestly! We are young parents, to our nine months old daughter. Secondly We own a unique 22ha plot next to the longest lake (9km) in Latvia, the EU. The situation is as follows. In our 22ha we rent to about 100 retired people who have built garden houses and cultivate various agro-crops, which we also do not mind! We also do not conclude contracts because we are reliable people and trust! But! Every year the land tax price rises and we can not even collect 8 EUR IN SEASON from the retired people! We have come to the conclusion with my wife! We must use the land appropriately, otherwise, we will degrade it! Then, as far as I am a crypt enthusiast, then I began to explore what are the possibilities for financing the land and in general try to make some business on it! We have found a solution !!! We decided to create a Crypto Holidays Camping site for the whole community! Researching the current situation associated with assets and the general attraction of real estate for funding is a very big problem due to SEC US and Australian laws. Third. Then look, Write this down, because you will never read this again and you will not see it until you won't come down by your self! All this project is based on our cleanest conscience and our own wish and trust! ME: I'm 32 years old and I have done nothing, life is starting to scare me. So I'm not here for a scam or call it whatever you like! For 18 years of my life, I have been working in 8 hard workplaces since my 14 years of age I helped my mother maintain my two wonderful sisters. I know what is a hard job! You won't be the one who will judge me on my self-esteem! By my Linkedin profile, you're definitely gonna choke. Who am I to show you what can I do. I never planned to be a millionaire! I just want to take care of my wife and dear daughter. Here's what I have outlined and offering to you. Forget the SEC and all the regulations that you know! JUST STOP IT !!! We offer half of our property = 11ha Divide him into 10,000,000 shares, if you even want physically presenting a registered LLC / LTD when the company's capital is a real estate that is distributed. We Create token, ICO, shares or whatever you want! I will call it Secret Trees Garden trust So, each of these parts STG Trusts is sold at 0.50, - EUR cents for you, founders. the total amount is 5 000 000 EUR! Forth. We offer all 22ha! also, the remaining part of our own which will not be divided, but separated from the detailed plan! We invest these funds in the capital by placing x30 from dubldom.ru! 2.65 designed cottages for rent, tourism, rest, holiday houses! The idea is to add all sorts of extras for profit as well Hot Tubs, Saunas, Active Sports, Water Sports, All that can bring us Profit! Create Crypto Holidays Camp! Our property is located in the city's territory and our municipality supports us in creating tourism. Payouts. Twice a year paying dividends. from total NETO from all profit makings. We pay 70% of the earnings to each token holder of the STG Trust. 30%, we continue to invest in the capital, to raise the 11ha by buying neighbor's property's and add it to the founders. Thinking about Token, ICO Value and its Usage? I do not care how much this coin will be worth after! Although 0.01 euro cents! STG Trust will be just as valuable to me! Why?! So when I paid back the same amount that I bought! She will be just as worthwhile as possible to get into contact with us, as well as locals - 40,000 will be of the same value as 0.50 Cents sold locally. Consider it as a member of the club who makes more cash by owning more of them! I understand you cant realize this project and know what it will take! I plan to work on this project for rest of my life and I don't think of letting it down! Try to Understand the property after 30 years been profitable x2 profit and if, however, you decide to sell, please! 11h +, which was split into some of the current moment of the token that everyone owns by hes % to divide it into dividends! We can even sell for each individual parts! We can make even trust due to date, 30years? I suggest you work with me to be in the team to create such a project. I repeat I do not have a doctorate or a lawyer, a programmer's diploma! here you can find all the data, planings and my contacts. leave your skepticism for shitBMW clubs! It's hard to believe but to do is harder! Trust is it.

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