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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 tit

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.
  - root_axis 9y ago
    > 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 What computer runs the scraper? How do I know I can trust the response of this computer? What if the scraper gets banned or breaks? > If the owner misses a prenegotiated number of payments, then the contract considers it a default and automatically releases the documentation. How do the token holders know the documentation they will receive upon default will be legit? How is the relationship between tokens and ownership stake enforced? What does it mean for multiple token holders to each receive a copy of the executed deed?
    - jasonlaramburu 9y ago
      >What computer runs the scraper? How do I know I can trust the response of this computer? What if the scraper gets banned or breaks? Housing price data is publicly-available and pretty easy to verify at no cost. Anyone considering investing in real estate presumably has access to this info already. >How do the token holders know the documentation they will receive upon default will be legit? That's a risk with any type of transaction, but easy to verify with a good lawyer. With boilerplate docs the cost of verification goes down with each incremental transaction, i.e. once your lawyer signs off on the docs for your first deal, you can feel reasonably confident making a 2nd deal on the same paper. >How is the relationship between tokens and ownership stake enforced? Token holders would only receive an ownership stake if the buyer defaults. Up until that point they are just creditors. Basically this is a mortgage, but it bypasses a long foreclosure process which is better for the lenders/investors. >What does it mean for multiple token holders to each receive a copy of the executed deed? There already is precedent for homes to have multiple owners. Depending upon the desired number of lenders/investors, a shell company may need to be created, but again that is relatively straightforward.
      - root_axis 9y ago
        > Housing price data is publicly-available and pretty easy to verify at no cost. Anyone considering investing in real estate presumably has access to this info already. That doesn't answer the question of how I know I can trust the computer that feeds housing price data into the contract. What if it cuts the prices by 10% before feeding them into the contract? > That's a risk with any type of transaction, but easy to verify with a good lawyer You have no way to ensure that what the lawyer verifies is what the contract will release upon default. > Token holders would only receive an ownership stake if the buyer defaults That doesn't answer the question of how the ownership stake is enforced. If the default occurs, the token holders will have to go to court to figure it all out which eliminates the usefulness of the contract. > There already is precedent for homes to have multiple owners. Depending upon the desired number of lenders/investors, a shell company may need to be created, but again that is relatively straightforward. If my ownership stake is codified through the existing legal system what use is the smart contract? It doesn't matter what the smart contract does if I've already established myself as a partial owner via a shell corporation.
dragonwriter 9y ago
> Basically all the comments are about how this can’t be done, which aren’t super helpful. I dunno. The truth seems pretty helpful. Not pleasant, perhaps, but that's a different story. > 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? Default of what? This isn't a lease contract, it's sale of a non-possessory interest that entitles token-holders to a share of the value price when the token-seller transfers it. The only time a failure of required payment could happen is after a transfer of title to some third party. > Thoughts? As well as likely not working legally for a number of reasons (if they can't access the deed until default, they also can't validate the deed until default, plus the problems with an unrecorded presigned transfer deed that isn't delivered until default, although the particular problems depend on the form of the deed, plus the fact that the unrecorded (in title records) encumbrance does not stop the recorded owner from burdening or disposing of the property adverse to the interests of token holders), your rental scheme isn't what the OP was seeking, which is to sell rights which give an interest only on the value at transfer. So you've proposed a system which doesn't work for what you intend, and which even if it did wouldn't do what the OP wants.
- jasonlaramburu 9y ago
  The ‘truth’ is that you do not have a clear understanding how smart contracts work. All elements can be verified and validated against open source code using the contract’s Bytecode and a contract verification tool like etherscan. I agree, this is a nonstandard legal structure but that doesn't mean it wouldn't work. As I understand, the OP’s goal is to raise money to buy a home, and securitize with an ownership in the home in the event OP cannot pay back what he/she borrows. He/she also wishes to offer funders the ability to liquidate/trade their token. You're right, the owner could sell the house and keep 100% of the proceeds, ignoring the token holders. She would then be in default, the smart contract would automatically execute the legal document, and the new owners could then sue the original owner. You could even set up a listener on the contract to monitor the public record for sales of the specific property to automatically trigger the 'default' function in the contract. Before you ask, it would be the responsibility of the lender to verify the code in the contract actually does this, but it's totally possible.

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.
- root_axis 9y ago
  > 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 What computer runs the scraper? How do I know I can trust the response of this computer? What if the scraper gets banned or breaks? > If the owner misses a prenegotiated number of payments, then the contract considers it a default and automatically releases the documentation. How do the token holders know the documentation they will receive upon default will be legit? How is the relationship between tokens and ownership stake enforced? What does it mean for multiple token holders to each receive a copy of the executed deed?
  - jasonlaramburu 9y ago
    >What computer runs the scraper? How do I know I can trust the response of this computer? What if the scraper gets banned or breaks? Housing price data is publicly-available and pretty easy to verify at no cost. Anyone considering investing in real estate presumably has access to this info already. >How do the token holders know the documentation they will receive upon default will be legit? That's a risk with any type of transaction, but easy to verify with a good lawyer. With boilerplate docs the cost of verification goes down with each incremental transaction, i.e. once your lawyer signs off on the docs for your first deal, you can feel reasonably confident making a 2nd deal on the same paper. >How is the relationship between tokens and ownership stake enforced? Token holders would only receive an ownership stake if the buyer defaults. Up until that point they are just creditors. Basically this is a mortgage, but it bypasses a long foreclosure process which is better for the lenders/investors. >What does it mean for multiple token holders to each receive a copy of the executed deed? There already is precedent for homes to have multiple owners. Depending upon the desired number of lenders/investors, a shell company may need to be created, but again that is relatively straightforward.
    - root_axis 9y ago
      > Housing price data is publicly-available and pretty easy to verify at no cost. Anyone considering investing in real estate presumably has access to this info already. That doesn't answer the question of how I know I can trust the computer that feeds housing price data into the contract. What if it cuts the prices by 10% before feeding them into the contract? > That's a risk with any type of transaction, but easy to verify with a good lawyer You have no way to ensure that what the lawyer verifies is what the contract will release upon default. > Token holders would only receive an ownership stake if the buyer defaults That doesn't answer the question of how the ownership stake is enforced. If the default occurs, the token holders will have to go to court to figure it all out which eliminates the usefulness of the contract. > There already is precedent for homes to have multiple owners. Depending upon the desired number of lenders/investors, a shell company may need to be created, but again that is relatively straightforward. If my ownership stake is codified through the existing legal system what use is the smart contract? It doesn't matter what the smart contract does if I've already established myself as a partial owner via a shell corporation.

dragonwriter 9y ago

> Basically all the comments are about how this can’t be done, which aren’t super helpful. I dunno. The truth seems pretty helpful. Not pleasant, perhaps, but that's a different story. > 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? Default of what? This isn't a lease contract, it's sale of a non-possessory interest that entitles token-holders to a share of the value price when the token-seller transfers it. The only time a failure of required payment could happen is after a transfer of title to some third party. > Thoughts? As well as likely not working legally for a number of reasons (if they can't access the deed until default, they also can't validate the deed until default, plus the problems with an unrecorded presigned transfer deed that isn't delivered until default, although the particular problems depend on the form of the deed, plus the fact that the unrecorded (in title records) encumbrance does not stop the recorded owner from burdening or disposing of the property adverse to the interests of token holders), your rental scheme isn't what the OP was seeking, which is to sell rights which give an interest only on the value at transfer. So you've proposed a system which doesn't work for what you intend, and which even if it did wouldn't do what the OP wants.

jasonlaramburu 9y ago
The ‘truth’ is that you do not have a clear understanding how smart contracts work. All elements can be verified and validated against open source code using the contract’s Bytecode and a contract verification tool like etherscan. I agree, this is a nonstandard legal structure but that doesn't mean it wouldn't work. As I understand, the OP’s goal is to raise money to buy a home, and securitize with an ownership in the home in the event OP cannot pay back what he/she borrows. He/she also wishes to offer funders the ability to liquidate/trade their token. You're right, the owner could sell the house and keep 100% of the proceeds, ignoring the token holders. She would then be in default, the smart contract would automatically execute the legal document, and the new owners could then sue the original owner. You could even set up a listener on the contract to monitor the public record for sales of the specific property to automatically trigger the 'default' function in the contract. Before you ask, it would be the responsibility of the lender to verify the code in the contract actually does this, but it's totally possible.