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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 don

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.
    - jasonlaramburu 9y ago
      I think a lot of your questions are more related to how eth smart contracts work. Apologies if I'm misunderstanding. It's easy to verify that the deployed code of an eth smart contract matches the open source code using the Bytecode of the deployed contract. Etherscan offers contract verification, as do many other sources. >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? You can read the state of a contract for free, so you would be able to see whatever the 'price' was at any given moment. It would obviously be on you to do your DD and confirm that the price is accurate. >You have no way to ensure that what the lawyer verifies is what the contract will release upon default. Yes you do, see first comment above. >If the default occurs, the token holders will have to go to court to figure it all out. Not all defaults will necessarily lead to litigation. The parties would only need to go to court if the owner did not abide by the terms of the contract. In any traditional foreclosure lots of money and time is spent on legal proceedings. >If my ownership stake is codified through the existing legal system what use is the smart contract? You would only need to use the existing legal system in the event of default or breach, which would hopefully be rare. The contract eliminates middlemen. The token also gives investors/lenders significantly more liquidity, which is desirable.
dragonwriter 9y ago
> I disagree that it very obviously cannot be done. If you can get a jurisdiction to make the ledger on which the smart contract operates the legal source of truth for real property rights, it can work. For real existing jurisdictions without that, it's unworkable.
- jasonlaramburu 9y ago
  I don’t see why that is necessary. If a lender were willing to take the risk, which is admittedly significant, there is no reason the ledger would need to be a legal document. The legal document would be referenced in the contract, with a pdf copy held in escrow on ipfs or something similar.
  - dragonwriter 9y ago
    > If a lender were willing to take the risk, My point is that without something equivalent to a recorded interest, no sane lender is going to be willing to take the risk. Beyond a certain point, the risk is so high that the premium for that risk will price out most of the potential borrowers not intending to exploit the giant legal vulnerabilities in the scheme, which drives the risk premiums higher, which narrows the pool of borrowed even more narrowly on ruthless exploiters, etc. To make it reasonable, it has to be a remotely reasonable choice for legitimate borrowers and lenders compared to other means of borrowing, or other investments.
    - jasonlaramburu 9y ago
      People invest in ICOs based on a white paper. Risk is a relative term. I can't think of any other way to invest and trade ownership online in properties you (the lender) curate. Yes, you can buy, sell, trade a REIT, but you are reliant on someone else to select the properties.
      - dragonwriter 9y ago
        > People invest in ICOs based on a white paper. Risk is a relative term. Sure. I'm not saying no one would participate in this scheme in the short term, I'm saying if implemented it would quickly collapse in a storm of abuse. > I can't think of any other way to invest and trade ownership online in properties you (the lender) curate. Yes, but the reasons no system for that exists don't have anything to do with anything that smart contracts solve (again, unless they are legally replacing title registers.)

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.
  - jasonlaramburu 9y ago
    I think a lot of your questions are more related to how eth smart contracts work. Apologies if I'm misunderstanding. It's easy to verify that the deployed code of an eth smart contract matches the open source code using the Bytecode of the deployed contract. Etherscan offers contract verification, as do many other sources. >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? You can read the state of a contract for free, so you would be able to see whatever the 'price' was at any given moment. It would obviously be on you to do your DD and confirm that the price is accurate. >You have no way to ensure that what the lawyer verifies is what the contract will release upon default. Yes you do, see first comment above. >If the default occurs, the token holders will have to go to court to figure it all out. Not all defaults will necessarily lead to litigation. The parties would only need to go to court if the owner did not abide by the terms of the contract. In any traditional foreclosure lots of money and time is spent on legal proceedings. >If my ownership stake is codified through the existing legal system what use is the smart contract? You would only need to use the existing legal system in the event of default or breach, which would hopefully be rare. The contract eliminates middlemen. The token also gives investors/lenders significantly more liquidity, which is desirable.

dragonwriter 9y ago

> I disagree that it very obviously cannot be done. If you can get a jurisdiction to make the ledger on which the smart contract operates the legal source of truth for real property rights, it can work. For real existing jurisdictions without that, it's unworkable.

jasonlaramburu 9y ago
I don’t see why that is necessary. If a lender were willing to take the risk, which is admittedly significant, there is no reason the ledger would need to be a legal document. The legal document would be referenced in the contract, with a pdf copy held in escrow on ipfs or something similar.
- dragonwriter 9y ago
  > If a lender were willing to take the risk, My point is that without something equivalent to a recorded interest, no sane lender is going to be willing to take the risk. Beyond a certain point, the risk is so high that the premium for that risk will price out most of the potential borrowers not intending to exploit the giant legal vulnerabilities in the scheme, which drives the risk premiums higher, which narrows the pool of borrowed even more narrowly on ruthless exploiters, etc. To make it reasonable, it has to be a remotely reasonable choice for legitimate borrowers and lenders compared to other means of borrowing, or other investments.
  - jasonlaramburu 9y ago
    People invest in ICOs based on a white paper. Risk is a relative term. I can't think of any other way to invest and trade ownership online in properties you (the lender) curate. Yes, you can buy, sell, trade a REIT, but you are reliant on someone else to select the properties.
    - dragonwriter 9y ago
      > People invest in ICOs based on a white paper. Risk is a relative term. Sure. I'm not saying no one would participate in this scheme in the short term, I'm saying if implemented it would quickly collapse in a storm of abuse. > I can't think of any other way to invest and trade ownership online in properties you (the lender) curate. Yes, but the reasons no system for that exists don't have anything to do with anything that smart contracts solve (again, unless they are legally replacing title registers.)