I had been thinking about this topic for some time and this is one of the main
reasons the Centrifuge project has captured my interest.
With the traditional realm of property conveyance lawyers take care of the legal
work around transferring ownership of a property from one entity to another.
There may be some kind or public land record that also get updated at the time
of transfer, and there would usually be a deed that provides evidence of the properties
title being transferred from one person/legal entity to another.
If the entity purchasing the property has taken out a mortgage with a bank to
help pay for the property the legal ownership entitlement would shared with the bank and
written into the contract and this collateralizes the loan, so that the bank can claim a
foreclosure should loan become delinquent and the mortgage agreement is defaulted on
buy the entity taking out the loan. The ‘value’ of the property is usually derived from
the market, but also things like professional valuations, and capital valuations by local
authorities (councils etc) to work out property taxes can play a part in assessing the
value of a property in terms of fiat currency.
So what if the legal title of a property could be tokenized (as an NFT)?
Providing the regulatory and legal framework is modernized to recognize the tokenized
representation of the property title, and NFT could be used as an instrument within a
smart contract, and the provision of a loan against the property could then instead
be provided through the means of decentralized finance (removing banks from the equation)
reading through the info on the Centrifuge website it looks as though invoice factoring
going to be a big use case, however this scenario mentioned above seems to be something that
could play into the longer term vision of this project. In my opinion this could be an extremely
disruptive force within global finance structure if able to be realized.
Keen to hear anyone elses thoughts on the matter…