Mortgages for Crypto Natives

Transcript

hello everyone and welcome back to the forest stage here at barcelona a very special guest right now uh joseph from pond but also uh from eth prague and parallel only police and lots of other cool decentralization projects that are super cyber punk rock so welcome come on up give me a hand thank you scott thank you um hello everybody um so my name is joseph and as soon as i'm as i'll see my slides oh and i see them now uh cool i'm going to talk about uh mortgages for crypto natives today um

it's it's kind of a topic touching touching uh defy but also kind of the the cultural setup that we have like within within the crypto industry so um something about my background um i guess i got aware of crypto quite early on uh true silk road um and i don't say it as a flex of like hey i've been in bitcoin early because that's definitely not the case i'm saying it because well two reasons uh the first reason the most important one is um i think like buying drugs online should be should be normalized and should be fine and people shouldn't be ashamed for uh doing psychedelics and i actually as a matter of fact i think uh if more people use psychedelics regularly we would be living in much

healthier society the second reason is um well i was aware of bitcoin but pretty much until 2016 i i didn't take it as a revolution i just took it as like magic internet money that you used to buy shitty shady things online uh but it was it and it was first with ethereum uh and uh with my exp uh my exposure to uh parallel nepalese in prague and the institute of crypto anarchy and the whole cyberpunk movement that made me realize like uh that this technology can actually like uh change how we behave and uh and what's achievable uh in society um i spent like four last years of my life within the turin foundation where i

did like various things um focusing on the theorem ecosystem as uh as such um um in 2020 i co-founded here at mario the hacker space bordell uh in prague and if you saw some of the latest tweets about the dtr merch this was the place where things were tested out uh and finally since uh last year uh i'm also a d5 dj now and i started pawn which is what i'm going to talk about a little bit today so quick content i'll start with like definition of the terms what are mortgages anyways um then i want to talk about who are crypto natives how do we define them and if there are some uh of those among us

um and then you know it's the topic is mortgages for crypto natives so where is where is the issue and then finally i'm going to do a quick intro into how are we trying to tackle the issue troupon so what's a mortgage um well you can google internet definitions quite easily one would be it's a it's a pledge which runs until your debt which is a wrong one but a mortgage is literally a debt pledge which disappears uh or dies upon repayment or default uh so it's a pledge which you know has a certain uh point in time when it when it goes away and then obviously it's it's used in the real estate financing

context who is a crypto native um to be honest i don't know this is something we are trying to figure out um but i wonder who in the room and i i can't quite see you but please raise your hand if you consider yourself to be a crypto native that's good that's not too bad there's quite a quite a few here so but my quick definition is that well it's it's someone who obviously holds digital assets um crypto nfts um but it it's not enough to hold them i don't i don't think that if you huddle bitcoin you're a crypto native um you you're driving a particle meme um but well you know like you're not using it so

that's kind of the significant significant part of being crypto native uh i think if you're a crypto native you have to be um avid defy user you have to prefer like certain types of services um rather than you know like centralized exchanges and that kind of stuff um also well me as a crypto native i kind of have a have an issue with the concept of bank holidays i don't i don't understand the concept like i don't i don't know why it takes three days uh for an international uh money transfer um i'm sure there are reasons uh but those are beyond me which is like i don't think we we have to uh live in in such a world and as a matter of fact the last

40 minutes of my life i spent on a support line with the bank uh and i'm not i'm not making this up i literally had a call which took 40 minutes where we went through the issue of like them thinking that the u.s bank account number is a is a wrongly inserted eban that's why that's why these they stop like transfers for like two weeks um so yeah well i guess crypto natives kind of like don't understand the legacy concept of of banks and like today uh today's like financial system also again comes to the usage i think uh crypto natives are actually using in pain with crypto quite often it's not about huddling it and demographically i think it's mostly millennials in gen z's and

actually uh believe that uh crypto is a new normal and like all of the generations after we'll just be crypto natives because they will be born in the world where like the people in this room and the people at the conference and like the the many others in the ecosystem have built up services uh that will enable to basically bypass or just um take over the the financial industry uh because all of those services will be much more convenient and will be much more easier and like cheaper to use so what's the problem uh i would separate the problem into three different baskets there's a social or economical and a technological one so the first one

social i think we are facing as an industry as like individuals we are facing a certain [Music] constraints or certain like gatekeeping from from banks i actually think banks hate us as an industry um and well maybe maybe it's not even the banks maybe it's the government governments that are putting these constraints on these financial institutions uh but i i still think that um well they're certainly not making this easy and like even you know in a place such as switzerland where crypto is is quite normal now if you're if you're a company in in a crypto space and it doesn't really matter what you do as long as you as you mentioned the the magic word like crypto

or blockchain they won't very likely open up a bank account for you or they won't kind of like want to work with you at all um and that's gatekeeping because like you need the bank account to to run a business uh but yeah let's not blame them there is certainly like a certain aspect of novelty there is aspect of like these things are volatile are risky they don't want to touch them it's understandable um then well another aspect of a social issue in relation of like mortgages or you know people buying buying real estate is that well millennials as a demographic group um in the us as a as an example market are the largest productive demographic

but they are the smallest um social group in terms of the wealth that they that they come accumulated and obviously you can you can think well all right like these folks are going to um you know inherent uh inherit like all of the boomer money eventually well they will but also um the life expectations are increasing and like whole bunch of millennials are basically getting into like a real estate market where they cannot really afford uh to own property anymore so and this is i think this is going to get worse um there is an economical issue which is well if you want to get real estate then well you are for sure considering a mortgage because like over 80 percent of

real estate purchases if you are not like a super super rich person um are financed through um financial instruments such as mortgages so you're basically competing uh against like people who um you know just need like a small deposit in order to um just like pay a bigger price the other issue is if you're in crypto if you're a crypto native and you want to you know do the other thing and you want to buy real estate you have to you have to choose either or like now the decision that you're making is like well either i'm going to keep those assets of the future the exposure to this like future financial system or i'm going to sell them uh i'm going to go through the um i'm going to go through taxation i'm

going to go and buy property um uh with with that money uh so you lose exposure to the future in order to like buy you know something in the present um and well another another issue kind of like related to to gatekeeping is that like if you're if you happen to be a true crypto native and like your income comes from a dao and you would actually like want to just sell a bit of your crypto and like go to a bank and get a regular mortgage they'll be like like you don't you don't have anything like you know like you don't have a track of like actually earning any money what happens on like the magic internet but to them it's not enough and this was this was exactly my case like i had to for two years i had

to fake i'm having like a fiat income in order for the bank to actually say well yeah this guy actually like has an income um and then another aspect is that pricing is hard obviously like all of these assets again linked to the novelty uh those are kind of hard to price you don't really know like um um [Music] you know like how much your entire network in crypto is worth so again like don't just blame the banks um there is another issue obviously we have like a whole bunch of d5 protocols already so you could you know you could take a now take a loan a loan on maker or other or something like that with your digital assets um but there are some technological constraints so a well most of these are

uh pools of money or there are certain like uh systemic risks associated with that um be like like if you're considering a mortgage like you don't want to get liquidated like in 10 years because of the price bikes so liquidations uh and like the current system of liquidation certainly an issue if you are thinking about like actually taking like five 10 15 years types of loans which you would regularly need in order to participate in a real estate market uh then another issue is that well all of these protocols are only working with a fraction of the assets that are out there like nft lending is a thing of like the last year let's say uh but certainly there is still not a lot of

liquidity there and it's also only possible for certain types of assets um again towards like systemic risk you always have to uh you have to need you know have a on-chain oracle which again creates exposure to uh some sort of like third-party influence of whatever protocol you're using um and the last issue if i skip the pricing is hard again because obviously that's that's connected to price oracles uh you can have your cake and eat it too like again you have to like if you're if you want to use collateral today you have to deposit somewhere in a wall like you lose access to it but you know the case of traditional mortgage is that like you actually can use the asset while

uh you're repaying um the loan against it so now finally let's talk about pond and what we are trying to do to tackle the issue so pawn is a is an open protocol which allows you to use like any type of token any digital asset on ethereum any erc 20 721 or 1155 token as collateral even like combining those assets together um and and get a loan against them so pawn currently works essentially as a pawn shop uh you just like take any of these assets uh there's no white list it literally works more as an open sea of landing where you can literally take anything and you lock it in a fixed term loan

without liquidation risks for the borrower it's fixed costs fixed interest and you only need one transaction to do it so even without pools you can already achieve a certain certain level of like user experience without having to um you know worry all that much about like all of the secondary effects of your loans the contracts are super simple there is no third party oracle and obviously all of those are open sourced and open for anybody to read or try to break um but it's like not quite the mortgage case it's it's still pawnshop one of the one of the deals uh just to get the idea is um is a board ape loan

where a borrower got 126 die a thousand die um in credit against deborah ape uh well you may think well you know you're not getting a you're not getting a flat for that um or a house for that well you're not unless you live literally anywhere than the western part of the world otherwise you can already get a decent decent property for such such a loan the interest rate on this one was roughly uh 4.5 but let's talk about the d5 mortgage a bit so with pond what we are building um in in the next month is a case of the d5

mortgage we also have a prototype for self-custody collateral of collateral where you don't have to actually trans transfer the collateral anywhere you can keep it and you only work with the right of uh withdrawal which you use as collateral which enables a lot of use cases from um you know gaming where you can still play with the assets that you're using as collateral you can also um you know keep like access to your ens names uh and so on uh while it's used as collateral and you don't have to you know you don't have to choose like you can actually uh have your cake and eat it too uh we already have a collateral bundle which again allows you to combine like any uh any basket of different assets of

different standards together to create like a unique basket of um of assets that you can use as collateral [Music] so how how does the d5 mortgage work i mean like we work in a in a space of smart contracts and like a lot of automation um and we can already build the the d5 mortgage case on the setup on the technology that we have today so just a simple example uh let's let's take a case where a borrower only has like 500 bucks and there is a lender which who also has 500 bucks and is willing to to lend that money to someone um who kind of wants to buy a particle

collateral let's say the particle collider in this case is an axi which costs one thousand dollars uh so let's say the borrower wants to buy an axi for a thousand bucks and once you play uh the game with it uh but he doesn't quite have the full amount and there is a lender who wouldn't mind like uh getting defaulted on an axi uh but only if he paid 500 bucks for it so what you can already do because of smart contracts obviously is that well you combine the money and in one transaction you buy the axi you lock it as collateral immediately uh and you result with exactly what we have on pawn today which is well the lender basically um

the lender basically only gave like 500 bucks uh against a collateral which is valued one thousand bucks uh which obviously results in 50 loan to value uh and the borrower didn't need the money up front so currently most of the lending setups are established in a way where you need the asset first and then you can lend up until you know certain percentage of value of that asset uh but which is like one extra step in the flow uh you don't even now you don't even need like to um to have all of the capital up front uh in order to take a loan so you can literally start like financing things in the metaverse like in the digital space

and eventually i think even in the real world just like with one transaction and just a small deposit so what we are building towards kind of for the on for the end game is is a full-blown case uh where uh we are setting up a dial around the protocol so the dow will collect all of the fees and we'll basically decide like what are the basic parameters um currently it's it's all binary loans uh but we'll be getting uh we'll be getting gradual payments which will enable you exactly these cases of like five 10 15 year loans um we're going to enable perpetual loans uh where you'll be able to like change the terms on the go or swap the collateral in the

meantime and the holy grail for us is to um enable people in crypto the crypto natives to essentially just use their digital wealth just use the portfolio of assets what they what they have in crypto use that as collateral for a mortgage sized loan um take the stablecoin which is borrowed funds go and buy real estate and then repay that real estate against the basket of their digital wealth so they wouldn't have to sell crypto they can keep it for the years to come and instead of like having to sell it first and getting a house and then like

repaying it against the house uh they can just stand crypto completely um so this is our roadmap this is where we stand now um the the d5 mortgage case is coming so in case like you have certain assets that you'd be interested in using please reach out to us um and we'll be we'll be happy to take you through the platform and like show you how things work and yeah eventually i think like in five to ten years um you won't have to go to bank to like ask for a mortgage you'll be just like able to do it on like based on a couple clicks because the not only the nft space but the entire crypto space uh will a be i think like much larger than

it is today uh but it will be like enough services that hopefully like also you guys are building now uh that will just enable you know a lot of automation in the space like you won't have to go through like a month uh to uh get a get a mortgage approved um so yeah this the summary is well what crypto natives made this market you know like things like maker dow and ava and all of these they enabled uh this this like huge realm of like d5 or like nfts if you will um and we are trying to build something for them we are focusing we are not worried about adoption i think it's inevitable like crypto will be here for for decades uh and the ecosystem is already large enough for us to just build a service for people who are part of the ecosystem

um i also think that we are at the stage where like now they're fighting us right there's a lot of regulation coming into place but inevitably the next stage is the stage where we win where crypto just becomes a normal thing and we won't ever have to talk about adoption again because it'll just be the thing that's that's being used um and the last message is well if you're thinking you know about the hurdles of the bear market just don't sell your crypto assets yet uh just pawn them instead like you don't have to we don't have to lose them and finally there is a pull up under the qr code so if you are a co pull up collector uh please scan it and get your pull up well thank you [Applause]

[Music] can we do a little bit of a q a we have a little bit of time okay yeah we have a question back there uh somebody have the mic yeah you want to repeat that maybe repeat uh the question when yeah because there's no mic oh he has a mic now as okay it's not okay yeah um yeah so uh i was just wondering because

like the uh assets right now are gonna be super super volatile right like especially nfts uh like with the lending rates um at what point would they you know like uh default on these loans and yeah basically that yep thank you so uh so the question was about the volatility of those assets and i guess like our our the main difference of our protocol is that uh well i guess traditionally if if that word is appropriate uh basically the lenders in d5 get all of those protections right because like you have you have liquidations uh that can be triggered automatically uh if you uh

if your characterization ratio drops under certain value with price spikes um or price movements uh with pawn we are trying to like move uh part of that risk to uh to the lender uh so we don't have liquidation prices or like we don't we don't have liquidations within those loans so the only case of a default is like if you don't pay before the expiration uh but the way we we handle the the lender protection is that well this entire loan is uh is tokenized itself so it's like having a contract mortgage which could be like shift into into an indice and like a large fund could like average out on having a bunch of these so essentially as a lender if the price of the

collateral of those of those like loans that you're holding um goes against you you can always uh decide to to sell them uh before the expiration to someone else uh who might have a different risk appetite so essentially you you make those uh assumptions early on like in the beginning exactly as like the the mortgage the mortgage pricing works right now um and um um you basically choose like whatever whatever like risk you're willing to take so what we're seeing now is like loan to value like up to 50 on some nfts these are collectible nfts but you can think you can think more broadly right like think like liquidity to provider tokens where it's much easier to price those assets and you can create like

different pairs which keep the same currency exposure as well so you don't have to worry as much about uh about like one you know asset dropping in the price because like you can still get the same return on the asset of exposure oh yeah sorry let's talk about it later on i guess thank you so much thank you okay thank you so much so we have a panel coming up um but before we do the panel i just wanted to do a quick uh psa so um if you guys noticed you have these numbers on your on your badges is uh nft id so

um that is your personal identification number for the festival now um if you take photos of yourself and you go to east barcelona dot com slash moments and you post the photos and you use this id in it and you tag yourself or you tag your friends whoever's in the photo you stand the chance of winning tickets to the next eath barcelona and other cool prizes and one of the cool things about this is that when you mint these photos as an nft it's the subjects of the and of the photograph that actually are the owners um you could

also include the taker of the photograph but it's just a way of kind of increasing uh increasing the uh the intellectual property experiment uh okay cool i guess we're going to get started with the next the next panel let's see do we have our panelists okay what's up you