DeFi Meets Real Estate as Aave Readies Crypto Mortgages


Aave – the sector leading lending protocol – has partnered with RealT to bring interest-earning mortgages to DeFi.

RealT allows investors to buy shares of managing properties.  Each holder earns revenue directly into their wallet via stablecoins like DAI and USDC. This is very similar to how Real Estate Investment Trusts (REITs) work in traditional finance. The key difference between is that RealT aims to remove any central point of failure and to make the system fully decentralized.

REITs are a massive market globally. In 2019 alone the combined market capitalization of all the US REITs amounted to 1.33 Trillion USD. If RealT can manage to capture a fraction of that market, then it could rake in hundreds of billions of US dollars.

What’s to Know?

Aave plans to pass a proposal to add RealT money markets added to their leading lending protocol. Should RealT get added, it will become the fourth market after Aave’s own market, the Uniswap Money Market, and the forthcoming TokenSets market.

The integration looks to let users borrow stablecoins by collateralizing their RealT holdings. This market will be limited to whitelisted Ethereum addresses with KYC’ed users being able to deposit their tokens and use them as collateral to borrow stablecoins, opening up new use-cases for their assets.

The team also announced that in the future, RealT plans to allow for private tokenization. This allows for decentralized refinancing – a first in the growing space of tokenized real-estate.

“RealT tokenized properties are backed by real-world assets in the form of properties. These are less volatile than cryptocurrencies. However, in the US property crash of 2008 the prices fell by 50% over the course of one year, and this could very well happen again and soon. Initially, to protect against liquidations, the Loan-to-Value ratio will remain below 50%. It will be difficult and time-consuming to liquidate, thus requiring a low liquidation threshold and high liquidation bonus. The (Aave) risk team will look closely at the RealT market data and follow the evolution of this brand new market, and if the data allows, it will publish updated recommendations for LTV and risk parameters to the Aave governance.”

Crossing the Chasm

Earlier this year, Aave Limited was issued an Electronic Money Institution (EMI) license by the U.K. Financial Conduct Authority (FCA). This EMI license allows Aave to facilitate payments and currency conversions, as well as to issue electronic money accounts for consumers and businesses. Thanks to this development, the team will be easily able to onboard both retail and institutional clients that otherwise would not have access to DeFi.

Aave is about to underdog a token migration from LEND to AAVE as a part of an ongoing Aavenomics upgrade. The team will introduce yield farming/liquidity mining along with staking for protocol safety and many more new governance features.

Needless to say that Aave is considered one of the fastest moving projects in the entire crypto space and rightfully so. To stay up with Aave, follow them on Twitter. To stay up with RealT, follow them here.

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