- The Fluidity startup will tokenize mortgages.
- While buyers and sellers will not interact with cryptocurrency directly, it will be used by Fluidity for back-end management.
Every industry has been working to see how blockchain technology can be used independently of cryptocurrency. Fluidity, a fintech startup, has decided to create Ethereum-powered mortgages, which will start in California and New York. The offering is planned for summertime, which is when they expect that the licensing paperwork will be complete.
Todd Lippiatt, the chief architect for Fluidity, said that the houses will be tokenized, which basically means that the house will be used as collateral for the token. Lippiatt explained,:
“You’re pledging the house and you get an advanced rate back in terms of dollars.”
Fluidity only came into the crypto industry in 2019, as a merger between the ConsenSys DEX and Propellr commenced. The co-founder of fluidity, Sam Tabar, said that there is a specific set of shareholders for this platform, even though ConsenSys founder Joe Lubin is a major shareholder in Fluidity’s subsidiary AirSwap. Some of the shareholders in this effort include major investors in the crypto industry, like Brock Pierce, Bill Tai, and Mike Novogratz.
The mortgages will be recorded via smart contracts, while using cryptocurrency, for back-end management. In the meantime, Lippiatt stated that that the startup is looking for other partnerships with lending platforms that already are based in Ethereum, like the dollar-pegged loans that are offered through MakerDAO.
Even though the stablecoin through Ethereum is still struggling to establish itself in both liquidity and stability for the rest of the market, there’s only a “mitigatable” risk with mortgages in this partnership.
The reason that the risk is so minimal is because there is no direct contact between the cryptocurrency and the sellers or buyers. Clarifying, Lippiatt explained that the company’s role will be to “deal with the inner workings of the decentralized system.” The individuals who receive loans will be making payments in fiat currency, while Fluidity deals with the risk profile.
Essentially, the borrowers still have to submit what would be expected of them with any loan platform online – credit checks and personal data that pertains to their purchase. The information is then managed with Fluidity, which will create a smart contract that reflects a tokenized representation of the newly held mortgage. Ultimately, the loans could be sold through AirSwap as securities. This is an ideal opportunity for individuals who can make repayments but are classified as “low income” or underbanked buyers.
The records will be easy to audit through the use of DeFi smart contracts, and the Fluidity platform aims to offer cheaper rates than what new homebuyers would receive from a financial institution.
Overall, this process is a lot like a traditional mortgage, but with greater ease and fewer costs. Lippiatt added:
“Our methodology provides better pricing that is determined solely by the intrinsic credit of the transaction, as opposed to external factors like domestic central bank governance policies and political trade winds.”
At the Fluidity Summit in Brooklyn today, which is the second annual event, the company will be making their annoucement for this opportunity.