“DeFi and Real Estate”


Last year, waves were being made in the decentralized finance (DeFi) industry courtesy of decentralized lending protocol, Aave. They announced their intentions to tokenize one of – if not the most – expensive purchases many people will make: home mortgages. At the time, they were starting to partner with real estate tokenization firm, RealT, so that they could incorporate home mortgages into DeFi. This collaborative effort will ensure that people can stake their tokenized real estate as collateral and allow them to take out loans.


The tokenization of real estate


The process of “tokenization” involves the creation of a virtual token to represent the ownership of a real estate interest. Instead of dealing with conventional real estate interests in an obsolete fashion that utilizes paper documents, purchasers can digitally engage in transactions with tokens.


A notable quality of tokenization is its flexibility. A token could symbolize underlying asset ownership, an equity interest in a legal entity that owns that asset, an interest in debt that the asset secures, or a right to a portion of the profits stemming from the use of the asset.


The types of real estate involved sometimes vary. However, the most common ones include single-family homes, warehouses, office buildings, retail spaces, and multifamily structures, among several others.


Tokenization has the potential to completely transform the real estate market on a global scale. It provides issuers and investors with an array of advantages that make it more favourable to existing investment options. Moreover, it could introduce a large number of new investors to the market. Tokenization advantages include an increase in liquidity, among other various benefits.


DeFi loans


In the DeFi space, all a borrower needs to do to prove ownership is to have the keys to their cryptocurrency. However, in the physical world, should someone steal your identity and use it to secure a DeFi mortgage, they can burden you with a huge loan that you are unable to pay back.


DeFi loans are considered frictionless and one of the reasons why is it doesn’t matter if you can afford the loan. Liquidating cryptocurrency is quite simple. In the event of a borrower not being able to afford the payments, the capital can be reclaimed. Contrarily, to verify affordability for a mortgage, a substantial amount of personal data needs to be shared. When self-sovereign identity becomes much more widespread in the future, there is a good chance that it will be viable to automate.




It is too soon to tell if DeFi real estate will dominate the market or leave a huge impact on the industry. However, crypto is nothing if not ambitious and it will be interesting to see how much DeFi changes the world of mortgages.