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How Real Estate and CitaDAO can Create Sustainable Value on the Blockchain
August 8, 2021
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Way back in 1960, US President Dwight Eisenhower signed Public Law 86–779, which allowed investment in large-scale diversified portfolios of income-generating real estate. That chunk of legalese permitted the formation of Real Estate Investment Trusts or REITs. Since then, REITs have grown from being an offshoot of traditional mortgage companies into globalized businesses operating in over 39 countries with a total market of roughly $1.7 trillion dollars. Most REITs now not only own the real estate they are invested in but also operate them to generate stable income streams. Some of your favorite outdoor malls, live-work spaces, and other gathering places may be owned and operated by these REITs.

These REITs have been around for a while and have a proven track record of success. They benefit from providing investors:

  • Accessibility — the minimum investment in a REIT can be much lower than the cost of acquiring entire real estate properties, and investors in a REIT can gain exposure to properties across different jurisdictions
  • Liquidity — shares of REITs are freely traded on equity markets, unlike traditional real estate
  • Transparency — legal requirements ensure that REITs are honest and upfront in reporting on their holdings
  • Scalable — the companies operating REITs have proven methods of acquiring new properties and turning them into cash-flow positive investments

At the same time, there haven’t been any big changes in the REIT game since they were signed into law way back in 1960. In the meantime, we’ve had the microchip revolution, the personal computing revolution, the Internet revolution, the wireless and smartphone revolution, and are on the cusp of the AI revolution. Isn’t it about time REITs were updated for the 21st century?

Here at Citadao, we’re using blockchain based Decentralized Finance (DeFi) to make real estate investment easier, more borderless, more transparent, and scalable. Using Citadao, real estate investors can acquire Ethereum based ERC20 tokens corresponding to fractional rights and ownership of real estate listed on the Citadao platform. In the case that they acquire enough of these ERC20 tokens, they can go on to purchase the property outright and have a NFT representing legal ownership of the property be transferred to them. The ERC20 tokens can also be traded for other valuable cryptocurrencies via DeFi Automated Market Makers, and they can be staked in Liquidity Pools to yield Citadao tokens as rewards. Those Citadao tokens can in turn be used to vote on the governance of the platform, such as how the revenues of the platform should be spent or distributed. In the case where Citadao token holders vote to distribute revenues, the tokens will also entitle the holders to a corresponding share of this distribution.

Property owners can use the Citadao platform to list their real estate for sale in an Initial Real Estate Offering (IRO), and receive the proceeds of the sale in their ERC20 wallet. These property owners have the flexibility of offering up fractional shares of their real estate as they wish, and our platform will mint ERC20 tokens corresponding to these fractional shares.

By tokenizing real estate, an asset that has a proven track record of value and a real-world income stream, we are also providing an instrument for lower risk and higher yields in the Defi ecosystem. Between new market entrants, rapid imitation of successful strategies, effects of margin trading, and the increasing hesitancy around riskier Liquidity Pools, multiple forces are driving the unsustainably outsized yields of Defi downwards. As the total value locked into these pools increases, these yields are expected to further revert towards the mean. In order to evolve and grow, Defi needs sources of value that are:

  • Income Generating — the asset must be able to generate positive cash flow
  • Sustainable — the asset must have a proven historical track record as a source of value
  • On-Chain — the asset’s ownership and legal rights must be clearly mapped from the “meat space” of the real world into a tokenized asset on the blockchain (and ideally, the asset would even benefit from being moved “on-chain”)

Real estate has always fit the first two criteria, and with the emergence of blockchain and DeFi, the time is now for moving real estate on-chain, down to the legal ownership and title rights. That’s where Citadao comes in.

The Citadao platform combines the advantages of:

  • Permissionless Accessibility — anyone anywhere can access fractional shares of real estate listed on ERC20, and anyone residing in the 54 Commonwealth Nations can list their real estate on the platform
  • Liquidity — real estate on the Citadao platform can be freely traded with other ERC20 tokens through Automated Market Makers
  • Transparency — all governance decisions made by the Citadao organization will be in accordance with voting based on staking Citadao tokens
  • Scalable — our portal makes it easy for new properties to be listed and new ERC20 fractions for those properties to be distributed to buyers, making it possible for a limitless supply of real estate properties to be invested in
  • Composable — by using a blockchain native asset bearer property token, Citadao will serve as the foundation for a plethora of innovative DeFi primitives, such as collateralized loans, futures, indexes, real estate backed stablecoins, etc.

Real estate has long been one of the most important investment assets in the world. Now, Citadao is taking the value of real estate and reinventing it with the power of DeFi. Citadao is what happens when real estate investment evolves for a world of cryptocurrency tokens, Liquidity Pools, and decentralized networks.

Disclaimer: The information contained in this communication is based on sources considered to be reliable, but not guaranteed, to be accurate or complete. This communication should not be relied upon or the basis for making any investment decision or be construed as a recommendation to engage in any transaction or be construed as a recommendation of any investment strategy

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