Funding Community Needs

Transcript

All right. Uh, good morning everyone. I just remembered yesterday I introduced yesterday's keynote as the second to last keynote, but that was actually not true. Yesterday was Wednesday. Today is Thursday and today is the second to last keynote. We're going to have one more keynote tomorrow by Rashmi. But today's keynote is by Simon uh who's here uh for uh own labs and um they've developed something very interesting uh a funding mechanism which helped uh them uh buy a bunker in Prague and turn it into hacker space. And so yeah, that's pretty cool.

and uh uh could also give us inspiration for how to fund our own uh uh co-l livingiving dreams. And so yeah, I personally have been looking forward to this for a long time to hear the details of how you did that and how we could use that. Uh I'm excited. Um welcome Simon and thanks for being here. [applause] >> So hello everyone. Can you hear me? Good. Okay. So, uh yeah. So, this might be talk about like the financing community needs. We will go over like a different models which are possible to do.

So uh we will first go from like the bordell mortgage case which is like the hackerpace case and then we will also explore how it's possibly use like a tokenized real world estate uh as a collateral or as a way of funding in like onchain mortgages and then I will also move a little bit into DAO space and the undercolateralized loans. So let's get into it. So yeah, so I'm working on own for like a last five years. So we are doing like a onchain mortgages. Initially I got interested into this space uh because of the idea

how we can use technologies to make some kind of like more free and new ways to collaborate basically like I would say like on the crossroads of like the cypher punk and solar punk ideas and I'm also helping a closer and the traditional dream factory with some technical web free stuff mostly smart contracts so yeah so I'm very technical not really a business person. So let's get into it. So why do we care about financing?

So I would say even for like the regenerative communities there is a lot of need for like a financing be it like buying a new land a property some renovation infrastructure basically anything that uh you can imagine. So there is like this issue that like each community needs uh a little bit of different terms. I feel like especially in this space where we are also on some kind of like crossroads of crypto and banks usually don't work with crypto very well but not just crypto. It can be also that for example you need some kind of like different repayment schedules or it can be like uh how long you want your

loan structured or you want some kind of like support from community for example from community funding you can have like a community donations that's of course like one of the possibilities but then of course you can also have like a crowd loan meaning that like the people that actually wants who supports your projects will lend you money in some like a good uh interest rate for example like 2% which is much lower than you would get anywhere else. So this is a way how to support the community for the project that they care about while also getting something uh back. So I would say this is like an alternative of the

donation. So the usual options can be poor fit especially like given like what the terms you are getting in the bank or attracting actually like community lending and stuff. Uh you might be forced to sell your assets which you don't want to sell but instead you want to get just the liquidity of it. uh so I feel like there are like a little bit conflicting of two different realities of like the traditional finances and more like alternative finances which we are trying to connect.

So uh just a little bit short note about like the trustless system. I feel like when we are talking about like the community it's usually about the trust like when we are here we kind of like trust each other. So talking about the trustless systems can be maybe a little bit uh you know like a paradoxical but I feel like when we are talking about like the systems where also there are like anonymous actors and the potentials more potentials to game this system and stuff like that I feel like if you can have like a two systems which are doing the same job but one doesn't require much trust I would say this is like a better

system but it of course doesn't replace the trust within like the community and the people. It's just that for a certain job that you are doing you don't necessarily require that and of course even in blockchain there are some some levels of trust but usually it's like much less than uh than usual. So this is just like a side note about like the trustless systems and why I feel like they are important even in communities such as ours. So let me quickly introduce you into what we are doing. So we are trying to do like a onchain mortgages. Basically right now we are trying to find like a communities and uh projects which are

exploring like a financing needs for their own purpose where maybe like the traditional finances might not be a good fit or they are for example looking for more like a community funding or funding from their investors or like a circus where it might be actually like easier and cheaper to do this on chain than through some kind of like legal bindings and all this stuff. So I feel like a lot of things onchain can actually like simplify and make the process costs actually lower. So right now we are explor exploring like a two vertical.

The first one is with like the crypto collateral which means basically like the cryptonative assets such as like Ethereum web bitcoin. It can be basically anything for example like with the bordell it was also like this case and the second case which is I guess like more interesting going to the future but also more like legally complicated let's say or there are more quirks based on the jurisdictions and stuff. So this is like using actually like the tokenized real world assets directly. So let's first explore the first one which is like the crypto collateral stuff on the bordell mortgage

case. So if you don't know Bardell it's like a hacker space. So let me show you quickly. Oh I cannot use Mac. Yeah. So this is like a space basically for where that like gathers like the hackers like the maker space community arts like audio guys and all this stuff and it initially originated in parallel police in Prague and now we are looking or we were looking for like a new space to actually like uh buy. So this was basically like a use case. So given that most of the

people around Bordal hacker space are like deep into the crypto then using like some kind of like onchain mortgage for that was uh I guess the primary option because you cannot really go into the bank and use your assets and at the same time you don't want to sell them and also it was a way for the community to support us and uh yeah as I said before it's kind of like a alternative donation So this is like a bordal hacker space if someone remembers like the marriage event. Uh so there was like a marriage party and stuff like that. So it's pretty cool place. So if you are in Prague, you can visit soon.

So yeah. Yes. So I think I went through that already. So actually how does the bordell mortgage work? So basically anything I am talking about here is like the pure onchain stuff. So it's just like a bunch of code and smart contracts on the blockchain. For this one there were no needed some like legal bindings just for the mortgage itself. So how it usually works in this case is that like for us uh what we are doing is like the peer-to-peer loans or peer-to-pool loans which means that

basically as long as you find for a suitable terms by terms I mean like a loan duration uh loan interest uh collateral assets being used LTV and stuff like that. So as long as you find a counterparty, you can actually do this loan which is a little bit different from like most of the lending protocols which requires you to have some kind of like health factor, LTV and stuff like that. So uh for us it's about like providing uh communities and people the opportunity to basically do any kind of deals that they want which then also includes for example the

undercolateralized loans that I mentioned before. So just bear in mind that this is all like a smart contracts stuff. So usually the flow starts with the borrower that uh in this case it's like a bal team that proposes the terms. So the terms are like uh what I want to use as collateral. In this case it was like the etherfy eat then what ltv do I want what interest in our case like the interest is actually like fixed. It's not uh it's not like variable. So for example, if you have like uh five years loans or 10 years loans like in this period like the

uh interest rates can vary or change quite a lot. So I feel like that for the longer term durations the fixed interest actually might be more suitable and more predictable both for borrowers and for the lenders. So you also like set interest repayment schedule duration and what credit asset you usually want usually. So far it's just like the stable coins either like USDC or like the EU or C or like the Switzerland stable coin that exists. So these are the terms. So this is basically how the loan starts or we call it like a proposal like you know so borrower proposes. So this is like a proposal. So

after like the proposal is made then uh I don't know uh then the uh then the like lending phase uh starts. So still at this point the borrower still has the collateral in their own holdings. So right now after the borrower sets the terms right now the lenders can come and pull their money into what we call like a lending vault. For people that are more technical it's like ERC 4626 vault. For people that are not that technical, you can just imagine as a way where to pull your money together basically as you have some kind of like fundraising

campaigns where like people are gathering like 100k and you can contribute to you know like 1k or something like that. So this is like a similar to it just that you don't purely donate it but then after the threshold is reached meaning for example for the bordal case uh you know like 180k was uh was deposited by the lenders into this lending vault then the borrower can come and accept this money. So at this point the money comes from the lending vault.

So the credit assets come to the borrower and the collateral is locked into the escrow. So this is like the start of the loan where actually after that the borrower needs to make uh repayments. After that the borrower usually have some time uh for uh repaying. Usually we have some kind of like grace period which means that for example for the border case it was like a half a year because you make this loan right but it takes some time before you actually like buy the property and have some operational income. So it doesn't make

sense to require the borrower to make the repayments like right now. So you so the borrower has some period until which he cannot he doesn't have to repay after that he's making like a regular repayments and uh after each repayments the lenders can actually claim their share of the repayments meaning if they for example deposited 10% of the lending money to the lending vault I mentioned earlier then they can claim 10% of each of the installment and repayment.

And uh basically from the loan life cycle, it ends either by that that the loan is repaid like a full which then means that the collateral goes back from this like smart contract escrow to the borrower or in case the borrower misses the repayments the loan defaults and the lenders can claim the collateral proportionally. So again if someone contributed like a 10% to the collateral or to the lender vault they can claim 10% of the collateral and liquidated. So uh as you see we don't have here like a typical price based liquidations instead we have like a time duration

liquidations but if needed uh we can also do like a price based liquidations as I said before we are kind of like in exploratory phase so anything basically is configurable so I guess this is from like the basic uh life cycle of the loan so right now I have a question if it's clear or if you have some questions on how this actually works uh for the last step there if the required payment is missed then the lenders can reclaim a portion of the collateral. So, does that mean like say

like it's going well, there's like six payments are made well and then the seventh uh the borrower can't repay. So, does that mean the whole thing's over and then all the lenders split the whole collateral and like the rest is canled or is it like split up in a it's just like this month that happened and we take a little bit of bit of collateral or like Yeah. How does that work? if like one payment is missed, how does it uh how does that translate into the overall like system?

>> Yeah, it can be also configurable but uh for this case it means that like the borrower loses the entire collateral which has like the consequence that like with uh more and more time passing towards the end of the loan, it's less and less profitable for the borrower to default even in case the price of the collateral would decline. for example. But it can also be made that like such uh it can be also made just that like the each of the individual let's say monthly or some kind of like regular repayment can be then like uh liquidated from the collateral but still the wall alone doesn't so it's also configurable >> as you presented it now. Uh

this system only really makes sense if the if the borrowers themselves provide uh ETH as collateral. We can't really separate these functions, right? You mean uh from like using uh the actual real estate as collateral or >> um yeah I'm saying like if if in in in this system uh if someone external to the real estate project provides ether as collateral and then the borrowers so the real estate project does not repay then the external one uh faces the consequences of uh uh

their assets being uh uh claimed. So, how does pressure on the uh uh provider of collateral uh translate to pressure on the borrower if they're not one of the same? They have to be the same, right? If they're not the same, we still need a bridge or some connection between them or we Yeah, let's I can turn it into a question. Um, how can we uh separate the function of uh borrower and provider of collateral? Can we?

That would be more interesting to us. Okay. Use case would be uh we want to uh buy and renovate the property up there. We have uh wealthy friends that are deep in crypto. They are okay with providing collateral because they trust us that we will uh uh that this project is stable. They don't want to uh sell their assets, but they they're okay with they're playing a long-term game with ETH and uh they're okay with us using their assets as collateral.

But we would still what what's missing basically is a provision to to protect uh than the external uh collateral from us just uh uh defaulting on purpose purposefully defaulting. You you could possibly uh have a side contract that uh uh uh makes the property itself uh uh or

ownership of the property uh uh subject to repayment of the loan. So if if uh the loan uh goes under, if the loan defaults, then whoever provided the collateral loses their collateral but gains the real estate. >> Yeah, I think you could have do it actually already with like the borrower hooks that we have. So if this would work then yeah, I guess it could be made. So like for each of the life cycle basically we have some kind of like hooks where you can uh put your own uh functionality. So if there would be some kind of like liquidation mechanism like this I can imagine it being true.

Word Jeff we can't hear you. It's really annoying when you watch a live stream and then you just hear then give me the mic. [laughter] Um I think this is if we take the same tool but use it between the collateral providers and the borrowers. So let's say we create a bonding curve. You collateralize it with ETH. Well the bonding curve is just a price curve.

roll your eyes. It's what it uses. Um the collateral could be taken out against that and then paid back into that. So the agreement is now between the um collateral providers and the borrowers using the same primitive rather than between having those as the same stakeholder and an institution another mortgage institution. So I I think there is a way to withdraw. I mean, you would need some kind of um liquidation um mechanism and borrowing against a volatile asset for long-term like I think that's one of the biggest risks is

if and I mean ETH is low right now so it's probably got more upside than downside but if there well who knows yeah but if that is very volatile the tricky thing is you're kind of like matching your preference dur your time durations over real estate and over crypto and crypto is very fast and volatile and real estate is very slow. Um, so I think the biggest risk is sort of a a price duration mismatch. If you're collateralizing on a volatile asset for a non-volatile asset, you risk liquidation at uh in in those scenarios. But I think it's possible with the same mechanism.

>> So like uh for us as I mentioned there are like no price based liquidations. So it depends like if you think for example it depends how long would the would the loan last right? If it would be like 10, 15, 20 years, then it depends like do you really think that in 20 years the Eve will be for like 1,000 or you know like no one knows but I feel like with the longer the duration that was kind of like incentive also for us that uh when you have some kind of like short-term loans then like the price based liquidations makes more sense but when you have like a loan for 20 years or something like that then like the volatility can be a lot in the meantime,

but uh on the long way if you are actually like positive about like this industry it can make more sense I guess. Do you have ways of uh uh dealing with the different time horizons like basically let crypto uh uh uh cycle in and out over a longer real estate uh loan duration?

>> You mean what exactly? Sorry. I mean, let's say I want to borrow 100k for 20 years and uh I have some people that want to do the first two years. So, I have enough uh people in ETH that want to provide collateral for the first two years and then maybe longer but they don't want to tie themselves down for 20 years. So for the first two years uh I have it I start and then I have these two years basically to find the followup uh liquidity or like you could either say if I don't find it then I go bust and and uh loan defaults or or well real estate uh uh

get sold or you could also say uh I don't know you have a waiting room of capital wanting out and way of of capital wanting in and only if there is enough that want to go out can someone go in or the other way around. I mean it's interesting use case. I feel like we haven't really uh yeah like discussed it so far because right now it happens that like the full credit is uh transferred to the borrower and the collateral like the full one is transferred to the to the smart contract escrow. So right now there are no possibilities of like uh actually after

like two years let's say I need to supply more collateral or more credit. So so far we did don't have this yet. >> I have a clarifying question. [clears throat] Um maybe it's obvious uh but I'll ask. Um, so there's a you have a pool of say ETH of crypto um that's going to be used to purchase real estate. At some point that crypto has to be transferred into euros to be given to a bank to purchase the real estate as a down payment. So that is is that is that how it works?

>> Yeah. Yeah. In this case, yes. >> All right. Because I So, so then when we're getting to this part where where the loan defaults and the lenders rec claim collateral, they're then claiming collateral on the real estate asset. >> No, no. In this case, they are claiming the collateral on the ether it >> but the ETH has been spent to purchase the real estate, right? >> No, the ETH is in the smart contract escrow. >> So, that's the part that I'm missing. If it's if the ETH is still in the smart contract escrow, how does the bank get the money to give the the title to the real estate?

>> Yeah. So the owner of the real estate like from who you are who you are buying. So you get it from the credit asset right like the borrower gets the credit asset gets the USDC then you just exchange it somehow to the fiat and then you buy the property for that but that is like the credit asset which is like USDC in this case and not like the ether that is collateral. Yeah. Yeah. Yeah.

>> Okay. >> I hope it makes sense. >> Yeah. So, it's basically the equivalent of borrowing an a money against the collateral and then you get that money that USDC that you use to buy the title. Um I was to me like I ideally like the owner of the asset of the house that wants to be for example here uh in the neighborhood like would be okay to directly accept that collateral in crypto so that you actually can bypass

altogether the bank. Um, so if I'm the owner of an asset and I'm willing to sell and I'm willing to sell in yeah peace meals basically the owner of the asset acting effectively as the bank in a way with the promise of having a collateral um but I just wondering like um if the the loan defaults at the end then it's super advantageous for the lender because they get all the previous payments plus the collateral.

Um and so is that what you meant by being maybe at the beginning of the of the length of the loan maybe the collateral value is actually underolaterized because at the beginning you trust more the ability to but then over time it actually you know like at the beginning of the loan it might be advantageous uh on the borrower side and towards the end it's advantageous on the lender side. Yeah, because like the outstanding principle is getting lower and lower. So, uh, >> so it's not like if it if it at the end if it's a default that as a lender I can only get

whatever was left to be paid back. I get actually more than that. >> Yeah. But it's also like configurable. But I feel like uh for the last five years you know we were fighting a little bit between like the uh the risk on the lender side and the risk on the borrower side that for example when you don't have like a price based liquidations then it uh kind of favors the borrower a little bit right because like uh from the lender side there is missing this protection of like the price based liquidations. So for me I see it as kind of like a balancing this risk between like who you take on borrower and who you take on lender because then you have issue

either with like the borrower side liquidity or the lender side liquidity. So >> can you pass it to just out of curiosity? So, the lenders are going long on ETH. They're not selling their ETH. They're collateralizing it and then making a loan off of the USDC. So, that that implies that the borrower is going short on ETH. Okay. I guess here's my question. What if, let me ask the question.

What if I borrow today when ETH is at a thousand and then I repay it back in 10 years when ETH is at 10,000. What if ETH 10X's so I borrowed let's say a 100 ETH at a,000 bucks I have $100,000 and then when I go to repay it ETH is $100,000 and I know owe a 100 ETH at $100,000 in collateral. How does that How would that How could that? Or is that just thinking about it wrong? Felix has an answer.

We can just leave the microphone on now. Uh, your premise is wrong. Um, the premise was that the lender provides ETH, but that's not right. The lender provides USDC. You are the borrower. You borrow USDC and you provide your own ETH as collateral. Um like like on the protocol level you can you know you can like uh borrow or lend

anything you want but usually you just like from the lender side it's usually stable coins of some sort because usually Usually as a borrower you are looking for like some kind of like stable coin liquidity and not like a volatile asset. >> Okay. Yeah. Yeah. This was like the questions about like the Yeah. like this basic flow. So just to remind you so this is like a flow of when you are

actually using like a native crypto assets as a collateral which in a sense it's a little bit of shortcut you know when we are talking about mortgages you usually imagine like uh using actually like the tokenized real estate as a collateral but for example in this case it was more feasible as you have basically no legal stuff going on and uh the people are like cryptonative anyway. So this was the case of using actually like ERC20s in this case like Ethery eat as a collateral but uh moving forward we will also get how can it potentially look to actually use like actually like a real estate as a collateral in this case.

So I think I talked about uh most of it. Uh maybe just like a side note for people that are more into DeFi. So actually when you are in the like the lending uh lending pool phase actually these money that are in the lending vault are also g getting some uh interest. It can be from some like yield bearing protocols such as a or anything else. So in this way the opportunity cost for your community or investors also is getting close to zero. So this is just like a small side note.

Yeah, I think we talked about this already as the amortization and the principle and the risk of the lender and the borrower. So uh in the border case I think it's interesting to look also who actually owns the hacker space. So it's actually like a joint stock company where people that uh contributed the collateral uh are getting the proportional shares in that company that owns the hacker space. So if someone deposited 30% of the collateral then they get 30% of the shares. The next phase actually is which is possible to do at least in check is

that actually you can determine like the ownership in this joint stock company by the onchain data. So that is planning to expand on and I find it kind of interesting to have more this like legal bindings between onchain data and actually like uh uh ownership of some company and stuff like that. Yeah. basically like uh the contribution to the collateral basically works via multisc maybe you know what multisc is just that like when you have some shared pool of money and for example you are team of four and you want to have three confirmations of people before this money can be spent or you can make some

other transaction then you use multisc so in this case when I am talking about like people actually contributing to the collateral they are contributing to the multisc which acts as a borrower. So the repayments uh come from uh in terms of like bordell they come from like the everyday operations like a membership fees and the space revenue but also if someone wants to get more to the core team they can also help with the repayments and then they get like a new shares issued to them in case someone wants to be more like uh contributed into it. So this is also a

way how to uh yeah how to help with the repayments of the project. of course uh all these like mortgages and uh stuff it's not like the final goal right it's a like a how to get to the destination like of course that like the ultimate bordell goal is to have like a rentree mortgage free hacker space where like all the funds that are gathered within the community can go back to like uh improving the place and stuff so all this I am talking about is more of like how do we get to the things that we actually want to do instead of this being like the ultimate goal.

Yeah. So I guess we went over the questions already. So now let's go into like the next phase which is also kind of like exploration and as I said before it differs a lot on the jurisdictions and I'm not really like a lawyer. So uh so these are just like some of the possibilities how it is possible to actually use some kind of like tokenized real estate as the collateral instead of like the crypto assets as for example with the border loan was like the etheri eat.

So uh here it's uh so how it can potentially work of actually using like the tokenized real estate. It can be that you create like an SPV company that actually owns the property and this SPV company issues company shares which are then tokenized and these shares of the SPV company that is uh owning the property is actually used as a collateral. So you are using like the property still kind of like indirectly as a collateral but there is more legal binding already than when you just like work around it by just like

using like etheri eat as a collateral. So this is one of the ways uh yeah as I said there is like I guess unlimited amounts of ways how to do it. for example, this can work in Switzerland, but this might not work in Austria or Czech like the the legal side really differs a lot. But if this is something like interesting for you, we would like to explore this use case like more specifically with you. So this is just like one of the example how actually this can work and move towards more actual mortgages instead of like mortgage like uh loans.

Well, I I think however it's possible in most of the jurisdictions to have or at least Yeah, I know most of the check, right? So, uh but I know that for example in Czech it's actually pretty feasible to make like this legal link between like the tokenized shares and the shares in the company. So, I feel like some structure like this in check in some variation for example can work. But uh yeah this is all like a exploratory that we are still actively working on and then there is also like of course like the question of what what happens in case of the defaults. Uh so the lenders can take over the shares or if I

if it might not be feasible then you can have some kind of like appointed like authorized party that sells the property liquidates the collateral and then distributes the cash between the lenders but it also like differs uh based on the each of the jurisdiction. So yeah, I guess it's better to talk about than like individual use cases. But uh there are some of these uh challenges and things to think about but I think uh it's feasible to do but I feel like it's very unexplored area. So so yeah but uh for us this is like ultimate goal to make this uh happen.

And the last uh thing I wanted to talk about is uh more again back to the digital space which for example like if you have some kind of like DAO that has some like a treasury that for example holds the stable coins then uh you can also structure such system that generates like a stable income for the DAO treasury while also providing like the DAO token holders some uh liquidity. So for example, we are now in contact with Dnosis for their treasury as they hold some stable coins for making something like this happen. So there are of course like uh also just like pure digital use cases

also like this where like the DA wants to actually increase the usefulness uh and the liquidity for their token holders while still gaining some stable income because otherwise the money can just sit in the treasury or maybe they can deposit it but yeah there are some additional risks as well. So we are also exploring this case with like the DAO native organizations. And the last thing and this is really just like a side note that I would like to see uh is like this under collateralized lending because for example with a and most of the stuff you cannot really do it. So I think

especially within like communities such as this where maybe like the reputation and stuff is uh more important and people know more each other and there might be more trust within like these actors. I feel like it can also be something interesting to explore when for example you have just like a 60k collateral while you would need for example 100k for some of your infrastructure or building or something like that. So uh personally I would also love to explore this use case uh somehow but I would say it's also like very uh experimental phase but if you have some ideas then I'm happy to talk.

Yeah and um as I said uh if uh something from this sounds interesting of course uh we are still like building and exploring what is possible. So uh uh for us it's like a open thing. So if it sounds interesting then just get in touch and we can start some conversations. So yeah I guess that was it. So thank you. [applause] Questions?

Yes. So one of the things that we need at the common Brussels is um it's related but different approach is could people put their Eve as a collateral like in a moro type of uh vault but then the interest uh the yield will actually go to the community and not back to the person who put the collateral in the first place which effectively will give us to the community a free rent so that we could actually with that maybe then borrow with banks or what not

to buy or other things but basically solving the same problem but by from a different angle if that makes sense but I still haven't seen anything doing it. >> Yeah. Yeah. That's what what kind of I like that I feel like it's a kind of like a concept also of like that you are paying back interest maybe to your own community instead of some external actors be either with this like D use cases or even with like the bordell mortgage where you basically like pay back your own community. Oh, yeah.

What do you mean? >> Do you mean something like uh are you familiar with the breadcr uh we could bake our own kind of bread here? Um and that uh uh basically the the interest from that bread we bake, we other people bake, right? Uh we could use that to to repay or at least interest cost or part of loan. That could just be a revenue stream, right? That could be a nice workaround for what we are.

>> It it feels much simpler and it would like it would need less uh legal provisions. It could be a fairly more or less temporary uh uh like you know you can decide to do it for one month or for 10 years. uh leave your uh USDC in in as red and uh have us uh earn or ear earn your interest. It's fairly interesting. Yeah, it's it's basically the equivalent of an endowment. If I'm a rich person and I have a property and I could say to the community, you can use it. Um, you know, that's the the equivalent except that the end is now a multiplayer game because many people can feed into the

end and make that resource available to the community while keeping the ownership of it. Can we have people uh just forward their ETH staking rewards to us? Same thing, but they stay in ETH. >> Interesting. No, really. No, no, no. Actually, no. Actually, no. actually [laughter] >> you guys >> uh uh the Bordell uh maker space, you had the slide showing like the ownership or how ownership translates for the people

who lent and you were saying that um roughly 30% was paid for by the lenders. Just so then they get 30% of stake in ownership in it I think. Or maybe that was just an example. >> No, no, I meant that that within like the joint stock company that owns the border space. So it's not about people that lend, it's about people who supply the collateral >> because >> ah people who supply >> because the people that lend already they are getting their money back from the repayments >> just as loan as loan repayments.

>> Yeah. Yeah. Yeah. So it's about people that supply the collateral. >> I see. And those were like members of that community who could afford to put up some for the collateral or were they like outside people? >> No, no, these are all like core people that uh wants to actually participate in the space. >> Cool. And what's the other who owns the other 70% of it? Who owns the rest of Bordell or Yeah, >> just all the No, so the 30% it was just an example that if you like supply 30% of collateral then you get 30% of the share >> or like each person like if one person supplies >> Yeah. Yeah. their portion >> but it's 100% owned by the Bordell team.

>> Nice. Very cool. Cool. Cool. Cool. So to use the first version, the portal version, let's say, we would need to find first uh let's say we we want to raise uh 2 million. It's just uh uh ballpark figure, but that would be around uh well 100 ETH, but we want to over collateralize. So want to have 150 ETH uh provided uh from within our uh community like ideally from within the tenants right uh and we would also need uh 2 million uh eure or like that would be like two 2.3 million USDC. Uh so we

would also need someone willing to lend that. That's the outside. someone willing to lend 2.3 million uh USDC and the internal condition would be 150 E that uh we're willing to as collateral and are willing to lose and then the question becomes okay I provided 100 you provided two it's way easier for you to say it I'm not pay repaying the loan than for me because I'm going to lose Yeah. How do you deal with that?

an uneven collateral provision and and the the the conflicts of interest arising from unevenness. >> So you mean that like multiple people would uh supply the collateral and combine it uh together. I mean for for me I found it like that. Uh if you maybe I just uh not my brain working but uh I feel like that uh yeah so but do you know what I mean like my my

worry is particularly if you have a lot of very small contributions where [sighs] in the end okay like you know if it defaults okay I lose my one ETH, but I'm not going to go through three months of work and of of trying to convince others to make the payments to not lose this one ETH. Like I might at some point if if if the riskreward is just ah basically my collateral is too small to really hurt me. I have a different I have different interest than someone whose collateral is big enough to really hurt them.

And then you have a conflict of interest between different uh uh uh co-owners where some might say let's default uh lose our ETH and uh not have to repay the loan whereas others say you that's my 100 ETH. I'm not I don't want to lose them. >> I mean like any anyone can repay. So if some of the owners doesn't want to Yeah. doesn't want to lose it, they can repay. It doesn't have to come from the multisc itself. It can come from anywhere.

>> Yeah. >> And that would also change the ownership structure as you said. I remember on the right side of slide if someone repays uh their ownership draws. Okay. Cool. Um, this might be like a finance 101 thing, but I'm trying to understand the uh to use Felixam example. So, uh, value of the commons wants to buy this property. It costs just let's say 2 million.

using this scheme, they or we need to uh dredge up that much or more in collateral just to get the loan to buy the property. It seems circular. Like if we can figure out how to get 2 million for the collateral, why wouldn't we just use that? >> The premise was that uh we own ETH. We think ETH is going to be worth more in the future and we want to stay invested in the up and down side of ETH. That's why like in conventionally we just sell our ETH right now, have 2 million

invested, but then we don't have ETH up or downside. We currently think ETH is undervalued, so we don't want to sell it. Um, yeah, that that's why [laughter] >> always >> no financial advice. Can we have uh fungeible onchain assets as uh borrowing collateral nonfgeible?

>> Yeah. Yeah. You can also have like NFTs. >> Fantastic. But you need a lender that accepts your collateral. >> Yeah. But like you you need someone that says yes, if this loan defaults, I want this collateral. And I think your Crypto Punk is at least uh two E worth. So like >> yeah like previously we have done bunch of deals with like NFTs like previously we were working more closely with like the DeFi assets. So it could be like a unis swap LP positions for example like the NFTs or stuff like that. So but we are now trying to move a little bit away from

like the DeFi space and more into like actually like real world use cases. But uh yeah, it's possible to also use NFTs. Of course, in case of multiple lenders, you then have like the questions of how this would be like liquidated, but you could possibly like use some kind of like liquidation hooks if the NFT is actually like possible to somehow like smart contract based do it. >> There are lending platforms for NFTs that do exist. Um so that would probably just be an integration question of the smart contracts.

Yeah, usually you just need to care about if like uh the NFT doesn't have some way of how it can be transferred away from like the escrow or something like that. Some like non-standard things like that. But we were for a long time also one of the platforms that uh yeah that uh supported NFTs usage as well before when we were uh called pawn and not own. Um hi. Um okay so my question my question is on eligibility of

collateral. Um do you check if the collateral is like new the transaction history of the wallet that is supplying the collateral like to base some trust foundations cuz in like the undercolateralized loans is uh in my understanding not a new concept. Uh so in web 2 we use it for like agriculture and crop financing and stuff. Um so there people do this and they kind of do it based on credit scores on FICO scores and things like that. Is there something like that uh that you do or so not or and do you have any KYC requirements because you're touching real estate assets which is one of the most uh

KYCish related things. >> Yeah. So the good thing about like for example the Bordell case and the approach is that you don't need any KYC but when then you have some kind of like a tokenized shares in the SPV you have more legal work and does also like a more KYC requirements. So there are where these two approaches differs and with like the undercolateralized loans like we were also playing around with some like uh borrower reputation systems because you need something that replaces the actual value but I feel like this can happen. Yeah, I feel like maybe the reputation and some kind of like personal connections make sense. So on the protocol level it's possible but of

course there are these like additional uh things yeah like reputation that need or something else that needs to replace the missing uh missing uh LTV under 100. Um also on like when we convert the you said crypto finance and to real world assets which is real estate tokenization. Um is there a cap on how many owners per real estate like per land plot?

Because usually like lands are in like say 2,000 square foot per land blocks. Uh and then this can only have like five owners or two owners or three owners. Um is there something some math done on that or it can be as fractionalized as it could be? >> I think maybe yeah I think it depends again on like the jurisdiction. But for example with the case I saw here with the SPV I feel like then it's question about like how many holders can be there in this SPV as the owner of the land or property is actually the company and not like individual holders if this you mean >> that that clarifies a bit but I'll also

dig into it more before I ask >> um what noninancial incentives, returns. Uh uh do you have you tried out or or have you discussed in detail uh to compensate for cheap interest rate from your to compensate for a below market uh interest rate from your lenders? Like how do because if we say we want a loan at one or 2% that's something we want. No lender wants to give a loan at one or 2%. So they must want something else to say yes this is maybe they just want to see this project

thrive and that's the ideal case but what non-financial gifts have you developed uh or conceptualized that that can convince an a lender that is let's say already ideologically or you know somewhat open to this and uh basically driven by idealism and not by let's make money. Uh but still they they want to be nudged. >> Yeah. Yeah. So in this example like with the bordell it was as I said it's kind of like alternative of the donation. So the idea was that people will actually like uh still get at least some of the APR even though like not big one but it was a mean as a support of this project.

But of course you can have some kind of like a perks that for example if you like uh contributed uh you know more than for example 5k then you have like a one-year membership for free within the within the border space other like these perks like in the past we also tried to uh experiment with some like uh reputation points and stuff like that but it didn't really catch up. So for example with the border loans it's mostly like these perks which you would have otherwise to pay for but this way you will get for free while you are lending at the start.

Yeah, on that note, I can maybe an experiment that I'm doing right now with a new echo village community space uh echo village in Belgium. Uh which is basically along those lines where um I lend money and but the interest it's the interest is basically paid back in the virtual local currency of the place that can be redeemed for whatever the place is offering. So technically it means that okay I get 3% back interest. Uh so from my perspective as the lender uh it is worth 3% but from the perspective of the borrower the cost for them for offering that is actually as effectively a marginal cost sometimes of zero

sometimes of less. But the end point is that it might be at the end of the day 1% equivalent interest rate on the side of the borrower whereas the lender has a perceived value of a higher percentage. And the good thing about that that it really aligns the interest. One of your slide you put like committee members plus aligned investors. The good thing is that in that case this only makes sense if you can make use of whatever that community is producing thanks to your loan. Because if it if you're not aligned then actually there is no interest for you literally.

>> Uh we had that model for the church uh race right we off we wanted to raise uh up to 240k and we're offering 7% interest rate but in value vouchers that can only be redeemed here. So, it was interesting for people that know they come two weeks a year and that will cost about, I don't know, €600. Uh, for them, it made sense to to lend us up to, uh, 10K at a 7% interest rate. It's not bad. Uh, it's kind of market. Um, but of course, if you're just interested in in growing your capital, it's uh, it's not interesting. Um so but and and then of course like for

us the reasons to give 7% like we would never take a loan at 7% that would crush us but we thought that of the 7% about half would fall on would would replace existing revenue and then it is actually 100% the cost of it is 100% because we lose 100% of the revenue but the other half of the of the loan would bring additional revenue which uh we would only price at like 1 1/4 of the cost like you know for utilities and stuff. Uh so that makes like 1/4 of the 3.5 uh uh cost let's say I don't know 1% um so it's actually just a 4.5% loan if we say that half half is right. Um

something I've been thinking about uh in terms of uh TDF's model were also this discrepancy between the cost of producing the service versus the price uh uh uh realized when selling it uh where we could carve out a potentially attractive offer for both the sides because of this discrepancy. So um taking TDF's model of one token uh gives you the right for one night per year in eternity. Uh so starting from how much would let's say that that one night per year is a single room over there in the villa

roughly rough market value €100 uh per night. Like if you compare here it's usually around 100. Um, so let's say we sell a token for €1,000 and that gives you the right for €100 night per year. That's 10% interest rate as long as you need that utility and would otherwise also want to pay for a single room. If you say usually you stay in a tent and you never afford a 100 euro room, it doesn't work. But if you do want your single room and you know that you want to come here uh every now and then it makes sense and then it's quite a good uh uh uh interest rate. Whereas for us my calculations tell me it's

roughly around €20 per night like the the cost of uh cost of capital and utilities uh basically. Um so we would effectively take a loan at 2% interest rate where uh the loan giver would realize uh 10% interest rate quite attractive for both sides. I think with this these things we can play around for example with the TDF. So we were also in contact with TDF about uh because they also have some kind of like financing needs especially if they could take it against their TDF tokens but I

think the current the biggest issue there are some like a technical difficulties that it's not like transferable yet and also it doesn't have like open like it's not openly like uh exchangeable. So I think maybe once maybe next year or other when there will be like a token go event then uh it might be more feasible to do than right now. But uh we are also discussing with TDF potential like financing of their own >> and they would use their own uh ETH as collateral or are they interested in a second more expansive uh real world asset uh optional

>> actually like to use like the TDF tokens >> as collateral. very interesting because we can generate them from uh the property whereas we cannot generate ETH from the property like we tokenize the property itself into TDF like tokens and use these as collateral for a loan uh which enables uh uh gaining uh the property in the first place. So the only thing you would need then is market demand for TDF tokens [laughter] which has been the key issue over the last four or five years.

>> So I feel like that's some like market making and or like uh yeah like uh actually being transferable. I think maybe next year. So after that because usually I feel like with this community tokens you have the biggest problem of finding actually like the landing site. If you find a landing site, you can actually use basically like anything as long as they are, you know. But since now it's not uh transferable or like uh tradable, I feel like after it finds some kind of like market price, then you can be much more uh certain about the quality of the collateral in case of like community tokens such as this.

>> Very interesting. Um I want to add a whiteboard session uh of uh uh mapping this out mapping out options uh to today's afternoon program. [applause] >> Thank you.