We previously wrote about Propy using blockchain technology to smooth real-world real estate sales by introducing the concept of smart contracts. Propy was the first blockchain startup to make that work. Now the company is pushing the boundaries again, by auctioning a real apartment as an NFT. Although one might want to brush this aside as a stunt, the event is designed to make the point that it could well be done legally. And, by golly, they are going to try.
The auction will be of the NFT attached to a modern, brand new, one-bedroom apartment in Kiev, Ukraine, that Propy previously made history with by making it the first-ever blockchain-based real estate sale.
The NFT created by Propy will, it says, transfer real ownership of the property. Just in case you haven't been paying attention, NFTs, or non-fungible tokens, are cryptographic "tokens" that represent a unique asset — such as a piece of art, music or other collectibles — and certify ownership digitally. NFTs have set the crypto-world alight with their potential to be applied to just about anything, including a work of art by Banksy which was then burnt.
Once someone has won the NFT of the apartment at auction, the NFT will include access to the ownership transfer paperwork; a digital artwork NFT by a popular Kiev graffiti artist, Chizz (a physical painting of the digital artwork is painted on a wall of the apartment) and the apartment pictures. But obviously, the apartment is the main asset here.
The auction itself will happen over a 24-hour period, with the initial listing starting at $20,000. Details for the NFT sale are available here and will be updated with any new information as the auction proceeds.
Investors in Propy -- which says it has so far processed $1 billion worth of transactions via its platform -- include Arrington himself and Tim Draper, former founder of DFJ.
Natalia Karayaneva, CEO of Propy said: “This NFT will go down in history. For Propy it is a major milestone in leveraging the promise of blockchain technology and non-fungible tokens (NFT) to achieve 'self-driving' real estate transactions and real estate participation in the decentralized finance economy.”
Here’s how this is all going to work: Arrington has signed legal papers designed by Propy’s lawyers for the NFT to transfer ownership to a future buyer. Propy then conducts the NFT auction and receives payment in cryptocurrency. The winner in the auction becomes the owner within a minute, after filling out KYC details.
The Kiev property is owned by a USA-based entity, and when the auction completes, the new owner of the NFT becomes the owner of the entity and thus the property itself. This process is repeated every time the NFT attached to the property is resold.
In an interview with me, Karayaneva said: “We were brainstorming and this appeared to be a natural development of our white paper of 2017. And in fact, many things we transact, real estate, via property, we are actually already kind of doing NFTs, but with our unique smart contracts. But now the NFT concept provides a different approach, where a property can be transferred between two wallets, peer to peer.
“Thus we do not need to change the name of the owner in the land registry. And this applies to many countries, as well as the United States. This model will work for the United States, and overall, there is this notion of buying real estate via LLC in the United States to preserve the privacy of the owner.
Over the same call, Arrington added: “Coming at this from a crypto angle, we’ve seen what happens how DeFi gets plugged into credit markets. If I have an NFT or any DeFi asset I can then borrow against it, without a middleman. Right now, if I have a real piece of real estate, there is no way for me to borrow against it, without a middleman, because I have to go through a bank and get a mortgage or whatever. And it's also the friction, all of the costs in terms of speed and how long it takes.
“If we can find a way to plug real estate and other real-world assets into DeFi, I think that the amount of credit that can be created around that is in the trillions, eventually. And so I think that has to happen. The questions around this are legal and regulatory… The legal stuff around this is tough, and so Propy has done a lot of work with that. But if they do, I think that the idea of an NFT representation of a real-world asset purely from the point of view of ease of trade and ease of access to credit markets is a big idea.”