After The Successful IRO: What's next?
Hello Knights!! We’re back with another interesting biweekly edition of RealFi.
This week, we are covering what happens after the IRO (the process where the community determines the type of Real Estate to be tokenized) process is successful. This part of our process is just as important as everything else we do.
Ok, let’s start with the basics. What’s an IRO? We have published a full issue on the same (you can read it here), but here is a short version of that:
IRO aka ‘Introducing Real Estate On-chain’ is the process we follow at CitaDAO for community members to commit USDC for a commercial property to be tokenized and put on-chain.
Now, what if the IRO fails? Well, you guessed it, correctly. The property won’t be tokenized and the members who committed the funds during the IRO process will get back their committed USDC.
What if the IRO was successful?? That’s where this story begins!!
First of all, why does any want to participate in an IRO and commit their stablecoins? We already know that investing in Real Estate is one of the BEST ways to get a better hedge against inflation (Please note that we never make any promises on value or potential future yield).
So, after a successful IRO, people who committed USDC will be able to claim the ERC20 Real Estate Tokens (RET) and the IRO reward for locking up their liquidity.
This happens automatically. Upon a successful IRO, an NFT (ERC721), a digital right to redeem the title deed will be minted and deposited into a smart contract which will distribute fractions of itself as the RET.
And because each IRO is different for different properties, the people who committed USDC will get back Real Estate Tokens (RETs) for that particular property based on the commitment money they’ve put in.
Holding some RETs in your wallet gives you the right to buy out the property & redeem the underlying title deed.
Note that RETs do not represent shares of the tokenized property. But we believe (that is backed by a real estate property) that RETs will accrue value over time, because of the burn mechanism (some RETs will be burned based on the amount of the rent the property gets, so eventually there will be fewer RETs for a property, and hence each RET will probably be worth more) and also based on the future demand of the property.
In other words, RETs are indirectly supported by the value of their corresponding Real Estate but are not pegged to the value of the Real Estate.
Ok, now that the community members who participated in the IRO already have RETs, what can they do other than make those tokens sit in their wallets?
Well, they can lend those to a pool and earn a fee. All thanks to the Blockchain Technology and DeFi protocols, we no longer need permission to participate in a pool.
Confused??
Now, let’s understand all of this with an example.
We have successfully tokenized an industrial unit in Midview City (Singapore).
It is a 1,356 sq ft net industrial space on the 2nd-floor industrial building. The RET for this property is 20SML0253.
And because all this blockchain stuff is quite transparent, you can go into the token contract (via Etherscan) and see more details.
You can track the movement of these RETs, the max supply, and even how many users hold these tokens. This level of trust and transparency can never be achieved if you go through the traditional real investment route, not to mention the need for huge capital and paying high bureaucracy costs.
Now, when it comes to making RETs (in this example - it's 20SML0253) work for you, here is a liquidity pool that does that:
We simply want to emphasize that real estate is fantastic yet ineffective in practice. But through CitaDAO, we want to improve the effectiveness and accessibility of real estate for everyone.
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