The banks are failing, fiats are failing, stablecoins are not stable, and $BTC and $ETH are volatile. Where do we store our wealth and capital? We want to store our wealth and capital in the safest place possible, however, we also need our capital to be liquid. Historically, there has been no better way to store wealth than through gold and real estate. Capital is something we are not sure about, as it needs to be liquid. This is also exactly why CitaDAO is bringing real estate to the blockchain. Let’s store our capital in real estate itself but this time with liquidity. This means that now we can store our capital in the safest option without compromising on liquidity.

This article will show you how this works and how you can yield a 20%+ for enabling this, Let's dive in...

How does real estate become liquid?

The answer is liquidity pools run by automated market makers(AMM) in decentralized finance(DeFi). Oh, that might be some new terms. Let me break them down one by one.

For now, simply put it like a pool of capital that is always available for you to trade for your real estate. You don't need someone else to buy it. Sell your real estate to the pool and get the capital from the pool!

What is DeFi? 

Decentralized finance is a new trustless financial system where things are run by the code; it's permissionless and you have full control over your assets.

Decentralized finance offers financial instruments without relying on intermediaries such as brokerages, exchanges, or banks by using smart contracts on a blockchain.

https://en.m.wikipedia.org/wiki/Decentralized_finance

What is an AMM?

An automated market maker is what enables a new liquid market where we trade our assets to a code and not to another person.

An automated market maker (AMM) is a type of decentralized exchange (DEX) protocol that relies on a mathematical formula to price assets. Instead of using an order book like a traditional exchange, assets are priced according to a pricing algorithm.

https://academy.binance.com/en/articles/what-is-an-automated-market-maker-amm

What are liquidity pools?

These are the pools of capital that will be always available for you to trade your assets in DeFi. The price is decided by automated market makers.

A liquidity pool is a crowdsourced pool of cryptocurrencies or tokens locked in a smart contract that is used to facilitate trades between the assets on a decentralized exchange (DEX). Instead of traditional markets of buyers and sellers, many decentralized finance (DeFi) platforms use automated market makers (AMMs), which allow digital assets to be traded in an automatic and permissionless manner through the use of liquidity pools. ~ Cryptopedia

Let’s simply put it like this:

• There is this magic pool of capital called the liquidity pool available for you to trade.

• There is this magic price calculator called AMM.

• There is this new financial system run by code that makes all this possible.

Okay, so coming back again, How does real estate become liquid?

Real estate becomes liquid when we bring real estate on-chain using these new technologies. New technologies make the things that were impossible before possible!

How does real estate become on-chain?

You might be still wondering:

-Where does the liquidity come from?

-Why are they providing it?

The liquidity is coming from people who want to facilitate it for some rewards. Usually, the rewards are trading fees and governance tokens. Trading fees are the small fees that they get from each trade, usually, it's below 0.5% of the total value; However, the fees can become a huge amount when added up. Governance tokens are tokens that represent ownership in a DAO. Anyone that's interested in these types of rewards provides liquidity as it strikes their interest.

Note: Different people would have different reasons for providing liquidity.

20%+ yield for providing liquidity in CitaDAO

Now let's get to our business, I hope that now you have a general idea of how this liquidity providing works. CitaDAO is a global marketplace for tokenized real estate. They are rewarding the people who are helping them to make real estate liquid by giving trading fees and their governance token($KNIGHT). Right now they have tokenized 2 real estate properties in Singapore:

1. Singapore 20 Sin Ming Lane 0253

The property is a strata industrial space in the vibrant Midview City in Singapore. The property is a 1,356 sq ft net industrial space on the 2nd-floor industrial building.

The space is leased to a well-capitalized non-profit organization with a gross rental yield of 4.1%. There is a high demand for the space due to its prime location and superb connectivity.

You can find more details here

2. Singapore 18 Sin Ming Lane 0711

You can find more details here

They are rewarding 200k $KNIGHT tokens per pool along with the trading fees.

How you can earn 20%+ is simple, you just have to provide liquidity using CitaDAO!

Let me walk you through the process of providing liquidity.

How to provide liquidity using CitaDAO and earn 20%+ yield?

Head over to the CitaDAO App → Connect your wallet →  Swap $ETH to $RET and $USDC → Select a pool → Input the amount you want to deposit → Give permission to use your $RET and $USDC → Click on deposit and confirm the deposit transaction in your wallet → Done!

Prerequesteries: A web3 wallet, $USDC and $RET to deposit, and $ETH to pay gas fees.

1. Head over to the swap section of CitaDAO app and connect your wallet.

2. Swap $ETH to $RET. Input the amount you want to swap and click on “Review swap” and then confirm the transaction.

If you don't have $USDC in your wallet, swap $ETH for $USDC in the same way shown above.

3. Now head over to the liquidity pools section and select the pool you want to provide liquidity.

4. Input the amount you want to deposit and click on “Approve USDC” → Approve the transaction in your wallet → Now you will be asked to approve RET → Approve that also the same way → Now you will be asked to confirm a final transaction to deposit both your $USDC and $RET → Click on deposit and confirm the transaction in your wallet.

You have now successfully provided liquidity and have started earning the 20%+ yield!

Closing thoughts

Liquidity providing is a good way to earn passive income in web3 when done right. Before jumping in and providing liquidity you must learn about the risks such as Impermanent loss, flash loan attacks, a bug in a code, reward token and APR being volatile. If you still think liquidity providing is good for you then look no further as providing liquidity to real estate is the best option in the market! RETs are less volatile and do provide a high yield that other safe assets can’t offer!

Enjoy your yield..!

Note: Owning RET does not mean you own part of a property. Instead, RET gives you the right to buy out other RET tokens to redeem the underlying property title deed. Learn more about the process here.

This is Not financial or tax advice. This content is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.

The future of Realfi as a class of investment is revolutionary and promising - high liquidity, easy access to everyone, composability, verifiable blockchain history, fractionalization, DeFi Tools and products, and many more. This is a nascent field and is undergoing experimentation and innovation as we build together. While all that is well and good, what about the downsides and problems that come with tokenizing real estate? Haven't you ever wondered? Our aim is to onboard you into this journey fully informed. So, today we will be exploring exactly that. 

Note: This Article is an overview, and we will be digging deeper in the upcoming issues 

Let us explore the new and unknown...

Writer: FINE
Editor: Cheetah Published in the RealFi Newsletter of CitaDAO on Jan 18, 2023.

The Road to Real Estate Tokenization

Tokenizing Real Estate and bringing the 200+ trillion-dollar asset class to DeFi will be more than fantastic, right? Yes it is, but it's easier said than done. To make this a reality we have a long way to go. Bringing a new system into life requires the transition and merging from the previous system and it takes time and work (and I mean REAL WORK). There are many roadblocks dear Knights, here are a few to begin with:

1. Security

2. Volatility

3. Legal Framework

4. Governance

5. Adoption

1. Security

RealFi basically is merging Real Estate and DeFi. In 2021 alone more than 2 billion dollars of crypto were stolen in DeFi hacks and exploits. DeFi is a young tech. A bug in a code, a security breach or a flash loan attack can wipe out your wallet and this can happen often if we don't take enough security measures. It is famously said in crypto circles “Not your keys, Not your Crypto'' which means that this comes with responsibility. If we lose our KNIGHT tokens or any other Real Estate tokens (RET) that's on us.

But hey, as DeFi technology matures and becomes more widely adopted, it is likely that the number of hacks and security breaches will decrease. This is because DeFi protocols and platforms will have had more time to identify and fix vulnerabilities, and users will have become more educated on how to securely manage their digital assets. In addition, the increased attention and scrutiny on DeFi will likely lead to the development of more robust security measures and best practices within the industry. As a result, the risk of losing one's digital assets due to security breaches or attacks will be substantially reduced, making DeFi a more reliable and trustworthy way to manage and invest in digital assets including RET.

2. Volatility

Crypto market is a rollercoaster where even stable coins die. The speculation in the market can pump a meme coin to the moon and make** billionaires broke!** even when invested in good projects. How fascinating, this unprecedented speculation and market condition could make the RET even 80% volatile a day. However, the reality is that only a little volume in the dump will not stop Investors from feeling insecure. A situation where there is liquidity but not with the traditional market rate.  

So how do we overcome this? The market will have to mature, and the market cap should become unshakable. It is a matter of time and adoption. Let's take bitcoin as an example:

The volatility of Bitcoin has significantly decreased as the market cap has grown. Increased adoption and a larger number of participants in the market tend to lead to more stable and predictable price movements. Those 100x in a day that were common in the early days of Bitcoin are long gone my fren :) When RET also reaches a high market cap and maturity, volatility won't be a significant concern.

3. Legal

The laws on digital assets, real estate and the degree of KYC requirements vary from state to state. Complying with every country's law requires a lot of regulatory formalities as RealFi is global and borderless like the internet. Why? Because:

• what's compliant in the US may not be compliant with the EU region; 

• taxation laws and rates are not the same;

• El Salvador welcomes Bitcoin and China Bans Bitcoin.

Note:* RETs are not ALWAYS Security Tokens*

This is the general condition of laws across the globe. Tech is easy but dealing with the law is hard. Here is a likely scenario I am hoping and envisioning:

More people and businesses become aware of the benefits of RealFi and starts using it. Making RealFi more widespread and resulting in governments and regulatory bodies developing more concrete guidelines and frameworks. Introduction of new laws and regulations, as well as the clarification of existing ones. (I have my doubts on this)

4. Governance

Fractionalizing real estate will give ownership to 1000s of market participants. Even when there are only 2 owners, a lack of consensus occurs. How to achieve consensus when there are 1000 opinions and each of them has equal shares? Who decides? and how to make sure that it will be the optimal decision? Governance is something the industry is actively experimenting and building - a new optimal governance framework that prevents bad actors from gaming the system while finding a solution for governance. This problem goes to the root of human existence and is a gamble of the system.

5. Adoption

*                                             “The internet is just a fad” …*

*Was it really? NO. Yet this is a cycle every Innovation will go through, from wheel to Bitcoin. The majority would always underestimate the potential in the early days and will criticize. *

Tokenized real estate will be no different.* This is a roadblock at a fundamental level. *

At the industry level, most of the products have not yet reached product market fit. Listing a new property, buying a new property, using defi, dapps and tools, liquidity providing, AMM, self custody wallet, 1000s of crypto, on ramping and off ramping and many more things are just not comprehensive for an average person - why go through the complexity while they don't have to? 

People calling each other using smartphones without knowing or caring how it works is the type of products and services Realfi needs to offer for mass adoption and cherishing the innovation and we will get there!

Closing Thoughts

RealFi is introducing a ton of value to the world that is worth exploring and building. Only time can show what RealFi is capable of. Even now at the early stage, the blockchain industry is worth (value) billions of dollars. RealFi is not doomed. Every innovation will face roadblocks. But as with every innovation, people who believe in it will work on it, make it a reality and will create a fortune. Provide value to the world and the world will reward you. Fortune favors the brave! See you 10 years from now, hopefully as a patron of RealFi.

There is light at the end of the tunnel. We are down, but we are far from out.