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Tokenized mortgages can prevent another housing bubble crisis, says Casper exec

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Summary

The 2008 financial crisis was caused by the lack of transparency in the mortgage industry. Ralf Kubli, a board member of the Casper Association, believes that blockchain technology can fix this problem by tokenizing mortgages and creating a digital term sheet. This will allow defaults to be observed transparently on the blockchain, creating a more transparent and secure mortgage industry. He also believes that an open-source standard must be created to define how smart financial contracts can be built. Other experts, such as Peter Gaffney from Security Token Advisors, have also argued that tokenizing mortgages can help avoid future financial crises.

Q&As

What caused the 2008 financial crisis?
The 2008 financial crisis was caused by the opaqueness of the mortgage industry, where banks packaged AAA-rated securities with lower-quality ones and passed them off as top-rated securities when they were sold to investors.

How can blockchain technology help to avoid future financial crises?
Blockchain technology can help to avoid future financial crises by allowing mortgages to become “observable, verifiable and enforceable” on a public blockchain, making the mortgage industry more transparent.

What challenges exist in tokenizing mortgages?
Challenges in tokenizing mortgages include creating a machine-readable, machine-executable and machine-auditable native digital term sheet that is agreed upon by all of the counterparties to the mortgage, and ensuring that the terms of the mortgage are transparent.

Can DeFi apps help solve the problem of tokenizing mortgages?
DeFi apps can help solve the problem of tokenizing mortgages by allowing borrowers to take loans without signing any legal agreement to repay the loan, but most DeFi apps require the borrower to put up cryptocurrency as collateral to secure the loan.

What open-source standards are available to tokenize mortgages?
An open-source standard to tokenize mortgages is Algorithmic Contract Types Unified Standards (ACTUS), available on GitHub.

AI Comments

👍 This article provides an interesting perspective on how tokenized mortgages could help prevent another housing bubble crisis. It is great to see industry experts advocating for the use of blockchain technology to improve transparency and reduce the risk of future financial crises.

👎 This article does not provide any solutions for how to implement tokenized mortgages, nor does it discuss any potential drawbacks of the technology. It is important to consider the potential risks and challenges that could arise from tokenizing mortgages before implementing them on a large scale.

AI Discussion

Me: It's about how tokenized mortgages can help prevent another housing bubble crisis. It talks about how the 2008 financial crisis was caused in part by the opaqueness of the mortgage industry and how tokenization can help make the industry more transparent and avoid future surprises. It also talks about how decentralized finance (DeFi) apps can extend into under-collateralized and overcollateralized loans, and how an open-source standard must be built to define how these loans can be tokenized.

Friend: Interesting! It sounds like tokenizing mortgages could be a big step in preventing another housing bubble crash. It would certainly make the mortgage industry more transparent and hopefully prevent any confusion or disagreements that could lead to catastrophic losses. Do you think this will be implemented soon?

Me: It looks like some initiatives are already underway. For example, Security Token Advisors has seen promising clients that are working to bring tokenization to the mortgage industry, and Citigroup has released research suggesting that an increasing number of mortgages may be collateralized with crypto assets. So, it looks like the technology is moving in the right direction. We'll just have to wait and see what happens!

Action items

Research the 2008 financial crisis and the role of the mortgage industry in it.
Explore the concept of tokenization and its potential to revolutionize the economy.
Learn more about the Algorithmic Contract Types Unified Standards (ACTUS) and how it can be used to create smart financial contracts.

Technical terms

Tokenized: A process of converting a physical asset into a digital token that can be tracked and traded on a blockchain.
Mortgage-backed securities (MBS): A type of asset-backed security that is secured by a mortgage or collection of mortgages.
Decentralized finance (DeFi): A type of financial system that is built on top of a blockchain and is not controlled by any central authority.
Smart contract: A computer protocol that facilitates, verifies, or enforces the negotiation or performance of a contract.
Soulbound tokens: Digital identity tokens representing the characteristics or reputation of a person or company.
Algorithmic Contract Types Unified Standards (ACTUS): An open-source standard for building smart financial contracts.
Tokenized mortgage-backed security: A type of security that is backed by a tokenized mortgage.