Monetizing Off Chain Data Digitalization: OPTIMIZE 2.0

We previously introduced “OPTIMIZE”, “a new venture aiming to become a blockchain powered digital marketplace for fractionized NFTs representing either Micro, Small & Medium Sized private equity or real estate.” Optimize thought to implement a “Value Chain” strategy (Joshua Gans) partnering with local real estate agents and local accounting firms using a native token to get client access and use diversification, liquidity, and its potentially derived price appreciation as a selling point.

The “last mile” problem in real estate and private equity transactions is well documented and includes a high number of intermediaries with relatively high market power as well as the reliance on government or its appointed agents and the resulting bureaucracy. That makes it at best slow and expensive in developed countries but also corrupt and untrustworthy in others.

The use of blockchain technologies in those transactions could make them much faster, safer, more granular, cheaper to verify and therefore more abundant (Christian Catalini). While “digitalizing” those assets will decrease the costs of trading them and tracking their ownership to quasi zero, there will still be value in verifying their attributes, initially bootstrapping them on the blockchain and reliably updating any changes on their physical counterparts (Christian Catalini).

After further consideration, we feel that OPTIMIZE underestimates the hurdles it faces in “fostering the digitalization of property & private company ownership records through collaboration with relevant authorities”, does not have a strong enough incentive scheme to create value chain enhancing propositions for all stakeholders and misses out on the added value of being the bridge between the on-chain and off-chain world. (Christian Catalini).

Firstly, a rapid collaboration with land or company registry authorities to digitalize records is utopic at best but can be circumvented by creating an NFT representing ownership rights to an LLC as it was done by Propy (propy.com). Secondly, selling only a fraction of a property or SME might not be a monetary incentive enough to get traditional incumbents to collaborate let alone to get them to explain the “hows and whys” to their clients. They of course get the “OPT” token and will benefit as the network and marketplace grows but as of today that might only convince a few blockchain enthusiasts. We should not forget that even if our end users are the owners, our initial clients are in fact the traditional intermediaries themselves. As the marketplace grows, more end users might become direct clients and agents solely fulfill the role of an oracle or property manager/accountant.

For those reasons, we feel “OPTIMIZE” should refine its “selling point” from “Diversification” to that of offering fast and red tape free outright sale or monetizing/yielding solutions for idle assets owners. The diversification and fractionalization will become natural consequences of the marketplace.

Many properties are already owned by LLCs or equivalent and so are SMEs obviously. By putting them in an NFT and on the blockchain not only do we give clients access to a global and decentralized marketplace, but we also give them access to whole range of DEFi solutions. (Ethereum.org). For example, Propy and Helio Lending offer 70% LTV loans on property backed NFTs (heliolending.com). Depending on the way it is structured one can be offered a collaterized loan and hence the ability to monetize or simply earn interest on assets. For the latter the NFT would have to be “wrapped” and then staked as a token (medium.com) or one can simply stake the proceeds of the NFT collaterized loan. While initial liquidity constraints might affect price discovery, NFTfi is doing so with digital art where “market value” is even harder to define. To ensure a safe marketplace, “floor value” and LTVs would have to be reasonable (medium.com).

The “OPT” native token remains the primary incentive and especially for OPTIMIZE itself but brokers will also get remunerated part of their standard selling fees for any initial outright sales to encourage collaboration. Agents will also form part of our global network of oracles providing updates and interaction with real world events. That could include property management or accounting data services.

As in Rarible (Ethereum.org) users will also get rewarded in our native token for the listing, buying, and selling of their assets hopefully creating a positive feedback loop reenforcing network effects.

While networks effects will be further supported by using Ethereum’s permissionless blockchain the need for many oracles and for many interactions with the off-chain world will result in more of a hybrid network.  From company due diligence to property management, Optimize will need to create a marketplace for Oracles (gnosis.io) (agents, notaries, lawyers) while acting as some sort of a “permissioned node” with Oracle aggregating capacity to minimize “excludability” (Catherine Tucker). Oracles will be remunerated and so will Optimize for its value adding data collection and aggregation services.