Fintech startup “Fluidity” has announced their plans to launch Ethereum-powered mortgages in California and New York. The service is expectedly set to kickstart this summer and will reportedly feature lower rates when compared to traditional loans. Fluidity provides technology services to registered broker-dealers, issuers and financial institutions for tokenized securities.
“We’ll tokenize the house, which will effectively take the collateral that is the equity of the house,” said Fluidity chief architect Todd Lippiatt. “You’re pledging the house and you get an advanced rate back in terms of dollars.”
The pricing model solely depends on the intrinsic credit of the transaction. No external factors like the political trade winds and domestic central bank governance policies will affect these Ethereum-based mortgages.
Upcoming Fluidity Mortgages
Fluidity’s upcoming mortgages are set to use smart contracts and cryptocurrency for back-end management. Fluidity at the moment is looking for partnerships with ethereum-centric lending platforms like MakerDAO’s dollar-pegged DAI loans.
Notably, the ethereum-backed stablecoin still struggles to achieve liquidity and stability in the wider markets. However, Lippiatt states that mortgages from such prospective partnership merely involve a “mitigatable” risk. Taking forward, neither the borrower nor the property seller will directly touch cryptocurrency.
“We will deal with the inner workings of the decentralized system. The borrowers pay back in dollars and we will manage the risk profile of the underlying securities.” added Lippiatt
Who Will Be The Customers
The low-income and under-banked borrowers who can repay represent a prime opportunity for these loans. Fluidity plans to offer cheaper rates compared to the banks. Borrowers have to submit online credit checks and all other essential information same as like using any other online loan platform. In the next step, Fluidity will then process the information and create a smart contract using a tokenized representation of the mortgage.
“Together, we are taking complex financial assets, breaking them down into their basic factors, and encoding them to a blockchain. This enables standardization, transparency, and liquidity, making capital markets more efficient and reducing the need for expensive middlemen.” said Lippiatt.