What is a DeFi mortgage?
A DeFi (Decentralized Finance) mortgage is a property loan originated, managed, and serviced entirely on a blockchain through smart contracts, bypassing traditional banks, mortgage lenders, or credit bureaus. Borrowers collateralise digital assets or tokenised property to secure loans, with all terms automatically enforced by code.
How It Works
- Borrower locks collateral (crypto assets or tokenised property) in a smart contract
- The protocol calculates loan-to-value (LTV) ratio automatically
- Funds are disbursed immediately in stablecoins or cryptocurrency
- Repayment schedules and interest are enforced by smart contract
- Failure to repay triggers automatic collateral liquidation
DeFi Mortgage Platforms
- Aave & Compound: Leading DeFi lending protocols where crypto assets are used as collateral for loans.
- Figure Technologies: One of the first companies to offer home equity loans on a blockchain (Provenance Blockchain).
DeFi mortgages are a pioneering but high-risk innovation that could eventually disintermediate traditional mortgage lenders. Their widespread adoption in property markets like India depends on regulatory clarity around crypto-collateralised lending and digital property rights.
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