When non-fungible tokens (NFTs) first hit the scene several years ago, some saw mere pictures on the internet, while others saw an opportunity to use them in a variety of situations. Since NFTs verify ownership, forward thinkers wondered what this new technology could be used for. Some early use cases developers came up with involved supply chains, patent protection and medical records. While most of these ideas have not come to fruition yet, one of the more promising ideas that involve NFTs is the mortgage industry. With the use of NFTs, mortgages could become entirely automated and take away much of the need for banking institutions.
Will NFTs Revolutionize the Mortgage Industry?
NFTs validate ownership through the blockchain. All records of NFTs are stored on the blockchain and cannot be tampered with. This feature could be used to facilitate the mortgage industry by allowing potential homeowners to get automatically qualified for a mortgage and then have the information about the mortgage stored on the blockchain.
This idea is still largely under development, but Bacon Protocol is hoping to make NFTs that revolutionize mortgages a reality.
What is an NFT?
An NFT is a unique asset that has no identical asset that can replace it. NFTs use the blockchain to store records. Each NFT has a specific address that is stored on the blockchain, along with the wallet address of the user who owns the NFT. Since the blockchain is a nearly tamper-proof ledger, the owner of an NFT is the guaranteed owner.
As of right now, the largest use of NFTs is art and collectibles. Just as art collectors have certificates to guarantee the authenticity of a piece, NFT owners use the blockchain to certify ownership.
What’s Wrong With Traditional Mortgages?
If you own a home, you probably have a traditional mortgage. This process typically involves going to a bank or credit union to get qualified. You also usually have to complete a long application where you are required to provide loads of documents.
While traditional mortgages have gotten the job done for centuries, the holes in the system have started to show. Specifically, the financial crisis of 2008 showed some of the largest issues with traditional mortgages.
The 2008 financial crisis was in large part the result of poor judgment from both small lenders and large investment banks. Small lenders would give out as many mortgages as they could with a disregard for credit scores or financial history. The lenders would then package these mortgages into mortgage-backed securities (MBSs) and sell them to investment banks. The banks became heavily leveraged on these MBSs, and when the homeowners began to default on payments, the securities collapsed and the entire global economy suffered.
Perhaps the largest takeaway from the 2008 financial crisis is that greed, carelessness and lack of forward-thinking could bring about worldwide financial suffering.
Is the Solution NFTs?
In terms of the mortgage industry, NFTs could be a possible solution in that they take out much of the human interference. For example, NFTs could automate the process of approving mortgages. This benefit could help avoid issues that led to the 2008 financial crisis. It could also decrease the hassle of getting a mortgage. And it would give retail investors access to the $17 trillion mortgage industry.
While NFTs would not solve everything in the mortgage space, they could definitely provide benefits to many.
Best NFT Mortgage Platform: Bacon Protocol
A few NFT mortgage platforms are fully operational. However, not all of these platforms are equally good. Some lack a way for retail investors to gain access, and others remain unaudited.
However, one NFT mortgage platform stands out among the rest. Bacon Protocol has it all — retail investor access, transparency with loan terms, high rewards for staking, low interest rates for borrowers and a fully audited platform.
What is Bacon Protocol
Bacon Protocol uses a variety of different features of the blockchain to create an NFT mortgage platform. The platform has four main components, named in a breakfast theme:
Its smart contracts — called Pans — automate the process of giving out loans, as well as pooling together capital to fund the loans. For borrowers, Pans are used to automate the process of receiving a mortgage, as the smart contract directly complies with Fannie Mae’s mortgage standards. Pans are also used to mint the ERC-20 stablecoin, called HOME.
HOME is a stablecoin that can be bought by investors and has several unique perks. For starters, it uses the home’s value as collateral for the value of the token. It also can experience growth as mortgage payments are made on time. The payments can also be used to provide rewards to holders and give liquidity.
Each time a new loan is given out, an NFT — called Eggs — is minted. These NFTs represent the loan and can allow the homeowners to borrow more using the NFT as collateral. Egg NFTs store basic information on the house, such as the address, amount of the loan and a photo of the property.
The BACON governance token allows users to have a say in the direction of the project. The founders of the Bacon Protocol anticipate that governance will become fully decentralized and all major decisions will be made by BACON holders. Some of the decisions that BACON holders can vote on include the usage of treasury funds, automated market maker (AMM) parameters and the creation of new Pans.
How to Get Started With Bacon Protocol
Getting started on Bacon Protocol is easy. Head over to its website and open the app. From there, you can connect your wallet and deposit USD Coin (USDC) with an Ethereum wallet. You can then transfer your USDC to HOME and stake it. You can earn rewards in the form of BACON or HOME.
So, Will NFTs Revolutionize the Mortgage Industry?
Several problems plague the current traditional mortgage system. Traditional mortgages get the job done but leave room for improvement. Bacon Protocol is hoping to solve these problems and bring about a new way for investors and borrowers to access mortgages. While the project is still fairly new, optimism surrounds the idea that NFTs could revolutionize the mortgage space.