Transcription
uh, first of all, we had uh a call with one of the major mortgage players in the country. Uh, the, the organization that establishes the rules for the mortgage industry, for, uh, whether the cryptocurrency statements should be adopted for mortgage approvals and so on. And, uh, they have a whole team already. They want to adopt, they want to make a proof of concept. Uh, and the question is no longer, what is blockchain? The question is, please pay attention to us, please have a call with our team. How can we integrate it?
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Welcome to the Thinking Crypto podcast, your home for cryptocurrency news and interviews. With me today is Natalia Koneva, who's the CEO of Propy. Natalia, great to have you back on.
Thank you so much for having me, Tony. Hi everyone.
Natalia, you know, I'm a big fan of you and the work you're doing at Propy. I believe, uh, real estate will be on the blockchain from a transactional standpoint, as well as tokenization. So, lots of questions for you and all the latest and greatest that you guys are doing. Uh, so let's start with what's new at Propy.
Absolutely. There have been so many new things in Propy, in our ecosystem, and overall in the crypto industry. So, I'm excited to have this conversation with you. But since, uh, we last chatted and your interview, I think the major update on our ecosystem is that we've backed the new ecosystem project called Propy Keys. And then Propy also launched a licensed title and escrow business about a year ago. And with that business model, where we utilize our transaction platform on blockchain, uh, we're close to being profitable. And then also last week, we launched a partnership, a collaboration, and integration with Coinbase, the Coinbase wallet. Uh, so super, super excited. Another item, we launched an AI model for document recognition and automation of the transaction last year. Um, so again, a lot of stuff to, to update you with.
So let's talk about Propy Keys. How does that work?
Absolutely. So this project, Propy Keys, was beta launched only a couple of months ago, but last week it was the major official launch. And it is built on Base, the layer two on Ethereum network. Uh, Propy Keys allows users to mint addresses, home addresses, and then keep those addresses all over the world on your wallet, in your wallet. And then you can put your deed on-chain, attaching it to the address, or even upgrade your home if you minted your own home to an RWA NFT.
Oh, wow. So, to your point of RWA and the tokenization and all these things that are happening, so I can, let's say, the house I live in here in New Jersey, I can create the key for this property location and then put the actual, well, obviously the deed, minted within the NFT. Is that how it works?
Exactly. So first, you buy your address. You can also buy the whole street. And then there is a gamification, like in, similar to Monopoly, but it's a very crypto-native, staking-based, uh, protocol that will allow you to mint homes and neighbors and so on. But let's say you mint your own address, it costs only 10 Propy tokens, which is about $10 today. Actually, we just reduced it to $5 and five Propy tokens. And then if you want to keep your deed on-chain, you click upgrade the NFT, you pay an additional 100 Propy tokens. And then because we have a licensed title and escrow company, automatically we extract your deed from the county and send it to IPFS, encrypted with a password, so that you can keep it securely. Because last year alone, there were about $400 million lost in title fraud, and multiple counties are being hacked all over the country, unfortunately. So this data, the deed, uh, data is not secure for, um, homeowners currently.
So, can I do this across the United States and or is it beyond the United States as well?
Minting addresses actually is a global product. Uh, so we call it Mint the World. We encourage people all over the world to, uh, buy their addresses, play with them, and even mint landmarks through our AI integration, where AI will generate an image, and you can add Bitcoin or Ethereum or any popular coins on top of the image and keep it on your wallet. But the upgrades are available only for the United States for now.
Now, can I mint? You mentioned I can do my entire neighborhood. Is it kind of first come, first serve, where I can take the property even if I don't own it, create the NFT?
Exactly. That's why we encourage people to hurry up and mint their own home before somebody else grabs it. But if somebody else did it, no worries. There is a game between minters and homeowners where the homeowner can come and claim their address, and, uh, it will be, um, the upgrade to tier two right away. The payment is 100 Propy tokens, as I mentioned. And then 50 Propy tokens actually goes to the minter. So you are incentivized to mint your whole neighborhood and then go and explain them, hey, here's your address, here's my gift to you. You can upgrade it, you can keep your deed on-chain. You need to do XYZ steps, and here are the benefits. And then the protocol will incentivize you with 50, 50 Propy tokens. It will also give you a special OG NFT as a present and will give you 5x staking power in the Propy Keys staking protocol.
Now, you mentioned the county will, will facilitate adding the deed and so forth for a property you own. So I'm assuming they go through the whole verification process that if someone tried to say, put a deed they found online or something on there, the county may reject that. Was that how it works? And once again, excuse my rookie questions, I'm just trying to figure out the logistics if someone was to say, try to take my address and maybe they found a deed, a copied the deed, but it's an outdated deed and they tried to add it to it.
Yeah, yeah, that's a great question. First of all, when we add deeds on-chain, it's a timestamp of the past, right? You may have a new one. So it's, it's an immutable record, and it can serve as evidence in many courts in the United States. But it's not a proof of you to transfer ownership. That's the upgrade number three, the tier three, the next upgrade where you create your, you create an RWA NFT from your home with our help. That's where the final source of ownership is the NFT itself. While, and we did those, as you remember, that's when we had this interview last time. It's when we were transferring NFTs of real estate ownership through LLCs recorded already in the county, instantly, entirely via smart contracts. That was the big innovation of the, the previous cycle. So, yeah, when you upgrade your deed on-chain and put your deed on-chain, it's just an additional evidence of that current deed. We extract the latest deed, of course, and we put it to your NFT in your wallet. We also verify through a very simple KYC that it's you who is upgrading the NFT. We avoid any strangers to just mint addresses and personal information, right?
Right, right. Okay, so that, I guess that's the answer because I was wondering, you know, what if someone was to, you know, try to do something? But to your point, you go through that KYC process.
So, Natalia, I know we're very early in this cycle of tokenization and putting real estate on the blockchain and much more. And do you see, you know, the, the innovation that you guys are doing, that, you know, maybe in five years, the National Realty Association and maybe, you know, different folks in different states are going to start adopting this technology?
Absolutely. I think we're in the very beginning of this story, where we have a proven track record that this innovation works better than the traditional real estate transaction. And also, all those industry participants that we've been educating for years now, right? Propy has been around since 2017, and obviously, we're very well connected to brokerages leadership, to Freddie Mac, to the National Association of Realtors, and so on. But at this point, we're no longer wasting a 30-day closing process. And then the transition to the NFT for us, that's a streaming, streaming ownership entirely on-chain. And it's like Netflix, online CDs. They had those business models in parallel, and they actually stopped the CDs online only two years ago. So it's been in parallel working for for many, many years. But now we all just know movies online. That's how I see in five years, it's totally doable that suddenly the real estate will be liquid entirely on-chain. And our investor, Tim Draper, recently, we had, we had Spaces on Twitter on Anthony Pompliano, who is also very active both in real estate and crypto. Both of them are telling that most likely it won't be the, the government that will, uh, change the real estate transfers onto blockchain, but rather it's a consumer push. The title insurance will no longer be needed at some point. The licenses, title and escrow licensees will know will be obsolete because smart contract is the settlement. Why not to have this high-value asset to be transferred via secure protocol as blockchain?
Now, related to being built on, building on Base, right, which, um, is through Coinbase, but it's an Ethereum layer two. Since the Dencun, Dencun hard fork on Ethereum went live, the gas fees associated with minting addresses on Base via Propy Keys went down by over 100X. Can you tell us about that?
Yeah, absolutely. I think this upgrade, the Dencun hard fork of Ethereum, for the industry, it's like the transition from the modems in the internet space to broadband. Suddenly, we have this affordable network on blockchain. Just like when the internet has those, you remember the noisy modem switching on, a lot of products were not user-friendly just yet. But now in blockchain, it's more affordable. So since the Ethereum merge occurred in 2022, this significant upgrade from Ethereum from proof of work to proof of stake did not reduce the gas fees. And only with this upgrade last week, suddenly we see a significant, significant drop of fees. And in our case, when we launched the Propy Keys minting and address was about $2 per mint, where the address itself cost, as I mentioned, about $10. So now, and it's of course, it's a significant cut, 10 to 20%. Now, since the update, upgrade, it is a couple of cents, one to two cents only. And you can imagine that the activity of minting addresses suddenly spiked. The Base network also is experiencing a sudden increase in transactions. So definitely, it's a historic moment, I believe, in this upgrade, more significant, probably even the merge itself on Ethereum. So the network performance is definitely now a foundational change for the whole blockchain space.
Yeah, great point. And to your, you know, because people have been concerned about gas fees and so forth, but that's great that the upgrade is lowering those fees. And also, you know, your analogy of going from dial-up modem to broadband, it seems we're in that transition phase. So that's really great. And then the Propy token got listed on Coinbase. I, I've been a Propy token holder for a long time, and I, I believe obviously in Propy, that's why I've been holding the token. And was the listing earlier this year or in last year?
It was actually previously, but, um, what has happened recently was listing on the Prime app, as well as the integration with a Coinbase wallet. So, for us, Coinbase is this gatekeeper of crypto legitimacy. They do very high-quality, uh, verification of projects. They check that tokens are utility tokens, that the teams are serious executors behind the project. And, uh, for us, Coinbase is this big player, similar to Amazon or Google at the time. They are building the future economy on-chain. Last year alone, their revenues were over $3 billion. So they're growing very, very fast. And now, when you go to Coinbase wallet, since last week, you can actually see that you can mint a home address through the Coinbase wallet browser and get a reward for that. And then this week, actually, they will also promote a, um, put your deed on-chain through Propy Keys, which again, delivers this real-life application for users.
And this may be a tough question to answer right now. Do you foresee secondary markets or is it too early for those NFTs? I don't know, maybe if somebody, I guess I could obviously resell it to, like say, the property owner who may want that NFT, but I have the, let's say, I have the entire neighborhood, right? But then could I lend it out? Is that a possibility yet?
That's a great question. We're seeing the first secondary sales of the landmark AI NFTs on OpenSea. There was a Hollywood sign NFT that was sold a couple of weeks ago for 1.3 ETH, I believe. For the addresses in the neighborhoods, I'm not sure how this POG gamification will evolve. For now, what it makes sense is actually to stake those addresses. So if you mint over 10 addresses, you can stake all of them at a staking protocol and get a distribution of Propy tokens from the entire minting revenue channel.
Oh, wow. Well, you know what? I'm going to do after this interview, Natalia. You're gonna be, I'm gonna go grab up a ton of neighborhoods and, and stake them. And anybody, fantastic. So I'm definitely gonna do that. It's, I really want to play around with that and it's just fascinating to me.
Um, now recently you were at a conference and I, I saw a clip of it where you were talking about Amazon and, and I think Google as well, and them potentially getting involved in real estate and tokenization of real estate and so forth. Can you expand on that and, and your, your thoughts there?
Actually, I was at a conference called Inman Connect, uh, in New York, and it was all about real estate, Realtors, real estate portals, and how the residential space is evolving. And many, many panels and keynotes were about the attention of home buyers and the war of portals between Zillow, Homes.com, Apartments.com, Realtor.com, where are the eyes of the consumers when they are searching for a home? And my argument was that Homes.com should not spend a hundred million dollars to attract the home buyers for the lead generation business because most likely some of the new startups or the tech platforms such as Amazon or Google could overtake the consumer attention for the real estate because if we figure out the transaction automation, that's Propy's mission. Once the transaction is automated, then the portals and the attention of home buyers, it's the easiest task in the real estate industry to tackle. And imagine if transaction is automated and very secure, why not an Amazon platform just introduces the tab, real estate, and then you can securely click, click, click and buy it through Amazon or through Google or through a new startup or through Propy.
Yeah, and what I, just one item to add, for example, Propy Keys could also become this platform to become the new Zillow, but global. Because now they are attracting the eyes, the attention of people minting their addresses in a gamified way. And then through the gamified way, Propy Keys platform will teach the homeowners on different items, how to sell, how to buy, how to do it on-chain. So that's, that's what I meant that the, this current bottle of, of portals of real estate portals might be kind of unnecessary.
Yeah, a great point. And it's only going to continue to evolve. So it's fascinating. So on that note, are you seeing, look, you've been at this since 2017, building, innovating, and so forth, but we know the traditional industries are going to be slow to adopt. And don't get me wrong, they are adopting, but have you seen a change in these brokers and the National Realtors Association that they're now maybe having their "aha" moment, like, oh, we need to pay attention to this, it's coming? And have you noticed any changes there?
Absolutely. So many changes, especially from October when the first fake news about Bitcoin's, uh, broke. First of all, we had, uh, a call with one of the major mortgage players in the country, uh, the, the organization that establishes the rules for the mortgage industry for, uh, whether the cryptocurrency statements should be adopted for mortgage approvals and so on. And, uh, they have a whole team already. They want to adopt, they want to make a proof of concept. Uh, and the question is no longer, what is blockchain? The question is, please pay attention to us, please have a call with our team. How can we integrate it? So we spent probably about 10, 10 hours of conversations where they begged us to pay attention and find resources for faster integration, rather than how it was in the past. Then one of the largest brokerages in the country also just launched a partnership with us, Berkshire Hathaway HomeServices of America. For now, it's an education, uh, platform, education, crypto-certified class for with, with credit for Realtors. But it's a very major point within the Berkshire Hathaway umbrella, which historically has been very against Bitcoin and cryptocurrency. So that's another win. And then there is another very traditional real estate media that has just accepted Propy tokens as a form of payment. So we were very surprised how the industry now is accepting cryptocurrencies payment, and not Bitcoin first, but the Propy token, because it's the industry cryptocurrency that has proven to be a good track record in terms of the project behind it.
Oh, man, it's fascinating. I think they're having maybe their "aha" moment, right? They're waking up to, yeah, we better get on board.
Okay, question for you, Natalia. I don't know if you can answer this, and you probably say, I can't answer it, but if Redfin, if Zillow or Realtor.com or somebody said, came, came along and said, Natalia, we want to buy Propy because you see this is the direction things are going, what would you say?
Well, first of all, I would never sell. Well, never say no, never. But I would not sell to a current real estate player. That's why they're not in the top 10 or 20 platforms on the stock market because they cannot be the innovator that will transform the real estate industry. Secondly, we would never sell to a brokerage because a brokerage is just one side of a transaction. They cannot automate the transaction. You have to be on both sides of the transaction. Realtor.com or Zillow.com, they are very limited to the US market. It's a business model that works precisely for the, uh, for the US market, while we figured out a business model that could work globally. And so none of those companies would be interesting for us. And we indeed have a lot of requests for acquisitions through last cycles, not even now, from all the best brokerages and portals and software companies related to real estate. But I can totally see as to entertain ideas with some tech platforms such as Google, Amazon, or those that I mentioned before, who have the attention, not attention, but I would say technology resources.
Yeah, that makes sense. Well, you know, I know everybody usually tries to get acquired by Googles and so forth, but it makes sense because you are certainly ahead of the curve and an outlier in the real estate industry because you're doing these forward-thinking, innovative, uh, initiatives. So that's really great.
Let's see, you know, let's continue the real estate conversation. We'll circle back to crypto. I would love to get your take on the real estate market and what's happening in the US with rates very high, people are not really selling because many got low rates. And then it's a tough economy, right? What is your outlook for this year, maybe 2025?
Well, of course, the main player in the real estate industry right now is the interest rate problem. So I expect, uh, there to be some fat interest rate cuts, very modest, maybe in the middle of this year. And then the market may recover. And if the Fed does not take this path, then of course, we'll see even more stagnation in the real estate market. The most significant change and challenges are happening now in the commercial real estate, which has more leverage in construction, in development. The transaction though last year, they fell only 20% down, right? Even though the stock market and a lot of industries have fallen up to 70%, 60%, crypto 80%, but the transaction volume in the real estate industry and the residential real estate industry have not fallen drastically or stopped because people still have to make their changes in lives, divorces, marriages, downsizing, moving, and so on. So the transaction will continue to be there. But then we have this news with the NAR settlement, the commission may drop this year, which is obviously might be great for the consumer, but the Realtor community is very, uh...
Yeah, so I wanted to ask you about that. It's, you think that's going to go through? And it's, man, maybe Realtors, like you said, are not, are not going to be as incentivized to work as hard, maybe I don't know, or become more competitive. I don't know what's going to happen, but, um, you think that's gonna help?
Well, the Realtor community will work even harder than they have been right now. And you will see the non-professional and part-time Realtors leaving the space because the fees for the license are expensive. So, in fact, probably we'll see a higher quality of Realtor staying in the market. Yet, of course, they're very, very frustrated. But, um, I think they will fight more for the consumer, especially the buyer. So the seller will remain with 2.5%. They may request an additional 1% or half a percent from the consumer because now they have to deal with more buyers personally. More buyers will come on the market without having representation. And thus, now the listing agent will probably have to deal with them. And then the platforms like Propy and other platforms will occur, will be introduced that will have the, will help the buyer to go through this process easier. But there is one good news for Realtors and for the consumers, it is the increased liquidity. Now that the transaction is more and more automated through platforms like Propy, we're very passionate to achieve this better affordability. 10% of the value is lost now in those fees, 10% of home value. So imagine normally you need 5% in down payment, but instead, you have to pay the mortgage fees, title, escrow, the title insurance, the commission. And thus, even the new generation when they move, they are afraid to acquire a home or they cannot afford it. But as all the fees are decreasing, then anytime the new generation move from one city to another city, instead of renting, they would be more inclined to sell it and buy a new one because the fees are lower. And we will get rid of the bureaucracy.
See, that's, that's what I wanted to ask you about because you have a great perspective there. So let's switch back to crypto. What are your thoughts on the Bitcoin spot ETF launches and their performances? The inflows have been pretty incredible.
Absolutely. I think Bitcoin ETFs is the most significant marketing campaign for the blockchain industry. All those 11 Bitcoin ETF vehicles have been very serious in attracting the Wall Street investors to the space, both institutional investors as well as retail investors. And I think they've been very successful. Of course, this initial Grayscale sell-off was very harmful and worrying for all of us. But nevertheless, now it's over $2 billion in flows.
Yeah, I, it just keeps going up every day. So I think it's around there.
Yes, yes, it's incredible. And, uh, it's probably the Bitcoin ETF approval is comparable to the Telecommunications Act of 1996 for the internet. So when the internet was still in the gray area, it's this Telecommunications Act of 1996 that made the internet kind of legitimized and it gave the opportunity for commercial use cases to come on the internet. And, uh, it provided the necessary infrastructure, competition, different ways to get on the internet by serious companies. Now, with the Bitcoin ETFs, we have invited the Wall Street community to invest in Bitcoin without having the headache of setting up wallets and keeping the private keys and worrying about custody.
Yeah, it's fascinating. And I can't wait for it to go beyond Bitcoin, maybe that'll happen later this year with Ethereum, and then eventually, you know, I don't know, other altcoins and altcoin baskets. We'll have to wait and see.
You know, what are you most excited about for this upcoming cycle? Well, we are in a bull market cycle right now, and it's certainly different. Bitcoin is ahead of schedule. We got the ETFs and much more. What are you most excited about for this cycle?
Oh, that's a good question. Well, at ETH Denver, of course, I think there were about four trends that most investors have talked and entertained about. That's the Bitcoin derivatives, of course, driven by Bitcoin ETF news. Then it's RWA, real-world assets, and loans and real estate and tokenization and so on. That's the second one. Then that's the Dencun, where we will see more real-life infrastructure projects coming into on-chain. That was super, super exciting. And what next? And fourth, I'm, I'm kind of blanking right now, but these were the most exciting new new projects. I'm also hearing a lot about memecoins, which personally I cannot grasp why it would be the big trend of 2024. Hopefully, other trends will win, and we'll again see more utility and real-life applications. So I would say after the Bitcoin ETF approval is the biggest news, and then the Dencun upgrade is the second biggest news in our, in the crypto industry. I hope that the next, the next big exciting thing will be something around real-life applications, whether it's car applications like demo, whether it's DDP in smart cities being connected and scaling through blockchain. Also, I'm super excited about the Base community. Now that we've been building on Base and interacting with the Coinbase ecosystem broadly, I just can see and appreciate the value of the community and the community of developers and executors in one ecosystem. So that's, that's also another, another item I'm excited about a lot in 2024.
Yeah, for sure. It's exciting times, Natalia. It's always a pleasure. And as I stated before, after this, I am about to go check out Propy Keys and mint some addresses and start staking. Really great stuff. Thank you so much for joining me.
Thank you, Tony. It was a pleasure as always. Thank you so much.
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