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Karl Jacob Of homecoin.finance - The Stablecoin Backed By U.S. Homes, Plus: Pınar Öncü Of AtlasSpace - The Enterprise Metaverse, And More…
A mortgage is hardly accessible to everybody but banks and the government. But through savvy blockchain technology uses, this can finally be opened up to people of all levels of wealth. Eathan Janney, together with guest hosts Zach Sekar and Ben Noble, talks with Karl Jacob of homecoin.finance. Karl shares how their platform helps Defi investors acquire a consistent yield through Stablecoin backed by home mortgages. He explains how they use the power of NFTs to make properties exist both in the blockchain and the real world. For this episode’s Sponsored Hot Topic, Pınar Öncü of AtlasSpace talks about their efforts to onboard traditional enterprises into the metaverse to revamp the future of work in this digital age.
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Karl Jacob Of homecoin.finance - The Stablecoin Backed By U.S. Homes, Plus: Pınar Öncü Of AtlasSpace - The Enterprise Metaverse, And More…
**Stay tuned for this episode with special guest hosts, Zach Sekar, Head of Events in NFT LA for our company, as well as Ben Noble from our partner Web3 agency, Howl Labs, and find out why there’s no place like home. **
How Atlas Space is onboarding enterprise into the metaverse with stealth ninja tactics.
How buying a mustang horse turned into selling a Mustang car in our guest life.
Finally, how you can enjoy more from our co-hosts every Thursday at 4:30 PM Pacific on the NFT LA Live Twitter account.
Don’t forget, we put together a gathering called NFT LA a few months ago. It brought out thousands of the world’s most innovative doers in Web3. Head to NFTLA.live to get tickets to our bigger, bolder, better, but just as an intimate and impactful event happening in Los Angeles, March 20th to 23rd, 2023. Help us co-create the future of Web3. We’ll see you there.
This episode features Karl Jacob, CEO and Cofounder of HomeCoin.finance, the platform that offers DeFi investors the opportunity for consistent yield through a stablecoin backed by home mortgages. He is also the Cofounder and CEO of LoanSnap Incorporated. Karl is a serial entrepreneur who has been building, advising and investing in companies for the last several years. Karl’s career has been focused on founding companies that solve big problems. Those companies have helped tens of millions of consumers.
He has raised 23 rounds of financing from investors, including True Ventures, Baseline Ventures, Richard Branson’s Virgin Group, Microsoft, eBay, and others. While CEO, Karl has generated hundreds of millions in returns to investors and over $150 million in revenue per year. In 2005, he joined Facebook as one of its first advisors. He advises several companies. HomeCoin is a new cryptocurrency backed by the same orgs used by governments, insurance companies, and high-net-worth individuals to preserve and grow their wealth. HomeCoin is available to anyone in the world with a DeFi wallet. Payments from the loans backed by homes flow back to the holders of HomeCoin so you get a Stablecoin backed by homes in the US and a part of the payments from homeowners. Karl, I’m blown away just reading all that, and I’m sure you are.
It’s a lot.
Welcome to the show.
Thank you.
It’s great to have you here. Before I dive into the questioning, I will prepare the audience for some interesting voices that will be coming in. We have Zach Sekar, who’s Head of Events for Edge of Company. He has been collaborating with us since 2021 on the NFT LA event. We thought we’d bring him in to pinch hit. Jeff Kelley and Josh Kriger couldn’t make it.
We’re also bringing in Ben from Howl, a PR company that’s doing wonderful stuff in the Web3 space, formally known as Multiplied, but we’ll pump the rebrand, Howl. They work on Twitter spaces with us on NFT LA’s channel, as well as Howl’s channel. You can catch Zach and Ben on Twitter. It’d be fun to hear their voices here. Karl, I’ll jump right into the questions here. HomeCoin is helping people preserve and grow their wealth backing with mortgages as we said. Walk us through how this project came to be and how it works a little bit.
One thing most people don’t realize is that mortgages of their underpinning the financial system. As an example of that, if you look at the US dollar, it’s backed by the US government. A third of the backing of that dollar is mortgages. That’s a very stable backing and cashflow. The two key things are what’s safe and what generates a cashflow, particularly now that people are thinking about cashflows in this environment, and also preserving the wealth that they’ve made. In some ways, you can look at this as probably the only NFT out there that pays you to own it on an ongoing basis.
That’s pretty impressive and fascinating. I’m not a real estate mogul myself, but I’ve always been fascinated with a couple of rental properties and so forth. I was coming of age and getting out of college right there when the mortgage peaked and all of that. I was lucky enough to buy a home as this crazy young kid at 22 or something, and sell it before the crash, which is great. That whole system has been fascinating. What I found interesting is that sometimes young people, and maybe we’re seeing this with Web3 and the growth of Web3, are even a little bit savvier about what’s going on. They can smell a rat or they can see that there’s something not quite right going on here. That’s part of why this world’s been fascinating to me.
That’s a great point. It has always been inaccessible to anybody but banks, governments, financial institutions, and wealthy people. The reason for that is buying a home loan is expensive. Let’s call the average home loan in the United States is $300,000. It doesn’t take many of those to run through most people’s reserves. What we decided was, “Couldn’t we open this up not only to people in the United States of all levels of wealth but also anybody around the world?” The big unlock here is to take this product that has been preserving and growing wealth for large governments, financial institutions, and wealthy individuals, and put it in the hands of everyone, which is what DeFi and blockchain are all about. How do we get access to these products that were normally only reserved for a tiny few group groups of people in the world?
It’s interesting to see a DeFi project where the returns are backed by a company.
It was crazy, nobody wanted to talk to us in 2021. Now, all of a sudden, everybody is interested.
I can imagine. You mentioned how this has been accessible to banks and financial institutions. What are the mortgages that are generating these returns?
There are $13 trillion in mortgages in the United States, so there’s a lot to choose from. We chose to focus on high-quality ones. The high-quality ones are defined by the US Federal government. They have a set of specifications that narrows which are the ones that they would buy, and they would put on the balance sheet to back the dollar. We use that same standard in HomeCoin.
As a Millennial, if you own one piece of real estate, aren’t you a real estate mogul at this point?
If you can grab any real estate that Bill Gates has not already acquired at this point, especially farmland, then yes, you are.
I grew up on a farm or a ranch.
Access is a huge part of it. We can talk about the issues with the mortgage market. How has that become more or less difficult for people to get involved? A lot of these foreboding and preventative world events have happened. They made people feel even more desperate these days. How is this solution angling to help get better transparency and decentralization, and use those things to make things more accessible?
Honestly, the housing market has frozen out a whole generation as you pointed out. That’s sad, but also potentially a great opening because if you think about several years ago, everybody wanted to own a house. That was putting pretty much their entire net worth into one single house. If anything happened on that block or that street or to that particular house, things didn’t go so well. HomeCoin is backed by a pool of mortgages spread around the country. The great thing there is you can buy into the housing industry or real estate, and become a real estate mogul without owning a piece of property, which is a powerful thing for people who are not interested in owning a home or may own a home down the road but are trying to get their feet wet.
Blockchain Technology Uses: Homecoin is backed by a pool of mortgages spread around the country. The great thing there is you can buy into the housing industry or real estate and become a real estate mogul without owning a piece of property.
On the industry itself, 2008 has the worst housing crisis ever. It was a horrible event for consumers. For the industry itself, it was not as bad as people talk about it. If you were holding mortgages and you weren’t doing crazy things like credit default swaps and other things, you’re just holding a pool of mortgages. The default rate was about 10% across all mortgages in the United States. If you look at the pool that we have and you took a “hit” like that, effectively, you’d still have the liens on the home. You’d still have a right to the house itself. You would get your collateral back. You’d get your original money back, which you know stablecoins is unique these days. In many cases, you would start getting the payments again after the house was either sold or payments were resumed.
There was a momentary point in time when there was some pain. Overall, the housing industry has moved through those kinds of things. In 2008, that inspired a whole bunch of new regulations that prevented a lot of the loans that were done back then from ever being done again. If you look at the regulatory environment now, it’s quite a bit more stringent than it was in the past. There are no more loans where you can just submit a guess on your income or stated income.
Now, the great thing is twofold. 1) The rules say that you have to verify stuff, and 2) We have better ways to do that. We have technologies and APIs we can talk to that can verify this information in real-time. What a great way to verify that deposits exist for purchasing a home without having to go through bank statements. Technology and regulation have moved. Honestly, the industry has matured quite a bit both in the people buying mortgages and putting them on their balance sheets.
Wells Fargo has about $275 billion of mortgages on its balance sheet. They’ve had to make changes, as well as the types of loans that we are allowed to make, and we’re allowed to call a certain type of loan like the Fannie Mae loans, which are the Federal. That bar has risen quite significantly over the past few years. Even the people who have a relationship with Fannie that are able to sell loans to the Federal government have greatly reduced over time.
It’s great because data efficiency and regulatory certainty create an environment where you can at least transact more clearly. It’s good to see that we’re moving in a positive direction, at least. That’s what I’m waiting for from that.
I think as well, the things that you could have never done before. Transparency and decentralization are great examples. For transparency, we put an NFT around every lien that we do and publish it to the blockchain. That’s representing a real-world lien that exists at the county on the blockchain for anybody to look at. Go back in time to that movie, The Big Short. What was the big thing that he unlocked? He dug until he found what loans were inside these pools. To do that, what did he have to do? He had to get on a plane and go visit the houses. We published that for everyone to look at and run that statement analysis in real-time all the time.
Maybe you want to run an analysis and say, “How distributed are these houses across the United States? What’s the lien value that we’re placing on the house?” A lien is a promise to repay a loan at a certain price. Let’s say it’s $50,000. That we think is going to open up a whole new era in stablecoins that are truly transparent. The other is the decentralization piece. Mortgages are decentralized now. There are 1,300 mortgage originators in this country. There are tens of thousands of counties across the United States. Each one of those has a registry for liens on the home. Let’s say you don’t believe the blockchain. Let’s say you don’t believe that the lien exists. You can go down to the county recorder and pull the records and look at the lien right there and verify it.
Verify, don’t trust.
The thing is that level of decentralization is unheard of. I’ll give you a good example. We have two people. Most people who use HomeCoin on the lending side, meaning they get a home loan through a HomeCoin, don’t even know there’s cryptocurrency behind it. It’s all done in fiat. We had two people who said, “I want to pay my mortgage through my wallet.” Those two people make their mortgage payments without ever touching the banking system. Even if the banking system crumbled, they would still be making their mortgage payments and HomeCoin holders would still be getting the return.
There’s a lot we can talk about with your fungible stablecoin. It’s cool that you can get a mortgage and interact with it entirely outside of the banking system. You also hinted that you’ve got several ways that you guys are using non-fungible tokens. In addition to the one you already spoke about as far as that transparent information about the lien, you’ve also got another NFT opportunity for people to boost the returns so they get through your ecosystem. Can you tell us about that one?
It’s been interesting. We are one of the few people who use NFTs for something other than art. Oddly enough, they are really powerful. The first is every time we make a mortgage and we buy a mortgage effectively, we wrap an NFT around the lien. It’s a way of representing a real-world object on the blockchain. The second is it became clear to us that we needed to understand how long somebody wanted our coin to use their money. For most stablecoins, the problem is if you put a dollar in today, some people want to take that dollar out two seconds later. Other people would love to leave it in there for 90 days, and some other people, for a year or even longer. There’s no way to tell the difference between those groups of people.
Blockchain Technology Uses: We are one of the few people who use NFTs for something other than art.
Our decision was, “Let’s use NFTs again.” The new set of NFTs we have are called boost. Boosts are pretty simple. They represent a block of HomeCoin, a dollar value, let’s say $50,000, and a time period that you were committing to hold that coin inside of the protocol so we can use it. We have 90-day boosts and year-long boosts. We’re giving some of those away here. The cool thing about that is it doesn’t just have a representation in your wallet. There’s an NFT that you can get which represents that position, which shows up on OpenSea and is tradable. You can imagine a world where I have a $50,000 position locked up for a year inside of HomeCoin, and there’s a certain return right now that’s over 7% return, which is pretty great in this environment.
Maybe I want to sell it. Maybe I’d sell that for $55,000 or less in a particular situation. The idea there is not only to use NFTs in order to wrap that and represent that but also to provide a way for you to trade that if you want to narrow down the road. You’re not just trading the NFT itself, you’re also trading the cashflows that come from that NFT, which is the real power. You could let’s say gift it to your children, “Here’s an NFT that won’t just sit on your profile picture. It’ll pay you every month,” which is pretty cool.
That sounds cool. In order to get one of these NFTs, I would lock up my HomeCoin and that would mint that boosted NFT.
We have different ones for different levels. There are different colors and different materials. It goes all the way from the iconic green home that you saw probably in Monopoly, that’s where the idea came from, all the way to the diamond-encrusted one. There are a couple more after that. We’ve got a few of those.
When that term of 90 days or a year expires, does that NFT then revert back to the original HomeCoin?
You get the HomeCoin back and you can reboost it if you like, or the HomeCoin stays and the NFT has zero value after that. That’s what NFTs are designed for. It has value for a certain period of time and then it goes poof. You get the value back but the NFT goes away.
That sounds like a lot of fun. I’m going to check it out.
We tried to do this for the incentive structures for nodes and things like that when we were trying to scale Ethereum. StrongBlock was doing something like that where they had an NFT and they did a boosting factor. Creating those incentive models, especially in the early stage when you’re trying to get more people on board is valuable to them. It shows where your head’s at if you want to reward them for participating more in the long-term vision of what you’re doing. Speaking in that long-term vision, unless, Eathan, you wanted to jump ahead of me, I wanted to talk a little bit more about their roadmap and what they’ve got going for the future.
I had a question and I know Zach cut me off. I didn’t even know what the question was, but more importantly where’s the monkey picture attached to these NFTs?
No ape, no coin.
Now I had an image in my head where the actual NFT is a home logo as you can probably imagine in a different material. Maybe we need a Bored Ape hanging from the chimney or something like that, which is interesting because the NFTs that are wrapping the liens have representations of the houses. If you go to the website or you look at the blockchain, there are some interesting things that may come of that.
There are privacy things that we’re concerned about so we don’t put actual pictures of the houses up. They’re renderings of the house that are not traceable back to the actual house. However, you could imagine somebody getting fancy and saying, “I want this particular image to represent my house. Maybe that’s one with a Bored Ape hanging out of the chimney or the front porch or something like that. That would be a fun idea.
That’s completely not necessary, to be honest.
The nice thing is if you’re generating a 7% return, you get to have a little bit of fun.
It’s a boring space, which is great because that’s the whole idea. It’s boring and delivers cashflow every month.
Now I’m going on long tangents. I remember my friend who grew up in India telling me how actual monkeys would come into her house and steal fruit from their kitchen and stuff.
That would be a cool NFT to show, the monkeys hanging out on the front porch with the stolen candy and fruit.
Does that add or detract from the value of the real estate? That’s my question.
As long as you’re protected from the monkeys.
Beware of monkey thieves.
Before we get onto the roadmap, Ben, I did want to check in on this concept of exchanging any coin supported by the curve for the HomeCoin LP rewards. Can you tell us what that means about the utility of the LP rewards? How do the boosted Home NFTs tie in?
That’s the exciting stuff that’s going on. We had a vote of the DAO. It’s so far doing quite well. They are very supportive of it. The idea here is freedom from USDC and effectively the US dollar, which is a crazy concept but important because a lot of the stablecoins that are out there are backed by fiat coins. What we said is if that’s the case, what you want to do is be based on what fiat currencies are based on. In the United States, a third of that is mortgages. Let’s go direct to the source, which allows us to give our coin holders the return that others can’t. They’re basing it on an actual dollar and we’re basing it on an actual mortgage and the dollar value of the lien against that mortgage.
It’s easier to inflate dollars than houses.
We might have boroughs. You don’t know.
That would get some looks.
Thanks for answering that one.
A horse.
Do you remember how much the horse was?
Was it alive?
It was the sale that was painful.
What is the most recent thing you purchased?
iPhone 14.
What’s the most recent thing that you’ve sold?
What’s your most prized possession?
Nobody’s getting any shoutouts.
I would say curiosity and a desire to learn.
Getting too excited too early.
I’ve heard him speak at TED. He’s amazing.
What are you about to do after the show?
Yes, I’m here guys.
Thank you. It’s great to be here.
It sounds like it’s a slow process.
We’re still early, guys.
For the projects, HomeCoin.finance is the main website. @HomeCoinFinance on Twitter is a great place to discover what’s going on in real-time. We have a Discord channel as well. It’s active. The community helps us to carve out the vision and test our theories and everything like that. For me, I’m @Karl on Twitter.
You gave me the idea for some Christmas gifts.
Bring it. We love it.
It depends on what time zone you’re in.
Let’s go Pacific.
Important Links
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@Karl – Twitter
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@NFTLALive – Twitter
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Spotify – Edge of NFT Podcast
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iTunes – Edge of NFT Podcast
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@EdgeOfNFT – Twitter