Tangible AMA with CRE8R DAO
Primer: Tangible is a marketplace for NFTs backed by real-world assets. They had launched a stablecoin backed by real-estate properties and sustained by actual rental cash flow. Find out more about this recipient of the Polygon Ecosystem DAO from the key highlights of the AMA with CRE8R DAO below.
Team
Tell us more about the team’s background. What are the different skill sets that each brings? How do the team know each other?
Most of the team started working together several years ago when Jag founded a social media app with crypto integrations called Vid. That company was eventually sold and about a year ago the team got back together to start working on Tangible.
The team is about 12 people, the majority are devs and we have an in-house design. Jag, the CMO Mike and community manager Robbie lead on anything public or community-facing. Josh runs point on ops.
What is the origin story behind Tangible?
Coming towards the top of this past cycle, Jag and Josh started to think about what assets they wanted to rotate into next. As crypto natives, they wanted to keep the majority of their wealth on chain. Moving into stable farms wasn’t appealing as the yield had started to dry up as borrowing demand fell. Real-world assets emerged as the category that made the most sense, but the issue was having to move to fiat to get them. There wasn’t access to real estate, gold or luxury goods on chain. After asking around, and chatting with friends and other crypto natives, the demand was there for this type of product and Tangible was formed. That was a year ago, the team’s been working on it for the past 12 months.
How is the project funded? Are there any prominent VCs/investors/funds that people know of?
There was an early round raised from Master Ventures, Skyvision and Nxgen.
Tangible
What is Tangible in a nutshell?
Tangible is a marketplace for NFTs backed by real-world assets. It’s a place to buy and sell real estate, wine, gold and luxury watches entirely on-chain, claiming the physical goods or leaving them tokenized for a later date.
What is the value proposition of Tangible? What problem does it solve?
Tangible gives the crypto community the opportunity to diversify their portfolio into real-world assets.
Without moving to fiat, users can diversify into established physical asset classes, uncorrelated to crypto. Tokenized real estate presents a unique opportunity to access consistent, off-chain sources of #realyield.
Do real estate-backed TNFT holders own the properties outright? Are the properties free from all encumbrances?
The properties are held in a Special Purpose Vehicle (SPV,) a legal entity created solely for this purpose. Tangible then tokenizes the beneficial ownership to each SPV (containing the property) and distributes it as a TFNT. When the TNFT changes hands beneficial ownership to this SPV and the property do as well.
Anyone holding 100% of the TNFT can dissolve the SPV and take physical possession of the property.
How does Tangible earn revenue?
Tangible takes a transaction fee on sales in our marketplace. Tangible also collects an annual management fee on the properties managed in our portfolio.
USDR
What is USDR? What led to the decision to launch a stablecoin?
USDR is a fully-collateralized, native-yield, USD-pegged stablecoin that’s backed by tokenized, yield-producing real estate. When USDR is minted, 50%+ of the money is used to buy tokenized real estate which is the source of the token's native yield.
Seeing the mass adoption of stablecoins as DeFi’s killer app with product-market fit, it made sense to apply that format to tokenized real estate.
But the benefits are deeper than that. Stablecoins backed by fiat are subject to the same loss of purchasing power as fiat as currencies are debased. If the fiat is backed by nothing, ultimately the stablecoin is as well. So our thought was to create a new type of hard money, backed by the value preservation and historic growth of real estate, one with native yield built into the design. As fiat currencies continued to lose value, USDR holders would maintain their purchasing power through a daily rebase (sourced from rental income) along with an appreciating store of value as the collateral for the currency. USDR turns real estate into money, bringing new operability and liquidity to the oldest asset class on earth.
What is the relationship between Tangible and USDR? How do both products build on one another?
USDR sits under Tangible as one of our primary products, alongside our marketplace of tokenized real-world assets.
USDR allowed us to build strength on strength. With the systems and organisational knowledge in place to purchase, tokenize and manage real estate, it was a simple leap forward to apply that infrastructure to the design of a fully collateralized stablecoin.
There are many stablecoins available on the market. What features does USDR possess that make it stand out from the rest?
USDR is fully-collateralized/over-collateralized and designed to become more collateralized over time as the real estate assets in the treasury appreciate.
It’s the only stablecoin backed by real estate. It’s really the only money that’s backed by real estate.
Real estate is a proven store of wealth unlike the fiat backing other stablecoins. Unlike stablecoins backed by crypto, real estate is a human primitive with timeless demand and substantially less volatility than digital assets.
USDR has a native source of real yield, distributed via daily rebase, built directly into the token itself. Rental income is extremely reliable/consistent and uncorrelated from the performance of crypto markets.
The lifeblood of stablecoins is adoption and usage. What is your strategy to distribute USDR as widely as possible and to encourage its use in DeFi and commerce?
We’re moving from the current two-token system to a single, rebasing token, moving our liquidity from Uni v3 to Curve, which is really the centre of the stablecoin market. We’ll continue our cross-chain development after the move to Curve.
A new bonding feature offers DAOs and institutions a significant boost in yield in exchange for locking their USDR for specified periods of time. A 90-day bond will return 5% which is over 20% APY. Along with built-in portfolio access to real estate/off-chain assets, we think USDR is an ideal asset for any on-chain treasury.
The upcoming Borrowing product on Tangible will allow users to borrow up to 66% on tokenized properties. Any piece of real estate that’s owned entirely by the user can be tokenized and USDR can be minted against 66% of the asset value driving up TVL and utilization.
Beyond DeFi, our main focus will be to attract retail consumers, similar to what we saw with Anchor/UST, but with an actually sustainable source of yield. We’ll explore partnering or setting up our own neo-bank where users will benefit from the yield of USDR without having to leave fiat.
“Tangible’s goal with USDR is to create a better version of money, satisfying all three conditions of an ideal currency.“ USDR is only the beneficiary of the cash flow, not the principal value of the properties, so how does USDR preserve purchasing power when this feature only applies to TNFT property holders?
USDR maintains purchasing power in two ways:
USDR is a full beneficiary of the USDR treasury which includes DAI and tokenized real estate. So appreciation in the value of the real estate directly benefits USDR holders. USDR is essentially a fractionalized asset of the treasury backing it.
The ~8% APY from rental income, distributed daily through a rebase, helps holders keep place with the loss of purchasing power. If inflation drives up the price of goods by 8%, then the 8% increase in USDR leaves the user with no loss of value.
Once the treasury is 130% over collateralized, any additional appreciation on the real estate assets will be added to the rebase sent to USDR holders, raising the yield up to nearly 20%.
Describe the selection process for the properties. Must it come from Tangible’s marketplace? Is it all residential properties? Any restrictions on where these properties reside?
We have a team who identifies high-yield properties which are added to the marketplace and subsequently the USDR treasury. These properties are already tenanted with established high yields. This established yield also serves to insulate these properties from price volatility as the markets move.
The majority of properties currently in our pipeline are in the UK. We have a property management team and realtor relationships established and a large number of high-yield locations identified. We don’t have any geographic restrictions and plan to diversify locations as we grow with the US next on the list.
We’re certainly open to listing properties from any owner looking to sell and will do our due diligence. But we’re not actively seeking out user properties at this time.
As the market cap for USDR grows, we’ll naturally evolve from single-family rentals to multi-family and possibly commercial as well.
At inception, what assets does the USDR treasury contain? What are the roles for each of these tokens in supporting the ecosystem?
The following is the current breakdown of assets/allocations in the market cap of USDR. Additional amounts/percentages of these assets may be held in the treasury as USDR is overcollateralized. But this is the asset/percentage backing for the tokens in circulation. As TVL grows, real estate will take a larger and larger share of the backing.
~50% tokenized real estate - supplies the yield for the token
~22% DAI - DAI is used to mint USDR as we keep DAI in the treasury for redemptions
20% of the treasury is always held in protocol-owned liquidity, the USDR-DAI pool
12% TNGBL - No more than 12% of the market cap can be backed by our governance token TNGBL. This allows us to run protocol incentives like bonding and minting USDR at a 2:1 value ratio. TNGBL captures value from marketplace transactions and through a bnb function.
What happens when there are no tenants leasing the property, resulting in zero rental income? How does the ecosystem accommodate such a scenario?
2% of the property value is held in a vacancy reserve. This supplies yield in the event of a vacancy. Once the property is tenanted again, a percentage of the yield from that location will be used to resupply the reserve.
Many of our current properties have tenants on government aid meaning the rental reliability is extremely high, over 99%.
How is the selection of agents (e.g. property agents, maintenance contractors, lawyers, property valuators etc) done? How does Tangible ensure that the quality of its services matches the costs?
We work with established teams in the UK to assist with all aspects of property operations. As we expand we’ll hire location leads with additional real estate experience to facilitate operations with local realtors, property managers, lawyers, etc. The fees charged for these services are at industry standard percentages.
What are some of the concerns with regulations, both from the real estate perspective and also from the fact that stablecoins are being targeted by regulatory parties? How does Tangible handle all these concerns?
We have a legal opinion from a leading UK firm on our approach to tokenization and fractionalization of real estate assets.
Stablecoin regulation has yet to be passed. As a fully collateralized asset, we’re not concerned with policy affecting algorithmic stablecoins. And given that we’re not holding a large treasury of US dollars, we think we may be exempt from other regulations. That said, we’ll comply with regulations/regulators when asked.
Can you give us a user’s journey on how a person can mint USDR, receive the rental yield from the properties, and finally redeeming their capital?
Users mint USDR with DAI 1:1 on the Tangible site.
The user stakes the USDR, receiving sUSDR. sUSDR sits in the user’s wallet, rebasing daily to accrue the rental yield.
To redeem, the user unstakes and redeems the USDR 1:1 for DAI. They can also swap out on Uniswap.
In the coming weeks, we’re moving to a 1-token system, where USDR will receive the daily rebase, no staking required.
What happens if there are no more DAI in the treasury for redemptions?
If all the DAI in the treasury has been redeemed, pDAI (promissory DAI) will be issued to users 1:1 for USDR. pDAI can be redeemed 1:1 for DAI at a later date, once treasury assets have been responsibly liquidated. pDAI allows Tangible the time to extract maximum value when liquidating treasury assets instead of fire-selling to meet redemptions.
For users who are in immediate need of DAI, we expect pDAI-DAI pools will be created allowing users to swap to DAI at a minimal loss of value, similar to ETH-sETH pools.
Partnerships
Who are some partners that will be integrating USDR into their protocols?
We’re currently working on partnerships and reaching out to DAOs and DeFi protocols who might be interested in USDR’s consistent yield as part of their treasury management strategy.
Are you targeting merchants/e-commerce stores to adopt USDR as a payment option? What are some challenges in this area and how is the team going to resolve them?
Our first step will be to establish a neo-bank backed by USDR. Users will benefit from the yield of USDR, but have access to spending tools like VISA cards to facilitate day-to-day transactions.
Security
Are the USDR contracts audited? If so, by whom? Will there be any bug bounties?
We’re not yet audited, but will be scheduled for an audit in the near future.
We plan to launch a bug bounty program in the coming weeks.
Is there an emergency shutdown switch in the event of an exploit?
We cannot blacklist any individual addresses, however, in the event of an exploit, we can lock the system and pause all transfers of USDR.
Roadmap
Is there a separate roadmap for USDR? What are the major highlights for USDR in the next 6 months to 1 year?