Each pixel is a 10×10 square meters virtual land where you can build all sorts of things in a virtual reality world called Decentraland.
Things like “a casino, watch live music, attend a workshop, shop with friends, test drive a car, visit an underwater resort, and more – all within a 360-degree, decentralized virtual world,” we’re told.
Decentraland has now partnered with Ripio Credit Network (RCN), another project running on ethereum that uses smart contracts in the lending process.
RCN was created by Ripio, described as one of the biggest crypto company in Latin America with 200,000 users. They say:
“Ripio main product is their mobile wallet that operates on Bitcoin, Ether and local currency: users can receive, store, buy / sell and send cryptocurrency, and also make digital payments from their mobile phones, and also request micro-loans to finance their purchases.”
The micro-loaning aspect will now extend to mortgages for Decentraland pixels, with a statement further explaining as follows:
“To apply for a LAND mortgage, the purchaser simply has to complete a brief application form including the transaction details and deposit at least 10% of the total value of the parcel in question.
Once the user requests a mortgage on the Decentraland marketplace, a new loan is automatically published on the RCN dApp. As long as the parcel remains available (“on sale”), any lender is able to lend funds and fulfill the request.
This action creates a smart contract that locks the parcel and transfers the land’s ownership to the borrower (i.e. the mortgage requester).
The requester will immediately find a “pay” button on the Decentraland dApp. Once this user decides to repay the mortgage, he becomes allowed to demand the land’s full ownership by using the “claim” feature on the Decentraland dApp.
If the borrower does not repay the mortgage amount (up to 7 days after the loan expiration date), the lender is allowed to request the mortgage back using the same feature.”
The dapp tells us the lend functionality is not available in our region (London). So we could not test-run it to get a proper feel from the end user’s perspective.
What one notices, however, is that there are requests for ARS loans, that being Argentine Pesos. As well as MANA, the Decentraland token, and RCN, the token of the smart contract based lending framework.
The charged interest rate looks stupendously high, with these being short term loans. In addition, the smart contract part is probably more backend where it concerns fiat lending, but where the entire operation is natively digital, then this becomes a self-executing mortgage.
One feature of a mortgage is monthly installment payments. Here they could be employed through new subscription models especially with tokens, like weth (eth itself tokenized), but as stated we could not quite see how it works exactly.
“Decentraland is dedicated to making the exciting new world of virtual reality decentralized—ruled by open standards as opposed to one central organization.” Decentraland CEO, Ariel Meilich, said before adding:
“This partnership will help us fully commit to that mission, as the buying and selling of land—the basis of all the exciting things our users can create in VR—will not just be decentralized, but done on the leading global blockchain-based credit network.”
Making it a somewhat interesting financial service where natively digital aspects are concerned.
In that sort of situation, the smart contract itself can know when the mortgage is paid or otherwise, with ownership so automatically changing.
Making this a smart mortgage that doesn’t really need much human involvement and does not require much level of trust, but still of course contains the usual risks of default.
Here, however, the risk is minimized as you automatically get the land. So there are no jurisdictional issues, courts, and so on. With the only question being: for just how much can you sell the re-possessed virtual world.