After DeFi disrupted the lending and borrowing system, it’s time for mortgages. The newly launched Bacon Protocol has created a new smart contract that would make mortgages easier through NFTs.
Although people sold Real Estate and house NFTs before, this is the first time NFTs will represent mortgages.
The project has divided the mortgage system into two categories. The first one is the right to the property or a lien, and on the other side is the mortgage that the lien issues.
Bacon Protocol Explained
Bacon protocol has created a smart contract that wraps the lien into an NFT and then lends against it. So far only the banks and institutional investors could buy and lend mortgages. But with this, anyone around the globe who meets the protocol’s criteria will be able to lend mortgages.
Loan Snap, another decentralized protocol, will operate the mortgage lending and repayment process.
This ground-breaking feat is already in effect, as the protocol has minted 8 mortgage NFTs so far. All the transactions in the Bacon ecosystem are done through currency which is pegged to $USDC.
The average interest rate on these mortgage NFTs is 1.5%-3.1%. In comparison to the current average (2.27% to 2.98%) of the traditional finance world, it seems pretty reasonable.
The founder of Bacon Protocol, Karl Jacob thinks morgage NFTs are not here to replace the mortgage system but to perfect it.
Even though, it’s in a very early phase, the project has the potential to disrupt the mortgage market by opening it to the DeFi space. You can read the Bacon Protocol Whitepaper to understand the core technicalities of the project more in detail.
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