Is Collective Governance Coupled with Fractional Property Ownership, the Future? 🔮

Web3 - The Key to Addressing the Well-Known Wealth Gap? 💸

We’ve all been made aware of the data concentration, ownership, and privacy concerns by the present informational monopolies in the real world. It’s almost as if getting banned by an app is worse than getting banned by a country, because of how much access apps give you nowadays. Could you imagine your life without Whatsapp? Or Gmail? Well, very few people could. It is this exact informational monopoly that the web3 movement aims to deter. With web3, the movement’s proposal is to establish an open, trustless, accountable, decentralized, and democratic internet that changes the perception of data ownership. 🚀

Do you know what else informational monopoly brings with it? Wealth gap! The rich get richer and the poor get poorer. The wealth gap only continues to increase. Web3 aims to lay down a critical foundation that would eventually fundamentally address the wealth gap that runs the real world. Since informational monopolies have created a wealth gap by capitalizing on the world’s best asset - data and business monopolies have actively capitalized on land - it remains to be seen how a decentralized parallel world will impact their power. The dynamics are definitely set to change when there is further transparency, accountability, and autonomy in the decision-making processes! 💃🏼 

Ever heard of Adam Smith’s famous quote - “Wherever there is a great property, there is great inequality?” Well, if not - then let us tell you, this sentence is too real! It was real in 1776 and remains to be real in 2023 unfortunately. 😢

Source : Pinterest

Let’s talk about this ‘great property’ now then, shall we? 👇🏼

Fractional Property Ownership through DAOs x Token Engineering 🏛️

Let’s start by talking about fractional property ownership in the real world, i.e., not the digital world that all of us seem to be living in. In order to ensure greater equity and access to property ownership, and in order to facilitate the enhancement of liquidity, asset managers established a mechanism wherein they divided a single asset into multiple shares of ownership through various investment instruments. This was sometimes also done through an SPV, or a Special Purpose Vehicle, wherein investors pooled in resources and formed an SPV wherein they purchased commercial real estate together. Sounds good, right? What’s the issue then? 💭

Source: CoffeeMug

Here’s the issue - it’s not only that each SPV was capped at only 250 investors thereby making it unscalable, but also that this mode was not easily accessible to the general public. Furthermore, in order to be eligible to be an investor in the said SPVs, you need to meet very stringent requirements of investment accreditation. Sounds so complicated now! An alternative that the investors came up with was REITs or Real Estate Investment Trusts wherein a company is established, that buys, sells, operates, or finances commercial estate. Although REITs are publicly tradable and therefore, ideally accessible to the public unlike SPVs, a majority of them are also privately owned and only accessible to accredited investors. Just as complex, right? If you don’t think so, then check out the image below! 🤔

Source: iPleaders

With transparency in the decision-making and governance processes being the key issue in both of these fractional property ownership investment mechanisms, web3 is here to save the day! ✔️

It is clear that while web2 solutions exist to resolve fractional property ownership, they are not efficient, sustainable, or sufficient. Web3 tools, on the other hand, can definitely help enable a more accessible, affordable, scalable, and transparent solution. The primary ways that web3 tools can facilitate this are: 👇🏼

(i) through an advanced accountable allocation of shares and resources, due to the transparency and immutability that the adoption of blockchain technology offers. This would also help redistribute power and data ownership back to the users - the rightful owners. 💯

(ii) ever heard of the distant landlord problem? If not, then here’s a breakdown for you - since the landlord is usually detached from the property that they are renting out, as the said property merely serves as a source of income to the landlord - the landlord is clearly disinterested in improving the conditions of the property itself. In order to resolve this, and many such other allied and cognate issues, the programmability of digital tokens can be utilized. This would allow for flexible delineation of incentive mechanisms as well as governance systems that could also be customized to the needs of a certain situation. 👌🏼

All of us must have heard of people already buying or renting plots of land in the Metaverse, i.e., the virtual world that will soon be running the real world. Organizations like Second Life have also actively relied on the rental fees from its virtual property, for revenue generation. While token engineering of both fungible as well as non-fungible tokens (NFTs) can facilitate fractional property ownership, let’s delve into the latter first. In December 2021, around 28,983 buyers spent around $575 on each share, and they held about 3,12,686 shares in total - of the same artwork “The Merge”! This is exactly what fractional ownership entails. Multiple owners enjoy fractional property rights and therefore, creating a situation wherein multiple owners have the right to benefit financially from a potential increase in the value of the property that they have collectively invested in. 🤑

Source: PixelPlex

DAOs - Collective Governance Saves the Day ✔️

Did you know that as per DeepDAO, as of February 2023, there are 11,150+ DAOs throughout the world and the total shared treasury in the DAO universe is about $13.3B? 🤯

Caught your interest in DAOs now? 😅

DAOs are decentralized autonomous organizations that are primarily community-driven and engage in collective decision-making by ensuring that power is not concentrated in the hands of few. The purpose and the intent of the DAO can be anything, ranging from crowdfunding, to an art collection, to book clubs, to encouraging investment. However, when we talk about fractional property ownership in specific, two types of DAOs come to mind: 👇🏼

(i) NFTs! The Merge instance that we talked about above, was not a one-off instance! Since NFTs are often expensive, small investors who don’t have the capital to invest in them are often discouraged from doing so. Collector DAOs would definitely genuinely come to the rescue in such cases as they would allow individuals to own merely a fractional share of an NFT. This is essentially the co-ownership of digital assets by pooling in the capital as a community. A couple of examples that we can think of, off the top of our heads are - PleasrDAO collectively bought the all-famous “Doge” Meme NFT for a whopping $4 million, and then divided this individual NFT into multiple pieces so that everyone could own a fraction of it; and JennyDAO which enables individuals to afford rare NFTs by way of acquisition and subsequent fractional NFT ownership.👌🏼

(ii) Real Estate! Yes, we know it sounds unimaginable that people would divide property voluntarily, with all of the property disputes that continue to plague the judiciary, all over the world. But it’s true! Real estate DAOs have actively worked toward lowering the cost of real property ownership by tokenizing real estate. For instance, let’s say a 1-acre piece of land is tokenized into 1000 tokens. Buying merely 1 token would let you own a smaller portion of the land and therefore result in fractional property ownership. This would not only increase the number of asset owners in a world plagued with a generational wealth gap, but it would also facilitate the generation of individual wealth, substantially. 🤑

To Conclude - Let’s Bridge the Wealth Gap with Decentralization and Accountability 🚀

The framework proposed for fractional property ownership by Helena Rong effectively utilizes community governance and token engineering. It could actively be extended to all sorts of properties as demonstrated by the author - to go beyond just real estate, but to include NFTs within its realm, public goods, infrastructure in general, and so on and so forth. This is a scalable economic prototype that would be one of its kind to actually capitalize on higher social participation through community-driven DAOs. The ideals communicated throughout, i.e., the equitable ownership and distribution of assets, is certainly an achievable outcome despite the generational wealth gap, if the immutability of blockchain technology is effectively utilized as well. 💯

There is no ounce of doubt that the democratization of decision-making in DAOs would certainly facilitate the process of increased fractional property ownership, thereby accordingly increasing the individual wealth in the economy as a whole. Since the effect of collective governance and token engineering as part of the web3 movement would be entirely universal and borderless, the implementation of such an economic model would certainly be beneficial for economics in first, second as well as third-world countries that continue to be developing. So what’s stopping us from trying this out? LFG! 🔥

References

A proposal for fractional property ownership and collective governance in local development

DAO, Web3 Community & Ownership Economy

Money, possessions, and ownership in the Metaverse: NFTs, cryptocurrencies, Web3 and Wild Markets