Real-world Assets in DeFi

Karolina

12 Sep 2023
Real-world Assets in DeFi

In the ever-changing world of finance, Decentralized Finance, or DeFi, is quickly gaining popularity. With over $44 billion secured within its system, DeFi signifies not just numbers but an evolutionary shift in how cryptocurrency investors manage and grow their assets. This groundbreaking approach has introduced crypto enthusiasts to unique ways of increasing their wealth. However, although DeFi has made a significant impact in the crypto world, its presence remains relatively small within the broader global financial sector. For DeFi to fully realize its potential, it must establish a bridge to the traditional financial system, tapping into the immense opportunities presented by institutional investors and established businesses. Integrating real-world assets, specifically tokenized versions of well-established financial instruments, can pave the way for increased stability in DeFi.

DeFi's Present State

Accomplishments

The significance of DeFi's rapid ascent in the world of cryptocurrency cannot be downplayed. It serves as a shining example of success, providing crypto holders with chances to generate passive income through creative methods like yield farming. In contrast, borrowers are granted quick access to loans with favorable terms that outshine offerings from even the most experienced traditional financial institutions.

Challenges

However, DeFi isn't without its challenges. Although it represents a substantial presence in the crypto sphere, it faces numerous internal struggles that put its foundation at risk. One particularly problematic issue is over-collateralization, which results from strict requirements imposed on borrowers. To counter price instability, they're often mandated to provide collateral well above the loan's value. For instance, MakerDAO - a stablecoin issuer - demands a shocking $1,500 deposit as collateral for borrowing only $1,000. Should the collateral's worth fall below this amount, harsh liquidation penalties follow. This situation not only presents considerable risks for borrowers but also hinders DeFi's fundamental mission of democratizing financial access. As a result, numerous global businesses remain constrained and unable to utilize DeFi for funding due to the inflexible crypto-only collateral requirement.

Further exacerbating these issues is the problem of liquidity. The initial excitement that pushed DeFi's total value locked (TVL) to a record $236 billion in November 2021 didn't last. The following 'crypto winter' caused a steep decline, dragging TVL down to just $40 billion by mid-2022. This sharp drop significantly impacted most DeFi tokens, diminishing their value by a staggering 80%-90%. Such turmoil severely disrupted DeFi's incentive model, as yields – dependent on deposited funds and paid out in DeFi tokens – suffered a substantial depreciation.

While the DeFi landscape holds great potential, it is also riddled with these daunting obstacles. To fully unlock its possibilities, a strategic integration with traditional finance is necessary.

Uniting Traditional Finance with Decentralized Finance

The Prospects of Tokenizing Physical Assets

As decentralized finance (DeFi) continues to experience growing pains, the answer may lie in tapping into the strengths of traditional finance. Integrating real-world assets, specifically tokenized versions of well-established financial instruments, can pave the way for increased stability in DeFi. Envision tokenized bonds, equities, debt, and physical assets such as gold, real estate, and art incorporated into the DeFi realm. The inclusion of these more stable assets can serve as a protective barrier for user investments and broaden the reach of DeFi protocols.

What does this integration process entail? Tokenization revolves around creating digital replicas of physical assets on a transparent public blockchain. This revolutionary procedure ensures not only transparent transactions but also removes intermediaries from the equation. As a result, transactions become faster and more streamlined, with costs significantly lower than traditional methods.

DeFi Drawing Attention from Institutions

DeFi's potential has captured not only its supporters' interest but also that of major players within traditional finance. The increase in institutional engagement serves as evidence of this trend. Consider BlackRock's recent submission to the U.S. Securities Exchange Commission (SEC) for approval of a bitcoin exchange-traded fund (ETF). They're not alone – Fidelity, Invesco, Wisdom Tree, and Valkyrie have also filed ETF applications, demonstrating the growing institutional appetite for DeFi exposure. This interest extends beyond ETFs; Banco Santander's efforts to educate its user base on digital assets and the launch of EDX Exchange by giants like Charles Schwab, Fidelity, and Citadel Securities exemplify the strengthening relationship between DeFi and traditional finance.

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Integrating Real-world Assets into DeFi

Perks for Conventional Financial Institutions

Traditional financial institutions are undoubtedly drawn to DeFi. Introducing tokenized versions of traditional stocks, commodities, bonds, art, and real estate can revolutionize financial transactions. Present-day markets heavily rely on intermediaries like stockbrokers, who take a cut of the profits with each transaction. However, DeFi has the potential to change that scenario. Enter smart contracts: these self-executing agreements with coded terms automatically complete transactions as soon as pre-defined conditions are met. Faster transactions, decreased administrative expenses, and unparalleled transparency become realistic expectations under DeFi – a transparent, public ledger accessible to everyone fosters a more accountable financial future.

Advantages for DeFi Protocols

Incorporating real-world assets may be the key to resolving DeFi's issues. These assets are generally more stable than the often volatile DeFi tokens, allowing protocols to aspire toward reduced volatility. Decreased liquidations, minimized fluctuations, and overall ecosystem stability become achievable goals. The real game-changer? DeFi becomes accessible to businesses worldwide. Picture a company tokenizing outstanding invoices for quick credit access or assets like art and real estate becoming fractionalized among numerous investors. Such tokenization efforts introduce exclusive DeFi services like staking and yield farming, revolutionizing market accessibility.

Traditional Finance and DeFi Synergy

Mutual Advantages

Traditional finance and DeFi are not in a rivalry for replacement, but instead, they work together to address deficiencies and capitalize on their distinct strengths. Conventionally, the financial markets demonstrate resilience and consistent growth despite global economic uncertainties, while DeFi brings the potential of democratization, transparency, and efficiency which tend to be insufficient in the traditional system.

During the 'crypto winter,' the DeFi market experienced downturns that revealed its susceptibility to volatility. Nonetheless, with extensive expertise, diverse portfolios, and established risk management approaches, traditional markets offer a stabilizing influence against such drastic fluctuations for DeFi.

Integrated Financial Ecosystem

Merging DeFi and TradFi entails developing a financial ecosystem where assets, digital or physical, circulate seamlessly without the existing cumbersome obstacles. This amalgamation may facilitate the creation of hybrid financial products combining the best features of both domains. Envision a situation where traditional real estate investment, backed by tangible property, is effortlessly tokenized, segmented, and traded on a DeFi platform. Alternatively, consider a conventional bank adopting DeFi protocols for immediate loan approvals with fluctuating interest rates determined by real-time market data.

Conclusion

DeFi's progression from its early stages to its present-day prominence signifies its potential for transformation. To genuinely alter the global financial landscape, it must establish a balanced relationship with traditional finance. By incorporating real-world assets and adopting time-tested methods of conventional finance without sacrificing its fundamental principles of decentralization and transparency, DeFi can pave a way towards an innovative, stable, and inclusive future. This partnership doesn't only signify evolution but also indicates a potential revolution that lays groundwork for a financial world with indistinct boundaries, democratized opportunities, and collectively embraced growth.

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AI in Real Estate: How Does It Support the Housing Market?

Miłosz Mach

18 Mar 2025
AI in Real Estate: How Does It Support the Housing Market?

The digital transformation is reshaping numerous sectors of the economy, and real estate is no exception. By 2025, AI will no longer be a mere gadget but a powerful tool that facilitates customer interactions, streamlines decision-making processes, and optimizes sales operations. Simultaneously, blockchain technology ensures security, transparency, and scalability in transactions. With this article, we launch a series of publications exploring AI in business, focusing today on the application of artificial intelligence within the real estate industry.

AI vs. Tradition: Key Implementations of AI in Real Estate

Designing, selling, and managing properties—traditional methods are increasingly giving way to data-driven decision-making.

Breakthroughs in Customer Service

AI-powered chatbots and virtual assistants are revolutionizing how companies interact with their customers. These tools handle hundreds of inquiries simultaneously, personalize offers, and guide clients through the purchasing process. Implementing AI agents can lead to higher-quality leads for developers and automate responses to most standard customer queries. However, technical challenges in deploying such systems include:

  • Integration with existing real estate databases: Chatbots must have access to up-to-date listings, prices, and availability.
  • Personalization of communication: Systems must adapt their interactions to individual customer needs.
  • Management of industry-specific knowledge: Chatbots require specialized expertise about local real estate markets.

Advanced Data Analysis

Cognitive AI systems utilize deep learning to analyze complex relationships within the real estate market, such as macroeconomic trends, local zoning plans, and user behavior on social media platforms. Deploying such solutions necessitates:

  • Collecting high-quality historical data.
  • Building infrastructure for real-time data processing.
  • Developing appropriate machine learning models.
  • Continuously monitoring and updating models based on new data.

Intelligent Design

Generative artificial intelligence is revolutionizing architectural design. These advanced algorithms can produce dozens of building design variants that account for site constraints, legal requirements, energy efficiency considerations, and aesthetic preferences.

Optimizing Building Energy Efficiency

Smart building management systems (BMS) leverage AI to optimize energy consumption while maintaining resident comfort. Reinforcement learning algorithms analyze data from temperature, humidity, and air quality sensors to adjust heating, cooling, and ventilation parameters effectively.

Integration of AI with Blockchain in Real Estate

The convergence of AI with blockchain technology opens up new possibilities for the real estate sector. Blockchain is a distributed database where information is stored in immutable "blocks." It ensures transaction security and data transparency while AI analyzes these data points to derive actionable insights. In practice, this means that ownership histories, all transactions, and property modifications are recorded in an unalterable format, with AI aiding in interpreting these records and informing decision-making processes.

AI has the potential to bring significant value to the real estate sector—estimated between $110 billion and $180 billion by experts at McKinsey & Company.

Key development directions over the coming years include:

  • Autonomous negotiation systems: AI agents equipped with game theory strategies capable of conducting complex negotiations.
  • AI in urban planning: Algorithms designed to plan city development and optimize spatial allocation.
  • Property tokenization: Leveraging blockchain technology to divide properties into digital tokens that enable fractional investment opportunities.

Conclusion

For companies today, the question is no longer "if" but "how" to implement AI to maximize benefits and enhance competitiveness. A strategic approach begins with identifying specific business challenges followed by selecting appropriate technologies.

What values could AI potentially bring to your organization?
  • Reduction of operational costs through automation
  • Enhanced customer experience and shorter transaction times
  • Increased accuracy in forecasts and valuations, minimizing business risks
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Want to implement AI in your real estate business?

Nextrope specializes in implementing AI and blockchain solutions tailored to specific business needs. Our expertise allows us to:

  • Create intelligent chatbots that serve customers 24/7
  • Implement analytical systems for property valuation
  • Build secure blockchain solutions for real estate transactions
Schedule a free consultation

Or check out other articles from the "AI in Business" series

AI-Driven Frontend Automation: Elevating Developer Productivity to New Heights

Gracjan Prusik

11 Mar 2025
AI-Driven Frontend Automation: Elevating Developer Productivity to New Heights

AI Revolution in the Frontend Developer's Workshop

In today's world, programming without AI support means giving up a powerful tool that radically increases a developer's productivity and efficiency. For the modern developer, AI in frontend automation is not just a curiosity, but a key tool that enhances productivity. From automatically generating components, to refactoring, and testing – AI tools are fundamentally changing our daily work, allowing us to focus on the creative aspects of programming instead of the tedious task of writing repetitive code. In this article, I will show how these tools are most commonly used to work faster, smarter, and with greater satisfaction.

This post kicks off a series dedicated to the use of AI in frontend automation, where we will analyze and discuss specific tools, techniques, and practical use cases of AI that help developers in their everyday tasks.

AI in Frontend Automation – How It Helps with Code Refactoring

One of the most common uses of AI is improving code quality and finding errors. These tools can analyze code and suggest optimizations. As a result, we will be able to write code much faster and significantly reduce the risk of human error.

How AI Saves Us from Frustrating Bugs

Imagine this situation: you spend hours debugging an application, not understanding why data isn't being fetched. Everything seems correct, the syntax is fine, yet something isn't working. Often, the problem lies in small details that are hard to catch when reviewing the code.

Let’s take a look at an example:

function fetchData() {
    fetch("htts://jsonplaceholder.typicode.com/posts")
      .then((response) => response.json())
      .then((data) => console.log(data))
      .catch((error) => console.error(error));
}

At first glance, the code looks correct. However, upon running it, no data is retrieved. Why? There’s a typo in the URL – "htts" instead of "https." This is a classic example of an error that could cost a developer hours of frustrating debugging.

When we ask AI to refactor this code, not only will we receive a more readable version using newer patterns (async/await), but also – and most importantly – AI will automatically detect and fix the typo in the URL:

async function fetchPosts() {
    try {
      const response = await fetch(
        "https://jsonplaceholder.typicode.com/posts"
      );
      const data = await response.json();
      console.log(data);
    } catch (error) {
      console.error(error);
    }
}

How AI in Frontend Automation Speeds Up UI Creation

One of the most obvious applications of AI in frontend development is generating UI components. Tools like GitHub Copilot, ChatGPT, or Claude can generate component code based on a short description or an image provided to them.

With these tools, we can create complex user interfaces in just a few seconds. Generating a complete, functional UI component often takes less than a minute. Furthermore, the generated code is typically error-free, includes appropriate animations, and is fully responsive, adapting to different screen sizes. It is important to describe exactly what we expect.

Here’s a view generated by Claude after entering the request: “Based on the loaded data, display posts. The page should be responsive. The main colors are: #CCFF89, #151515, and #E4E4E4.”

Generated posts view

AI in Code Analysis and Understanding

AI can analyze existing code and help understand it, which is particularly useful in large, complex projects or code written by someone else.

Example: Generating a summary of a function's behavior

Let’s assume we have a function for processing user data, the workings of which we don’t understand at first glance. AI can analyze the code and generate a readable explanation:

function processUserData(users) {
  return users
    .filter(user => user.isActive) // Checks the `isActive` value for each user and keeps only the objects where `isActive` is true
    .map(user => ({ 
      id: user.id, // Retrieves the `id` value from each user object
      name: `${user.firstName} ${user.lastName}`, // Creates a new string by combining `firstName` and `lastName`
      email: user.email.toLowerCase(), // Converts the email address to lowercase
    }));
}

In this case, AI not only summarizes the code's functionality but also breaks down individual operations into easier-to-understand segments.

AI in Frontend Automation – Translations and Error Detection

Every frontend developer knows that programming isn’t just about creatively building interfaces—it also involves many repetitive, tedious tasks. One of these is implementing translations for multilingual applications (i18n). Adding translations for each key in JSON files and then verifying them can be time-consuming and error-prone.

However, AI can significantly speed up this process. Using ChatGPT, DeepSeek, or Claude allows for automatic generation of translations for the user interface, as well as detecting linguistic and stylistic errors.

Example:

We have a translation file in JSON format:

{
  "welcome_message": "Welcome to our application!",
  "logout_button": "Log out",
  "error_message": "Something went wrong. Please try again later."
}

AI can automatically generate its Polish version:

{
  "welcome_message": "Witaj w naszej aplikacji!",
  "logout_button": "Wyloguj się",
  "error_message": "Coś poszło nie tak. Spróbuj ponownie później."
}

Moreover, AI can detect spelling errors or inconsistencies in translations. For example, if one part of the application uses "Log out" and another says "Exit," AI can suggest unifying the terminology.

This type of automation not only saves time but also minimizes the risk of human errors. And this is just one example – AI also assists in generating documentation, writing tests, and optimizing performance, which we will discuss in upcoming articles.

Summary

Artificial intelligence is transforming the way frontend developers work daily. From generating components and refactoring code to detecting errors, automating testing, and documentation—AI significantly accelerates and streamlines the development process. Without these tools, we would lose a lot of valuable time, which we certainly want to avoid.

In the next parts of this series, we will cover topics such as:

Stay tuned to keep up with the latest insights!