Crypto Co-ops

Home ownership is one of the primary forms of wealth building in America. Homeowners' wealth is highly concentrated in a single illiquid asset. This makes the NIMBY impulse understandable. Rather than racism or fear of outsiders, NIMBYism is primarily driven by a rational economic response to holding most of your wealth in a single physical asset.

How can we align the incentive of individuals with that of the broader community? Residents need a way to see financial upside as their community grows and prospers, rather than just suffering the costs of construction and crowding.

The crypto co-op is a new form of real estate equity that allows residents to invest directly in their community.

Today people primarily rent or own their home. Renting offers flexibility, lower risk, and has fewer upfront costs. Whereas home ownership makes it possible to build equity and have predictable housing costs. The crypto co-op is a third way, offering the flexibility of renting and a more diversified and liquid way of building wealth than home ownership.

A crypto co-op is a DAO that lives on the blockchain. It raises funds to purchase and potentially develop a property by selling tokens and then rents that property to residents. The co-op acts as a mini-REIT and manages the property. Major decision making happens on-chain using crypto governance. The tokens are fungible and liquid. The co-op can raise funds at any time by minting new tokens and selling them on the open market. If the co-op has a cash surplus it can buy and burn tokens akin to a share repurchase.

Residents have the flexibility to move units within the co-op without the hassle of buying and selling property. There are no transaction costs or taxable events, they just rent a new unit and move. The tokens are highly liquid allowing residents to adjust their equity exposure to a level that makes sense for them. There's no need for reverse mortgages when you can sell your tokens or directly borrow against them.

The co-op can incentivize residents to hold the community token by offering discounts on rent. For every token you hold and stake you get X dollars off your rent. This emulates the predictable costs offered by home ownership and encourages residents to acquire tokens. An individual's financial arrangement lies on a smooth curve between renting and homeownership. Additionally the staked tokens can act as a safety deposit, if the resident damages the unit the DAO can confiscate a share of the staked tokens to recover costs.

The downside with this new form of equity is that laws and the tax code are custom tailored to home ownership. Banks provide highly-leveraged, low-rate loans to acquire homes. And the government provides large tax breaks for home ownership. But this may change over time.

The crypto co-op brings new meaning to the phrase sweat equity. When members volunteer their time to the community, such as building a new hiking trail or making repairs to a building, the co-op can grant them tokens for their work. They literally receive equity in return for their sweat labor.

Crypto co-ops scale the entire spectrum of community sizes. They could be as small as a single home with individual rooms rented out or as large as entirely new cities built on a community ownership principle. Small co-ops can be managed by a resident. Mid-sized co-ops would likely be run by specialized management companies, similar to HOA management companies today. City-sized co-ops would be run as full, independent corporations.

They can extend beyond residential real estate. Communities could own office and retail space that they rent out. The incentives align here as well: companies may wish to invest in the co-op to receive a discount on the rent they pay.

The co-ops can grow by raising more equity or reinvesting their profits into developing additional real estate. Equity can be raised continuously from residents allowing the community to grow organically over time, developing a few additional buildings at a time.

A benefit of building the crypto co-op on-chain rather than with a traditional REIT is that you get access to all the DeFi primitives for free. You can offer your tokens as liquidity to a distributed exchange to earn trading fees or provide your tokens as collateral for a loan.

Crypto co-ops aren't limited to being purely real estate holdings companies. Blockchain software is pluggable and composable, so additional features and functionality can be implemented by the co-op. This will lead to frequent experimentation within and between communities.

For instance, part of the co-op's treasury could be dedicated to a community wealth fund. Residents would vote on investment opportunities and the funds would be automatically dispersed when the vote succeeds. These funds could be used to improve the community and build amenities. Or they could be used to fund community businesses, such as a local coffee shop.

Crypto co-ops are ideology-agnostic and allow like minded individuals to come together to form shared-value communities. We'll see everything from socialist co-ops to techno-capitalist co-ops, from hippie commune co-ops to religious benedictine option co-ops.

Crypto co-ops are the future of real estate. They offer the benefits of renting and home ownership while aligning economic incentives within a community. They'll lead to shared prosperity and vast innovation in city governance.