NFTs, or nonfungible tokens, have exploded in popularity for selling digital art, but now their uses are expanding to real estate and mortgage lending.

Last fall, decentralized mortgage lender Bacon Protocol became the first to offer mortgages as NFTs.

Since then, TerraZero Technologies has introduced “Metaverse Mortgage” transactions through the platform Decentraland, and startup Brightvine has also introduced its own mortgage NFTs.

Bacon Protocol’s platform allows homeowners to exchange a lien on their property for an NFT that represents a portion of its value. Currently, the few that have been minted are a form of equity loans.

NFTs are unique, non-interchangeable units of data that are stored on a blockchain. In comparison, bitcoin is fungible, which means you can trade one bitcoin for another and have the same thing.

NFTs can be purchased and traded online with cryptocurrency and usually are secured by the Ethereum blockchain.

Ethereum.com states that NFTs can only have one official owner at a time, and no one can modify the record of ownership or copy and paste a new NFT into existence.

According to Bacon Protocol, their NFTs are based on smart loans developed by LoanSnap and use artificial intelligence to determine loan eligibility.

Bacon Protocol’s smart contract wraps the lien into an NFT and then lends against it.

Experts say NFTs could transform mortgage lending by allowing property transactions within minutes, rather than long loan processes with tons of documentation and paperwork.

This is because the NFTs store property and borrower information securely on the blockchain.

The future of mortgages

While few lenders are currently offering cryptocurrency mortgages, NFT experts say the speed and security of these types of transactions are going to gain traction as people start to notice and word spreads.

Experts don’t anticipate a full transition to NFT mortgages in the near future but expect that a gradual integration of traditional buying and selling with NFTs and crypto is more likely.

For those in the industry who are interested in the potential of NFTs but unsure if it’s the right time to switch — now or ever — NFT experts suggest building knowledge on blockchain technology and staying up-to-date on the latest advancements and offerings.

In the future, the lending funds are expected to come from crypto investors, so the value would mirror what mortgages currently provide to financial institutions.

NFT experts suspect that younger homeowners who are already experienced in crypto — and are more distrustful of banks — will be the pioneers of NFT mortgages and real estate investments in the future.

Photo by Andrey Metelev.