Introduction

In the wake of the industrial revolution, philosopher and political economist John Stuart Mill predicted that capital-managed firms would be superseded by cooperative forms of enterprises, such as the labor-managed firm. [1] According to Mill, the free market itself would gradually and quietly transform from capital-ownership and capital-management in favor of cooperative associations. Over 150 years later, we are finally in that transition period. With the advent of blockchain technology, new cooperative forms of organizing have emerged, such as decentralized autonomous organizations (DAOs) and decentralized finance (DeFi) protocols. However, decentralized networks still face barriers to interact with the legacy market. New financial systems, legal frameworks, and business models are needed to bridge the gap between the on-chain decentralized world and the off-chain built world.

To that end, Tokr is a protocol for financing real-world assets on the Solana blockchain. In this paper, we introduce a system for tokenizing real property and establish an open-source platform for accepting real-world assets as collateral in decentralized finance.

Capital Markets are where savings and investments are channeled between suppliers (people or institutions with capital to lend or invest) and those in need (people or businesses seeking to borrow money or raise equity capital). [2] Private markets refer to investments in equity and debt of privately-owned companies. [3] Capital Markets seek to improve efficiencies by bringing capital suppliers together with those seeking funding, and provides a place for them to exchange value.

Tokenizing real property refers to the creation and issuance of non-fungible tokens (NFTs) that represent real property ownership. A protocol is needed for real property ownership to be digitally represented as NFTs in a way that counterparties can trust as collateral. This enables the frictionless exchange of real property and facilitates the formation of capital pools that algorithmically lend and/or invest in real-world assets using blockchain technology.

An open-source standard for tokenizing real assets promotes wide adoption and supports the interoperability and confidence needed for real property-backed NFTs (rNFTs) to be accepted as collateral by any DeFi protocol at scale.

The Tokr Protocol consists of composable modules that include the following:

• Tokrizer: a dApp to certify and mint rNFTs by interacting with a Proof of Title and Proof of Value oracle,

• Tokr Markets: markets that facilitate lending and borrowing with rNFTs as collateral, and the

• Resolver: a system for risk mitigation and dispute resolution.

Tokr real property NFT (rNFT) Metadata Standards provide reusable frameworks for minting rNFTs and representing real property on-chain. Tokrizer is a process by which rNFT metadata is certified through a decentralized oracle network. This process results in the certification of Proof of Title and verification of Proof of Value. Tokr Markets incentivize asset tokenization and promote liquidity. This demonstrates how DeFi markets can programmatically lend using Tokerized rNFTs as collateral. The Resolver system mitigates the risk of loss and deters bad actors.

Lenders, investors, and buyers can trust that Tokrized rNFTs certified by Tokr DAO adhere to a Tokr Market Framework that ties them to real property ownership. Open-source metadata standards enable the global market to create rNFT marketplaces, trade rNFTs across centralized and decentralized exchanges, and accept rNFTs as collateral in DeFi markets.

Transparent, automated, digitally-enabled asset ownership, capitalization, and exchange unlock new potential in financial markets and the built world. Tokenized assets and securities provide the nuanced sophistication of traditional financial instruments with the added benefits inherent and unique to blockchain and cryptoasset ecosystems, such as instant transfer and settlement, 24/7/365 global markets, permissionless and programmable borrowing/lending, and disintermediation to reduce fees. Moreover, decentralizing real property finance eliminates barriers to entry, is anti-confiscatory, and expands access to ownership.