🪙CDP: gaining exposure

Zona's Collateralized Debt Position (CDP) product allow users to mint real estate Index Tokens using collateral such as stablecoins and WETH to mint real estate Index Tokens.

Index Tokens

Zona Index Tokens are onchain representations of Zona Real Estate indexes. There will be one Index Token for each city, where the price of the Index Token is pegged to the median price per square foot of residential properties of its corresponding city. For example, the Dubai Index Token will be pegged to the median price per square foot of residential properties of Dubai.

Is there any real estate tokenization during this process?

No, users can only mint and redeem Index Tokens, which are representation tokens that track the price of the median price per square foot of properties across major cities. As a result, there is no actual real estate tokenized during the minting and redemption process.

Why mint Index Tokens instead of tokenized real estate?

Over the past few years, real estate tokenization and fractionalization has been a widely tested model. However, actual demand to purchase onchain real estate lags behind supply, mostly due to liquidity being fragmented on an individual property level, limited selection in available homes, and a relatively-untested real-world redemption system.

Index Tokens solve all three problems faced by tokenization solutions listed above. Firstly, liquidity is city-wide instead of segregated by individual properties. Secondly, real estate exposure is via the median price per square foot of all properties in a city, instead of individual homes could have the possibility of underperforming the overall market. Lastly, there are no real-world redemptions required for Index Tokens, as there are no homes tokenized in the first place.

How is the peg between the Index Token and the index price maintained?

The peg is maintained by the Zona Peg Stability Module (PSM). When the Index Token is above the index price, users can mint additional Index Tokens at a discount to its current price on liquid markets, sell the newly minted tokens, and earn an arbitrage profit. When the Index Token is below the index price, users can buy discounted Index Tokens on liquid markets and repay their debt on Zona at a cheaper rate.

What types of collateral can I use?

USDT, USDC, ETH, and stETH (Lido) will be initially allowlisted as collateral types. Additional collateral types will be added based on demand, safety, and available liquidity.