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The first incentive is the establishment of a positive on-chain credit history. Because Borrowers need to publicize their wallet address when proposing pools to Backers, their on-chain history becomes public to future creditors—even those off-chain. As more of global finance moves on-chain, creating a negative on-chain credit history is comparable for future credit opportunities to creating a negative off-chain credit score or record.
The second incentive is that Borrowers will likely want to continue borrowing from Konkrete. The moment they are late on any payment, Borrowers are unable to borrow further from any Borrower Pool.
A third incentive is an off-chain legal agreement with borrowers, including requiring Borrowers to collateralize their on-chain loan with off-chain collateral standing as a first-call guarantee of the contractor's obligations.
In addition, while occasional defaults are common across finance, Konkrete will likely stop supplying more capital to any of a Borrower’s pools if the Borrower is consistently late on repayments.
Development is a term used to describe the strategy of purchasing a property, renovating it, then selling it at a profit. A ”house flip” is when a stakeholder buys a home with the intent to resell it a short time later at a higher price. This activity is very specific in Real Estate and usually, two types of stakeholders undertake it. On a relatively small scale, individual investors “flip houses”, apartments, and small residential buildings. At a bigger scale and with more challenging projects, this activity is carried out by Developer's businesses and involves more significant constructions, as opposed to mild renovations commonly known as “house, flips”. This activity is referred to in the industry as Real Estate Development.
Let’s take the following example to explain what Real Estate Development is:
When Investors lend to a Borrower, they lend to a Real Estate Developer 1m€ for the construction project of a whole building.
The 1m€ is locked in that project until the construction is delivered as referred to the completion of Development.
The Developer sells that building to someone else, at which point the Strategists reallocate the principal and the accumulated interests to the Konkrete protocol allowing Investors to redeem their APY.