Latest / Talk Commerce / Tokenized Real Estate and RWA Tokenization with Thomas Gaffney of OFA Group
Transcript
- Brent Peterson (00:01.614) Welcome to this episode of Talk Commerce, our last episode of 2025. Today I have Thomas Gaffney. He is the chief operating officer at OFA Group. Thomas, do a much better introduction for yourself. Tell us your day-to-day role. Tell us your, and give us one of your passions in life and then why you haven't run 75 marathons yet. Thomas Gaffney (00:14.965) course. Sure. Thomas Gaffney (00:22.327) Sure, So, OFA Group is kind of a transition to a holding company. We were traditionally a legacy architectural design firm, did a hard pivot about two years ago, and now we're more of a tech company. We are building out architectural tools for AI space, but we're also very heavily involved in the Web3 crypto blockchain space. My role... is the COO. I basically wear a lot of hats. I'm the kind of guy that is just, hey, if you need something done or you need to get something across the table, call Thomas. He gets it done. So I manage a lot of the &A stuff that we're working on. I also manage the Hearth platform, which is our RWA, which stands for Real World Assets. It's essentially taking like real estate, such like hotels, apartment complexes, different buildings and say mortgage or something like that. And putting them in a tokenization form, which is the smart contract, which is the RWA and putting them on chain and then fractualizing them and selling them. It's a good way to raise capital. It's a good way to provide liquidity for developer builders. It's becoming increasingly popular. It's something that I really like about significantly. so as to the like passion, one of my passions, one is my family and friends. I have a recent one year old. He's a handful, but it's a lot of fun. I just like spending time with family mostly, but also like my work passion is blockchain, web through and crypto. I've been in the space for well over a decade now. It's funny, I wrote a paper while I was in law school about mortgage backed securities and how the 2008 crisis would have never happened if all mortgages were put on a blockchain and 10 years later, I'm actually doing that. So it's kind of cool. Yeah. Reason why I haven't run 75 marathons is because I have bad knees. I ran one marathon in fourth grade. Brent Peterson (02:34.914) And that's awesome. Brent Peterson (02:40.387) Ha Thomas Gaffney (02:43.831) It was called the Thunder Mountain Marathon out in Tucson, Arizona. My dad was in the military, so I moved around a lot and he was super into running. He ran 75 marathons in his lifetime, but my knees do not hold up. so I stick to golf and just kind of wasting the elliptical. Yeah. Brent Peterson (03:04.441) That's awesome. Thomas, all right, before we get started on we're going to talk about RWA and it's a really good acronym that we haven't had in our vocabulary here at Talk Commerce. But before we start, I'm going to tell you a joke. You just give me a rating 8 through 13. So here we go. Two cowboys are lost in the desert. One cowboy sees a tree that's draped in bacon. A bacon tree! We're saved! He runs up to the tree and is shot. It wasn't a bacon tree. It was a ham bush. Thomas Gaffney (03:14.103) Cool. Okay. Thomas Gaffney (03:20.31) Okay. Thomas Gaffney (03:36.075) That's good, that's good, that's good. I'll give it a 10. 10? Good, well in terms of just witty, like I'm a more dark humor guy. My wife actually dabbles in like, not stand-up comedy, but she does a little comedy stuff herself. And so for her sake, I'll give it a 10. And I want to be a hard judge, you know? I expect a lot. Brent Peterson (03:57.775) That's awesome. Yeah. Thomas Gaffney (04:03.191) A 10 is a high score in my opinion, because if it's a 13, that means it's literally perfect. But it's a good one. Brent Peterson (04:10.19) All right, thank you. All right, so RWA, I think most of the time that I'm, when I'm speaking with somebody, it's a digital product and yours sounds like you're making physical products digital. yeah, just give us the 10,000 foot view first on RWAs. Thomas Gaffney (04:31.137) Sure. So 10,000 foot view is you essentially take a property. let's just say the Hyatt Hotel. Okay. Traditionally, there's usually one to five owners, you know, and their money is kind of locked into that hotel. They own the hotel. There's an operating company who operates it, et cetera, et cetera. And RWA is essentially what it is, is putting the economic rights to that hotel, the ownership. So like say any appreciation and you don't have to do this, but you can have future incomes, future rents, future any profits that's being driven by the hotel. And you put that on chain, right? The rights of it. So when I say on chain, mean, just put specific language and ownership rights and economic rights into a smart contract, which is an RWA, right? Which is just the acronym they've given these kind of smart contract tokens, and then you can fractionalize those. So say you wanted to sell 10 % of the economic rights of the hotel, to the public, you, have say it's worth a million dollars and you want to sell 10%. So you sell a hundred thousand dollars worth, you sell a hundred thousand tokens that is attributed to this RWA hotel, let's say hotel RWA and, then they own that person who owns one of those tokens owns a portion of the percentage of that hotel. And so if the hotel does really well and appreciate say it goes from a million dollars to $10 million in theory, if it's ever liquidated, the RWA holder would then receive the benefits of the appreciation of that hotel. Brent Peterson (06:28.826) There we go. how difference is this? So there's like real estate funds as well. The REITs, I think they're called. How different is it from that? Is it the blockchain part and the tracking of it as it goes down the line? It's the big differentiator. Thomas Gaffney (06:38.101) Yes. So yes. Yes. So like one of the differentiators is that like one is on chain. So it's completely decentralized and you have a lot of transparency. So anything that you put on a blockchain is usually a different like decentralized version where everyone can see who owns what via their wallets. It's not going to say, hey, I have a wallet. Thomas owns this many RWA tokens. It will say XRW54123456 owns this many RWA tokens. When they have distributions, so say they have profits, the distributions will be made via on-chain. You will see exactly the amount of money that's being flowed through. So say you're using a stablecoin. A stablecoin is a token that is usually pegged to some kind of currency. So USDC or USDC- D1 is a US dollar stable coin where every token that you hold from that Should translate in theory one-to-one for United States dollar is supposed to stay at that value Perpetually, right it fluctuates slightly depending on the yield that's there but in theory it stays at a dollar and so if you have the tokens that are the RWA tokens and you have distributions right like and say they made $100,000, so everyone made a dollar, so everyone should get, every token holder of the fractionalized RWA should in theory get a dollar. So if you own 10,000 of them, you get $10,000 that gets deposited in your account or your wallet, and you can kind of see everything. So a lot of it's transparency. And one of the things that's really interesting though is getting people earlier access Thomas Gaffney (08:30.775) to different kinds of investments, right? So right now, if you were going to build out a hotel, right? Say it's not built yet, there's a plot of land, you have a contractor, it's gonna cost $100 million to build it. You can sell $25 million worth of RWA tokens to raise the funds, but they get it at the developer's level of valuation, right? So a developer is gonna spend $100 million and then expect to flip the buildings in it, say for... 200 million, right? So like that's like an interesting concept. It's allowing, it's like kind of crowd searching funds to be able to invest into these development projects where traditionally you can only have institutional grade commercial level investors being able to get access to. Brent Peterson (09:19.534) So this opens it up, really kind of democratizes that. And that's, know, that's like the term of the 2025, right, democratization. This does open it up to any sort of investor, right, who wants to try to, who wants to get in on something that makes it much easier. Thomas Gaffney (09:26.54) Yeah. Thomas Gaffney (09:33.559) Exactly. That's the whole thing. It's because like investments, a lot of the best investments in the world are sheltered. are only the select few very rich have access to these things and these really, really good deals. Right. And so what these are, WAP platforms are trying to do and tokenize tokenizing at the developer level is to give a very enticing access. to these enticing investments to the public, regular individual Main Street investors rather than just having Wall Street investors do it all. Brent Peterson (10:11.95) So this is similar to NFTs or any Bitcoin, things like that. there differentiators between some of those? And you hear NFTs are kind of dead now and they're not really being sold. What's new about this that's making the difference? Thomas Gaffney (10:32.225) Sure. So funny thing is an RWA and an NFT, technologically, same thing, just rebranded. right. So like an NFT stands for a non-fungible token. So what that means is a non-fungible token has a unique identifier that makes it unique, right? So it's just, it's, hey, this is a specific thing in ownership. So if you have a Bitcoin, is cryptocurrency, Bitcoin is a fungible token. there's no differentiator between one Bitcoin and another Bitcoin. It's just a Bitcoin, right? Whereas an NFT and hence an RWA, it has a unique identifier. So the RWA is unique to the underlying asset, right? So whereas an NFT, what people think of is the monkey pictures and all those things and the JPEGs and all that stuff. So it's same technology. here's the differentiator is the underlying asset, right? So it's the same tech, but underlying assets. So like an NFT where most people think is a, piece of art and whatever, right? That's the underlying asset to the NFT smart contract. And then the RWA, the underlying economic ownership rights to a hotel is significantly different. Brent Peterson (11:54.157) Yeah, so I mean, this would translate to a physical painting, right? If like, think the Frida collages have the most expensive painting sold, that somebody could digitize that and theoretically sell a portion of the painting. Thomas Gaffney (11:57.751) Yes. Thomas Gaffney (12:04.863) Yes, and people call that RWA rather than NFT. Because people have thought of NFTs as digital art, whereas they can just be actual collectibles. Because like I said, RWA, NFT, same exact technology. But yeah, so you can put an RWA on a Rolex. Say if you have the first Rolex ever made and it's worth $100 million and you want to own a fraction of that, you can put the ownership rights to that Rolex on chain. Brent Peterson (12:08.866) Yeah. Thomas Gaffney (12:34.843) sell about say sell 10 % of that Rolex there's $10 million and then five years and appreciates you're an art collector or whatever. And then there's some people that are having like showrooms for this thing where it's like, hey, here's the showroom for where your Rolex is being held. Right. So if you want to come see it, interact with it, you have to here's my wallet, I own 10 % of this, I get access to looking at this thing, messing around sure. in some kind of way, but that's kind of the concept. Brent Peterson (13:08.014) Yeah, and I guess the risk there is theoretically that could get stolen, right? And it's harder to take a physical thing. And I know there's a serial number, I suppose, that would be tied. Maybe it makes it even easier to track it down, right? Because you have a blockchain that's tied to a serial number that's tied to some other way of tracking it. Thomas Gaffney (13:24.503) You're completely correct. And that's kind of the sell here, right? Is that if you want to make an investment in a physical real world asset, right? Like you have some kind of stamp, some kind of serial number, whatever it is, a unique identifier that says this is what it is, that's embedded in the smart contract, it gets stolen. Five years later, they track it down. Boom, all of a sudden that RWA that's sitting in your wallet that was worth nothing. it's now been reclaimed and now it could be worth a lot more. And so it's exactly what you're talking about. Brent Peterson (14:01.42) And what other industries, I mean, I can think about timeshares and I hate timeshares, but that seems like that this could apply to that as well and make easier to sell your timeshare theoretically, if there's such a thing as a resale market on timeshares. Thomas Gaffney (14:06.254) shit. Thomas Gaffney (14:15.551) Yeah, mean, yeah, I mean, I agree. You can. Yes, you can in theory, tokenize anything, anything of value, right. And so timeshares, you could do it. I don't know how well it would sell in the RWA market if anyone would want to buy it. You know what I mean? But traditionally, the RWA market is more for economic rights, right. And being able to being able to participate in the proceeds, those kind of things. But if you wanted to do a timeshare, you could, but timeshares are fine where they are. You can just leave them on the web too. Brent Peterson (14:53.554) Yeah. What other, like, what do you see now growing, this growing into it? We've talked a lot about the physical, like building, the building space, the real estate. What other avenues do you see coming up for RWAs? Thomas Gaffney (15:08.727) One thing is definitely mortgages. Mortgages is huge just because like in the 2008 crisis, like you have all these mortgage backed securities, right? That so you have say a thousand mortgages are all pulled together and they're put into CDO's credit default obligations and they're sold around and you have multiple different entities that are the manager to collect the fees on the mortgage. It's all centralized information. It's not necessarily out there. Here in a blockchain, if you had a mortgage on a like just a digital mortgage that is just on the blockchain, it's open, right? You know how much that property costs. You know how much the mortgage was for. You know what the interest rate is. You know how often they've been making their payments because every time they send their say USDC or USD1 stablecoin to the smart contract to pay their mortgage. It would get distributed automatically to whoever owns the rights to that mortgage. And you'd be able to know in real time who's paying their mortgage on time, whether it's up to date, the property that the mortgage is tied to, any other. If all mortgages were recorded on a blockchain, you would know how many mortgages are on that house, what other liens are on that house. And it would just pretty much eliminate what's called counterparted risk. And so counterparted risk is when you have multiple entities, multiple people involved controlling different information that you have to verify. And it's just, it gets convoluted. Right. So if you put, say one, let's say a thousand mortgages, just all the mortgages were on chain and you have a thousand mortgage pool, you'll know in real time it's up to date. So In the 2008 crisis, happened is you have a thousand mortgages in this CDO, you have a thousand mortgages in CDO B, you have thousand mortgages in CDO C. so, say CDO A, that was 99 % up to date. Everyone was good, they're paying, it's a valid security and it's still going to have its yields, it's still going to maintain its value. Thomas Gaffney (17:29.495) The B has 50 % in default and they're going into a foreclosure. And then you have C that's 80 % valid and only 20 % is in default. And so what was happening in the 2008 crisis is that no one knew exactly what was in each one of these little pockets of securities. So they just shorted the entire market, right? No investor is going to short a 99 % valid security because they're going to lose on their bet. So like, I'm not saying it would have completely resolved the whole issue, but it would have made it significantly less painful and significantly less severe. So over time, I do think that all mortgages likely will be on the form of blockchain, whether it's crypto or not, just because It's just much more efficient system, right? As humans, we're constantly evolving. We're constantly being driven to be more efficient and more effective and building on top of that. And so it's just a logical next step to have that, to have that technology brought into this mortgage industry because, it makes it safer. It makes it more reliable, right? And if it's safer, more reliable, you have less defaults. If you have less defaults, you can have more money to lend out and allows the economy to kind of in terms of mortgages to speed up, grow and lend out with less systematic risk with less risk for the banks, make it easier to get a mortgage. Because all this information is being updated real time rather than taking months and years to figure out the whole mess of what happened in 2000. Brent Peterson (19:08.812) And is this something you see banks adopting eventually? Thomas Gaffney (19:12.133) without a doubt. mean, if like, and like I said, if it's not through like cryptocurrency, because crypto gets like bad rap once in a while, like, there'll be some form of blockchain, right? Right. Like, so I've with this RWA platform, I've been talking to a lot of realtors, a lot of people in real estate, and they're they're all on board with adopting blockchain because it is more efficient system. But they're like, keep the blockchain dump the crypto, right? But You kind of can't have one without the other because I also was kind of on that fence of being like, I believe in blockchain, but crypto might not work. crypto blockchains are live on the internet, right? And you need some kind of means of exchange to make blockchains work. And that would be something like a stable coin, some kind of token, some kind of cryptocurrency. Right. And so I do think they will adopt that eventually. It's a much more efficient system. It's much more effective system. Yes, they'll learn at lose out on some transaction fees, maintenance fees, and stuff, cetera. But I think they'll gain more by being able to have more volume, less downside risk, more like discrepancy and being able to see the transparency of everything that's going on in chain. Brent Peterson (20:25.186) Yeah, that makes it easier to resell to write, you know, the risk involved and there's no speculation on the risk inside that mortgage. Thomas Gaffney (20:32.887) Exactly, because it's all real time, right? if you, I mean, if you have one of say an RWA with 1000 mortgages in it, if 50 % of them are default, you'll know, so you can short that one, and then go buy the one that's 99 % up to date, right? Brent Peterson (20:49.454) Yeah, that's interesting. Thomas, you know, this time I always go so fast. It's been super interesting. So as I close out, I give everybody a chance to do a shameless plug about anything they'd like. What would you like to plug today? Thomas Gaffney (20:54.048) Haha, yeah. Thomas Gaffney (21:01.911) Sure. mean, I'll have to plug Hearth Labs is what we, it's so, OFA group, Hearth Labs is a wholly owned subsidiary. We are building out an RWA launch pad where we are trying to attract, different properties to be put into an RWA tokenized, and kind of bring this, tokenized future to the world, right? And to the public. And we want to be able to give, the opportunity for real mainstream investors to get some interesting investments and opportunities for really attractive investments that they previously wouldn't have been able to get before. so especially if you like real estate, if you are watching all the New York high real estate shows, and my wife watches all those where they're, I think it seems like Ryan Sirhan or something like he's super popular right now. We're making it. accessible for the average day person to own some of these cool 100, 200, 400 million dollar buildings, right? Just a portion of it. So check us out, Hearth Labs, OFA Group. Brent Peterson (22:09.132) Yeah, I spell that. Thomas Gaffney (22:11.079) Hearth will hearth actually, but I pronounce it hearth and my family did H e R H e a R th labs labs and OFA group is OFA gr you GRO UV Brent Peterson (22:26.84) Perfect, I'll make sure we get those in the show notes. Thomas Gaffney is the Chief Operating Officer of OFA and Hearth Labs. Thank you so much for being here today. Thomas Gaffney (22:36.161) Thanks, Brent. I appreciate it. Thanks for having me on.