The Groma Mission

Groma was founded on the belief that the world works better when everyone owns a part of it.

Our plan enables this via the following steps:

1. 1Enabling more people to own more real estate

2. 2Turning rent payments into distributed ownership of real estate

3. 3Providing a platform for better governance and currency

But before we discuss this plan in depth, let's discuss what we mean by "the world works better when everyone owns a part of it."

The world today is full of opportunity, but it is nevertheless clear that many of the human systems that currently exist are not well suited to the challenges we face. Perhaps the most obvious example of this problem is the juxtaposition of immense productive capacity with artificial restrictions on the actual use of this capacity.

Less abstractly, building homes is a well understood, highly scalable process that could, if left unchecked, provide high-quality living spaces that would be affordable for the vast majority of households in developed countries. In reality, many of the highest-opportunity parts of these countries have become incredibly expensive to live in, largely as a result of artificial constraints on the supply of housing in these areas. This has a number of undesirable consequences:

These dynamics create a system of haves and have-nots in which financial gains are decoupled from actual economic productivity. This contradicts one of the core underlying assumptions of liberal capitalist systems: that people should be compensated proportionally to what they produce. When this assumption is broadly valid, incentives are aligned–each individual best serves their own interest by adding as much value as possible to society. When this assumption is not broadly valid, incentives are misaligned, and individuals may be able to serve their own interests by engaging in behavior that detracts from society overall.

This is what we mean when we say that “the world works better when everyone owns a part of it”. When some people’s ownership stake is artificially large and others’ is artificially small (and often nearly nonexistent), the consequences extend beyond distributional fairness. When people believe–accurately, in this case–that unequal outcomes are caused by procedurally unfair rules, they may seek to counter this unfairness by advocating for other rules that are unfair in their favor.

In this defect-defect equilibrium, both private individuals and the politicians who represent them spend time looking for ways to benefit themselves at the expense of others instead of engaging in voluntary, positive-sum activities. The net result is a society that progresses more slowly, that contains more animosity, and that abandons lessons about cooperation and coordination that have been hard-won by humanity over millennia.

This process must be reversed. Groma doesn’t expect to fully solve the problem–it has too many different dimensions to be fully solved with a single project–but, as both housing and currency play a critical role in the modern economy, we believe that re-engineering these systems to enable everyone to have a real stake in them will constitute significant progress towards moving society in that direction more broadly.

The rest of this whitepaper will explain in detail how we plan to achieve this goal. It is broken into the following sections:

Outside of settings with evolved traditions of cooperation, human life is solitary, challenging, and relatively short. But cooperation is an impressive emergent feature of society. Humans and our primate ancestors wouldn’t have survived long enough to evolve into the sophisticated readers of this whitepaper if it weren’t for cutthroat self-interest programmed deeply into their brains. Nevertheless, cooperation is all around us. Everyone reading this paper has likely been raised under the aegis of laws and cultural norms intended to prevent people from pursuing their own interest at the direct expense of others; this dynamic has created incredible value for society as a whole. Yet, despite these institutions curbing our natural instincts, that atavistic self-interested imperative still lives within all of us, almost unchanged since the first Homo sapiens walked the Pleistocene savannah. Any effort that seeks to create significant societal change needs to accept as a precondition that we are self-motivated. This self-interest must be embraced and channeled, not denied.

The consequence of this is that people’s behavior and the outcomes produced by it are only as good as the systems in which they occur. In short, civilization can be framed as a series of agreed-upon mechanisms to regulate, moderate, and generally channel human self-interest into broadly beneficial behaviors. That gives preeminent importance to the design of those mechanisms. At this point, developed countries tend to have most of the basics down: laws against initiating violence, laws against theft and fraud, laws that protect the commons, and cultural norms that favor cooperation. This reduces the likelihood of the worst outcomes, but there are still a lot of major human systems that aren’t quite up to the task of optimally channelling human self-interest, either because they try to work against it or don’t understand it sufficiently well.

Groma’s design philosophy is predicated on the idea that the most effective way to achieve positive societal outcomes is to create rules and mechanisms that channel the self-interest of each individual in the system towards collectively beneficial ends. Humans are self-interested by evolutionary imperative, but also intelligent and capable of projection and foresight. Good mechanisms accept our fundamental self-interest and harness it using transparent mechanism design to facilitate a better path at each step along the way. This is not a new idea; some of the most important progress made by humanity over the course of its history has been the development of political, legal, and cultural institutions that have recognized this principle and constituted steps away from the defect/defect equilibrium that is the state of nature and towards the cooperate/cooperate equilibrium of a well-functioning society. These include useful policy tweaks like carbon and congestion pricing to fundamental building blocks of civilization like property, due process, and the rule of law.

The progress made thus far is impressive and deserves our respect and consideration. This paper seeks to improve and iterate upon current progress, not reject or diminish it. As discussed in the classroom vignette at the beginning of this paper, the evolution of many of the social technologies that we rely on daily was shaped heavily by the physical technologies and scientific knowledge available at the time. Roman voting systems involved tossing stones to one side or another of a bridge. Was that ideal? Of course not, but it was a decent system for the time. It was particularly non-ideal for absentee Roman voters, a problem we’re still struggling with 2000 years later, even though the technology we have to solve it is far more advanced than in the times of the Caesars. In many cases, the advancement of these social technologies has not kept pace as these technical constraints have been lifted. State institutions in particular are overrepresented among these laggards, largely as a result of insufficient incentive alignment stemming from weak exit rights and imprecise mechanisms for conveying voice. If a company doesn’t keep pace with its competitors, you can stop buying their product, or cancel your subscription and “exit” to an improved service offering. It’s much more difficult to exit your government, and governments, like companies and people, react to stimuli. The slower and less effective the stimulus, the slower and less impactful the progress.

The problems Groma intends to solve have been in the crosshairs of governments and nonprofits for longer than we’ve been alive. Much progress has been made, but not as much as we’d like. It’s hard to achieve long-lasting change when solutions rely on top-down decrees by slow-moving institutions or soliciting charity. Unlike governments, Groma can consistently prioritize the long term without compromising our principles for the sake of short-term re-election efforts. Unlike publicly traded companies, Groma will not be beholden to quarterly analyst calls and short-term profit motives. Unlike nonprofits, our programs seek to serve our investors’ consciences without emptying their wallets and, by producing compounding returns, multiply our impact over the years. We believe that, by establishing smart governance principles that ensure the long-term profitability of Groma and that push incrementally towards our broader goals, we can create self-sustaining growth that only requires each individual to act in their best interest in each single moment, yet puts us all on a trajectory towards lasting positive impact.

Self-interest not only drives individuals to adopt Groma in the first place, it also creates incentives for them to remain engaged participants in the decision-making that the Groma ecosystem enables. In network-effect-laden sectors like currency and real estate, convincing individual, uncoordinated actors to move from an established paradigm to one that’s unconventional and untested requires making each incremental step a net gain for the individual, independent of others’ behavior.

Groma aspires to re-engineer the institutions of housing and currency to bring about the world envisioned in Mr. Yorage’s class, ideally before 2071. The scale of transformation described here is ambitious, but we believe that conditions today make it not only possible, but necessary. The rest of this section of the whitepaper will describe in detail the social, political, and economic change that we expect Groma will enable. Our goal in writing this paper is not to convince our readers that Groma is a good investment at the individual level, but to make the case that Groma has the potential to transform fundamental aspects of our society, notably real estate ownership and currency, to create positive lasting change.

Real estate has suffered from a lack of innovation relative to many other sectors of the economy, resulting in an equilibrium that is suboptimal for a large percentage (arguably a majority) of participants. Groma incorporates a number of mechanisms designed to leverage individual self-interest to break out of this equilibrium into a broadly superior one.

What’s wrong with the real estate/housing market in the US? If your knee-jerk reaction is that “it’s too expensive”, then we agree, but we want to start with the underlying economic factors that contribute to this outcome. To start, let’s discuss some conditions that are necessary for competitive, well-functioning markets:

Below we provide our perspective on how certain currencies measure up against these goals.

In the US housing market (and, to be clear, in that of most countries), none of these conditions for effective marketplaces apply. Access to information has improved dramatically in recent decades with tools like Zillow/Trulia, Redfin, and local Multiple Listing Services (MLS), but even with transparent information on price, location, room count, square footage, and a variety of other quantifiable parameters, there are many other characteristics for each property that aren’t accessible via the internet, requiring in-person visits or specialist inspections that are costly in time, money, or both. These factors vary substantially from property to property, meaning that even two apartments that are identical on paper won’t be in practice, unlike truly fungible assets like securities or Bitcoin.

By far the biggest impediment to a competitive housing market, however, are the high barriers to entry for both buyers and sellers. Buyers must typically contribute a down payment of tens to hundreds of thousands of dollars to acquire a mortgage, and an immensely complex regulatory landscape favors large, experienced, and liquid institutional investors, both because more favorable lending terms are available to these entities and because regulatory compliance and political influence are subject to returns to scale. Sellers aren’t quite as badly off, but they still typically have to undertake costly and time-consuming relationships with brokers in order to successfully sell their properties. Additionally, existing property owners have an outsized influence on housing regulation, allowing them to protect their market position by limiting supply increases. Limiting supply is good for existing homeowners in a given area, but bad for society at large, as it keeps the price of housing artificially high.

The net result of these factors is a system in which both explicit housing regulations and the emergent properties of the uncoordinated elements of the system heavily advantage entrenched interests at the expense of those who don’t yet have a foot in the door. The housing supply increases at a much slower rate than would be preferred by the millions of residents and potential residents who don’t yet own property. This favors existing property owners by propping up home values. And when new housing is constructed, it is disproportionately likely (relative to what one would expect in a well-functioning market) to be built by the big developers with the capital, insider knowledge, and longer time horizons necessary to deal with all of the market’s obstacles. This exacerbates a trend that has been observed dating back to the 19th century, in which a disproportionate share of the immense productivity gains generated by industrialization then and in the modern knowledge economy now is captured by a small minority of property owners. Without change on a systemic scale, this pattern is likely to continue for the next century as well. But changing a system this big, with this many entrenched interests, requires coordinating individual self-interest at every step to create a better set of mechanisms that can generate better societal outcomes.

Groma aims to address these problems in two ways. The first relies on Groma being accessible to anyone and an associated financial innovation that we call the Liquid Mortgage that we believe can supercharge the renter’s path to real estate wealth accrual, just like the federally subsidized traditional mortgage industry has. The second, what we call Polis, relies on the transparent voting protocols enabled by Groma’s blockchain underpinning and will only achieve its full efficacy once a critical mass of Groma holders are engaged in its processes.

What is GromaCoin?

At the most basic level, a GromaCoin represents an ownership share in a blockchain-powered REIT.

To be more specific, the GromaREIT is an equity REIT that currently owns primarily residential real estate. This means that GromaCoin holders are effectively part owners of a proportional share of these properties, receiving dividends based off of the rent the properties produce. Additionally, as the net asset value (NAV) of the properties changes, the value of GromaCoin changes proportionately.

The primary way in which GromaCoin differ from shares in a traditional REIT is that they are denominated as fungible blockchain tokens. To learn more about why we're using blockchain in this way, see our "Why Blockchain?" section.

The Groma cryptocurrency will be available, pending regulatory approval, to all adults globally, enabling retail investors of all stripes to bypass the barriers to entry that have traditionally kept the most attractive real estate investment opportunities off-limits to all but the most established investors and institutions. Because of its targeted scale and embrace of efficient technologies like blockchain, GromaREIT is able to pass on the benefits of its buying power, market expertise, and levered borrowing to everyday investors. In addition to removing barriers to entry, this solves the substitutability problem by replacing ownership of discrete, variable real estate assets with a single homogeneous one.

While simply buying Groma may be a good option for many investors, we recognize that not everyone has enough free capital on top of their existing expenses to make substantial investments in Groma, or any real estate for that matter. Many renters, especially those with low incomes, are unable to save up enough money for a down payment on a mortgage, and as a result end up stuck in a cycle of paying hundreds or thousands of dollars in rent each month without building any financial equity. Those who can afford the tens or hundreds of thousands of dollars necessary for a down payment are able to build equity, but are nevertheless tied down to a static, non-diversified asset.

Groma’s Liquid Mortgage system provides a better option for both of these groups. Everyone needs living space, and most people want to be able to build real estate equity, but it’s not actually necessary that the property someone is building ownership in be the same as the property in which they live.

To illustrate how Liquid Mortgages work, consider the case of someone who has a budget of $2,000 per month for living space (such as rent). If they simply pay $2,000 each month in rent, they’ll get to enjoy the benefits of that living space, but they won’t accumulate any lasting value. A Liquid Mortgage allows them to do the following instead:

We'll show how this process would play out using two different sets of inputs - one in a high-interest-rate environment like the one we have in Q3 2023 (with somewhat lower appreciation and higher distributions), and another in a low-interest-rate environment like the one we had in Q2 2021 (with somewhat higher appreciation and lower distributions). Later on, you'll be able to plug your own parameters into our interactive tool to experiment with different scenarios.

This process is new, but it’s no more complex than a mortgage, no more costly than pure renting, and can be repeated each month. The first month is pretty simple from an accounting perspective: You buy $2,000 of Groma, take out a loan for $2,000, and spend that on rent. You have assets worth $2,000 and debt worth $2,000, putting you at parity with a renter with both equal to $0. It’s in the second month where things start to get interesting, as that’s where appreciation, distributions, and interest come into play.

You’re reading this correctly. After ten years of Liquid Mortgaging, with no more investment than simply renting, the user will have more than $46,000 in additional net assets in the high-interest-rate scenario and more than $75,000 in the low-interest-rate scenario. Here’s what it looks like in table form, factoring in all the components.

At year 10, if the Liquid Home user wanted to “zero out” their Liquid Mortgage debt, they could do so by selling their Groma, paying off the debt fully, and pocketing the accrued net equity. They might not want to do so and instead continue to accrue distributions and appreciation over time, but they also might want to cash out and use that accrued equity for a different purpose, perhaps even a down payment on a traditional home.

This isn’t magic; in fact, it shouldn’t even be that surprising. We all intuitively know that obtaining living space by buying a home with a mortgage is a better path to wealth creation than renting. The math here is similar, but with some of the initial obstacles (such as picking a single home, or a down payment) removed or inverted.

There are a few key innovations here, all of which rely on the Groma ecosystem, but can be boiled down to simple non-technical concepts:

To be clear, any investment in assets that can vary in value entails risk. If, for some reason, the value of the Gromabase were to underperform expectations, the numbers shown above would be less favorable. Using high-interest-rate scenarios to be conservative, the risk is still highly constrained - even if Groma’s appreciation were to underperform this estimate by 20%, the investor would come out ahead by over $38,000 after ten years. In fact, Groma’s underlying real estate assets could fail to appreciate at all and the distributions alone would result in a net gain of over $5,000. It could even depreciate by 1% over 10 years and still come out slightly ahead! The distributions are also subject to variation that can impact the model, but as you can see for yourself, real estate income in the form of distributions would have to significantly underperform interest rates for many years to achieve a net negative return.

This all simply illustrates what a raw deal renting is compared to owning a home, or a Liquid Home as the case may be. The fundamental issue is that rent money is spent, with no asset value created at all, each month. Even producing a poorly performing asset is better than producing no asset at all. That’s the relevant comparison here: Groma needs to do better than fully consuming $12,000 a year in rent money.

This is not a trivial innovation. Giving renters the ability to build a substantial amount of wealth without needing to earn more money or reduce their consumption elsewhere has the potential to provide long-term financial security for huge swathes of the population that have historically struggled to achieve this. We believe that Liquid Mortgages open up a second, equally viable path to the American Dream of wealth through homeownership. And this financial security doesn’t exist in a vacuum — the impacts it will have on outcomes in health, education, and overall quality of life are hard to overstate. While it’s impossible to predict all of the second-order effects of a change this big, we strongly believe that they will be overwhelmingly positive.

While the Liquid Mortgage tackles one problem within real estate (individual wealth-building), another important problem to address is the gap between housing supply and demand. We believe that this gap is largely the result of insufficient transparency and coordination, and that progress can be made with better mechanism design.

To that end, Groma plans to establish Polis, a blockchain-based system of soliciting and recording votes on any development proposals that reach a certain stage of planning. The most socially impactful function of Polis will be to provide insight and feedback on local development issues. Currently, development decisions in urban areas tend to represent the preferences of a fairly narrow set of residents and business interests for structural reasons associated with city approval processes. GPC users will be able to vote on a series of local governance/development questions (e.g. a proposed apartment building or a change to zoning to allow certain developments).

Two points of clarity are worth highlighting:

As described in Mr. Yorage’s class, our proposal is to create seven Strata (concentric areas) around each proposed development to facilitate regionally grouped feedback and express in an anonymized but segmented form the different preferences that may exist across those regions. For example:

For any given project, a city council could choose to weight that project’s closest neighbors more heavily than residents elsewhere in the municipality, which in turn could be weighted more heavily than residents of other parts of the state, which in turn would be weighted more heavily than residents of other states. Polis will simply provide government decision-makers with the relevant polling data by Stratum region, at which point they will be able to integrate it (or not) as they prefer, and weight the different Stratum as they see fit to help inform their decisions.

Even these seven Strata should be viewed as a starting proposal, and assuming sufficient vote density to guarantee anonymity, the data could be provided such that individual city councils could create their own regional data slices. Our goal is not to be prescriptive on how this data is used, but rather to provide a mechanism for the preferences of a broader group of citizens to be taken into account as city development is planned.

Along with providing useful, scalable input to city planners, Polis will allow constituents, journalists, and commercial enterprises to better hold their representatives accountable to the preferences of those affected by their decisions. The utility of these data will, of course, depend heavily on the scale of Polis's user base in a given area. The opinions of 100 users in a metro area of millions won't do much to sway policy outcomes, but the opinions of hundreds of thousands or millions will. This means that the deployment of Polis will only occur once Groma's user base has grown enough to make Polis a useful tool.

The other societal institution that we seek to positively impact is money. While there have been lots of innovations in terms of how money is used, there have been very few in terms of what it is. This is in part the result of states’ self-interested insistence for most of history that the currencies they issue be given special privileges relative to other currencies, but also of the inability of decentralized actors to adequately coordinate on alternative currencies prior to the information revolution of the past few decades. This latter dynamic began to change with the advent of the internet, and has accelerated over the past decade with the invention of Bitcoin and thousands of ensuing cryptocurrencies. In a manner analogous to the island scenario shown above, we plan to take advantage of these new technologies and the growing awareness of monetary alternatives to provide currency users (i.e. nearly everyone) an easy, low-activation-energy path from the currency system that exists today to the better one that we envision. It’s not possible to just snap our fingers and transition immediately, so we have to ensure that each step towards it represents an improvement for each individual faced with the decision.

The cryptocurrency explosion, combined with the US government’s increasingly loose monetary policy, has led to a large-scale re-evaluation of the nature of money. A key principle to keep in mind in this discussion is that “money” is best understood not as a binary label that something is or is not, but as a sliding scale based on a number of essential characteristics:

Below we provide our perspective on how certain currencies measure up against these goals.

Some currencies perform well in terms of some characteristics and poorly in terms of others, whereas other currencies may lag or excel across the board. Economists have long understood this, but it has been less apparent to the majority of the public until recently. After all, most US citizens have had little reason to use currencies other than USD outside of foreign travels, much less perform a comparative analysis of the merits and demerits of a basket of available currencies. Why spend energy on this when the default option is perfectly adequate?

Lately, though, the federal government’s approach to fiscal and monetary policy has become sufficiently adventurous that inflation has risen into the mid- to high single digits and concern over the dollar’s long-term suitability has begun to infiltrate the zeitgeist. While sheer network effects virtually guarantee the dollar’s continuing pre-eminence as a medium of exchange, and its inflation rate remains low/predictable enough to preserve its usefulness as a unit of account, more and more dollar users are realizing that there are alternate, perhaps better, options for stores of value. While it’s unclear exactly which forces have been suppressing inflation in the US in the face of the 2020/2021 explosion in the money supply (candidates include COVID-induced saving, low energy costs, and QE channeled into the stock market rather than consumers’ wallets), enough people are unwilling to bet their life savings on continuing low inflation that cryptocurrency has come to the forefront of discussions of what will succeed the dollar.

This is unsurprising — compared to the Fed, leading cryptocurrencies are paragons of transparent governance and resulting supply stability, though not necessarily price stability. This should be unsurprising, since every cryptocurrency is forced to compete with numerous rivals trying to upstage it. Plus, cryptocurrencies aren’t burdened with the Fed’s full employment mandate; they are free to focus on the value of money as money, not as a tool to achieve governmental goals. Their decentralized nature creates user confidence without the implicit threat of force that backs government-issued money, and while not all cryptocurrencies end up being trustworthy, it’s impossible for them to achieve long-term user growth without consistently responsible governance.

That said, Groma does not aspire to be another entry on the list of speculative cryptocurrencies. Bitcoin has its place, but although its issuance cap supports the argument that its value should increase in the long term, its abstractness leaves the question “by how much?” sufficiently open that speculation and volatility have been defining features of its history thus far. In this way, Bitcoin serves as a superior store of value to inflationary fiat currencies, but is less appropriate as a unit of account, where predictability is key. Will Bitcoin be less volatile in the future than it is today? Probably, but we don’t know how long that will take, and we don’t want to wait.

Because of these factors, we’ve chosen to base Groma off of real estate: a tangible asset class with a well established value that also has a special place, we believe, as the most obviously core input to all forms of economic activity. This provides a transparent reference point for the value of the currency that should prevent extreme speculative variation. We realize that, for many people, this level of volatility can be a bonus, both because it creates the potential for 10x annual returns and for its entertainment value. Nevertheless, we believe that this is not an appropriate feature for a currency that aspires to compete with the dollar in terms of daily use. We believe transparency in assets, ownership, and trading will lead to a market-defined price characterized by its accuracy and predictability.

The expectations created by this policy will act as a counterweight to volatility in their own right, and any remaining exuberance can be harnessed into the purchase of more real estate to grow the Groma ecosystem more quickly. The price of Groma should always be some reflection of the underlying value of the assets, but the rate of growth of the Groma ecosystem may vary, as more excitement may lead to more holders of Groma and more real estate acquired to balance the inflows. Greater size, scale, and diversification also ought to increase stability over time.

We also object fundamentally to the concept of seigniorage. The issuers of a currency in a sufficiently competitive monetary ecosystem should not be able to reap profits by simply issuing more of the currency at an arbitrary value above its costs. That is a useful feature for governments, but not a “good” feature for currency holders in our opinion and a tactic that is neither allowed, nor even possible, within the governance rules of Groma and its explicit 1:1 backing by physical real estate assets.

It’s important to note that creating a viable alternative currency is not just about safeguarding people’s savings. To paraphrase the excellent Stone Ridge 2020 Annual Report investor letter, money that can be created or destroyed en masse undermines the role of currency in transmitting price signals, and money that is channeled in and out of the economy via a select cadre of favored institutions undermines the notion of a currency that is impartial to the status of its users (even as so many other economic institutions aren’t). Trustworthy, transparent money not only safeguards the savings of those who hold it; it also transmits price signals more accurately than money that can be inflated on a whim, and renders impossible the stealthy transfers of wealth entailed by quantitative easing. These are all goals that we endorse (though we acknowledge that they’re not without trade-offs), and we look forward to building Groma to make them a reality.

To wrap up this section, our belief is that Groma can not only provide a valuable means of accessible wealth accretion to its holders, but also provide an entrant into the currency landscape that leverages new technology and strong governance to be a medium of exchange, a unit of account, and a store of value worthy of broad consideration.

The difference between visionary and delusional is that we wrote down a couple bullets on how to make it happen

We believe the set of principles and aspirations expressed above are compelling, but simply envisioning a better future has never been enough to bring about change at the scale we’re describing. To achieve the world explained by Mr. Yorage will take time and effort. There’s a reason we set his lesson in the 2070s, not the 2020s or even the 2040s.

But we do see a clear path from here to there and have broken it down into achievable, actionable steps which we describe in this section: The Roadmap.

The Groma roadmap consists of five phases:

The first step towards creating a cryptocurrency based on real estate is to own some real estate. To that end, prior to beginning work on Groma’s technical and political elements, the team behind the project founded a local real estate development firm in Boston that was also called Groma.

Names are important, and Groma’s name was selected for three reasons. First, the allusion to Growing Massachusetts, our home state. Second, the less obvious historical reference to the groma, an ancient surveying tool used by the ancient Roman empire to level surfaces, credited as one of the main tools used to build the aqueducts that paved the way for massive quality of live improvements for the Romans and the rapid expansion of Roman civilization. And third, the domain was available.

Groma set out to do two things. First, to add value to our city, our tenants, and our investors by creating high-quality residential living spaces. Second, Groma served to create an asset base of ~$100 million (so far) to act as a testing ground for many of the theories and learnings required to successfully execute on Groma. A big idea merits a big test. Groma’s first fund raised $20mm in investor capital, along with $60mm of bank debt, to acquire ~45 multi-family properties in and around Boston. Through successful research, acquisition, renovation, leasing, and management efforts, Groma Fund I was able to provide a high-quality smart-living experience to over 300 tenants while working closely with many city agencies to provide affordable housing to residents in need of assistance. We are proud to highlight that nearly a third of our units are leased to tenants benefitting from these programs, providing high-quality living to all members of the community — and at an ever-growing scale, since it is also a viable investment for our backers. Groma Fund I is on track to provide our initial investors with our target returns of a >7.5% annual equity distribution and a >10% IRR over the next ten years, while doing a lot of good in Greater Boston.

We’ve also demonstrated our ability to scale this model; GMF I’s success was not a fluke. After the success of Fund I, Groma raised Fund II (a $50mm fund focused on additional multi-family investment and some ground-up development in Greater Boston) and Fund III (a $35mm fund focused on investment in Opportunity Zones in Greater Boston). Collectively, Groma is on track to have over $250mm in real estate assets under management by the full deployment of these three funds, and we project having over a billion dollars of assets under management by the end of 2022. We intend to use these assets and the infrastructure and expertise our team has built along the way to build a stable foundation for Groma.

While we're currently focused entirely on investing in the communities in Greater Boston, Groma will need to be everywhere and accessible to everyone in order to become a useful currency. To achieve this, we intend to replicate the Groma investment model in other cities in the US and across the globe. We also will partner with local developers to leverage their expertise and invest Groma funds into their efforts. This will likely follow a phased expansion approach, first adding a second city, then a few more, then dozens until we can achieve global coverage.

While we are publishing this whitepaper in 2023, we still have some technical work to do to make the Groma vision accessible to anyone outside of a few beta testers. In the next 12 months, Groma aims to complete three core technical tasks:

While new Groma will be issued to fund the acquisition of new properties and sold directly to investors, Groma will also facilitate a secondary market for trading. This is crucial to provide liquidity as well as setting a market-driven daily price for Groma. After the initial offering, the goal is for all new Groma created to fund acquisition of new property to be offered at the then-current market price. This will provide market-driven feedback mechanisms and guide the overall growth trajectory of the Gromabase.

Each token will be defined as “one Groma”, and will be backed by an initial amount of real estate. It’s important to note that while Groma is issued to buy real estate, and that real estate is in a sense a fixed amount/asset, it’s not representative of a fixed dollar value over time because of appreciation/depreciation of the assets, distributions, and inflation (or theoretically deflation) of the dollar. It’s also not a fixed percentage of the Gromabase because of new acquisitions.

To illustrate this definition, consider the following scenario. Let’s say that the initial offering of Groma consisted of one hundred million Groma backed by $100M of real estate in 2023. At that time, one Groma = 1USD. Suppose that five years later, by 2028, the real estate from the initial offering has appreciated by 25%. In that case, the value of one Groma would have also appreciated by 25% in real terms — that is, one Groma would be worth $1.25 in 2023 USD (let’s leave the depreciation of the dollar out for the sake of simplicity). At the same time, new real estate — let’s say $1.5B in 2023 USD — has been added to the Gromabase. The Gromabase is now worth $1.625B in 2023 USD, with a total count of 1.3B Groma tokens. In this way, the value of one Groma increases and is invariant with the creation of new Groma, while the percentage of the Gromabase constituted by one Groma decreases (by a factor of 13). The below graph illustrates this relationship.

It’s also worth noting here that much of Groma’s real estate will be purchased with leverage, i.e. the use of a combination of debt and equity. For example, Groma might purchase a $1M building with $300k worth of investor equity and $700k worth of debt. In this case, we would issue $300k worth of GromaCoin to reflect the net asset value (NAV) of the building: $1M of real estate value minus $700k of debt. This multiplies the value of any future gains or losses relative to the invested equity. If the building’s value increases by 5%, the $300k investment is now worth $350k (an equity gain of 17%), but if the building’s value decreases by 5%, it results in a 17% equity loss. Groma’s use of leverage is based off of a core assumption of our investment thesis: that, on average, real estate values are more likely to increase than decrease over the long run.

New Groma may only be issued to add new real estate to the Gromabase. The method by which this happens is similar to the management structure of a traditional REIT, mixed with the ideals of a cryptocurrency utilizing a decentralized autonomous organization (DAO) to gather feedback on overall development plans and land use policy within any given city. It is important to note that while new Groma fund the purchase of a specific property, they are not intrinsically tied to that property in any other way. One Groma = one Groma, no matter which property it was initially minted to acquire. Each Groma is meant to be a truly diversified fractional piece of a very large amount of underlying real estate across different cities, regions, countries, and even estate types.

In addition to the details of real estate acquisition and our technical implementation, it’s important to discuss why we’ve chosen to build Groma on a blockchain instead of using a more traditional route with a simpler regulatory and technical path.

To answer the above question properly, it is important that our readers have a baseline understanding of how blockchains work and why they can be valuable technical tools in certain scenarios where traditional databases might not offer the same benefits. Our goal is to make Groma accessible and understandable to everyone, so we want to outline some key concepts about blockchains for those unfamiliar with the technology. If you already have a good understanding of blockchains and related technologies, feel free to skip the "What is a Blockchain?" section and move on to the next one.

Why blockchain versus traditional financial database approaches?

Most traditional financial systems (such as REITs or stock exchanges) are not built on blockchain technology. We see several technical upsides to building Groma on a blockchain, and on an idealistic level, there are several aspects of what the crypto community stands for that align with our mission.

For these reasons and many others, we believe blockchain to be the correct underlying framework for Groma.

Why Ethereum?

We’ve chosen to build Groma on the Ethereum blockchain over other existing blockchains or building our own. Ethereum is a vibrant, battle-tested ecosystem that facilitates trustless transactions and allows us to efficiently bootstrap our own platform and focus on developing Groma’s novel features. We also value Ethereum’s decision to move from a proof-of-work model to a proof-of-stake model given the latter’s superior energy efficiency. It is not inconceivable that in the future Groma could migrate to its own blockchain, leveraging some alternative validation model, but we believe the benefits of Ethereum far outweigh the potential upsides to implementing our own blockchain for the foreseeable future.

An overview of our smart contract architecture on the Ethereum blockchain.

Groma will implement multiple Ethereum smart contracts, including:

We plan to make all data regarding Groma tokens, real estate assets, and their financial performance publicly available via an API with standardized OpenAPI documentation. This will be supplemented by curated reporting dashboards and regular data reporting.

Primary Issuance and Secondary Trading

We’ll talk in the next sections about our regulatory approach for primary issuance (people buying Groma to fund new property acquisitions) and secondary trading (people selling their Groma to other people or institutions). We also want to provide additional insight here into the technical considerations to leverage the advantages of blockchains for these two core activities.

Primary Issuance: Primary issuance is the term used to describe issuing new shares to purchasers. In our case, this means selling newly minted Groma tokens to individuals or institutions who would like to purchase them. As described elsewhere in this whitepaper, newly issued Groma can only be created specifically for the purpose of expanding the Gromabase by buying new properties that meet our criteria.

While this structure could be accomplished in the traditional financial ecosystem, we believe there are benefits that doing this on a blockchain can provide such as:

By issuing shares onto the blockchain instead of a traditional share register, Groma aims to increase speed, security and transparency of transactions.

Secondary Trading

A critically important part of the Groma vision is to enable real estate ownership in a liquid asset class. Liquidity, i.e. the ability to sell your Groma for other currencies whenever you want, will be provided over time via a secondary market where individuals and institutions can buy and sell Groma to each other.

The term secondary market may be new to many of our readers, but it is almost certainly something that everyone is familiar with. The stock market as we commonly think of it, is in fact mostly a secondary market. When you buy or sell shares of Apple or Tesla, you are generally buying that from someone else who owns it, not from Apple or Tesla directly. The major exceptions to this — and the few examples of primary issuance in the stock market — are IPOs where companies offer new shares to the market or follow-on issuances of newly created shares. But those are few and far between compared to the huge volume of secondary trading on the NASDAQ, NYSE, Euronext, Shanghai Stock Exchange, and others every day. It is so common that “secondary“ has been dropped from the term and most brokers and people just call it “trading”.

New Groma can only be issued to purchase new properties, which naturally limits the rate (and balances the asset value) of any new Groma issued. This is our equivalent of primary issuance. But any holder of Groma should be able to sell their Groma at any time, and others can purchase that Groma on the secondary market at the market value.

While there is no difference between a Groma issued directly and one purchased on the secondary market, a purchaser may choose to buy Groma on the secondary market for several reasons. The simplest reason would be that Groma is not issuing any new Groma at the moment while new properties are being researched, but demand for purchasing Groma could still exist.

Groma will always provide insight into our valuation methodologies for each property in the Gromabase, but individuals and institutions may disagree about that valuation and have their own perspective. Those that think Groma is undervalued might be willing to pay more for it on the secondary market to increase their holdings. Those that think it’s overvalued might be willing to sell it for slightly under current market price to reduce their holdings. All of these activities are standard, and healthy, for any sufficiently sized marketplace.

In order to have an efficient and fair secondary market, it is important that there is equal access to the market and transparent information about market activity. We mentioned one such source of information about the data on our valuations and associated methodologies for each property, but there are other sources of information that are also important to a secondary market, such as who is buying and selling, and how much.

In the traditional financial ecosystem, many methods of market manipulation are illegal, but others are legal and happen more often than is ideal for the interests of non-institutional investors. Recent examples include a massive short (and then short squeeze) on Gamestop and an unravelling of the value of Viacom due to overleveraged bets from Archegos. Each of these activities took place in secondary markets and in most cases was driven by an information asymmetry on the part of one participant, or set of participants, making sizable bets to shift the market.

In the traditional financial system, knowing who is placing which bets is very hard, and that information can be valuable. As such, it is often unknowable, or known only to those willing to pay for it. For an example that may be uncomfortably close to home to many of our readers, the value of this data is one of the primary ways that Robinhood is able to offer “free” trading. They gather the information about their users’ intended trades, and prior to executing the trade, sell that data via real-time API to market-makers, who can instantaneously front-run those trades. Each individual front-run might only net the market-maker a few pennies (and “cost” the user pennies) but collectively it’s big business for those in the know. It’s also inefficient and unfair to the average market participant. Robinhood is technically “free” but not meaningfully so. It’s therefore not an example of the type of marketplace that we believe will help push the financial industry forward.

Groma believes that a secondary market running on the principles that underpin blockchain technology could create a more fair, more transparent liquid trading market for Groma by:

A secondary market is crucial to Groma’s goals, but we are disappointed by the governance and stewardship of many secondary market operators in the traditional financial system. We view the principles underlying the goals of many blockchain technologies as an opportunity to set up a better foundation for Groma’s secondary market.

Other Potential Uses

As Groma grows, one could imagine other use cases evolving such as collateralized loans, trustless peer-to-peer transactions, e-commerce using Groma, and many more we hope the community will explore over time. All of these we believe can be done in superior fashions to the traditional financial systems by leveraging the value provided by blockchain technology as described above.

Startups the world over are characterized by a desire to see their goals realized as quickly as possible. Often, this is done with a “regulations be damned” mindset. In many industries, this is an understandable approach — disruptive innovation garners a devoted user base before regulators can catch up, and the users/revenue can then be leveraged into a post-hoc remolding of the relevant laws to better suit the reality on the ground. “Better to ask forgiveness than permission”, as they say. While this has obvious downsides, it’s hard to argue with its effectiveness. Uber is perhaps the most famous example of this willingness to operate in a regulatory vacuum to build a brand new model for transport without waiting for explicit permission to operate. By the time regulators did begin to act, the model was sufficiently entrenched that it was able to (mostly) withstand onslaught after onslaught from other powerful entrenched interests, such as the taxi lobbies. Also, lest we simply critique Uber’s approach, it did also create a new transportation ecosystem that is valuable to many riders and drivers.

However, we firmly believe that this is the wrong approach for the crypto industry. Many cryptocurrencies have already run afoul of regulators by attempting to operate in the margins between regulations. Groma intends to embrace the rules and play within them while advocating for better, more nuanced approaches to cryptocurrencies where we see room for improvement. We intend to do this not just because it is the only legally sound approach, but because we believe that the rules and regulations developed for the financial services industry are in large part well-intended and well-designed to protect people and facilitate safe innovation, not stifle it.

We see many crypto startups playing the role of Roper above, willing to creatively negate the laws of the land that block their desired actions, but without thinking through the broader consequences of the lawless environment that might then ensue. That approach is simply not viable in financial innovation. As Thomas More knew well, a society bound by the rule of law is in everyone’s long-term interest, and we at Groma do not want to undermine this fundamental principle. We intend to play by the letter and the spirit of rules of the US and of any other country to which we expand. We also intend to advocate for changes to those requirements over time to better foster safe innovation.

Our Regulatory Approach

Groma must adhere to existing regulatory requirements to be a safe, investable, and tradeable asset/security for US citizens first (accredited and non-accredited), and eventually citizens of other nations (for their equivalents of large and small-scale investors). Along with the technical pieces described above, we will have to go through several regulatory phases to achieve this.

REITs are a special type of company designated specifically for owning and operating real estate holdings. Groma intends to structure the core Groma asset (GromaCoin) as representative of proportional ownership in GromaREIT (i.e. all the properties in the Gromabase).

As a REIT, Groma will be owned 100% by Groma holders and must meet many regulatory criteria, including the following:

GromaREIT will be a traditional REIT in some ways and a non-traditional REIT in many more ways. Unlike most other REITs in existence, Groma has significant technology needs and requirements in order to be able to achieve our goals and operate as designed, as well as a desire to be actively involved in the development and planning of the communities in which we operate via new tools such as Polis discussed earlier. To facilitate this, alongside GromaREIT, we intend to create GromaCorp, an operating company that will do much of the development work to bootstrap and support the Groma technical ecosystem. This company will do more than just technical work. It will also serve as the backbone of the Groma ecosystem in each region in which we operate, facilitating on-the-ground market research for property acquisition, handling property management and servicing, and engaging with the myriad tasks necessary to successfully build and manage real estate. The envisioned structure of Groma will look something like the following:

Given the regulatory hurdles necessary to reach our desired end state and our unwillingness to take any shortcuts, we will likely go through many phases before reaching the above status. For example, Groma will likely register as a private REIT and accept limited investment from accredited investors to begin with, under Regulation 506(c). While this may seem to contradict our goals of universal access to Groma, this step is a valuable bootstrapping mechanism to gain public regulatory approval, and so we believe it’s an acceptable short-term compromise on our path. The next step would be to "test the waters" on a Reg CF/A+ offering that could open up investment to all investors, accredited or not. Similarly, we may take the interim step, as many REITs do, of offering direct quarterly redemptions at the current fair-market NAV price of Groma tokens to provide liquidity right away before a secondary market is operating at sufficient scale to be viable.

GromaREIT will be a traditional REIT in some ways and a non-traditional REIT in many more ways. Unlike most other REITs in existence, Groma has significant technology needs and requirements in order to be able to achieve our goals and operate as designed, as well as a desire to be actively involved in the development and planning of the communities in which we operate via new tools such as the Geoscalar Polling Core discussed earlier. To facilitate this, alongside GromaREIT, we intend to create GromaCorp, an operating company that will do much of the development work to bootstrap and support the Groma technical ecosystem. This company will do more than just technical work. It will also serve as the backbone of the Groma ecosystem in each region in which we operate, facilitating on-the-ground market research for property acquisition, handling property management and servicing, and engaging with the myriad tasks necessary to successfully build and manage real estate. The envisioned structure of Groma will look something like the following:

The distinction between GromaREIT (all the land and all the tokens) and GromaCorp (the tools, technology, and team) enables us to operate within the current regulatory environment and achieve the vast majority of our goals with Groma. GromaREIT is all of the tokens and real estate asset value in the Groma ecosystem, whereas GromaCorp is the team and technology to facilitate all the operational requirements around those real estate and technical assets.

We believe that the best way to set up institutions for long-term success is to strike a balance between democratic stakeholder engagement to allow for adaptation to changing conditions and a narrow set of durable, constraining rules to prevent the entity in question from straying from its core principles. All of our governing principles will be publicly available with accompanying commentary on why they are in place, and any changes to the most fundamental of these principles will be subject to stakeholder, i.e. Groma holder, approval.

The system we envision is not a purely democratic system. While that may be viewed as a drawback by some, we believe it is a feature, not a bug. Some balance between democracy and technocratic guidance is necessary for this sort of project to succeed. However, most importantly, Groma’s overall system is predicated on strong entry and exit rights. Anyone who is legally allowed to buy Groma can enter (i.e. become a part of the system), and those already in the system can exit at any time by selling their tokens. This means that, if a given person disagrees strongly enough with any new or existing Groma governing principles and is unable to muster the requisite support to change them, it is trivially easy for them to leave (or not enter in the first place).

In this way, Groma’s governing principles represent a true social contract, as opposed to the more common Rousseauian usage of the term. If you were born in Boston, the “social contract” means that it was assumed you accept all laws that have been passed in Boston, in Massachusetts, and in the US since their respective creations despite the absence of any actual consent. Similarly, if you find any of these jurisdictions’ laws distasteful, your ability to leave is feasible, but extraordinarily expensive and challenging. Groma does not work this way, as no participant in our system arrives there without an explicit choice to do so, and any participant can leave at any time. The Groma Constitutional Council and other decision-making bodies therefore have every incentive to ensure that the system works as well as possible for all participants.

Groma will have several core governance principles. These Constitutional Articles are the core of Groma’s governance; they will be broad, change infrequently, and require stakeholder approval to modify. They include Groma’s decision-making structure, its legal/regulatory compliance, and the definition of the currency itself.

The amendment process for adding, removing, or modifying Groma’s Constitutional Articles relies on the combined input of Groma’s Constitutional Council and of all Groma holders. Our goal in this governance structure is to provide a clear framework for what Groma intends to achieve and to make it possible, but appropriately difficult, to evolve how we achieve those goals over time.

First, if you’ve made it this far, thank you for reading. Groma is a big vision. We believe we have a unique opportunity to improve the age-old institutions of currency and real estate in a way that can create positive societal outcomes for millions of people for hundreds of years to come. There is a lot of work to do to realize that vision, and we’d love for you to get involved. Right now, Groma is in a pre-launch phase, so what we could really use right now is your brainpower. Follow along with our progress here, on Twitter, or on Substack, or reach out to us directly with your thoughts, questions or ideas. We hope to be able to welcome you into the Groma ecosystem soon.