Taking a Byte Out of Real Estate with Cryptocurrency

Whether it’s a bubble or bona fide, anyone who pays even cursory attention to the financial world can’t deny that bitcoin is a force to be reckoned with. The decentralized digital cryptocurrency, a form of payment comprised of lines of code, entered the mainstream consciousness late in 2017 and has remained a controversial topic.

The currency that’s purely digital whose value rises and falls quite unpredictably has understandably earned many antagonists. But for true believers, bitcoin represents a revolution in money, where power has been wrested from big bankers and into the hands of the people who use it. So what does that mean for real estate, where major, life-changing transactions happen every day?

There’s been a number of quick adapters all over the industry. From the East coast to the west and even across the globe, Bitcoin has come into enthusiastic use for purchasing real estate. To say that these sellers are simply hopping on the newest craze sells a bit short the advantages that bitcoin carries for the property business.

Average people joining the bitcoin revolution enjoy the freedom from financial institutions that cryptocurrency offers. Rather than a credit card where you’re entrusting your money to a network of institutions, crypto is a one-stop shop without third party interests or issuers taking their cut.

This simplicity in moving funds around is a special advantage when purchasing real estate. The ease of movement eliminates the long waiting periods necessary for looping in the banks, lenders, and fee payments that have been part and parcel of real estate transactions for generations. Today’s cutting-edge homebuyer, armed with bitcoin, can close as soon as they find a property they like, as long as they have a seller willing to play ball. Such expediency is an undeniable advantage.

Buyers hoping for privacy will find exactly what they’re looking for with bitcoin and other cryptocurrencies as well. In an industry where secrecy is often a must for major private transactions, the untraceable, encrypted payment enabled by blockchain technology can give anonymous buyers the complete discretion they desire. Blockchain can also cut down on fraud, so even faceless buyers can be held to the same standard of financial transparency as the rest of us when it comes to spending funds.

Some influential names in real estate proclaim to be intrigued by the Bitcoin craze, but when pressed admit they don’t want to tie their own money into crypto. The risk factor in using a currency that’s more like a commodity is simply too volatile for many, and the potential that bitcoin amounts to another risky bubble has left major financial giants steering clear. So where does that leave the average homebuyer?

For many everyday people, buying a home is enough of a major undertaking without adding in the risk of dealing with such a volatile payment method. In a real estate world prone to bubbles in its own right, mixing bitcoin into the equation may well pile on risk to a situation where buyers and sellers would rather minimize, not multiply, potential hazards.

But for those untimid about riding the ups and downs of this craze wherever it may end up, there are worse things you can do with your money than acquire some valuable real estate. With a growing number of agents and sellers using bitcoin to gain an edge on the competition, you may well end up financing the house of your dreams with money that exists only in computer servers. If the unpredictability of cryptocurrency can be held in check in the future, expect this to truly be the beginning of a transformation in real estate.

By |2020-02-11T16:33:35+00:00September 5th, 2018|Technology|

The Ethics of Bitcoin: Is the Cryptocurrency Better for Banking?

If you’re anything like me, you’re equal parts fascinated and befuddled by the evolving world of cryptocurrency, and Bitcoin in particular.

For those of us used to paper and plastic, the idea of a decentralized, digital payment can seem pretty pie in the sky. But many are quick to call it the currency of the future, and if the buzz is any indication, it could be. According to Realtime Bitcoin there are more than 16.5 million Bitcoins in circulation. The current exchange rate is one Bitcoin to US $3,917.83. That puts the total amount in circulation at almost US $65 trillion.

Created sometime between 2008 and 2009, Bitcoin only took off in 2013 when it hit an all-time high––at the time––of US$1,100. Over the next few years, the price fluctuated. Recently, however, the virtual coin has garnered resurgent interest, skyrocketing to an all-time high of US $4,522.13 in August.

But what caused the newfound appreciation for the cryptocurrency? And what concerns should we have regarding the ethics of Bitcoin? Technology that seems amazing often poses ethical quandaries we need to engage with, as I’ve talked about in regards to AI.

Here’s a look at the current state of Bitcoin and what it means for banking, both today and in the future.

Bitcoin’s Surge

There are a few clear reasons for the recent surge in Bitcoin stock. First, its blockchain technology has been of special interest to some major players in finance. Morgan Stanley, Goldman Sachs, and JP Morgan believe that this technology may improve the trading of loans, securities, and derivatives.

Second, Japan and China have begun to embrace the cryptocurrency. In April, regulators in Japan introduced certain rules to integrate Bitcoin into the regular banking system (rather than peg it as an outlaw currency). This change has caused many investors to swap their Yen for Bitcoin.

In addition, Chinese authorities who have been critical of Bitcoin in the past have recently gained more tolerance for the currency. This has made Bitcoin-related investments in the region far less risky and far more attractive.

Thanks to these developments, Bitcoin has taken a step forward in legitimacy. People will be less likely to hold it for speculative purposes and start buying actual things with it.

But this begs an important question: Will Bitcoin, blockchain, and other cryptocurrencies bring us to a more ethical level of banking? Or will the challenges of these new systems create an equally murky financial system?

A Case for Bitcoin

Trust plays a key role in finance today. But what if we eliminated the need for trust in conducting business transactions? A successful transaction would be guaranteed, no matter who you were dealing with.

Garrick Hileman, an economic historian at the London School of Economics and University of Cambridge, points out, “A big part of the problem with Lehman Brothers in 2008 came from counterparty risk and the fact that settlement could not be counted on.”

With the advent of blockchain technology and smart contracts (computer programs set to execute a transaction once certain criteria are met), it could be possible to take trust out of the equation entirely. Transactions are conducted on the basis of guarantee because collateral is posted instead of withheld. Potentially, this could avoid a Lehman situation in the future.

Bitcoin also offers the advantage of cutting costs. Right now, banks put a lot of money into the transaction process. Part of the reason is that much of banking is still done manually and saturated with paperwork. This occupies both time and resources. With an automated system, verified by blockchain technology and smart contracts, we would save billions in capital, conduct transactions more quickly, and achieve it at zero marginal cost.

While the engineering behind this technology is still not yet ready to be rolled out for use in banks and other financial institutions, the promises of automated settlements, a higher level of transparency, and an overall reduction of overheads promise a more stable financial sector.

The Challenges

Cryptocurrency doesn’t come without its challenges. Though it has its proponents, some go as far as to call it “evil”. And this isn’t without reason. Those who argue against cryptocurrency have posed concerns on the anonymity of how transactions are conducted. Case in point: Bitcoin has long been associated with shady business transactions and entities such as Silk Road (which was shut down late 2014).

This anonymity, they say, allows the currency to be used for criminal activity in ways that other currencies cannot. It could be argued that this actually encourages unethical transactions.

However, it’s important to note that the anonymity isn’t absolute. Transactions conducted using Bitcoin are made public on the blockchain. That means that parties involved can be found linked to their Bitcoin addresses, although they are often difficult to find. A good example of this is the Silk Road founder, Ross Ulbricht. We were ultimately able to break the anonymity and discover his identity, but it took both time and resources.

In short, we don’t want to create a lawless market. That means there need to be additional measures put in place to ensure that the government, the technology, and the banks are in close contact. We must protect the ethics of cryptocurrency.

What it all means

Finance often falls into ethically questionable territory. That’s why banking needs an ethical solution that’s available to all parties, that is affordable and verifiable, so that there is accountability across the board.

On the other hand, the structure of cryptocurrencies and the blockchain technology allows for scalable ethical banking. This would be achieved by first combining the digital efficiency of the currency and the scalability of computers and networks. Existing rules and regulations would ensure that the consumer is adequately protected.

We’ll just have to wait and see on which side the Bitcoin lands.

By |2020-02-11T16:45:11+00:00March 12th, 2018|Culture, Current Events, Technology|