If someone offered you Bitcoins for the sale of your house would you take it? You would probably say what’s a Bitcoin and quickly do a Google search. What you would find is that in 2013 the first sale of a home in Southhampton was offered in Bitcoins. There were no takers. Since then, there has not been one sale of a home in the United States using Bitcoins even though there is an organization called International Blockchain Real Estate Association (IBREA) promoting the use Bitcoins in real estate transactions.
The Story of Bitcoin
The story of Bitcoins has been very exciting so far since its creation in September 2009. It involves a handful of competing cryptologist software nerds that wanted to eliminate the banks and governments from our monetary system by creating a worldwide digital currency. One person Satoshi Nakamoto came out on top with his technology. The strange thing is that Satoshi Nakamoto has never come forward to meet anyone. In fact Satoshi has stop communicating with the software designers who helped him in creating this new technology. Satoshi has disappeared! To get the whole story, Netflix has a great documentary called “Banking On Bitcoin” which tells the intriguing story of Satoshi, the rise and fall of new instant millionaires, the use of drug dealers and money launders, and the eventual crackdown by the US government.
Since the US government has establish new regulations in controlling the use of Bitcoins, the industry has taken off astronomical. The reasons for its success is because it speeds up monetary transactions anywhere in the world, cut transaction costs, and reduces fraud! Currently one Bitcoin is worth $16,720. In 2009, one bitcoin was worth less than one penny. To date, there are more than 2.5 million items you can use bitcoin to buy. The largest retailer accepting bitcoins is Overstock.com. Amazon is still evaluating the acceptance of bitcoins.
How it works
A Bitcoin is not a shiny coin, but a digital currency on the web called cryptocurrency. There is a maximum cap of 21 million Bitcoins available in the world as defined by Satoshi. Bitcoins are tracked on a ledger by computers using a technology created by Satoshi called Blockchain technology.
Understanding Blockchain technology is confusing and complicated. Blockchain technology involves people called miners who solve mathematical problems to discover the limited amount of bitcoins. (Sounds crazy right?) As part of solving the mathematical problems and discovering bitcoins, a block or a computer ledger is created that keeps track of every bitcoin. Every block created by a miner is required to connect to every other miner’s block in a chain. The Blockchain technology creates ledgers using digital balances of public and private “keys.” These keys are a string of numbers and letters linked through a mathematical encryption algorithm. This is the secret to Bitcoin’s security and relative anonymity. The public key is like a bank account number and the private key is like an ATM pin.
Individuals and companies have Bitcoin “wallets” to store keys they purchase from online exchanges There are a limited number of Bitcoin ATMs, where you get a key printout. Like cash, if you lose that piece of paper, you’ve lost your Bitcoin.
The Future of Blockchain Technology in Real Estate
Is Bitcoin or cryptocurrency part of the future of real estate transactions? It’s not so much a question of “if” as it is “how and when,” although the medium (Bitcoin vs another cryptocurrency) has yet to be finally determined.
As long as forms of cryptocurrency are accepted, homes will undoubtedly be purchased this way. Do home owners have anything to fear? As long as they use a licensed agent, a reputable lender, and title company, these transactions shouldn’t hamper the sale.
While Bitcoin is still viewed as a somewhat speculative currency, blockchain technology is here to stay. As an instantly verifiable and secure public record, information can be quickly and easily accessed. This may be the most exciting part for the real estate industry.
If property titles could be secured in the blockchain, it could transform and speed up the mortgage and title process. It could also lessen fraud by preventing the forgery of documents. The International Blockchain Real Estate Association (IBREA) is certainly working toward that end. Its more than 500 worldwide members met this spring in Newport Beach, Calif., to collaborate on mainstreaming this technology. IBREA’s initiatives are ambitious. It’s seeking to create universal platforms that are “open source, nonprofit, secure, and scalable” for property and title, as well as for digital deeds. Insurance and other essentials of real estate transactions could also be added to the blockchain. The IBREA hopes to promote and set standards for real estate transactions using cryptocurrency and set up industry best practices for the escrow process.
