As cryptocurrencies begin to play a role in American real estate markets, some Boulder County professionals preach acceptance of blockchain technology as the future of property transactions. Your take?
Money is all about trust. Consider Yap Island. Yap Island is a country in the Micronesia Federation and for millennia it has used limestone rocks as currency. There are approximately 3,000 rocks — some the size of a small car — scattered around the island. Most of them are too big and heavy to move. If Family A wants to purchase something from Family B, then Family A verbally transfers the rock to the Family B as payment. Then word is sent out that that rock is now owned by Family B. There are no written accounts.
For years, trust that the currency was worth what we believed it was worth was because its value was often tied to gold or some other physical object that the community agreed had value.
But currency has become increasingly abstract and now relies on nothing more than a collective sense of trust. In recent years, the U.S. dollar has cut its ties to gold and has managed to sustain its value. In fact, most other currency around the world now ties its value to the dollar. Our global belief in this system is what holds it together.
Cryptocurrency is one step further in abstraction. It resides in digital wallets. According to a cryptocurrency investor I know (my son), cryptocurrency is the wave of the future but its value has so far fluctuated too wildly to be dependable as currency. There are different brands of cryptocurrency, such as Bitcoin and Iota, so there is an exchange rate akin to exchanging dollars for Euros. When my son bought some Iota, they only would accept Bitcoin as payment, so he bought Bitcoin with dollars and then used the Bitcoin to purchase Iota. All cryptocurrency ties its value to Bitcoin and Bitcoin ties its value to the U.S. dollar, which is tied only to our collective belief. Feeling nervous yet?
Fern O’Brien, [email protected]
According to cryptocurrency advocates, one of the biggest advantages of allowing Bitcoin for property purchases is that it smooths a path into your real estate market for international investors. I’ve watched the Boulder housing market (and the discourse around it) for a long time, and I gotta say — I think that a rush of international investment is the last thing people are looking for.
Unless the cryptocurrency buyer is able to pay cash — token, that is — for a home that the seller already owns outright, the transaction will still involve a bank in order to convert the coin into U.S. dollars. That means that if the buyer has owned the coin for more than a year, he or she will have to pay a capital gains tax in order to make the conversion. Most people will still prefer to work with a traditional land title company, and the majority of those still prefer dollar transactions. Bitcoin home sales seem to be a market that works best for a very wealthy, tech-savvy clientele — actually, maybe Boulder real estate isn’t such a mismatch after all.
“The reason (Bitcoin‘s) value has largely gone up is because it’s volatile and traders are using it as a trading device,” said Justin Slaughter, the former chief policy adviser at the U.S. Commodity Futures Trading Commission to Curbed in March. That will be an obstacle on the way to widespread adoption, as real estate investors generally prefer a predictable market.
I expressed concern to a friend as I considered answering this week’s question: I had absolutely no idea how Bitcoin worked. “On the bright side,” he replied, “No one really does.” Call me risk averse — for the biggest financial investment I am likely to ever make, I sm going to stick with something more mainstream.
Mara Abbott, [email protected]
Out of the nearly 2 million homes currently for sale in the United States only one, a condo in South Florida, is exclusively accepting Bitcoin if you want to purchase it. That leaves approximately 1,999,999 property owners thinking you are crazy if you insist on purchasing their home with Bitcoin. Those numbers closely match the number of us who actually understand blockchain technology and Bitcoin.
Traditional currency I understand. A dime originally was smaller than a quarter and both were made of silver because the amount of silver in them was meant to approximate their value. Then paper money was invented, the gold standard adopted and abandoned, printing presses ran wild, the trilateral commission somehow got involved, all hell broke loose and we end up with the current monetary system we have today. So I wondered, how could blockchain technology and Bitcoin be any worse? Oh, but it can.
Turning to Upfolio.com, I learned that “Blockchain technology is designed to let you safely transfer digital property (like money), without the need for any middlemen (like banks).” Seems like a good start. “Strong computer code ensures that nobody can change these records after the fact.”…