What do you think of when you hear the word: cryptocurrency? Whether you’re a fan, a skeptic, or simply confused, the reality is that cryptocurrencies are exploding and could impact how we conduct business sooner than you think. Cryptocurrency is a digital or virtual currency secured by cryptography, which is a coding technique that operates on a decentralized computer network using blockchain technology. That probably didn’t help explain anything. Hang in there and let me try to clarify. Bitcoin launched in 2009 and is the first and largest cryptocurrency. Bitcoin is a decentralized digital currency that you can buy, sell and exchange directly, without an intermediary like a bank. Bitcoin’s creator, Satoshi Nakamoto, originally described the need for “an electronic payment system based on cryptographic proof instead of trust”. Bitcoin is built on a distributed digital record called a blockchain. As the name implies, blockchain is a linked body of data, made up of units called blocks containing information about each transaction, including date and time, total value, buyer and seller, and a unique identifying code for each exchange. Entries are strung together in chronological order, creating a digital chain of blocks.“Once a block is added to the blockchain, it becomes accessible to anyone who wishes to view it, acting as a public ledger of cryptocurrency transactions,” says Stacey Harris, consultant for Pelicoin, a network of cryptocurrency ATMs. Blockchain is decentralized, which means it’s not controlled by any one organization. Nobody owns it, but anyone who has a link can contribute to it. And as different people update it, your copy also gets updated. Imagine a ‘Dropbox’ bank. While the idea that anyone can edit the blockchain might sound risky, it’s actually what makes Bitcoin trustworthy and secure. For a transaction block to be added to the Bitcoin blockchain, it must be verified by the majority of all Bitcoin holders, and the unique codes used to recognize users’ wallets and transactions must conform to the right encryption pattern. These codes are long, random numbers, making them incredibly difficult to produce fraudulently. The level of statistical randomness in blockchain verification codes, which are needed for every transaction, greatly reduces the risk anyone can make fraudulent Bitcoin transactions. So how does all of this relate to the real estate industry? It’s too soon to answer that question with certainty, but the landscape is already starting to change on a national level. Property listings in bitcoin are popping up across the country, often because crypto creates buzz and attracts attention. Sellers can insist on receiving payment in bitcoin exclusively or offer flexibility in combining digital and government-issued lending. The first Bitcoin backed property in the U.S. closed in May, a home in Florida that sold for 210 ether tokens, which is type of crypto currency that translates to $654,000. Subsequently, several other properties across the country have been sold using cryptocurrency. I haven’t seen these transactions locally yet, but that’s not to say it’s not on its way.
Until next week, love where you love where you live. And if you don’t… contact your local REALTOR®.
Brian Haufe, 2022 MBOR President