The Needle
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A New Way to Pay

How cryptocurrency can flip the housing market


There’s a new currency in town! Well actually, there’s about 1,400 new virtual currencies in town.

“Right now we’re experiencing a gold rush,” said Diogo Ribeiro, lawyer and fintech entrepreneur. “There are so many different coins listed in the coin market. And there’s a lot more coming.”

Ribeiro describes 2017 as the year of ideas. People and companies created (and continue to create) new cryptocurrencies by the hundreds. This leads him to believe 2018 will be the year these ideas come to life. People are coming up with groundbreaking ways to use cryptocurrency in different industries — one of the most prominent being real estate.

“[Cryptocurrency] is a faster, less expensive way to do large payment transactions,” Ribeiro said. One of the most appealing opportunities this provides home buyers is that it cuts out a big, cumbersome middleman: the bank.

With cryptocurrency you can make transactions instantly. “If I have the funds in my account (to buy a home), I would basically just get your wallet address, I’d send you the Bitcoin amount, you receive it, and that’s it.” Forget wire transfers, getting letters from the bank proving you have the funds, no waiting for business hours to make things happens, etc.

Of course, there are other factors that need to be considered — home inspections, title transfers, conditions. This is when we enter the world of smart contracts. Smart contracts, put simply, are active contracts. Instead of making a contract that both parties sign that ends up in a drawer somewhere needing to be enforced by a lawyer, with smart contracts, everything is automated.

“You and I can say something like, ‘I’m going to transfer you the money for this house, however, the money is going to be held in a virtual escrow account. The day I can go and walk through your house and thoroughly inspect everything, 15% of the money will be transferred to you. We can set up the smart contract to automate everything we do.” Third parties are no longer necessary.

When it comes to title transfers, a new process is emerging too. “Titles will be tokenized. It’s the idea of putting the title directly in the blockchain. The title is passed to the buyer the moment the money for the home is transferred.”

So what’s the greatest roadblock when it comes to accepting cryptocurrency as a viable way to pay for a home? Value fluctuation.

“To give you an idea of how much cryptocurrency fluctuates, at the beginning of [2017], the price for one Bitcoin was around $907. By October/November, it got as high as $19,200. Then this week, it went from $15,000 down to $900. So that’s the risk: if you use Bitcoin to purchase a $1M home, for instance, and the next day the coin’s value drops by 50%, you would be holding currency that’s only worth $500,000.”

But there is a way to to bypass this risk, said Ribeiro.You can sell your Bitcoins. If you sell your house for 100 Bitcoins, you can immediately exchange those Bitcoins for dollars. You can technically buy a home and trade in your Bitcoins for a dollar amount in the same day.

Regardless of some apprehension, the idea of cryptocurrency as an alternate means to purchase a home is gaining traction. If trust in the system continues to strengthen, and automation, speed, and cost are solved using this new financial system, the effects of virtual currency on real estate everywhere will be nothing short of revolutionary.

Jared Klein