A Background in Bitcoin and its New Role in Real Estate
Though many people have probably heard of Bitcoin by now, there are now several types of cryptocurrency. New types you may start hearing more about include: bitcoin cash, ZCash, Monero, Ripple, and Ethereum. They essentially all function the same way; and act as digital funds that are produced in limited quantities and without involvement of a bank or governmental regulations. They also fluctuate in value daily. With the value currently skyrocketing many early adopters are cashing out, like stock, to convert into regular money. They can, however, also be used electronically to buy things, when the seller is willing to accept them as payment.
In 2008, a person calling themselves Satoshi Nakamoto, whose real identity is still unknown, had sent a paper entitled "Bitcoin - A Peer to Peer Electronic Cash System" to a mailing list discussion on cryptography. Bitcoin software was first made available to the public in 2009 and people began "mining" (which is "the process through which new Bitcoins are created and transactions are recorded and verified". The mining process basically consisted of a software program performing intricate math problems in return for portions of the electronic currency; and continued for a full year, until 2010, when the first person decided to finally sell theirs, "swapping 10,000 of them for two pizzas." From the beginning, there was a finite amount of bitcoin, causing the value to fluctuate. It stayed relatively under the radar for several more years with other rival currencies joining the race, the value rose and fell, and in 2014 the world's largest Bitcoin exchange went offline and 850,000 bitcoin went missing (valued at the time at $450 million dollars) and investigators are still trying to find the culprits.
The popularity and knowledge of the bitcoin community continued to grow and many governmental agencies began to warn investors and China banned the currency outright. The value of one Bitcoin reached $10,000 in December 2017 and mainstream banks are starting to investigate ways to get involved. You may have also heard about recent real estate transactions that have used bitcoin or other cryptocurrency. There have been homes purchased in California, Texas, and New York; and more recently a local man in Tukwila, Washington used bitcoin to fund his down payment.
In many ways, using bitcoin to purchase a home is much like trading in stock or cashing in a 401(k) to purchase a home. Ben Shaoul, president of Magnum Real Estate group in New York City states, "...the demographic of the crypto user is a younger millennial, but, that being said, you have a lot of people come from other countries, who are buyers from different places, who like to trade in different types of currency. Not everyone wants to trade in dollars or yen or euros." It seems as though cryptocurrency is only just taking off in the real estate sector. For now, Washington based purchases cannot solely be purchase with bitcoin as there are government agencies that get taxes on home sales and still need traditional cash currency. Only time will tell if this new payment will continue to be a viable option in such a competitive market.