Global Luxury Real Estate Disruptors - Digital Money and Blockchain Technology
Last Thursday we attended the Inman Luxury Connect event in Beverly Hills. Oliver Tickner CEO at StreetWire presented "Keeping High-Net-Worth Clients Anonymous: The Rise of Cryptocurrency." StreetWire is a a decentralized network built upon the blockchain to support the verification, analysis and protection of real estate related data for the smart contract. The popularity of blockchain and cryptocurrency transactions are gaining in popularity and digital monetary transactions could evolve into the future of global luxury real estate. For those unfamiliar with cryptocurrency, bitcoin, and the blockchain here's some background.
Cryptocurrency and the blockchain were a libertarian movement born out of the banking crisis, and specifically designed to take out the banks. Banks and lenders held little consequences writing off debts or government bailout money. In it's purest form, cyrptocurrency is like a Swiss bank account.
Using cryptography for security cryptocurrencies are a subset of digital, alternative, and virtual currencies. Cryptocurrency is a digital asset which allows for instantaneous transactions and borderless transfer-of-ownership. Cryptocurrency has much lower fees than traditional currency exchange rates and transaction costs, currently bypasses the scrutiny of the Patriot Act, “know your client” or "KYC," anti-money laundering systems “AMLs, "protecting buyer and seller anonymity.
Bitcoin is the most popular and the first decentralized digital currency. Nearly half of the $100 billion cryptocurrency market capitalization is bitcoin, however there are over two thousand in existence. Bitcoin was invented Halloween of 2009 under the pseudonym Satoshi Nakomoto, which could have been one person or a group of people. It's intention was to create a “A Peer-to-Peer Electronic Cash System," (think Napster) decentralized with no server or central authority. Nakomoto's major innovation was to achieve consensus without a central authority, which protects the payment network against double spending, and making digital currency uncounterfeitable. There is a cap there will only ever be 21,000,000 bitcoins mined.
A blockchain is a decentralized technology that creates the highest degree of accountability by eliminating the human element and machine errors. Essentially you transfer digital assets peer to peer, a permissionless transfer without having a third party approval. Blocks are recent transactions recorded in a chronological order on a main register and also a connected distributed system of registers. Nodes are computers connected to the network which get a copy of the blockchain, which is downloaded automatically.
Bitcoin has been around now for eight years, however with the October 2017 surge above $6,000 per digital coin, investment in real estate with bitcoin is becoming more of a reality. Piper Moretti with Keller Williams and Co-Founder and CEO at The Crypto Realty Group was part of the first Bitcoin transaction in southern California. The first ever single-family home sale in Texas involving bitcoin was announced September 2017. Both buyer used BitPay, a global bitcoin payment service provider to convert the bitcoins into dollars for the buyer the day of close. September of this year a real estate project in Dubai was the 'first major development where you can purchase in bitcoin'
Ben Shaoul who manages a $3B real estate portfolio is embracing cryptocurrency and creating significant buzz on his Liberty Toye development at 62 Avenue B. He's quoted in the Real Deal, Developer will be holding onto the cryptocurrency, which is skyrocketing in value “I think the demographic of the crypto user is a younger millennial, but, that being said, you have a lot of people come over from other countries, who are buyers from different places, who like to trade in different types of currency,” Shaoul said. “Not everyone wants to trade in dollars or yen or euros.”
Ragnar Lifthrasir is Founder & President of the International Blockchain Real Estate Association (IBREA), and believes the Blockchain will transform real estate in four ways:
Disintermediation eliminates middlemen and streamlines the process. Middlemen are defined as brokers, title, escrow, inspectors, and appraisers. It's apparent how a property could receive a digital address for title recordation, check encumbrances and verify easements. I'm personally unsure how technology could replace a physical inspector smelling, seeing, and touching for proper due diligence. I also don't think the blockchain can remove the need for a real estate brokers marketing efforts for unique homes, guidance with buyers through different markets, school systems, and due diligence catered to their needs.
In Tech Crunch 3 Ways That The Blockchain Will Change The Real Estate Market, Don Oparah is the CEO of Venture Aviator states, "The unique “digital ownership certificates” would be almost impossible to replicate, and would be directly linked to one property in the system, making selling or advertising properties you don’t own almost impossible." Moving land records to an online ledger, blockchain would eliminate the concern of fraudulent property ownership claims. The blockchain could also include documenting and maintaining transparency for multiple offers, prior inspections, building or remodel permits, surveys, perc tests, ect.
Money 2.0 is alternative currency and censorship-resistant which is why there's an even stronger emergence internationally where there are government controls over how much money can leave the country. Digital currency and an escrow can be secured with private keys and a multi-signature function for 100% transparency. There's also an anonymity factor that many in the luxury real estate market value.
Smart contracts enabled by the protocols of the blockchain reduce the human element to verify an agreeement such as in California an escrow agent, or in mortgage lending underwriters. At Luxury Inman Connect, Oliver Tickner shared his vision with Streetwire for creating computer code that relies on programmed rules to direct the flow of money on a streamlined network accelerating data exchange. Ragnar Lifthrasir's startup velox.RE, recently completed an eight month pilot program with Chicago’s Cook County Recorder of Deeds to test transferring ownership of real estate on the blockchain. His Cook County Blockchain Pilot Program Report concluded three things: you can legally transfer ownership of real estate on the bitcoin blockchain, a blockchain real estate title transfer can be recorded in the government public records, and you can do both without needing special permission or partnership with the county government.
Cryptocurrency and Real Estate Sales
While the practicality of the blockchain taking over real estate transactionally could be realistic in the next decade, understanding the value of cyrtocurrency in today's real estate landscape can help real estate agents, brokers, and developers make more sales.
Need More Information as a Cryptocurrency Buyer in San Diego?
If you’re having thoughts of buying or selling with cryptocurrency in San Diego, please do not hesitate to contact Aumann Bender & Associates with any questions or to begin your househunting process. We have spent an exorbitant amount of time researching and knowing the process required for a successful crypto purchase. We look forward to hearing from you and welcome the opportunity to help you find the home that best suits the needs of you and your family.
Joy Bender is the co-founder/owner of Aumann Bender & Associates, La Jolla real estate agents with Pacific Sotheby's International Realty. She has a passion for digital marketing and helping clients discover San Diego's lifestyle. Joy Bender specializes in La Jolla Condos, San Diego beach homes, San Diego oceanfront real estate, and San Diego ocean view houses in La Jolla, Coronado, Del Mar, Solana Beach, Encinitas, Rancho Santa Fe, and beyond.