What You Need to Know About Crypto, Blockchain, & The Future of Real Estate

Cryptocurrency & Blockchain - The Basics  

As cryptocurrency markets bloom, many investors are looking to cash in on capital gains and diversify. Naturally, the tried-and-true world of real estate comes to the forefront. So, whether it’s an investment or simply a lifestyle decision on the client’s part, modern real estate agents should have a basic idea of what cryptocurrency is and how it might apply to real estate. Here’s what you need to know to stay crypto-current in real estate.  

First, what is cryptocurrency?  

According to NerdWallet, cryptocurrency is a digital or virtual form of currency that employs blockchain technology to operate without a central governing body. 

Next, what is blockchain? 

Blockchain is the technology that allows for cryptocurrency to exist. Essentially a blockchain is a database full of encrypted data sets or “blocks” that are chained together by unique identifiers. When changes are made to the data – let’s say a cryptocurrency payment occurs – it’s then verified by hundreds of thousands, if not millions, of peers. 

What is cryptocurrency mining? 

Miners are specially built “computers” that provide the processing power required to build the “blocks.” They also help with some of the cross verification (in addition to other computers called nodes) that makes a cryptocurrency network secure. Since they play a crucial role in upholding the blockchain, they’re often rewarded in cryptocurrency.  

As a result, many (but likely not all) cryptocurrency transactions are secure, efficient, and don’t require a central governing institution like a bank to occur. It should also be noted, though, that users are not entirely anonymous.  

How Cryptocurrency is Used in Real Estate   

While real estate agents have facilitated a transaction from one cryptocurrency wallet to another in the past, it’s not very common. Both the seller and the buyer must be onboard with a cryptocurrency transaction and crypto-backed mortgages can be tricky due to cryptocurrency’s inherent volatility.  

Luckily, modern cryptocurrency wallets and investment platforms like Coinbase or Robinhood have made it easy to convert cryptocurrency to USD and USD-based coins. More often than not, average cryptocurrency investors will convert some of their investment to cash to use as a down payment, despite having to pay capital gains taxes.  

Examples of Crypto in Real Estate  

Perhaps the best known cryptocurrency-based real estate transaction was the Arte Surfside oceanfront luxury penthouse in Miami that sold for $22.5 million in June of 2021. In this case, the developer advertised that they were accepting cryptocurrency and were able to secure a buyer in the following weeks.  

Miami also saw another crypto sale at the beginning of 2022. A swanky lower penthouse with vast ocean views sold for $6.94 million worth of Ethereum (ETH). For this purchase, the Ethereum was converted to USD Coin (USDC) which is linked to the U.S. Dollar to ensure stability.  

Title Companies & Crypto 

The role of the title company is to protect both the buyers and the sellers in a real estate transaction. With that said, title companies sometimes maintain escrow accounts and conduct the closing. Traditional companies not yet familiar with crypto may refuse to deal with cryptocurrency, even if both the buyer and the seller agree to a crypto transaction. If they do work with cryptocurrency, they’ll likely need to have it converted to a USD-based coin or cash to curb volatility.  

Popular Cryptocurrencies Agents May Encounter 

As aforementioned, cryptocurrency is stored, purchased, or transferred via a digital wallet like Coinbase. There are thousands of cryptocurrencies available, but popular coins that grab headlines typically include:  

• Bitcoin 
• Ethereum 
• Dogecoin 
• Shiba Inu Coin 
• Binance Coin 

Pros of Using Cryptocurrency in Real Estate 

Using cryptocurrency to conduct real estate transactions has many advantages. For one, it’s a hip and trendy way to market yourself. But what’s more important is the security and efficiency that it offers. Thanks to the blockchain network and its constant state of cross verifying  the ledger, crypto funds don’t need to be verified and can be transferred or converted immediately. In the future, blockchain-based cryptocurrency could become a critical component in the digital contract automation process.  

Pros: 

• Security 
• Efficiency 
• Uniqueness 
• Contract automation 

Cons of Using Cryptocurrency in Real Estate  

The biggest obstacle to using cryptocurrency is that it’s still very much an emerging market and not widely understood by the public. Purchasing or selling a piece of real estate is one of the largest financial decisions a person will make in their lives, so they’ll want to use a method that’s familiar. In addition, crypto-accounts like other securities aren’t federally backed, are loosely regulated, can be somewhat volatile, and can complicate taxes which may push buyers to purchase in more traditional ways. 

Cons: 

Lack of understanding 
Not federally insured/backed in any way 
Volatility 
Taxes 
Lending can be more difficult (unless converted to USD) 

The Future of Crypto & Real Estate 

Cryptocurrency and the technologies behind it definitely have a future in real estate and contract automation. As buyers and sellers become more familiar with the benefits, more cryptocurrency transactions are inevitable. However, since most crypto-based mortgages are relatively high risk and residential buyers generally borrow to purchase a home, these types of transactions will likely be more common with investment groups or in the commercial space – at least for the near future.