Buying a home with Bitcoin and other cryptocurrencies could revolutionise how brokers interact with customers in the near future.
Blockchain, the tech that underpins cryptocurrencies, could be set to reshape how brokers, lenders and customers interact in the property market in Australia, with open source software representing the next stage of online interaction.
Research has seen property transaction times reduced from three months to three weeks in UK blockchain trials, showing the potential for transparent tech to speed up and decentralise processes.
“Blockchain is the next evolution of the internet,” explained Lachlan Feeney, CEO at Labrys, one of Australia’s leading blockchain developers.
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“It’s an open infrastructure network where you can build applications that could be useful to the property and mortgage broking industry, but also just generally.”
“It’s thousands of computers that run around the world. An application today that runs on the internet is hosted on a single server that sits at Google or Amazon somewhere: that’s the way the whole internet works today.”
“What blockchain is, and what the whole internet is going to move to, is that instead of hosting it on a single server somewhere, it will be hosted on distributed networks so that you application existed and is duplicated on thousands of servers around the world and when it runs and your users use it, it’s guaranteed to run every time.”
“It’s immutable, you can’t change it, you can’t hack it. It’s a better way of storing data, running applications and communicating both person-to-person and computer-to-computer over the internet.”
Bitcoin, housing and decentralised finance
The potential for blockchain to disrupt the property market in Australia comes from several different angles, said Feeney.
“There’s a few different angles that organisations in the blockchain space have tried to bring to the property space, but we are still very early and we’re still trying to work out the best use cases,” he said.
“One of the things that has been focussed on to date is tokenisation of real estate assets. In the blockchain space, you can tokenise anything, which means creating a digital representation of a digital asset.”
“You could purchase a property and put it in a trust and then issue tokens against it on a blockchain system. If you issue thousands of tokens, you could break down the investment to a few dollars per person, which would allow many people to get exposure to real estate assets.”
“There’s big differences between what is possible technically and what is possible within existing regulatory frameworks, so these are the areas that we are still trying to navigate, but in that space, the idea is that there is this new tech that allows us to fractionalise assets down to small units and we just need to work out how to make that available within the existing regulatory framework. “
“The benefit would be that you could get investors with small amounts of capital into investing in markets where, traditionally, there are fairly high barriers to entry.”
Crypto and the property market
Buying a property using Bitcoin and other cryptocurrencies could also be another way in which the blockchain ecosystem intersects with the housing market.
“Another use case is, instead of trying to use blockchain to represent the property itself, you could go on the flipside and use blockchain as the currency used to purchase the property,” said Feeney.
“That could be allowing people to buy property in Bitcoin or other cryptocurrencies or via stablecoin, which are like digital versions of the Australian dollar.”
“There’s various reasons why you might want to do that: the price of Bitcoin is quite high at the moment, almost $100,000 AUD, so there’s a lot of cashed up Bitcoiners out there looking to purchase property and it’s easier for them if the seller is willing to take purchases in Bitcoin rather them having to cash it out first.”
“Properties are now starting to sell in Bitcoin and other cryptocurrencies, and that can even be a marketing tactic to stand out.”
How to buy property with Bitcoin
“Another thing you can do when you use crypto is do smart contracts to develop blockchain-based escrow systems that can help to save costs around the sale of the property.”
“Instead of using a traditional provider, you can create a smart contract on the blockchain that takes in the currency and locks it up in a smart contract.”
“You could put the deposit in and, when other things fall into place, that money can get released to the seller based on conditions. There’s plenty that can be done there using blockchain based currencies.”
“A third big area is what we called ‘DeFi’, or decentralised finance. That’s when you take out collateralised loans on the blockchain. One of the biggest blockchain lending protocols is called Compound: they’re experimenting with using real-world property as collateral on their platform.”
“If you can verify that you own a property in the real world with Compound, they can use it as collateral and you can take out a loan in crypto or stablecoins against the value of it.”
“That’s not fully available to the public yet, but it’s an exciting application in the space where real world property is used on the blockchain.”