Land, capital and bitcoin

By, Simon Tucker

Blockchain, as you know, and hopefully bored of hearing by now, tracks changes in ownership, removes third parties increases efficiency….yadda yadda…boring.

But, because of these characteristics it's no wonder that many, myself included, have been touting blockchain as the future of land title registration, finance structuring, conveyancing, reducing fraud and increasing transparency. Eliminating many aspects of modern day real estate, that simply should not exist anymore.

In reality something like the vision of an industry-wide collaborative network is still too far off at the moment to really consider writing about in this piece. No matter how awe-inspiring and hopeful it sounds. It'll happen eventually anyway, you won't hear about it so much, rather see it in action, slowly taking place.

Instead, it would be much more interesting to understand what could be done in the very near future when the property market and cryptos begin to interact in earnest on this journey. To do this we've got to look at some fundamentals of why it would work in the first place.

If you consider the characteristics of bitcoin; its finite, its divisible, it can only have a single owner at any one time, its permanent, it's limited in supply. Generally it follows a technocratic form of development on the open-source software, but is not immune to having good ideas pushed through by catalytic events and upon reaching consensus in the community.

Now, compare those to land, which is also; finite, divisible, single ownership (by individual or entity), limited in supply if you consider population growth and follows a technocratic form of development. Also not immune to new ideas of engineering or design that eventually becomes commonplace. Think, the introduction of elevators in increasing the potential of verticality of space in buildings compared to the implementation of segwit and lightning network on bitcoin that work to increase the functionality of the software.

For me, it is the shared characteristics that give bitcoin and land aspects of their values (and yes, they're also completely different, please go mad in the comments), however because of the shared rules, I like to think of bitcoin as physical space in a virtual world. The first true manifestation of the stripped-back physical economy now in cyberspace, we can only build up from here. A property owner cannot be forced into giving up land, unless through existing legal systems or coercion, in the exact same way an owner of bitcoin cannot be forced to give it up, both parties can hold onto their assets until they feel it is the opportune time to sell.

This, in part, is why the speculation on cryptos has been bubbling away over the last few years (the same cannot be the same as of late 2017). People are holding onto cryptos on the assumption that it will prove more useful in the future due to increased functionality and network effect brought about by the constant improvement of the system. Call it greater fool theory (looking at you Ripple), call it mania, call it holding, call it whatever you want. I call it land banking.

On the other hand capital is temporary and is used to be invested or to be spent due to its inflationary nature. Yet it is how we both give and extract value from both land and bitcoin. And so much capital is tied up in land. £7.14 trillion, according to the financial times as of 18th January 2018. Not so much, a measly $635 billion in cryptos, as of 20th January, but no amount to be balked at.

A cryptocurrency may offer an elegant solution to extracting value from property, by using a crypto to represent a property. It can then be divisible to one billionth of the total asset, representing a fractional ownership of the property and it's income. It may even win over some skeptics, since there will always be a calculable net asset value. This is nothing new, property crowdfunding has been around for several years in a consumer friendly form and some are working well, however they still lack any real form of liquidity.

A property-based crypto could increase that liquidity by being able to be exchange into various forms of value, be that into other cryptocurrencies, into capital or maintained as a long-term store of value. The liquidity comes from the nature of cryptocurrencies, in which there is a combination of long-term holders who are 'landbanking' and more agile short-term traders, looking to play on the volatility of altcoin markets, in the assumption that it will outperform bitcoin in the short-term.

The market for reselling cryptos is much more developed than that for selling land, despite the fact bitcoin has only been around for ten years. Moreover the payments of any dividends based on ownership can be programmed into the cryptocurrency, since it is programmable money through smart contracts. In doing so saving quite a lot on accounting and payment services.

On the other hand, user experience for cryptos is still poor, and there is still a risk of losing it all very quickly, not only due to the speculative nature of it all, but also through the loss of private keys which means the irrevocable loss of entitlement to the asset. Until such issues are sorted, any sort of tokenisation of won't be particularly democratic, unless you happened to be an early adopter.

So, if such a token could represent property ownership and can also interact with other cryptocurrencies, it would have to regulated out the wazoo to mitigate some of the risks and less user friendly aspects of current generation cryptocurrencies, but it cannot be far away. It could be the first instance of the property industry collectively beginning to explore the edges of just what is possible with a trust machine, whether planned or unforeseen.

If you enjoyed the piece and would buy me a pint, or want to see continued thoughts on this topic in future pieces, then please contribute some monero (XMR) to this address: 43K8DhtM4rYZDNnz8Fq57va7VBWzoRGSajXwPgZwxw76XGQxe6VKKERLD6m3VVabpyAPqJN2Rsdf8NZKtgU8gTneBLiP9cJ

This is more a little experiment for me to gauge adoption rates, knowledge levels and reach within the property industry rather than a gushing plea for money. Essentially, if you know how to send monero and work in the property industry I'd like you to prove it. It may even be used for upcoming research projects, anonymised (obviously). But, any means to help achieve more financial independent is always welcome.

Thanks, Simon

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