If you don’t have a clue what Bitcoin is, you’re not the only one!
It’s not particularly new — Bitcoin was first mentioned in 2008 in a paper published under the name Satoshi Nakamoto. In 2009, the technology was unleashed upon the world and the first bitcoins were used.
Apart from those deeply invested in technological and financial news, this went largely unnoticed by most people until very recently.
After all, what’s the significance of virtual money any way?
More germane to our conversation, is there any future for using bitcoins to purchase real estate?
In December 2012, the first listings hit the market where the property was listed in bitcoin.
There are numerous articles on the internet since the end of last year of houses being bought and sold in the U.S. using bitcoins. There are even investment companies that allow you to invest in real estate using bitcoins.
So, as it turns out, there may be more of a future than you might think for Bitcoin.
What is Bitcoin?
Bitcoin is, in the simplest terms, a virtual currency system that exploded in value at the end of 2013. Right now Bitcoin is not widely used nor widely known — but it’s definitely beginning to make waves as a new form of payment as a currency that is decentralized and exclusively digital. It isn’t controlled by a bank or individual and is considered a peer-to-peer payment system. “Bitcoin” with a capital B refers to the systems and technology itself, while “bitcoin(s)” refer to the actual currency.
There are no third parties to go through to exchange and transfer bitcoins to another user. In that respect, it’s a lot like email — free (or in the case of Bitcoin, usually free) and solely an exchange between recipients.
Like most currencies in the world, bitcoins can be broken up into smaller units, as with our quarters, dimes and so on.
What’s the Advantage?
Bitcoin bypasses the bank.
It can be used from web browsers, tablets and smartphones. It’s easier to use than a credit or debit card and any business that accept Bitcoin aren’t required to register any merchant accounts (as with other online payment systems like Paypal, which deal in existing currencies and through banks) or pay hefty fees for said accounts.
While there still aren’t many Bitcoin transactions taking place today in comparison to the tens of thousands per second that major credit card companies experience, this technology could very well turn global banking practices on their head.
Bitcoin could particularly be of value in poor countries where banks are few and far between. In these emerging markets, people may have better access to smartphones than to bank accounts. That bodes well for Bitcoin’s ability to compete on a global level.
If Bitcoin is so Great, Why Haven’t I Heard of It?
Even though Bitcoin exploded in value last year, it’s still in its earlier stages of development and is only recently getting more coverage in mainstream financial news. Not only that, but it’s not a system without its fair share of criticism.
- Bitcoin prices are too volatile. The sudden increase in value isn’t necessarily a good thing — the value of a bitcoin jumped from an exchange rate of around $13.00 USD to $1,200. Of course, Bitcoin isn’t designed to be traded in for U.S. dollars. But… To avoid the volatility, one just stays within Bitcoin. Unlike national currencies, which are vulnerable to inflation and manipulations, there is a set number of bitcoins to be put into circulation: $21 million. That’s it. No more. As of April 2014, just over 12,650,000 bitcoins have been mined (meaning that they are in circulation).
- Bitcoins are used for illegal activity. Unfortunately, that’s the reputation Bitcoin received after the FBI took down Silk Road, an online store for drug trade. Why? Bitcoin transactions are anonymous — but only mostly. All transactions are public and, in theory, could be traced to an individual. The anonymity isn’t foolproof compared to that of cash, and those look to use bitcoins for illegal activities are finding that out.
So How Do I Use Bitcoin?
If you’re interested in Bitcoin, getting started is relatively easy.
Get a Wallet
Blockchain.info is the most popular wallet servicer for Bitcoin. They have both Android and iPhone apps. For payments, you’ll be given a unique address (like an email) and a QR code for mobile transactions.
There are three ways to get Bitcoins: buy on an exchange, buy from individuals, or mine them yourself. Mining, however, will require additional hardware for your computer.
You can read more about it here. For exchanges, you’ll give your Bitcoin address as funds will be directly transferred. Similarly, for individuals, you can open your wallet on your smartphone and have the seller scan your QR code for a transfer.
The Bitcoin wiki includes an extensive list of businesses that accept and use Bitcoin. Other lists are available online and are easily found with a quick Google search. Websites such as Overstock.com, for example, have started accepting Bitcoin payments.
While Bitcoin is still getting started, it has the potential to revolutionize banking and the face of global economic trade and possibly, jsut maybe revolutionize the way we buy real estate as well. Keep an eye on it in the financial news!
What do you think about Bitcoin?
Do you see this as having a future in real estate?
Tell us about it in the comments below!