The crypto market is heating up. Where and how investors can use their crypto to pay for things is increasingly becoming mainstream. In this clip from Backstage Pass, recorded on Nov. 15, Fool.com contributors Jason Hall, Toby Bordelon, and Rachel Warren discuss the rise of cryptocurrency.
Jason Hall: Speaking of rising tides, oh buddy, cryptocurrency. We got to get one crypto topic in here, and this is a really fun one. I guess New York real estate company, this isn’t a real estate company that has done it, but they’ve got a new construction. Its a residential building, that has some lease on the bottom floor. It’s in New York City. They’re listing it for $29 million in Bitcoin (CRYPTO:BTC). So here’s the question. I first saw this and of course all the alarm bells go off and I’m like, what is going on?
Then I think it through and I’m like, OK, here’s the question. How important will crypto become for real estate transactions going forward? Is this a passing fad or is this just the natural progression? Toby.
Toby Bordelon: I think it’s going to turn out to be very useful. I hope I can explain my thoughts here correctly or in a way they make sense. I’m very, very skeptical of the current cryptocurrencies out there, including Bitcoin — maybe especially Bitcoin. Well, I think there’s some dog-based cryptos I’m more skeptical of, but Bitcoin too. I can see the world where Bitcoin goes to zero, I honestly can. But I don’t think crypto, as iconic, is going anywhere. I don’t think the blockchain technology is going anywhere.
I think when you think real estate, all kinds of thoughts, but especially real estate, crypto makes sense. Blockchain makes sense, smart contracts, self-executing contracts on a blockchain make a lot of sense to track sales, to record ownership. We do that now with county registries, but, oh man, that’s a mess. You’ve got to search each one independently. They’re not linked together always, and it’s just a hodgepodge of how people do in different encounters.
Hall: There are 500 people involved in every transaction.
Bordelon: Oh my gosh, right, and different counties in the same state do things differently. What is this. There’s so much where I think crypto can come in and watching it come in really reform, that and make real estate transaction smoother, much more efficient, maybe we finally get rid of escrow agents potentially. You can see that happening. I guess it’s going to happen. I actually think it’s going to happen. When we think of crypto, something similar to what we now think of when we think of cryptocurrencies, probably becomes a default mechanism to commerce at some point.
The default mechanism of exchange and stores of value, my guess that’s not going to be one of the popular currencies we have right now. I think that’s how these things tend to go. If you had to say what’s your best guess, probably it’s a crypto version of a modern day fiat currency or multiple both, like a crypto version in you might call it.
Hall: That’s stable coin, as they call them.
Bordelon: Exactly. I think that’s where we’re going to end up, at least in the near-term. But I think it’s probably a long ways off too. I think my bottom line is, crypto is here to stay. But I think the crypto world is going to evolve and change a lot along the way. I think it’s going to end up looking like something that we’re not really thinking about right now. Yeah, I think the tech is going to be here to stay and it’s very useful.
Rachel Warren: This is a really interesting story. The fact that crypto being used in real estate transactions. I think it just speaks to how fast the technology is moving and how people are recognizing that it could have a lot of value in the years ahead. I’m in Toby’s camp in the sense that I’m a little bit of a cryptocurrency skeptic. I do love talking about it, I love reading about it. I’m not currently invested in the crypto.
But all that aside, I do think it’s here to stay. I think from these digital currencies that have been released, there’s been a lot of hype around them. Some of these animal mascot ones [laughs]. They’re fun to talk about, I don’t think those necessarily have a lot of staying power, but I think there are some that do.
I think Bitcoin is likely one of them. I think the concept of digital currency and its value in how a functioning society today operates, where we’re living in this increasingly digital world. I think it’s here to stay. I think this will become more of a trend where we’re seeing it becoming a way to enter into these real estate transactions and a lot of other types of transactions as well.
But I do think it will be a slow progression. I think there’s still a lot of skepticism surrounding crypto and I think some of that is healthy skepticism for sure. I don’t think it’s something that everyone would be comfortable with. But I think it’s interesting also to note that there are a lot of companies that are increasingly accepting Bitcoin to pay for things.
I did like a quick Google search on this and it’s interesting. For example, on Overstock.com, you can pay for furniture using Bitcoin. [laughs] I guess, Domino’s Pizza. There’s a way you can order pizza using Bitcoin through some third-party app, I believe. I believe some fast food restaurants are starting to let you pay using cryptocurrency.
There has been some event venues that have accepted Bitcoin for transactions. Apparently I did not know this because I book flights a lot through Expedia, but you can use Bitcoin on Expedia. I think there’s a lot of areas where these transactions are becoming increasingly common. I think it will take time, but then I’m looking at this and maybe it’s moving faster than we think. What do you think?
Hall: As soon as I got past my first initial knee-jerk reaction is like, what the hell is this and is it even legal? [laughs] Once I’ve moved past that, get off my lawn old man perspective and started thinking about it. I’ve really been studying cryptocurrencies a lot over the past few months.
I own some Bitcoin and I guarantee that a year from now, I will own a lot more Bitcoin and probably Ether than I do now and potentially other assets. I think this is exactly, this is like a textbook use-case. With Bitcoin, it’s gotten substantially better. You have the Lightning Network that’s facilitating faster, lower-cost trades. You have stacks which is a way to build things like smart contracts using Bitcoin. It’s blockchain network isn’t as advanced as others. But it’s making up some ground. I think this is going to be more and more of what we’re going to see as a valid, useful, use-case. The key though, is all of those things that we’re talking about Toby, today this is just buying it with Bitcoin. It doesn’t solve any of those other issues at all.
You have to have a lot of regulatory catch-up before the crypto assets can start answering and solving some of those problems with things that are heavily regulated like real estate transactions. But it’s a starting point and it’s certainly getting there. I think the big use case for Bitcoin right now and I think it’s going to remain that way is digital gold. I think just putting it in that bluntly and just saying the words digital gold, there I said it.
That’s the use case for Bitcoin because around the world you have a massive growing cohort of people that are looking for a digital store value. Hey guys, guess what? Gold has basically been a digital store value for 15 years.
With gold trust and all of those things that you can buy on exchange. That’s the way most people buy gold. They don’t buy gold coins and bury them in the backyard. Some people do, most people don’t. They go on their broker and they buy the gold trust. That’s what they do. This is the next iteration from that. I think it makes sense and there’s going to be enough technological innovation that it’s going to continue to keep up. That it’s going to have use cases, Toby.
Bordelon: I think too. I mean, there’s a lot of stuff out there now like, oh, what would you buy with Bitcoin? But are you really buying with Bitcoin? I mean, how much does this building cost? $49 million, is denominated in dollars.
Hall: Exactly. As long as we are denominating things in something else then that something else is the real money.
Bordelon: That’s the thing. Yes. We’re not quite there yet when it’s still in separate system. It’s still in relation to the U.S. dollar.
Hall: Yeah. Absolutely.