Why Bitcoin May Never Be Usable For Property Transactions

In the last 6 months, the price of Bitcoin has gone from lows of $3,236 to a peak of $18,868, then back to a low of $5,952. Intra-day movements of 25% have been witnessed of late, showing exceptional volatility for an asset which at its peak had a market capitalisation of over $250bn and has attracted widespread interest from retail investors in particular. “Tulip-mania” comparisons have even been drawn with Bitcoin’s recent meteoric rise and subsequent fall. Consequently, whilst Bitcoin can operate as a speculative investment, as a de-facto currency or even a reliable store of value it remains unusable. Accordingly, it would appear that property prices are unlikely to be listed in Bitcoin for some time to come until its price behaves within the usual standard deviations of a regular currency.

Using Bitcoin to Buy Property

This does not mean that Bitcoin cannot be used in exchange for property. Neil Singer’s Clicktopurchase in the UK already allows this, but the property is listed primarily in GBP. However, there the seller must be willing to accept Bitcoin (assuming the buyer is also willing to pay with Bitcoin) and the amount of Bitcoin paid must correspond to the exchange rate for the local currency price agreed for the property at completion. The few recently Bitcoin-listed properties have not sold successfully, partly because a buyer/seller could find themselves agreeing on a price in BTC which in “real money” could be 50% more or less in just a matter of days.

As Bitcoin’s price rose inexorably, bitcoin developed a problem as it became clear that those that understood bitcoin would not use it and those that did not understand bitcoin would not accept it, which is not a good thing for a currency. Bitcoin holders went from describing it as a cryptocurrency to “digital gold” as a means of justifying its hyperinflated pricing. Whilst in the long term, cryptocurrencies may gain traction in the mainstream and such pricing might be justifiable, there are strong signs that Bitcoin may not be the “crypto” used by the masses.

Regulatory issues aside, we also need to consider Bitcoin’s environmental impact. Mining Bitcoin requires a huge amount of energy and it has been estimated that the system of computers that verify bitcoin transactions consumes the same amount of energy in a year as the nation of Morocco. Energy requirements are likely to increase as Satoshi Nakamoto, the creator of Bitcoin, designed the system so that cracking the passwords required to mine subsequent Bitcoin would get increasingly difficult and require more computing power (and energy as a result). Accordingly, environmentally-conscious property buyers are unlikely to ever use of Bitcoin.

So if not Bitcoin, what other cryptos could we use in future?

Litecoin is a peer-to-peer cryptocurrency, inspired by and similar to bitcoin but the litecoin network aims to process a block in the blockchain every 2.5 minutes instead of 10 which will allow faster transaction confirmation (9 mins vs 2.5 minutes). Additionally, Litecoin has 4x the amount of coins for circulation, so users could transact in larger or whole units of the coin rather than tiny fractions of a coin as is the case with bitcoin. Potentially giving Litecoin a psychological advantage for their users. The key advantage, however, of litecoin is that due to the different cryptographic algorithms that they both employ, litecoin is more easily mined by the everyday individual. Meaning that litecoin can become a more widespread currency and thus more useful in the long term and more environmentally acceptable. Accordingly, if you’re more likely to buy a coffee with litecoin than with bitcoin, you’re also more likely to be buying property with it in the future.

Picture of Sophie Lopresti

Written by Sophie Lopresti

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