Bitcoin for mortgages?

The online currency is gaining ground among early adopters in real estate

The harshest critics have compared Bitcoin to the Beanie Baby craze of the 1990s, where the toys had a market cap of $10 billion at their peak – just like Bitcoin at the start of 2014 – and which are worth less than the beans inside those babies today.

Even the most forward-thinking, innovation-friendly investment gurus are having trouble wrapping themselves around Bitcoin, and few openly endorse heavy Bitcoin investment because of its unpredictability, and at best offer a tepid endorsement about investing a minuscule percentage.

No one wants to be the adviser who encourages clients to go heavy on the next currency version of something like Solyndra.

Early adopters in real estate, however, aren’t listening to the critics. In late 2013, Bond New York made headlines when it became the first real estate firm to accept bitcoins for real estate fees. (A single unit is called a bitcoin, while the system is called Bitcoin with a capital B.)

“We are the first out there,” says Kelly Kreth, head of public relations for Bond New York, and principal for Kreth Communications. “We accept Bitcoin for real estate transaction fees. We aren’t talking about accepting Bitcoin for the actual purchase – that would be between the buyer and seller.”

As of this writing in early February, Kreth says Bond New York hasn’t had any takers. The company has kept its ear to the ground on this, and hasn’t heard of any transactions anywhere else in the country.

That, of course, is one of the challenges of the currency – one of the purposes of Bitcoin is to allow anonymous transactions, so unless an entity self-reports it’s hard to find evidence of Bitcoin commerce.

A few other companies in the United States and Canada have also announced they are open to Bitcoin for transaction fees but they haven’t seen any traffic yet either.

The watershed moment for real estate may have come in early February, when the nascent startup RealtyShares in San Francisco announced it would be the first, as far as anyone can know, real estate investment firm to accept Bitcoin for its crowdfunding real estate investment platform.

RealtyShares likewise hadn’t had any takers at press time, but they expect it’s only a matter of days.

“We announced today (a Tuesday), and we expect based on the inquiries we’ve had that we will have some takers by Friday,” says Nav Athwal, CEO of RealtyShares. “We are the first platform to allow bitcoin holders to invest in real estate.”

RealtyShares is already an innovator. Its goal is to streamline real estate investment, which many investors in stocks and bonds avoid because of the complications and the cost. To that end, the company provides a platform for crowdfunding, where investors can invest as little as $1,000 directly in real estate ventures through their laptop, smart phone or tablet.

“So for us, digital currency fits in that mode. We think in a few years people will wonder why this was news, just as we look now at crowdfunding or online dating as the ordinary, but they were looked at skeptically when they first came out,” Athwal says. “In addition, 15-20% of our investors are from abroad, and they pay wire fees, conversion fees, unfavorable conversion rates, and the time that transfers can take – and this simplifies everything for them.

“We’re opening ourselves up to a wider range of investors,” he says.

“There a lot of bitcoin holders out there looking for a way to invest what they have. We are trying to be innovative and ahead of the curve, but we also see solid business reasons for adopting Bitcoin.”

Athwal says that he isn’t concerned about the volatility of Bitcoin value.

“January was Bitcoin’s most stable month since it went mainstream, and because there are more and more mainstream companies adopting, there is a stability and legitimacy coming to Bitcoin,” he says.

“We are still going out on a limb as far as using Bitcoin for investment in an asset class, but we aren’t exposed to the volatility that comes up. We integrated Coinbase into our platform, so that we can immediately convert bitcoins to U.S. dollars. There’s no exposure to volatility in the way we transact.”

There’s a certain appeal to the idea of cyber-currency, especially for those who have a dim view of the state of the dollar under the Federal Reserve’s ministrations.

Think of it – a private currency free from fiat declarations by central banks, free from intrusive scrutiny and regulations, and untraceable.

What’s not to like?

As James Turk and John Rubino write in “The Money Bubble”: “In the Internet’s early days there was general agreement that one of the first killer apps would be some form of cyber-currency…The emergence of such currencies would, in this optimistic scenario, consign relics like the dollar and the Fed to history’s circular file and usher in an era of trust, stability, and growth similar to what occurred under the classical gold standard.”

The first couple of goes at cyber-currency weren’t the success everyone hoped. They were more Friendster and MySpace than Facebook and Twitter, and primarily driven out by central banks and governments that wouldn’t abide competition. They were either tied to the existing money and banking structure, like eCash, or pushed into the margins by authorities that saw them as havens for money laundering, like e-gold.

Goldmoney beat the money-laundering rap by requiring users to register with their real names, but it ran into other legal barriers.

However, in 2008 someone – or several someones – under the name “Satoshi Nakamoto” gave to the world a new concept for e-currency – Bitcoin. This new concept uses a system that tracks each “bitcoin” from user to user to prevent re-use, and tracks by a diversely distributed, peer-to-peer decentralized network. Bitcoins are a long series of incredibly complex, military-grade encrypted alphanumeric characters that can be stored on a piece of paper, in a digital wallet or on an individual computer.

Miners create more bitcoins by working out increasingly difficult algorithms that grow more complex with every solution, so that more bitcoins are added to the system slowly over time at a rate that is both stable and predictable.

It took several years and the enthusiasm of early adopters and speculative traders, but by 2011 Bitcoin was starting to take off and to be accepted by a handful of businesses. A Forbes story in February 2011 gave Bitcoin a serious credibility boost, but at the same time fueled a wild roller coaster of valuations pegged to the dollar.

Now it was on the government radar, and bitcoin use on some black market sites like Silk Road – a now-closed site that was an eBay for all things illegal short of child pornography and murder-for-hire – was used to target Bitcoin. Critics once again said Bitcoin was online money laundering, while critics of those critics said the central banks and elected officials were simply mad because they weren’t getting their cut.

However, there was little government or banks could do this time around.

There were problems – bitcoins could be wiped out by hard drive crashes, using them was difficult for people without a high degree of technical skill, and they could be lost in trading exchanges. Users persevered through these difficulties, however, and new point-of-sale hardware and other technical fixes brought it back from the brink.

At the start of 2013, the single bitcoin was valued at $20 and went on a ride from $100 to $1,000 and back down to earth, a victim of a flood of speculators and investor exuberance. By the start of 2014, the market value of Bitcoin, according to “The Money Bubble,” was $10 billion and merchants of all types were saying they would accept the cyber-currency.

Bitcoin is still subject to wild fluctuations in value as its value is based purely on supply and demand, unlike the dollar and other national currencies that have fiat value or are pegged to precious metals. As of the time of this writing, a bitcoin is valued on most exchanges at around $835.

Critics still have a lot of reservations – bitcoin transactions can’t be undone.

That’s a boon that protects bitcoin transactions from government interference, advocates say, but a bust for those worried that there’s no way to mitigate fraud.

That doesn’t phase Bitcoin enthusiasts. A few perceived weaknesses and the occasional association of Bitcoin with illegal or shady transactions haven’t deterred enthusiasts. After all, does anyone condemn U.S. currency just because it’s sometimes used in illegal enterprises?

Companies as far ranging as, Virgin Galactic, Paypal, Reddit, The Pirate Bay,, and Zynga are now accepting Bitcoin, and the list is expected to grow greatly in 2014.

“The pioneers get the most arrows, but the more companies like us that adopt Bitcoin, the more it will bring greater stability,” Anthwal says.

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3d rendering of a row of luxury townhouses along a street

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