We are watching the progress of a market driven almost entirely by hype, and what we’re seeing is nothing short of crazy. But, because it’s a hype-driven market, the risks involved are becoming exponentially larger as the bubble gets closer to popping point.
There are individuals and companies hoarding Bitcoins and this is driving up the price. There is a risk that, as the value hits its perceived peak, those individuals and companies will cash out by dumping their stock. At that point, the value plummets and it’s the everyday folk who have invested a couple of grand or so in the currency who suffer.
It’s not all bad news. For the property industry, Bitcoin, and cryptocurrency as a whole, holds very promising potential. But to see it requires you to stop thinking about it as currency and start thinking about it as technology; technology which is being put to good use by PropTech companies and, increasingly, traditionalists to help aid frictionless and secure property transactions.
A recent announcement from Rentberry, the U.S online rental marketplace, told us how its plan to help tenants pay more affordable security deposits with the company’s own brand of cryptocurrency; BERRYs.
Even more interestingly, Rentberry plans to require tenants to pay just 10% of their deposit. The rest of it will be covered by one or more anonymous ‘community micro-lenders’ making up the total with their own crypto resources, charging a small amount of interest to the lender. At the end of the tenancy, just as with a traditional deposit, the correct portion is returned to the tenant and micro-lenders.
This results, or so Rentberry claims, in tenants paying as little as £60 for a year’s deposit, rather than having to give £2000 up front to the landlord.
Rentberry’s use of blockchain also allows landlords to avoid the banking system entirely and forego escrow accounts, even in countries and states that require them to do so. As its CEO Alex Lubinsky says, Rentberry has created a decentralised currency:
“The loophole is that we use our own crytocurrency and it’s essentially decentralised. We are not mandated by law to put it into the bank, because everything is done on smart contracts.”
“It’s not even really qualified as a security deposit because it’s done on the blockchain, not in U.S. dollars.”
While that’s happening in America, back in London, property developer The Collective has announced it too will start accepting deposits in Bitcoin, and then taking it one step further by accepting rent payments in the same way by the end of the year.
“With many savers and investors now choosing and becoming more comfortable with cryptocurrency,” says The Collective CEO, Reza Merchant.
“People will expect to be able to use it to pay for life’s essentials, including housing deposits and rent.”
Many argue, in response to this announcement, that cryptocurrency is still in its infancy and is thus too exclusive to appeal to the general public. As ARLA Propertymark puts it, “the market will need to develop more before it becomes a mainstream payment method for rent.”
ARLA’s right. As both a currency and a technology, Bitcoin and its peers remain relatively immature, and that’s partly why it’s so easy to be distracted by the negative headlines that they are receiving.
While I think we should act with caution and patience when thinking of new currency, I think it’s important that we look beyond that. Cryptocurrency’s value is fluid and destined to change by the day. One day, however, it’s likely to settle into a more predictable and reliable market.
Because of that probability, the world of property should today be making its preparations for a crypto future.
To be put-off by Bitcoin’s current volatility and negative press is to miss the bigger picture.
Everything is pointing to a future fueled by blockchain and cryptocurrency, if we wait for the market to settle before even thinking about adopting the technology, it will be too late to catch up.
*James Dearsley is a partner in PropTech Consult, digital transformation specialists for the real estate sector. To sign up to James’ Sunday PropTech Review, click here.