Real Estate at a Crossroads

by Gregory Charlop

  Interview with Ragnar Lifthrasir, founder of the International Blockchain Real Estate Association.

  Gregory Charlop: You're an expert on the blockchain. Tell us what the blockchain is.

  Ragnar Lifthrasir: Yes, the blockchain is a protocol for doing a couple of things. It transfers digital value peer to peer without the need or permission from a third party in a censorship- resistant network, and those digital asset transfers create an immutable ledger. You have value transfers with an immutable ledger recording those transfers.

  Gregory Charlop: Excellent. What does this have to do with real estate?

  Ragnar Lifthrasir: Real estate is about transferring value, whether it's an actual property from one owner to the next, whether it's money for an asset, or whether it's a short-term asset like renting or leasing. Also, obviously in real estate it's very important to keep track of ownership and transactions. In real estate it's important to be able to come to agreements between two parties. So big picture, what the blockchain does is it makes real estate more peer to peer, and it replaces or reduces the need for third parties. And that's across lots of applications for real estate, whether it's title transfer, currency transfer, chain of title, certain forms of contract, and investment. What the blockchain is allowing us to do is to make things more peer to peer, replace middlemen with code, basically.

  Gregory Charlop: When you say, "more peer to peer," if I understand you correctly, you're saying it would enable a buyer and a seller of a piece of property to transact more directly with each other without having other parties interfere or be involved with the contract or the payment?

  Ragnar Lifthrasir: Correct. For example, let's just look at a transfer of a property. Let's say an office building. There are two forms of value there that are transferred. There's the actual building itself, ownership of that, but then there's also money. Someone transfers money, the other person transfers the ownership, so blockchain can do both of those. Obviously, with the money you have Bitcoin, you have other digital currencies, so instead of having to go through your bank, each person can use their blockchain wallet, their Bitcoin wallets, their blockchain software to transfer that value. You don't need the intermediary of a bank. You also don't need the intermediary of an escrow, potentially, because you can do a blockchain escrow with a Bitcoin multi-signature transaction.

  Okay, so that's the money portion. That's a currency value transfer that we just made more peer to peer and censorship resistant because you don't have these third parties saying you can't do it. Now, the second part was the actual property, the title. You can create a blockchain token that represents that property. You can create digital assets, so I say this blockchain token is my blockchain deed and I can transfer it directly to you. I don't need to have a lawyer write it up or have the title insurance company write it up and then print it out for us and then look it over. We can use software to do that.

  Gregory Charlop: Great, so it sounds like they can make the process of real estate transactions faster and cheaper by removing these intermediaries?

  Ragnar Lifthrasir: Yes, faster, cheaper, more secure and, not only that, but with lower friction, and just a completely different experience. I think the best way for people to sort of visualize what the whole process will be like is buying stock, from Apple, for example. You go to a website, you can see all the data in front of you, you can take ownership of that asset by clicking a few buttons and transferring some money, and now you own that asset. That will be where we're trying to get this to. That will be the experience, versus what people currently have, which is much different.

  Gregory Charlop: Potentially then, there will be more direct interaction between the buyer and the seller to the exclusion of other parties.

  Ragnar Lifthrasir: Correct.

  Gregory Charlop: It sounds like this could potentially cause job losses in the mortgage industry, escrow markets, notaries, and other areas. Would you imagine if the blockchain were fully adopted that there would be less need for those job categories?

  Ragnar Lifthrasir: Definitely there would be much less need for those job categories. But I would say that those people, those professionals who work in those fields, a lot of them, might be working for the software companies that make the software more user friendly and know how to adapt software to the real world and the laws and requirements for all these things. So, yes, some of those jobs will go away, but some of them will actually transform and probably be more exciting and probably higher-paying too.

  Gregory Charlop: If you were speaking to someone who is considering going into escrow as a profession, what advice would you give them?

  Ragnar Lifthrasir: I would say there is going to be a long rollout of the technology but start now with hands-on experience. Buy some fraction of Bitcoin you feel comfortable with, and just start playing around with it. Get comfortable with wallet software, watch introductory videos on YouTube. Just start self-educating and start now, because it's early enough to where you can be kind of a leader and have valuable skills, so then as the transformation starts to happen, you're prepared. You don't want to wait five years. I think now is a good time for people in these professions—be it escrow, brokerage, title, others—to just start getting into the new economy.

  A lot of people say blockchain is the most important invention since the internet. The internet made information more peer to peer. It made information digital. Well, the blockchain makes value more peer to peer. It makes value more digital, so it's a similar revolution, and just as the internet replaced some jobs, it created a whole bunch of new great ones.

  Gregory Charlop: A lot of the people reading this book are real estate agents or brokers or executives with real estate companies. How would those folks, if at all, be able to use blockchain now? In other words, is there any way that an agent or broker or company could incorporate blockchain now into their business?

  Ragnar Lifthrasir: Right now there are residential and commercial real estate brokers who are helping their clients accept Bitcoin or pay for properties with Bitcoin. I know several right now. In fact, two residential real estate agents here in Southern California have named themselves the Crypto Realty Group. They're starting to specialize because now there's a lot of wealth floating around in Bitcoin in this area. People want to use that to trade for real assets. Something they could do now is learn how Bitcoin works, buy some Bitcoin themselves, transfer it around, get comfortable with it and just start telling clients, "Hey, I'll help you do it," and then once they find their first client, really figure it out.

  I would say “yes” to answer your question. First thing is just get comfortable with cryptocurrency. Don't worry about title and smart contracts and any of that stuff. Just the cryptocurrency; Bitcoin is the first place to start.

  Gregory Charlop: Excellent, and I do want to ask you a bit more about Bitcoin soon. But before we get to that, just so I could better understand, it sounds like for now, blockchain would mostly be using something like Bitcoin. But how do you envision real estate agents using blockchain or related technologies in the future, in five or 10 years, whenever you think it might be fully adopted? How do you think that would impact the day to day lives of real estate agents and brokers?

  Ragnar Lifthrasir: The power is going to be much more in the hands of the owners of the real estate because the owners will be able to eventually create a digital deed for themselves. They (agents and brokers) are going to have to realize that their role as middlemen is going to diminish over time, so I would say it's prudent to start being in front of that.

  Gregory Charlop: If you were speaking to someone considering a career in real estate as an agent or broker, would you still recommend they go into real estate or would you recommend it but make sure they learn about blockchain or do you think it would be a bad idea because there would be a far lower need for real estate agents in the future?

  Ragnar Lifthrasir: That's a tough question because I think it will be a long rollout and the world is changing so quickl
y. So I think it's fine that they go into that profession, but they need to be aware of Bitcoin and blockchain today. Not in three years, not in two years, today. They may not use it, but they need to start being in front of it and setting themselves ahead of the curve for that. So I think it's fine they go into that. They just need to start today by getting their feet wet at a bare minimum.

  Gregory Charlop: It sounds like current real estate agents could potentially use blockchain or at least acceptance of Bitcoin even as a marketing tool, if I'm understanding you right, because they appeal to clients who want to use that.

  Ragnar Lifthrasir: That's the simplest way. Once they have a basic competency, they feel comfortable moving a hundred dollars of Bitcoin around at a time. They know how to secure it with the right security practices. Then they can start doing that to set themselves apart, and when they do land a client, they could call someone who really is good at it and make it work.

  Gregory Charlop: When do you see the blockchain being commonly used as sort of a routine part of real estate practice?

  Ragnar Lifthrasir: It's so tough to predict and it's just so uneven. Some things are going to jump ahead really fast. I think cryptocurrency, Bitcoin is definitely coming. It is appealing to overseas buyers, especially the tech crowd, so I see it more in terms of the users, not necessarily the technology. So if you're in an area with more tech-oriented people, adoption will occur faster. If you're in a different part of the country with a less tech-savvy client base, you probably won't be as affected by it. So how I would predict is based more on the sector. There's the divide between residential versus commercial. I actually think commercial will beat out residential first.

  Gregory Charlop: It does seem like it might actually fit into commercial transactions more easily. I could see more savvy buyers and sellers in commercial real estate perhaps than you do in run of the mill residential real estate.

  Ragnar Lifthrasir: Commercial real estate companies often have a bigger budget. They often have a bigger team. So, they have the budget and the expertise to be ahead of the curve. They have a lot more money to save and friction to be reduced because they're operating at a larger scale, so it's more compelling. Economies of scale kind of thing.

  Gregory Charlop: It sounds like you're saying that in the short and medium term, real estate agents could really benefit from understanding and perhaps even using some basics of the blockchain, like Bitcoin, because they could attract savvy customers, particularly in technologically-savvy areas. But in the longer term, it may decrease the total number of real estate agents needed, and probably the ones who remain will need to be fairly competent with blockchain. Is that essentially what you're saying?

  Ragnar Lifthrasir: Yeah, that's pretty fair. The best application of the blockchain is Bitcoin. The best application of the blockchain is currency That's why it was first and that's why it will continue to be first, just because of that reason. And also because money is so important. Real estate is so much about money, whether it's a security deposit, a lease payment, a purchase, or whether it's investment in crowd-funding. Money matters so much in real estate, and Bitcoin is programmable money. That's what it can do. Smart contracts, what are you programming? You're programming money to act a certain way, so even though a lot of people talk about title being first, I disagree. I think it's cryptocurrency first.

  Gregory Charlop: What is Bitcoin? I think we've all heard it in the news. What does it mean? Is it a thing? Is it controlled by any government?

  Ragnar Lifthrasir: Bitcoin is a peer to peer currency, but it also has properties of more than currency. It has properties of an asset, of a commodity, so it sort of acts like a currency and a commodity, and it has aspects of a payment network. It's digital gold, so what is Bitcoin? It's a combination of actually several things, depending on how you use it, but basically what it is is a digital, peer to peer asset.

  Gregory Charlop: For many of us, the whole process sounds a bit mysterious, this idea of Bitcoin sort of being on the internet. Is Bitcoin stored somewhere or is it just kept in computer networks, and who's deciding Bitcoin's value and who sort of runs Bitcoin? Does anybody kind of own it or oversee it, or is it sort of an autonomous thing?

  Ragnar Lifthrasir: Bitcoin isn't a company or an organization or a government. Bitcoin is simply software. It's an open-source protocol that anyone can look at, can view, can try to adapt. It's an open-source protocol, just like we have an email protocol. All email applications use the same email protocol. That's why you can have different email addresses. You might have Gmail and I have Yahoo, but they can talk to each other. Why? Because everyone is using the same protocol, and anyone can build an application on top of the email protocol. That's what Bitcoin is. It's an open source protocol to transfer value.

  Who controls it? That's a great question. Who controls the email protocol? Basically, the users. The people using it. There are software developers who write the code, but then there are users who use it. Probably the hardest part for a lot of people to understand is who controls it, and the answer is no one and everyone at the same time.

  Ragnar Lifthrasir: Where is it stored? Bitcoin is also a ledger. That's really what it is. It's a distributed ledger and every single person who runs what's called a node, everyone who runs a node has a complete copy of that ledger going back from day one, back when the very first Bitcoin transaction occurred in January of 2009. So if you run a Bitcoin node, you have every single transaction that's happened since that date to the present. And there are tens of thousands of these Bitcoin nodes around the world. So where is Bitcoin stored? They're stored on tens of thousands of computers that all have the same exact copy of that ledger. So when you're sending a Bitcoin, you are not actually sending anything, you're just changing the ledger.

  Person A used to have this amount of Bitcoins and now person B has this amount of Bitcoins because person A allowed person B to send Bitcoins from person A to person B. Bitcoin is a ledger.

  Gregory Charlop: It's not a tangible thing, so it sounds like you could never cash out of Bitcoin, per se, like you can't exchange it for gold, or can you do that? Can you exchange it for something and cash out of Bitcoin once you have it?

  Ragnar Lifthrasir: You could trade it for anything that someone is willing to take for it. So if I have a certain amount of Bitcoin and you have euros, and you and I agree to it, I'll send you Bitcoins and you give me your euros. Or if I have a certain amount of Bitcoins and you own a house, we could trade one thing for the other as long as we both agree to it. So Bitcoin can technically be traded for anything that two people come to agreement on.

  Gregory Charlop: You and I could just agree with each other without having any other party involved, if I wanted to trade your Bitcoins for my house or my euros.

  Ragnar Lifthrasir: Yeah. Again, it's digital gold, so I could buy your car with gold or I could buy your furniture with gold. As long as you want my gold, we could do that, same with Bitcoin.

  Gregory Charlop: How safe is something like that? It sounds like you're describing something that lives on the internet, that's on everybody's computer. Is that safe or can some clever people, maybe living in their mom's basement or working for a government, hack Bitcoin or just take all of your Bitcoins away?

  Ragnar Lifthrasir: The main risk with Bitcoin really isn't hackers so much as the people themselves losing their Bitcoin. Not so much theft but just loss, and they could do that several ways—by forgetting their wallet password or by writing their private key down somewhere and then losing it. So Bitcoin is not safe if you don't do some basic security things, which are actually relatively easy once you've done them and you're in the habit of it. But Bitcoin definitely requires more responsibility though, because there isn't a bank. There isn't someone you call to get your Bitcoins back if you lose them. Bitcoin is great because it's censorship resistant, it's peer to peer, but because of those same reasons, you do have to take more responsibility for it.

  Gregory Charlop: You had mentioned that
there may be clients looking to buy properties or sell properties using Bitcoin. Why would someone say, today, prefer to use Bitcoin rather than dollars or euros or gold?

  Ragnar Lifthrasir: There are several reasons. Some people invest in Bitcoin and the value has gone up dramatically since its inception almost eight years ago. Instead of having to convert that into dollars to buy the property, they might just say, "Hey, I just have this and this is just what I want to use because I have it." It'd be like if you have euros versus dollars, if someone will accept euros, it's easier and faster for someone just to accept the euros than having to change it into dollars first. So the first reason is because some people are just sitting on that much Bitcoin, either because it's gone up in value or they've bought it or they've earned it. The second reason is because, especially for international buyers, it just makes the transaction much smoother, and people don't know this until they do their first Bitcoin transaction.

  Try to send your brother 500 dollars who lives two states away. Do that via a bank and then do it via Bitcoin. Once you do it yourself, the question answers itself. It's so much easier and faster, so there's convenience. Also, it costs less because you don't need all the intermediaries. And I think it actually lowers the risk because escrow agents are human, and they make mistakes. They have office hours and they're not always available. Banks, too, make mistakes, and wires can take several days, especially for international transactions, whereas two people can just do it right now. So between convenience, faster, safer, there's several reasons.