At first glance, Bitcoins and real estate have very little in common. The first exists only in digital form and is invested in or exchanged for good and services. The second is physical properties that people occupy – sometimes they own, sometimes they rent, sometimes they dabble in a bit of both.
However, there are similarities. Both are limited goods that fluctuate in price based on market behavior. Neither are generally traded on an open market like a stock or bond. Both derive their value from what others are willing to pay for it. Neither are technically currency. Both increase in total amounts following known (or predictable) trends and ownership of any given asset can be determined with a bit of work.
Your first question might be – so what? To you I invite to stop here as you are probably not going to be interested in the rest. To those that are intrigued by this vague connection, continue along with my thought processes.
The similarities between the two are surprisingly close once you zoom in further:
- Both are defined by quantities that can be continually reduced (1 bitcoin is the unit of measure but you can own .000000001 bitcoins if you so wanted just as theoretically could could lease or own .0000000001 square feet of a building).
- Each is a decentralized system where anyone can buy, sell, exchange their ownership to anyone else (it’s easier in Bitcoin than CRE but ease is merely a financial issue largely).
- New quantities of each don’t simply spring to life. They are based on known quantities that increase at some rate.
However, it’s the difference between the two that point to issues of CRE being the next Bitcoin:
- Bitcoins are digital while real estate is the definition of physical.
- Every bitcoin is exactly the same as the others while every building is different (every square foot is different).
- Bitcoins were created as a store of value and exchange while real estate was created as a place for people to live or work.
- Anyone (theoretically) can create new real estate where as bitcoins are created by an algorithm on a known schedule.
Why do I mention this? It feels like real estate was Bitcoins before Bitcoins. The more I look at it from different angles it should be (theoretically) possible to use real estate as a broader store of value. Not easily – but possible.