Bitcoin Is Creeping into Real Estate Deals | Hacker News Reader

Bitcoin Is Creeping into Real Estate Deals

wsj.com

115 pointsuptown72 comments

This article seems to conflate using the block chain to verify title transfers, with using Bitcoin to buy/rent property, as it discusses both without really drawing a distinction.

Can anyone make sense of what's going on here, and in particular why a municipality would prefer a block chain to a public database of digitally signed records?

It would allow two private parties to transfer title between themselves without permission or action by the municipality.

Not sure why the municipality would want that. Also would create a slew of issues around what happens if you lose the private key to your house, or worse, it gets stolen.

> if you lose the private key to your house

Haha. Sorry that I laugh, but using blockchain for land ownership is not about backing bitcoins with square meters, but about the tamper-proof, immutable, public and resilient aspects of the data you can store in the bitcoin blockchain.

The only private key that would be involved in this process would come from the government, which could just sign messages with some standard (encrypted) format that just maps addresses to individuals/entities. This way even notaries will become one day obsolete (or they will simply be there to make sure the blockchain entry happens and the transfer of the assets as well, in an atomic way; and the assets don't even need to be crypto in this case).

If the government instead stored the deed transfers in a database with digital signatures and exposed a read-only API to it, wouldn’t that solve this problem better?

What’s the concern? That the government makes you not the owner of your house anymore? And if your government does that, what’s the difference between fighting for a government that respects the rule of law versus fighting for a government that puts house deeds on bitcoin?

Thanks!

The difference is that the bitcoin wastes more energy to accomplish that.

but is guaranteed to accomplish that

If the government was going to take your house away from you anyway, why would they care what’s on the blockchain? This is so contrived...

If only one entity has the signing key, why not just use a centralized database?

Same things that happens with Bitcoin, you lose your house.

That's apples and oranges. A house and land doesn't become inaccessible if a key is lost, and the gatekeeper of "ownership of land" isn't the mathematics of the blockchain, it's the government.

Well sure, but that seems to undermine the necessity of the blockchain for this purpose right? If the ultimate arbiter is still the government, decentralizing the ledger is neat but it doesn't remove the requirement for trust in the government.

Bitcoin has proven to be an effective ledger in regards to uptime, consistency and not getting hacked. The transaction fees are becoming higher but it's probably still cheaper than administering your own database that's potentially worth billions of dollars. Bitcoin is worth billions of dollars so I'd rather trust it to maintain my records than some municipalities IT guy.

The protocol itself has not been hacked, but private keys get hacked all the time

This is largely solved with multisignature wallets. But centralized databases have this same attack vector, along with all the challenges of maintaining a database.

And if you get hacked and can prove it, the bank/municipality has the power to correct fraudulent transactions.

If they have the power to reverse the transaction, then what does Bitcoin add over a Database?

If the government needs to keep a record of who owns the house in order to resolve such problems then used a centralized and auditable system rather than a distributed one.

In a naive implementation, yes.

But to implement this properly, the real estate title should and would not serve the same purpose a bitcoin 'title' does via it's private key.

In case of bitcoin, a private key is literally the ownership of the bitcoins. In case of real tangible assets, the private key would serve as a pretty solid proof of ownership (but not THE ownership itself).

So, in case of a dispute over the ownership of a real estate property, you can point out that you had the ownership of the property via the blockchain.

In case of a theft of the keys, you must provide supplementary documentation regarding the prior ownership of the stolen keys. A pretty neat solution for the blockchain identity is being described by Vinay Gupta[1].

A simplified version is, imagine if the private key using which you purchased the house is stolen from you, then in front of the arbitrator, you present receipt from Amazon, where you used your private key to pay for goods which were delivered to you in your name, an affidavit from your bank which shows that you did business with them (using your real identity) and connected with your private key.

All these 'documentation' (which Vinay Gupta describes as 'insurance') is very hard for the thief to produce.

The same is not the case with bitcoin theft, where loss of private keys means loss of control of the assets (and not merely a 'dispute'). I hope that helps to explain it.

1. https://medium.com/humanizing-the-singularity/a-blockchain-s...

> proof of ownership (but not THE ownership itself)

The two could be if not the same then at least intertwined even for tangible assets. One could imagine a safety deposit box for example, with an electronic lock that would open not with a combination but a signature from the key that currently controls it on the blockchain.

That would be a nifty hack (and also a good plot for a movie where the hero manages to transfer ownership just in time for the bad guys to reach it).

If the arbitrator can alter ownership state (and the govt authorizes them to rewrite the blockchain to incorporate their findings) it isn't really a blockchain: just a centralized database.

If they can't alter the blockchain, then ownership state on the blockchain will diverge from reality over time.

Well, actually it just sits there forever and no one can use it.

Think of this more like converting your home into a museum for future generations.

Why? If the transactions logged on the blockchain contain annotations about your identity, you (as described by those annotations) would still own the house, only an impersonator matching those annotations as good as you would be able to challenge your ownership. On a blockchain without any fallbacks you would lose any ability to ever transfer ownership. As for future generations, will anyone could claim it but your heirs might have a better shot at it than a random impersonator.

It also seems to conflate online access to land records with bitcoin.

It's possible that the same folks that pushed MERS (trying to move land records out of county systems and into a private, mortgage industry-controlled system) may be pushing this as a second attempt at the same (just with the word "blockchain").

The only way it makes sense to me is as a further means of authenticating exactly what was done and who the parties were. See "Triple Entry Accounting" for a similar concept (added value from blockchain use): http://iang.org/papers/triple_entry.html

Many jurisdictions don't need signed records. Many Americans can deed property among themselves without touching a public database. There are surely reasons why one might want to register such a deed, but it isn't an absolute requirement. I do scratch my head at the desire to use blockchain tech in areas where absolute assurance isn't needed or even desired. And to implement such a system in an area as diverse as contracts and real estate seems folly. What happens when we want to do something that the blockchain's design hasn't anticipated?

For the same reason a group of banks would prefer a blockchain despite not having to worry about the Sybil attacks that motivated it -- it sounds modern and high tech and fancy.

In Canada, buying/selling Bitcoin is subject to capital gains in the same way buying/selling stocks are. I wonder if you have to pay capital gains if using Bitcoin directly as a currency- as in through the purchase of a house or other expensive asset.

I'm about to buy a house (US) and considered that very issue. I asked an accountant and the answer was that, yes, I'd need to pay capital gains tax on the gains.

On one hand it makes sense, but on the other hand, it could be seen as a diversification into real estate. If instead of personally buying the Bitcoin and house, I bought shares of "moduspol mutual fund", and then that mutual fund bought the Bitcoin and diversified into part of my house, I presumably wouldn't be taxed until I sold my shares in "moduspol mutual fund."

But it's a good problem to have, and probably not worth (legal) avoidance at smaller (< $1 million) values.

In that example, presumably "moduspol mutual fund" would need to pay capital gains taxes.

Wouldn't its profits be coming from the fees it charges me, and not from the investments themselves?

Do normal mutual funds pay capital gains taxes as the things they invest other people's money in are changed?

> Do normal mutual funds pay capital gains taxes as the things they invest other people's money in are changed?

Yep! Tax efficiency of a mutual fund is quite an important factor to look at for your overall expenses as well. It's a large reason actively managed funds don't do as well as simple market-wide ETFs.

Wow. TIL. Thanks!

CRA (Canadian's IRS equivalent) says bartering creates a taxable event, be it Bitcoin or turnips. Whenever you do the trade, you're supposed to calculate the value of what you're offering in Canadian Dollars. So buying in Bitcoin is not very different than buying in US Dollars.

I think yes, might be wrong but it's logical (logic and taxes don't always mix, so I may be wrong).

You bought Bitcoin at $1 and sell at $8000 to pay for a house, you need to declare income of $7999 for each Bitcoin at the end of the year or else...

It makes sense, I guess the question is if there's language in the tax code for alternative payment sources. It's not unreasonable that someone could trade their car, and 300 shares in Google; in exchange for something of equal value.

If there is, it sucks because you're getting hit doubly for taxes on the item you're paying and the capital gains you'd be taking.

In USA even if you sold cocaine...or your mom, you need to declare it on income taxes. They might not catch selling cocaine but if they catch you with undeclared cash, they'll Al Capone you.

I'm almost certain that all countries have a catch all phrase to include any gains /income.

Not all countries have capital gains tax, so no.

At the same time capital gains on such a stellar return is pretty amazing problem to have.

That's a good question.

Would you be charged capital gains taxes if you wanted to make a straight-trade of real estate properties, or would there need to be a symbolic changing-hands of money on paper, and thus taxed on each side?

I can't claim to be trading real estate properties, or even buying and selling them (long live Toronto real estate market...) so I have no idea. I know it's a weird scenario, but just in an attempt to find an analogue — anybody?

edit: This question was an attempt to create a more relatable analogue scenario for a BTC <> Real Estate transaction. Thanks for the info.

This is barter. Barter is taxed. You are required to estimate the value in dollars and pay the appropriate tax, whether or not dollars were actually involved in the transaction.

That fully answers my question, thanks. I wondered if there was a relevant term in taxation. It's not my strong point, so this is really helpful.

I can understand barter being taxed, that's fair, but would capital gains would be triggered if the item being bartered had appreciated in value before being used directly for purchase?

Yes

> Would you be charged capital gains taxes if you wanted to make a straight-trade of real estate properties

In the United States there's something called a 1031 exchange that allows the deferral of capital gains recognition on a sale of one asset and the purchase of a similar one under some circumstances. But in the case of real estate in can only be used for investment properties not owner occupied residences.

How will any kind of blockchain used for real-estate be de-centralized? My guess is that it will be centralized. No government would give up that much control over the property within its borders. Governments want authority to be the first to add property to the ledger to ensure it starts off in a valid state. Governments want to have the authority to seize property and enforce court decisions as well. People could get hacked and suddenly someone else owns their home, but with a centralized system, even if the government gets hacked and all property stolen, they simply fork off a previous block that was known to be valid and proceed as usual.

Blockchain ≠ Bitcoin

Alternate Source: https://archive.fo/5ArL4

Thanks. I can’t circumvent the paywall either with Google, nor Facebook, nor the E-Mail URL trick.

I seriously wish by now links to paywalled content that aren’t archived versions should be banned from HN, especially now that circumventing these paywalls is basically impossible.

You’re replying to a comment with a paywal circumvention link but saying it’s basically impossible?

I'm replying to a comment after already 4 attempts at circumventing have failed

The alternative is that people start commenting on an article without having read it, and that would truly turn HN into Reddit.

It is just money laundering & evading exchange controls. Would use pigeons if they were fast enough.

Article headline implies Bitcoin can be used in real estate deals. Article itself describes how blockchain techniques may be used in real estate record keeping. This aligns with my understanding of how bubbles are promoted through confusion tactics, via financial press as complicit agents. Mental Note; don't touch cryptocurrencies with a barge pole.

Well, WSJ and Wall St are interesting in bubbles of all kinds, so, of course, just like ever before, they would do anything possible to separate stupid people from their money...

Some markets are more false than others. With cryptocurrencies 1) you can’t measure intrinsic demand, so you don’t know if a price increase is being driven by sheep-like speculators or real buyers who want to hold the asset for its own sake. 2) you can’t validate counterparty identity so people can buy and sell with themselves, thereby creating a false sense of market demand. 3) because of a lack of market transparency you have no idea at all what you can sell bitcoin for in a certain size, similar to diamonds where people pay $1000 for a commodity that they wouldn’t be able to sell themselves for $100, so ‘investments’ in it are an instant money loss. It’s one of these markets where if you aren’t scamming someone yourself then you are the one being scammed. All that said, this bubble is still mid froth, and I expect my comment to get downvoted, by scammers and suckers.

EDIT (from https://www.nytimes.com/2017/11/21/technology/bitcoin-bitfin...):

> Tether and Bitfinex have insisted that the two operations are separate. But leaked documents known as the Paradise Papers, which were made public this month, show that Appleby, an offshore law firm, helped Mr. Potter and Mr. Devasini, the Bitfinex operators, set up Tether in the British Virgin Islands in late 2014.

> One persistent online critic, going by the screen name Bitfinex’ed, has written several very detailed essays on Medium arguing that Bitfinex appears to be creating Tether coins out of thin air and then using them to buy Bitcoin and push the price up.

I rest my case.

Great way for Chinese buyers to go straight from electricity bill to Canadian/Australian/Californian real estate without even moving any currency. Money laundering and capital control problems solved!

(OK the article looks to be about blockchain for confirming transaction rather than paying - but the joke still holds)

I don't see this comment as helpful. Bitcoin, and other crypto currencies, is akin to the internet when it was first introduced. It has the potential to disrupt the value business which is controlled by governments at the moment.

Worse, a lot our value system is controlled by corporations that have fees littered throughout every single transaction we do today. Crypto-Currencies have a chance to disrupt a system that is increasingly not good for the common person.

Secondly, Chinese buyers area already visiting the US and buying property and they pay cold hard cash. So not seeing what your point is here.

What are a few things you can do with Bitcoin that you couldn't do without it?

Near instant worldwide transfer of funds with low fees is a big one that comes to mind. I'm invested in bitcoin and it takes, on average, an hour to move around with around $10 in fees.

Of course the fees are still high but I imagine they will come down if bitcoin wants to see mass adoption.

Immutable, anonymous, and decentralized ledger.

Those are attributes of blockchain technology rather than bitcoin itself though. It's possible another cryptocurrency (litecoin anyone?) will dethrone bitcoin as the 'currency' and bitcoin will remain a store of value.

>Near instant worldwide transfer of funds with low fees

>Of course the fees are still high

He is comparing to traditional wiring.

> 7 days, $50-$100 in fees.

So it's still faster.

There are middle grounds between traditional transfers and Bitcoin transfers:

https://www.worldremit.com/en/help/sending-money

Most methods of receiving mentions are instant

Fair point but the blockchain eliminates the need for middle man and their fees due to its nature of being a Trust Protocol.

Well for one you can transfer money to anyone anywhere without any intermediates.

I don't think that's actually true. How does the sender convert fiat to bitcoin, and then the bitcoin back to fiat?

There's still intermediaries involved and they're not exactly simple to use.

Well - you do have to use an intermediary to exchange bitcoin for fiat, that is correct. I think the vision is that one day fiat will go away and be replaced by bitcoin and other cryptos though.

Everything is quite clunky right now, and not exactly easy but that is true of any new technology.

Why would you want that? What happens if you have a fraudulent transaction? How is it reversed? What about coercion? Blackmail, etc.

By the way, you can transfer cash without any intermediaries. You literally just hand it over.

I think blockchain in general has value, however I'm skeptical of cryptocurrencies vs. a trusted intermediary and the current setup.

>By the way, you can transfer cash without any intermediaries. You literally just hand it over.

Why would you want that? What happens if you have a fraudulent transaction? How is it reversed? What about coercion? Blackmail, etc.

Yeah, that's why you use escrow, or an intermediary service. By the way, I never claimed you should use cash. In fact, most of the criticism I have towards Bitcoin also applies to cash, as you've sarcastically pointed out.

This is one of the growing pains of bitcoin that will have to be worked out. You can send bitcoin to addresses that nobody holds the private keys to and those coins will be gone forever. There are likely already several hundred thousand or millions of bitcoin lost this way.

There is no reversal of a transaction, the ledger is immutable.

With all of that said, bitcoin was not created to solve crime.

You can move the cash straight from Mainland, instead of having to get around the 50k/p.p. capital control. This is huge as there are many more people who have money inside of China than in HK bank accounts.

Are you suggesting the massive paper trail of buying a house could be circumvented single-handily by pseudonymous cryptocurrencies?

Money laundering is a favourite catchall term law enforcement likes to use to label something as bad while ignoring all the context around the action. There are plenty of ways to catch tax evasion and other crimes without centrally controlled currencies. This is probably one of the worst examples to support the cryptocurrency = opening the floodgates to crime narrative...

Non-Paywall http://archive.is/5ArL4

A few other cryptos are as well http://vectorspace.ai/recommend/app/crypto_discover?query=re...

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