The Bitcoin Newsletter #5 - Bitcoin is digital real estate
Hard Money Show, Bitcoin Magazine, Documenting Bitcoin.
Welcome to the 5th edition of The Bitcoin Newsletter
In August 2022, I published an article in Bitcoin Magazine titled "Why Bitcoin is Digital Real Estate." The article highlighted the similarities between bitcoin and real estate and detailed how the properties of bitcoin reflect many of real estate’s value offers on top of fundamentally more secure custody.
I was happy to see that Swan Bitcoin, the Los Angeles-based Bitcoin financial service provider, has picked up on this concept and featured it on their new episode of Hard Money, a weekly Bitcoin news show hosted by Natalie Brunell.
In this issue of the newsletter, I will walk you through my thought process and explain what I meant with the analogy of bitcoin being digital real estate.
Best regards,
Leon
DEEP DIVE
Why bitcoin is digital real estate
Bitcoin has a unique value proposition. As a protocol for exchanging value it allows you to directly own part of it. The Bitcoin network is a transaction processing system. From transaction processing comes the ability to exchange money, namely bitcoin, the network's native currency, which represents the value of the underlying system. It is both a payment network and an asset, backed by the most resilient computer network in the world. If you could own part of the internet, would you say no?
In fact, that is owning bitcoin — owning shares in a new breakthrough protocol that will transform the internet from a space where not only information, but also value, can be freely exchanged.
Source: Jesse Myers (@Croesus_BTC)
With Bitcoin, it's possible to take an ownership stake in the entire internet of value. This was never possible with the internet of information. Ownership and value capture is built directly into the protocol (Guy Swann, 2021). This is a paradigm shift that new investors need to “wrap their heads around” to understand Bitcoin’s full potential (Croesus_BTC, 2021).
Michael Saylor has famously compared buying bitcoin to buying real estate in downtown Manhattan 100 years ago. Some of New York's wealthiest families have made their fortunes owning real estate over the past +100 years. When something that is limited is in high demand, it increases in value.
Scarcity has a lot to do with the value of things, which is why certain unique pieces of art are worth so much and why real estate in a densely populated area is more expensive than in a non-densely populated area (surferjim, 2020). Sure, real estate has value because people pay rent to live in it, but the value is primarily determined by the limited supply of building land. There are only "so many" properties to be built in prime locations. Bitcoin's appeal also stems from the fact that its supply is limited (Brown, R. 2014). There will never be more than 21,000,000 bitcoin. But bitcoin, unlike real estate, does not generate any income. It's like bitcoin is a digital property that doesn't earn rent. So wouldn't calling bitcoin land be a more accurate comparison?
In fact, as described by Richard Brown, bitcoin is very similar to land due to the network's accounting structure. But I would like to build on that and expand this comparison because bitcoin has a much higher complexity in its application than land, for which real estate is the best comparison.
Given the high levels of monetary inflation in recent decades, simply keeping money in a savings account is not enough to preserve the value of money and keep up with inflation. As a result, many, including wealthy individuals, pension funds and institutions, typically invest a significant portion of their disposable cash in real estate, which has become the preferred store of value of the world. More than 67% of the world's wealth ($330 trillion) is held in real estate. Over the past 50 years real estate has become the number one store of value in the world, because it serves the world as the primary asset to protect wealth from inflation. Most do not own real estate for its utilitarian value, meaning living in it or using it for manufacturing. They own real estate so they can store value (Jimmy Song, 2022). In its function as a store of value, it competes with bitcoin, which performs this function much better.
Store of value
Bitcoin is rarer (it has a fixed supply), more liquid, easier to move and harder to confiscate, tax or destroy. It is the ideal store of value. It is easily portable, noncustodial, censorship-resistant, divisible, durable, and easy to move or liquidate in times of crisis. In addition, there is no daily maintenance and it is relatively cheap to store. All you need to store it safely is a basic computer without internet access and a BIP39 Key generator — or just buy a hardware wallet for $50.
Collaterel
Aside from being used as a store of value, real estate is the most common form of collateral used in the traditional banking system. It is commonly used as collateral from a borrower to a lender to secure the repayment of a loan. Banks lend to people and institutions that own real estate. For comparison: bitcoin ownership has become synonymous with “creditworthiness” in the bitcoin space and the preferred collateral accepted by bitcoin financial service providers. Using bitcoin as collateral to secure the repayment of a loan has certain advantages for both borrowers and lenders. As digital collateral, bitcoin has a much higher velocity than real estate, which is physical. It is easier to access, buy, store, use and maintain. You might live in a remote village, but as long as you have a flip phone and can send and receive texts, you can buy and hold bitcoin. It has the ability to be used anywhere in the world. You could live in Berlin but get a loan from a bank in Singapore if they accept your bitcoin as collateral.
In summary, bitcoin is much more accessible than real estate, which has become expensive because it is used as the number one inflation hedge by investors and institutions. The smallest denomination of a bitcoin, 1 satoshi (1/100,000,000 of a bitcoin), costs as little as $0.0002123319. As real estate has become too expensive for most and therefore inaccessible, it has become impossible for most to store value and obtain credit, which is essential to building a business and wealth. Bitcoin provides easy access to store value and get credit, and therefore the opportunity to build wealth, thrive in life, and become self-sovereign. Bitcoin is a digital real estate. READ “Why Bitcoin is Digital Real Estate” | | “Bitcoin vs. real estate: what is the better store of value”
WORTH TO KNOW
The Hard Money Show - Bitcoin vs. Real Estate
I was thrilled to see myself on the latest episode of The Hard Money Show alongside Michael Saylor and Jeff Booth. Saylor has been a big inspiration to me for combining Bitcoin with more traditional industries. Among other things, the episode explores my concept that bitcoin is digital real estate and further explains why real estate has become a store-of-value in a world of debasing fiat currency. The show highlights the negative implications this has for society and presents the solution that Bitcoin offers. Natalie Brunell and the team over at Swan Bitcoin have done an exceptionally good job at showing why bitcoin is a superior savings asset for everyone. Thank you for including my insights and ideas. VIDEO
Documenting ₿itcoin
The popular Twitter account Documenting ₿itcoin has tweeted out the episode with an indication of how Bitcoin can solve the global housing crisis. WATCH & READ
IDEAS OF INTEREST
Nostrica, the start of something big ?
Andi Pitt, co-founder of Bitcoin and Lightning focused venture capital fund Ego Death Capital, has published an exceptionally well-written article about her experience as Nostrica, the first ever Nostr conference, which took place in Costa Rica at the end of March. Andi has done an excellent job at detailing the possibilities and opportunities that Nostr offers as a censorship-resistant platform for conveying information. READ
Resources
Guy Swann | With Bitcoin, it's possible to take an ownership stake in the entire Internet of Value
Croesus_BTC | Such a great way to illustrate the difference and that ownership & value capture is built directly into the network
Michael Saylor | Buying Bitcoin is Like Buying a Land in Manhattan 100 Year Ago
Surferjim | Bitcoin As Real Estate
Richard Brow | Welcome to Bitcoin Island
Jimmy Song | Bitcoin Songsheet: the Fiat Reality of Real Estate
The total value of global real estate
Pierre Rochard | The Bitcoin Central Bank's Perfect Monetary Policy
Photo Credit: labs.openai.com
Disclaimer: the content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Make sure you do your own research before making any investment and be aware of your own risk tolerance. If you like to build on my thoughts, feel free, but please cite me as the source. 2023 - Leon A. Wankum.
If you want to support me. Feel free. You can send me some satoshi/bitcoin.
My lightning address is: law@getalby.com
My bitcoin address is: bc1qyc9q89wjzmvaw729tj3wsrsfhft53mjycrjxdk
Hi Leon, good articles. Is there a way to understand some strategies for transfer the wealth from RE to Bitcoin without selling the RE?
"With Bitcoin, it's possible to take an ownership stake in the entire internet of value." 💯💯💯