Over the years, Bitcoin has gained a reputation as a lucrative investment option due to its potential for long-term wealth and the individual autonomy that users have by owning it. Investors have compared it to traditional investment assets such as gold, currencies, stocks, and even real estate. However, what if there was a way to have total ownership of your property without having to worry about tax burdens, maintenance costs, subdividing, the hassle and fees/time when buying and selling, geographical restriction, or the possibility of natural disasters. In this article, we will explore in more detail why Bitcoin can be viewed as a form of digital real estate.

Scarcity

The scarcity of Bitcoin is very different from traditional real estate. While both are scarce, Bitcoin's scarcity is based on a fixed supply algorithm, which guarantees that only a certain amount of Bitcoin will ever be produced. In contrast, real estate is scarce due to a combination of physical limitations (e.g. land availability, zoning restrictions) and market demand.

Furthermore, the supply of real estate is not fixed and can be influenced by a variety of factors, such as changes in zoning regulations, urban development, or even natural disasters. In contrast, the supply of Bitcoin is entirely predictable, and the fixed supply algorithm ensures that the maximum number of Bitcoins that will ever exist is 21 million.

Additionally, Bitcoin's scarcity is more easily verifiable and transparent than the scarcity of real estate. The scarcity of real estate can be difficult to assess accurately, as it is influenced by a range of factors such as market demand, zoning regulations, and population growth. Bitcoin's scarcity, on the other hand, is transparently verified by the network's underlying blockchain technology, which allows for the public verification of every transaction and the total number of coins in circulation.

While both Bitcoin and real estate are scarce assets, the nature of their scarcity is quite different, with Bitcoin's scarcity being more predictable, verifiable, and fixed than that of traditional real estate.

Store of Value

Bitcoin has become a widely accepted digital store of value, especially in a world where monetary expansion continues to increase. One of the reasons behind this is that the supply of Bitcoin is finite, which makes it an ideal store of value. Additionally, Bitcoin possesses several properties that make it a superior store of value compared to real estate. It is portable, divisible, durable, fungible, censorship-resistant, and noncustodial. These characteristics make it easy to move and harder to confiscate, unlike real estate which can be easily confiscated, and difficult to liquidate during times of crisis.

The recent conflict in Ukraine highlights the advantages of Bitcoin as a store of value. After the Russian invasion in February 2022, many Ukrainians turned to Bitcoin to protect their wealth, bring their money with them, accept transfers and donations, and meet daily needs. In contrast, real estate would have been difficult to move or left behind entirely. While Bitcoin is rare and more liquid, it is also much easier to move and transfer anywhere in the world at almost no cost at the speed of light. These advantages make Bitcoin a more attractive store of value than real estate, particularly in times of crisis.

Furthermore, Bitcoin's decentralized nature ensures that it is censorship-resistant, meaning that governments and financial institutions cannot control it. In contrast, real estate can be regulated and controlled by governments and financial institutions, which limits its freedom as a store of value.

In conclusion, Bitcoin's properties as a digital store of value make it a superior alternative to real estate, or at least worth investing in alongside traditional real estate investments. The finite supply, portability, divisibility, durability, fungibility, censorship-resistance, and noncustodial nature of Bitcoin make it a valuable asset for investors looking for long-term wealth and security. Its advantages over real estate in terms of liquidity, transferability, and resistance to confiscation make it an attractive store of value, particularly during times of crisis.

Collateral

In the traditional banking system, real estate is one of the most commonly used forms of collateral to secure the repayment of a loan. However, in the Bitcoin space, Bitcoin ownership has become synonymous with "creditworthiness" and is the preferred collateral accepted by Bitcoin financial service providers. Using Bitcoin as collateral offers advantages for both borrowers and lenders due to its digital properties. Unlike real estate, which is physical and location-bound, Bitcoin can be easily accessed, bought, stored, used, and maintained from anywhere in the world. This makes it a more liquid and versatile form of collateral. For instance, someone living in a remote village with access to a flip phone can still use Bitcoin as collateral for a loan from a bank located in another country.

However, traditional banks are more inclined to choose real estate over Bitcoin as collateral due to the latter's high volatility. While Bitcoin's volatility can be detrimental to market participants who are not prepared for it, it can also have a positive impact on the economy as it results in a more resilient market. The constantly evolving nature of the Bitcoin market means that firms need to be better at saving and not leveraging as much to avoid margin calls in the event of price declines. Nonetheless, this article is not intended to compare the specific characteristics of real estate and Bitcoin as collateral, but rather to showcase the different use cases of Bitcoin. A separate article will be dedicated to comparing the properties of both assets as collateral.

In Summary

While there are certainly many tangible differences between Bitcoin and residential/commercial real estate, each with their own advantages and disadvantages - it is clear that Bitcoin solves similar problems to what many are investing into real estate and land for. While Bitcoin cannot house a family or necessarily provide the same kind of residual income that real estate can, it represents a different kind of individual ownership and self sovereignty. Overall, if real estate is something that you are already invested in or considering investing it, then it’s worth taking a closer look at Bitcoin as an investment into the digital real estate space.

Sponsored by Bitcoin Sock Club