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Ask HN: Cryptocurrency To Replace Real Estate?

3 points by osswannabe ↗ HN
The question is simple - is it possible to design a cryptocurrency to replace real estate as a store-of-value and generational wealth mechanism? If so, what features and/or design goals would you incorporate? To focus the discussion, I'm only considering feasibility in terms of RE-like price stability and long-term appreciation (not regulatory/tax implications). Personally, I think the biggest challenges are implementing illiquidity and regional market pricing (e.g. SF real estate prices don't really influence the NY market). As for why any of this matters, I've had this nagging (grandiose) idea that replacing real estate as an asset class can enable affordable housing on a global scale. Thoughts?

9 comments

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Finnucane
Can I get a 3-bedroom bitcoin a 20-minute bike ride from work?
osswannabe
Of course this crypto wouldn't give you a physical asset (that's kind of the point). But if it were to be possible, maybe that 3-bedroom apartment wouldn't be so expensive...
wmf
replacing real estate as an asset class can enable affordable housing

This is a great insight. Taking Germany as an example, policies to de-financialize housing lead to low and stable prices. China has been the opposite with the US in the middle.

Ultimately investment gains have to come from somewhere; real estate "investment" has mostly ended up stealing unsustainable amounts from the next generation. Even if you could replicate that with crypto it would probably only work for one generation (if that).

I guess government regulations created the housing market so you could imagine different government regulations (Sinagpore-style?) propping up some crypto instead, but that's not realistic today. Although... a system that almost every working person invests into then cashes out decades later sounds like US Social Security (except bigger and more harmful).

the biggest challenges are implementing illiquidity and regional market pricing

Why are these good?

osswannabe
My thinking was that real estate's lack of volatility comes from its illiquid nature. You can't buy and sell property on whim so there's less chance of temporary events (e.g. Trump tweets, earnings call results) having an outsized impact on prices.

Similarly, regional market pricing would prevent pan-region price crashes arising from someone dumping a large number of coins in this illiquid market. However, the more I think about this, I think it's a non-issue if you have large enough demand for this coin and a lack of liquidity.

Finnucane
If you want to disincentivize nonproductive investment in real estate (Such as buying up re and holding it unoccupied as a kind of safe deposit box) that could be done with taxes and financial regulation. Where the money goes after that is not really our problem.
osswannabe
I think the problem is bigger than that. Consider the NYC housing market. Even though there's almost no vacant real estate, rents are always rising due to the constant flipping of property. I say flipping since most of these purchases don't fundamentally improve the property in any meaningful way. Moreover, this continues despite the city having one of the highest capital gains tax rates in the US.

If investors had access to an alternative asset class that allowed them to realize decent YoY appreciation without undertaking risky construction, demand would cool down significantly. The end result (in the long run) would be sustainable property values and affordable housing for the middle class.

Finnucane
There are alternative asset classes. There’s no market mechanism that can guarantee returns for any asset class. Even real estate takes hits once in a while.
gus_massa
If you buy a house now, you know that in 20 years someone will need a house. (Assuming you select a nice spot, and do all the maintenance work.)

With a cryptocurrency, you don't know if you choose the correct one. Will Bitcoin or Ethereum win the race? Which fork? Will they survive the transition from mining to fees? Will a PoS coin win?

Why a cryptocoin is better than a bank account or a treasure bond or a tracker fund?

osswannabe
For the first question, here are the features I thought would be beneficial to this brand new coin.

1) ASIC-resistant proof algorithm (like in ETH 2.0 iirc).

2) Fixed mining rewards. For example, offering 1 REcoin per mined block forever. The idea is to prevent the deflationary aspect of BTC.

3) Whole coin transactions (i.e. no buying/selling 0.0001 BTC) to simulate the capital range of real estate investments.

4) An ICO valuing each coin highly (e.g. $10k). The initial capital would be used to set up an insured exchange. The idea is to leverage the insurance to become the dominant USD/REcoin exchange, preventing a large exchange-established dark pool that trades fractional REcoins and threatens the coin's price stability.

For the second question, I think this coin is better than a treasury bond or index fund since it discourages trading and thereby emulates the illiquidity of RE. I've talked about why I think this illiquidity is important in another comment below. With respect to a bank account, I think this coin is far superior since it aims for a rate of return on the order of an RE asset (i.e. much higher than a traditional savings account).