Is the Future of Real Estate Digital? Crypto Whiz Lane Rettig Weighs In
Mar 16, 2022 | By: Perri Ormont Blumberg
Lane Rettig is a core developer at Spacemesh, a new blockchain platform similar to Ethereum, where he designs and builds blockchain infrastructure. He was formerly a core developer at the Ethereum Foundation. The New York City native regularly writes and speaks to advocate for the social and economic benefits of blockchain, cryptocurrency, and Web3 technology (an idea for a new version of the internet based on blockchain technology).
In this dialogue with LX Collection, he shares how he first got into crypto, his thoughts on the evolving role of crypto in real estate, and what real estate investors should know before using crypto to make a purchase.
This interview has been lightly edited for length and clarity.
LX: What first drew you into the world of crypto?
Lane Rettig: Ethereum was created in 2014-2015 by Vitalik Buterin and several other hackers and cypherpunks [people promoting the regular use of strong cryptography and privacy-enhancing technologies as a manner of creating social and political change].
I discovered Ethereum in 2016 as part of a hackathon I was participating in, and I finally really took the time to understand it in 2017 when someone sat me down and explained to me the concept of a smart contract. It’s an autonomous computer program that lives on a blockchain. Once it’s deployed, it cannot be changed or deleted (hence, autonomous). The best analogue is that it’s like a vending machine: You can interact with it, put money in, and it does things for you autonomously.
I found the idea immediately exciting and significant because it tied together with a number of disciplines that I’m interested in—technology, law, sociology, political philosophy—and because I immediately saw the potential for building better human institutions.
What are your thoughts on the trend, and the future, of crypto and real estate?
Real estate represents a natural diversification strategy for people who hold crypto. Those who are strong believers in crypto like Bitcoin tend to dislike fiat currency such as U.S. dollars. Since the end of the gold standard there’s nothing fundamental and scarce (like gold) backing up the value of those dollars, which means the government can effectively print as many dollars as they like, debasing the value of all existing dollars and leading to inflation.
By contrast, there will never be more than 21 million bitcoin and no authority, including any world government, can ever mint more. This makes bitcoin a “hard” currency, a concept from Austrian economics. Real estate isn’t as “hard” as bitcoin, but it’s much “harder” than dollars.
I think we’ll continue to see big crypto players, individuals as well as organizations, diversify into real estate, and I think we’ll see even more exciting things like tokenization of real estate into NFTs [non-fungible tokens, a non-interchangeable unit of data stored on a blockchain]—or, as a fun example, a “digital twin” of a real-world property that exists in a metaverse—over time.
Crypto investors who have no interest in buying real estate in traditional markets, or, for that matter, even investing in things like REITs, are more likely to buy, hold, and trade these cryptographic tokens that represent real estate.
NFTs and virtual real estate seem to be buzzwords as of late. Tell us more.
By far the most interesting recent trend to me is NFTs, and one of the most interesting use cases for NFTs is virtual real estate. This is something I’ve written and spoken about quite a bit recently. Sales of virtual land have exploded recently, out of nowhere. It’s very early days for these assets and for the “metaverse” in general, but long-term I think it’s an exciting trend, and it’s a practical use case for crypto and blockchain that makes a lot of sense.
It’ll be fascinating to see how it develops, to see some traditional real estate service providers, such as brokers, begin to move into metaverse real estate, and to see what happens to the intersection between physical and virtual. Imagine using crypto to buy an NFT for a virtual home in the metaverse that also gives you access to the same home in NYC!
Can you share any insight into the dark side of using crypto in real estate?
It’s a common misconception that crypto is anonymous. It’s pseudonymous, in the sense that you transact using opaque wallet addresses rather than a personal ID, but nearly all transactions are totally transparent and visible to the rest of the network, and the on-ramps and off-ramps (moving between crypto and fiat currency, such as U.S. dollars) all require going through stringent KYC/AML [know your customer/anti-money laundering] checks with reputable institutions like Coinbase and Gemini.
It’s next to impossible to move between crypto and dollars without passing through these checks. There have been a number of high-profile cases recently of the government successfully tracking down criminals attempting to use networks like Bitcoin and Ethereum to launder money: See, for instance, the Colonial Pipeline hackers and the recent case of Ilya Lichtenstein and Heather Morgan.
So, in my opinion, trying to hide or launder money using these crypto networks is dangerous and a bad idea. I doubt you’d be able to successfully off-ramp crypto funds anonymously in any meaningful amount into New York real estate. Of course, there are very few direct crypto real estate transactions taking place today, and I expect that having better tools, more mature service providers, and standards around these KYC/AML checks for real estate transactions will make them more common and smoother.
You recently purchased a three-bedroom, two-bathroom home at 145 Central Park North in South Harlem. We have to ask: Did you buy it in crypto?
We did not buy in crypto, but it was indirectly part of our decision to purchase, in that having crypto assets, and believing strongly in how they will perform over the long term, made us confident to spend and borrow more than we might otherwise have.
What considerations should investment property buyers make when looking into using crypto for purchases?
They should do the same sort of due diligence and financial planning that they would do before investing in any large asset. Crypto investors have a lot more options at their disposal than do investors who are only holding fiat currency and only investing using traditional financial markets and tools. This is because there is a “wild west” of many arcane financial products and services that have emerged in the “DeFi” (decentralized finance) ecosystem.
So, while real estate might be attractive if you hold dollars and want a stable, long-term return on investment, it’s less of an obvious choice for a crypto investor because there are many investment options out there that might perform better with a similar risk profile, while having other advantages, as well, such as being more liquid or having more favorable tax treatment.
Consider your appetite for risk, your current asset allocation, and your short-term and long-term need for cash flow. I do think real estate makes sense as part of the portfolio of any large crypto investor, as in some ways it’s a good hedge against the volatility and uncertainty of the crypto market. And it has one major benefit over crypto, of course: You can’t live in your crypto wallet—at least not yet!