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- Don't Sleep On the Threat of Real Estate Wire Fraud
A 2021 survey showed that 1 in 3 real estate transactions were targeted by cyber criminals. Real estate agents can no longer afford to ignore the threat or meet it with a one-line warning at the bottom of their email signature. By Rich Hopen, Published in Inman, April 11, 2022 This April, one of Inman’s most popular recurring theme months returns: Back to Basics. All month, real estate professionals from across the country share what’s working for them, how they’ve evolved their systems and tools, and where they’re investing personally and professionally to drive growth in 2022. It’s always smart to go Back to Basics with Inman. Rich Hopen is an agent in the Compass Short Hills, New Jersey, office. He worked closely with ALTA to create www.stopwirefraud.org. When my wife and I sold our house in 2017, our $239,000 mortgage payoff was stolen. The money was never recovered. We were victims of real estate wire fraud. I’m not only a victim, I’m also a real estate agent and lawyer. And shame on me for not knowing about wire fraud when I sold my house. Real estate wire fraud is perpetrated by cyber criminals who exploit the trust between homebuyers and sellers and their real estate agents, title companies, lawyers and mortgage lenders. Criminals steal home deposits, down payments and mortgage payoffs by accessing and monitoring email accounts of the parties in a transaction. When a criminal finds an email with attached wiring instructions, they change the depository account number and email the fraudulent wiring instructions to the person who will wire the funds. If the target is duped, the money will be wired into the criminal’s account. Accessing email accounts is easy for cybercriminals and opportunities to commit the crime are unlimited. According to a 2021 American Land Title Association (ALTA) survey, 1 in 3 real estate transactions are targeted. Real estate transactions are ripe conditions for thieves. Each transaction involves multiple parties working under pressure to meet the closing deadline. Many of the parties share information over unsecured email accounts that can lead a savvy criminal to the wiring instructions. Homebuyers and sellers are vulnerable. As a real estate agent, it’s no longer enough for you to include a wire fraud warning on emails or have customers sign wire fraud disclosures. At a minimum, every seller and buyer should know about the risk of real estate wire fraud and how to prevent it. I discuss wire fraud when I meet with prospective buyers and sellers. It’s not only the right thing to do, but it also builds trust and sets me apart from other agents. Here is a wire fraud script for agents when meeting with buyers and sellers. Wire fraud script for buyers “There’s one more thing I need to discuss with you, and it’s very important. It’s perhaps the most important thing you’ll hear from me today. It’s about protecting yourself from a problem that buyers and sellers know nothing about, and neither do a lot of real estate agents. I want to talk about real estate wire fraud. Buyers are at risk of losing their deposit and down payment. Sellers are at risk of losing their proceeds or their mortgage payoff. Here’s how it happens. As a buyer, you pay a deposit and down payment. When these funds are wired to the attorney’s office or title company, there’s a risk that the money could be diverted to a criminal’s account if certain precautions aren’t taken. Here’s how the funds could get stolen. Criminals may try to hack into an email account of someone in your transaction. It could be the other real estate agent, someone in the lawyer’s office, or even the title company. If the criminal finds the wiring instructions for your deposit or down payment, they would change the account number where the funds will be deposited. They would then email you revised wiring instructions from a fake email address that is similar to one of the parties in the transaction. If you didn’t notice the revised wiring instructions were fraudulent and you wired your money into a criminal’s account, the odds of recovering the money are very slim. When we get close to writing up an offer, I will walk you through some simple procedures to protect your money. Do you have any questions?” Wire fraud script for sellers “There’s one more thing I need to discuss with you, and it’s very important. It’s perhaps the most important thing you’ll hear from me today. It’s about protecting yourself from a problem that buyers and sellers know nothing about, and neither do a lot of real estate agents. I want to talk about real estate wire fraud. Buyers are at risk of losing their deposit and down payment. Sellers are at risk of losing their proceeds or their mortgage payoff. Here’s how it happens. As a seller, your proceeds will be wired into your bank account by the title company or settlement agent. Several days before the closing, the title company, settlement agent, or attorney will ask you to provide wiring instructions for your proceeds. If you email this information, you are exposing yourself to wire fraud. Here’s how your proceeds could get stolen. Criminals may try to hack into an email account of someone in your transaction. It could be the other real estate agent, someone in the lawyer’s office or even the title company. If the criminal finds the wiring instructions for your proceeds, they would simply change the account number to where the funds will be deposited. The criminal would then email their revised wiring instructions to the person who will wire the funds. Their email address will be similar to your email. Not only are your proceeds at risk, but so is your mortgage payoff. Your mortgage balance will be paid at closing. If that payment is wired, it could be stolen. Before closing, you’ll be asked to contact your mortgage bank and obtain a mortgage payoff letter. The letter will include the mortgage balance and wiring instructions. If hackers obtain the payoff wiring instructions, they will change the account number from your mortgage account to their bank account. They will then send the wiring instructions to the party who requested it. That may be your attorney, someone at the title company or settlement agent. Once the money is wired into the wrong account, the odds of recovering it are very slim. I know this is alarming information. However, after you find a buyer, and we have a firm closing date, I will walk you through several simple procedures you can follow to ensure your money is protected. How does that sound?” Until real estate agents start educating their clients, unsuspecting homebuyers and sellers will continue to lose their deposits, down payments and mortgage payoffs. It’s time to take real estate wire fraud as seriously as the growing threat demands. Rich Hopen is an agent at Compass in Short Hills, New Jersey. Follow him on Twitter.
- Crypto News for Realtors – Issue 10
APRIL 10, 2022 | Issue 10 PREDICTING THE FUTURE WITH CONFIDENCE Certainty. We crave it in our personal lives and professional lives. When we feel certain about the future, we feel calm and in control. We give ourselves permission to use resources for what we want in addition to using those resources to prepare for the unexpected. As Iife marches on, I’ve gathered practices that help me shape the future I want. Stretching, eating right, exercising, and getting enough sleep has proven to make me feel stronger and certain that I’m doing the right thing to stay healthy. Working in a company where I’m treated as a highly-valued "customer," provided with financial resources, expertise, and tools to succeed, instills confidence that I will meet my professional goals. Reading books, in-depth articles, and papers, watching videos of experts, listening to podcasts, and speaking with professionals teaches me the fundamentals. Writing and speaking about what I’ve learned sharpens my understanding. This is how I have cultivated my knowledge about crypto. Over the past year, I’ve watched crypto commentators predict the price of bitcoin and how crypto, blockchain, DeFi, NFTs, and DAOs will change industries, governments, central banks, and global economics. I have seen extreme volatility in crypto prices, but no exciting appreciation. NFTs have been embraced by celebrities, but are not yet part of the mainstream culture. I have seen a crypto real estate company tie itself in knots to sell a house as an NFT and reap the marketing benefits of being the first NFT house sale, but then discovered that the seller lost a lot money by not selling her house to a traditional buyer. Yet, I’m not discouraged. I am confident that crypto and blockchain will change much of our lives. After being immersed in the subject for a year, I now realize it will take much longer than the crypto evangelists espouse. This is especially true in real estate – an industry that is adept at resisting change. Stay with me on this journey. I’ll keep researching and sharing what I learn. Have a great week and stay crypto curious! Rich Hopen email@example.com 908.917.7926 PS. You can find all CNR newsletters here. CRYPTO & REAL ESTATE ▸ It's Deja Vu All Over Again – Propy Lists Another NFT House In Tampa Propy, a startup focused on real estate, is selling their second property in the US via an NFT. The first house, 6315 11th Ave S. Gulfport, FL was a single-family home and it listed for $650,000. After a six-hour auction, the NFT sold for $653,000. However, the MLS sale price was $631,790. (Click here for analysis of the NFT sale.) The $21,373 difference covered Ethereum “gas fees” and other undisclosed fees. In addition, there were fees to Propy and a brokerage commission. The seller owned a crypto business and was intrigued with NFTs. However, she said the process was “clunky.” A traditional sale would have netted her significantly more money. This second property, 1000 W Horatio St, Apt 127, Tampa, FL 33606, is a 1-bedroom condo that is owned by Propy. It will be auctioned on April 12, 2022. Propy purchased it for $215,000 on January 24, 2022 and it is listed on the MLS for $185,000. The MLS states that it can only be paid in cryptocurrency. Curiously, a CMA prepared by the listing agent shows a fair market value of $220,000. CRYPTO NEWS ▸ Miami Bitcoin Conference 2022 The largest Bitcoin event occurred in Miami this past week. Here are the highlights: ● US Senator Cynthia Lummis (R-WY) discussed her pro-bitcoin legislation, The Responsible Financial Innovation Act. The bi-partisan bill provides a framework for innovation and addresses tax issues, consumer protection, and privacy. ● Bitcoin mining experts addressed how the miners can work with the local grids to improve electricity distribution and production. CEO of CleanSpark said, "We can consume a very flat load all the time and we can drop it off almost immediately. Miners can interact to improve grid health. Bitcoin miners are now seen as really good anchor tenants to large scale power purchase agreements." ● Constitutional law scholar Neil Katyal argued that bitcoin provides power to individuals to operate outside the fiat (government currency) framework. However, he didn't think that bitcoin transactions are a form of expression protected by the first amendment. Katyal said, "Some regulation is OK." ● Bitcoin payment coming to Whole Foods, McDonalds, Chipotle, and Shopify stores. Strike CEO Jack Mallers announced these locations will accept bitcoin payment over the Lightning network (an instant payment system that sends BTC payments off the main blockchain). ▸ FDIC Asks Banks to Report on Crypto Activities The Federal Deposit Insurance Corporation, the entity that insures bank depositors, published a letter to banks. The FDIC expressed concern about crypto products and activities – 1) There is a lack of consistent definitions with crypto assets and crypto activities. 2) Crypto products and services are rapidly changing. 3) Difficult for institutions to assess the safety and soundness. FDIC wants the institutions to notify them of their intent to offer a crypto product and provide all necessary information to the FDIC. This request certainly casts a wide net. I suspect that the institutions will push back on the letter and at a minimum request specific guidelines from the FDIC. ▸ JP Morgan Slowly Embraces Blockchain and Digital Currency JPMorgan's CEO, Jamie Dimon, has a history of slamming Bitcoin. He called it a "fraud" in 2017 and "worthless" in 2021. However, JPMorgan set up the first bank branch in the metaverse and launched two crypto newsletters this week. Dimon discussed JPMorgan's use of blockchain tokenized currency in his annual shareholder letter. He said, "Decentralized finance and blockchain are real, new technologies that can be deployed in both public and private fashion, permissioned or not." "We use a blockchain network ... to enable banks to share complex information, and .... to move tokenized U.S. dollar deposits.... We believe there are many uses where a blockchain can replace or improve contracts..." CRYPTO CLASS - CRYPTO MORTGAGES Crypto mortgages are becoming an option for homebuyers who want to use their cryptocurrency, but don't want to incur the tax consequences of converting crypto to cash. Buyers who sell their crypto currency to get cash to purchase a house, will realize a capital gain or loss. However, if the buyer uses the crypto as collateral for a mortgage, there's no taxable event triggering a capital gain or loss. As reported recently in Crypto News for Realtors, several lenders offer mortgages for crypto holders. Loans range from a small deposit amount to the full sale price. Some lenders require many multiples of the loan amount in crypto as collateral and they don't require giving the lender foreclosure rights. Other lenders have the right to foreclose if the borrower defaults. I spoke to a loan representative at the crypto lending firm Abra who told me about a loan he's writing where the borrower is getting a three-year $2 million loan at 0% interest. The borrower is providing $25 million in crypto collateral. I thought I had misheard him, but I heard correctly. Abra's website advertises a 0% interest loan with a 15% LTV. A $2 million loan would require $13.3 million in collateral, not $25 million. Regardless, it's still a lot of collateral. Abra, like other crypto lending platforms, will lend out the crypto to other users, traders, or other platforms in exchange for a fee. The platform will pass some of the fee back to users in the form of interest. People lend their crypto to platforms because the interest rates are exponentially higher than at a bank savings account. Some platforms offer up to 13% on stablecoins or 7.15% on bitcoin. Whereas, savings accounts typically pay 0.60%. Enticing, but much riskier than an FDIC-insured bank account. Crypto lending is more controversial than crypto exchanges like Coinbase, Gemini, and FTX. The Securities & Exchange Commission (SEC) and six state attorneys general have threatened enforcement action against crypto lenders. When crypto exchange firm Coinbase announced in 2021 that it was going to offer a lending service, Lend, to its customers, the SEC warned that such this service could trigger legal action. Coinbase decided not to pursue the lending business. On February 14, 2022, the SEC announced a $100 million settlement with BlockFi Lending, LLC. The penalty was for misrepresentation about over-collaterization, not for failing to pay its customers. The SEC cites the legal litmus test used by the courts since 1946 to determine if an activity is a "security." The Howey Test asks three questions: 1) Is there an investment of money? 2) Is there a common enterprise? (Will customer assets be mixed together?) 3) Is there a reasonable expectation of profit from the efforts of others? The SEC has not yet issued any regulations stating that crypto lending activities are securities. The SEC's inaction is likely viewed as a signal to move ahead by existing crypto lenders and new entrants. According to a recent Wall Street Journal article on crypto mortgages, a real estate developer in Miami has partnered with crypto platform FTX and has accepted over $20M in crypto payments toward pre-construction purchase of 60 condo units. The article also quoted an attorney, Lorenzo Delzoppo, who is working with XBTO on a crypto mortgage product. Delzoppo said, “Integrating the legacy mortgage system with the new crypto environment is an operational nightmare." INFLUENCERS - People to follow Elon Musk – @elonmusk Elon Musk started tweeting about crypto in January 2018, but for a year he said he didn’t own any crypto other than 0.25 BTC that he received as a gift. In April 2019, Musk tweeted about Dogecoin and that kicked off interest and price spikes whenever he tweeted about it. Dogecoin hit its highest price in May 2021 following his Saturday Night Live appearance. He tweeted the above photo after the price spike with the caption, "UR welcome." Musk disparaged bitcoin until he announced in February 2021 that Tesla purchased $1.5 billion in BTC for its treasury. At the end of 2021, Tesla's BTC holdings increased in value to almost $2 billion. RESOURCES – Books, websites, podcasts, articles Bitcoin Magazine was launched in 2012 by Vitalik Buterin, Ethereum Founder. The current issue is reporting on the Bitcoin conference in Miami. CRYPTO WORDS – KYC/AML Know Your Customer and Anti-Money Laundering. Financial institutions have standards to identify customers who may be attempting to launder money and finance terrorist operations. KYC involves establishing a customer’s identity, understanding the nature of the customer’s business and source of funds, and assessing money laundering risks. AML compliance is one of the most costly and challenging issues facing financial institutions. Several academic papers and the United Nations have reported that the laws are grossly ineffective, only stopping less than 1% of criminal proceeds. OH, ONE MORE THING – In my April Fool's teaser video, I joked about the Academy minting an NFT of "The Slap" and auctioning it at Christies. A day after the Academy Awards ceremony, a "meme coin" was issued – The Will Smith Inu Coin. There was $3 million in frenzied trading, a price spike, and sudden crash. It lasted a bit longer than a slap. Thanks for reading! See you next week. Go to Crypto News for Realtors to read previous issues.
- Crypto News for Realtors ⏤ Issue 09
APRIL 03, 2022 | Issue 09 ON APRIL FOOL'S DAY, WHO IS THE BIGGER FOOL – THE FOOLER OR FOOLEE? I couldn't resist sending out an April Fool's Day video message on Friday, April 1st. Immediately after hitting "send," I received about a dozen email replies... "LMAO." "You had me until the Will Smith NFT." "I am so gullible." "Good one!" "Well played!" "I was about to invest all my money in BTC!" "Wait, was that a joke?!" "Realogy did that?" I came up with several stories that were on the edge of absurdity. However, we're living in such extreme times and the crypto world is so bizarre, I barely crossed the line from real news to April Fool's Day news. You be the judge. Watch the 87- second video I sent out on April 1st. Did I fool you? Let me know. In this issue, I discuss the real events that occurred this past week. If you are enjoying Crypto News for Realtors, please share it with your colleagues. Have a great week and stay crypto curious! Rich Hopen firstname.lastname@example.org 908.917.7926 PS. You can find all CNR newsletters here. CRYPTO & REAL ESTATE ▸ Taxes & Crypto – IRS Wants Everyone On Record The very first question on a 1040 tax form asks taxpayers if they sold crypto. Anyone who purchased a home with crypto in 2021 should pay close attention to the question. This week, I spoke with several real estate agents, crypto mortgage lenders, and title professionals about their experience with crypto real estate transactions. I was a bit alarmed by what I heard. Several didn't understand how crypto is taxed. While it's appropriate for real estate agents to remind clients to seek tax advice from a tax professional, real estate agents should understand some tax fundamentals. It is crystal clear that the IRS views cryptocurrency as property. If a buyer either sells their crypto to buy a house or pays crypto directly to a seller, this triggers a taxable event. Think of the crypto as stock. If someone sold shares of Apple stock to pay for a house, they would have a capital gain or loss on the stock sale. The same process applies to crypto. If you are working with a buyer or seller and crypto is used in the purchase, I suggest reading these IRS FAQs on crypto. ▸ Are Crypto Scammers Targeting Real Estate Agents? An interested buyer reached out to a colleague in the CØMPASS Boston office, Colleen Kelly, via whatsapp. The buyer wanted to purchase a $5M to $8M home in Boston and wanted to pay in crypto. Kelly asked for proof of funds and was provided with a screenshot of a crypto wallet showing a crypto balance over $30M. Kelly reached out to me and over the course of a week, we tried to discern if the buyer was real and the best way to handle the crypto payment. Kelly was cynical. The buyer was unwilling to have a phone call, avoided email, and only communicated by whatsapp. The buyer was more interested in flaunting his crypto trading skills than in the houses that Kelly presented to him. A turning point was when the buyer texted Kelly and offered to teach her how to make money with crypto. He urged her to download an app and let him guide her on investing. When she said they could have that discussion after they closed on a house, the buyer resisted, became indignant and used vulgar language in his text messages. Kelly notified the authorities. In hindsight, there were warning signs that the buyer wasn't legitimate. In one text, he mentioned the Houston market instead of Boston. When providing a home address, he provided the address for a high-end condo building in NYC, but didn't provide a unit address. Apparently, there are other scammers claiming to be serious homebuyers with crypto. A Miami agent who has a luxury building listing said a lot of bogus buyers offer to pay in crypto. Of course that doesn't mean all crypto buyers are scammers. Be sure to vet them by asking the right questions and seeking appropriate proof of funds. If a crypto buyer contacts you and you would like my guidance, reach out to me. I'm happy to help. CRYPTO NEWS ▸ Ukraine Sold NFTs, Raised Over $600,000 An NFT collection of art, photographs, and video documenting the Russian invasion of Ukraine is being sold to rebuild museums, theaters, and other cultural institutions that have been destroyed. The museum will also sell some of its artwork to those who hold a Museum of War NFT. ▸ Citibank Issues Report on Metaverse Citibank projects that by 2030, there will be up to five billion users and a metaverse economy between $8 trillion and $13 trillion. The report said the metaverse would be open, community-owned and self-governed. Citibank expects cryptocurrency will dominate the economy along with central bank digital currencies and stablecoins (crypto pegged to fiat currency). ▸ Michael Saylor's MicroStrategy Buys More Bitcoin MicroStrategy's CEO and bitcoin evangelist, Michael Saylor, borrowed $205 million against MicroStrategy's existing bitcoin holdings to purchase more bitcoin. This brings MicroStrategy's bitcoin balance to about $6 billion. Saylor told Bloomberg that the market isn't ready to issue bitcoin-backed bonds that could be sold like mortgage-backed securities. ▸ SEC Issues Guidance to Crypto Firms Crypto owners have a private cryptographic key to give them access to their funds. Some owners keep their keys in their crypto wallets (usually, a "cold wallet" that is not connected to the internet). Others keep their private key on a crypto exchange. The SEC may promulgate rules that would apply accounting standards to digital assets. It would require crypto trading platforms to assume the liability of holding their customers' assets. CRYPTO CLASS - Proof-of-Stake Since there is no central authority ensuring the integrity of a blockchain, a consensus mechanism is used to check the existing data and add new data. The Bitcoin blockchain uses the Proof-of-Work mechanism. Proof-of-work sets up a competition among Bitcoin miners to solve a mathematical problem that requires using a massive amount of computing power. This has a significant environmental impact. An alternative consensus mechanism is proof-of-stake. "Validators" will offer their coins as collateral for the opportunity to validate blocks on a blockchain. This is referred to as "staking." It only uses a small fraction of energy compared to the proof-of-work mechanism. The Ethereum blockchain is moving from proof-of-work to proof-of-stake. When it does, a validator will need to "stake" 32 ETH (about $110,000 at today's price). Validators are selected at random to validate the block. When enough validators verify the block is accurate, the block is closed. INFLUENCERS - People to follow Tyler Winklevoss – @tyler Cameron Winklevoss - @cameron Founders of Gemini, a crypto exchange, the Winklevoss twins used their settlement money from their lawsuit against Facebook and became investors in an early crypto exchange, BitInstant. Unlike other early crypto pioneers who had strong libertarian beliefs, the Winklevoss twins believed that it was imperative to comply with governmental regulations. In 2014, they launched Gemini. According to Bloomberg, Gemini is valued at $7.1 billion. Gemini and Coinbase are rival exchanges. RESOURCES – Books, websites, podcasts, articles The book, The Age of Crypto Currency by Wall Street Journal reporters Paul Vigna and Michael J Casey, dives deep into the crypto technology, ideology, and its impact. The authors explain complex topics, provide context, and share entertaining stories about the people who are shaping the crypto world. Although it was written in 2016, the book provides a great foundation. CRYPTO WORDS – Airdrop An airdrop involves sending coins or tokens to a wallet address to promote a virtual currency project. The coins are typically sent in return for a small promotional activity such as retweeting a post. Airdrops help increase ownership and spread awareness. OH, ONE MORE THING – David Spade on real estate and bitcoin, the metaverse, and NFTs.https://www.instagram.com/reel/CbqdTvrDpae/
- Crypto News for Realtors | Issue 08
MARCH 27, 2022 | Issue 08 WE'RE NOT HARDWIRED TO THINK LONG TERM, BUT IF WE DO, BIG THINGS CAN HAPPEN This morning, I listened to Tim Ferriss interview Mark Zuckerberg. While I'm not a fan of either Facebook or Zuckerberg, I am a huge fan of Tim Ferriss. I knew Tim would find the right questions to elicit worthwhile insight. In discussing Meta's commitment to building out their piece of the metaverse, Zuckerberg talked about his 15 year time horizon. He elaborated on the details of technological challenges that can only be solved over time. Putting aside real estate in the metaverse and focusing on real estate here on planet Earth, there are far more problems with crypto in real estate transactions than there are benefits. Yet, looking out into the future (certainly, not as far out as 15 years), I predict crypto will be commonly used in real estate. This assumes that crypto and blockchain continue to be embraced by individuals, institutions, and regulators. As I get involved in crypto real estate deals and talk with agents, challenges are discussed. It's our job to find the solutions. It doesn't matter if a crypto deal is more challenging than a traditional deal, the client decides how they're going to pay or get paid. We provide advice, but the decision is theirs. We're agents, not principals. Looking ahead, it's clear to me that bitcoin adoption will continue and more buyers will pay with bitcoin and use their bitcoin wealth to secure a mortgage. Creative sellers are already announcing in their listing material that they accept cryptocurrency. This sets them apart from the sellers who shy away from crypto buyers. It's a smart strategy, even though it is far from frictionless. As I report on crypto, I will not whitewash the dark side of our industry's attempt to adopt crypto payments, NFTs, and blockchain. The crypto real estate ecosystem is evolving. Don't be discouraged by the challenges. If you need any advice or want to work through a crypto issue, please reach out. If you have handled a crypto transaction, I'd love to hear about it. Enjoy this newsletter, share it with your colleagues, have a great week, and stay crypto curious! Rich Hopen email@example.com 908.917.7926 PS. You can find all CNR newsletters here. CRYPTO & REAL ESTATE ▸ While Real Estate Brokerages Plan a Potential Move Into the Metaverse, A Virtual Real Estate Firm Is Already There Metaverse Properties offers services to buyers and sellers of virtual property. They also develop virtual land, consult, manage, find rentals, and market businesses. ▸ Propy Selling Another House NFT in Tampa The 1 bedroom, 1 bath condo is owned by Propy and was purchased in January 2022 for $215,000. Propy is auctioning the property as an NFT with opening bids starting at $185,000. The winner will obtain ownership of a corporation that has the property as an asset. ▸ Mike Cagney, Co-Founder & Former CEO of Student Loan Refi Company, SoFi, Launches Crypto Mortgage Firm – Figure Cagney's Figure will offer 30 year loans up to $20M with crypto (bitcoin or Ethereum) as collateral. They will finance up to 100% including closing costs. They opened up a waiting list, but no details are available. Cagney answered some questions on LinkedIn. It appears that Figure holds custody of the crypto and releases it as the loan is paid off. Borrowers pay their monthly mortgage in cash. This service is similar to Ledn. CRYPTO NEWS ▸ Former Federal Prosecutor Katie Haun Raised $1.5 Billion Web 3.0 Fund As a Department of Justice prosecutor, Haun pursued criminals who used crypto to launder money. In 2014, she created a government cryptocurrency task force. She left government and joined venture capital firm Andreesen Horwitz as a general partner. In January she created Haun Ventures to focus on Web 3.0. On March 22, 2022, Haun announced that her firm raised $1.3 billion to back early-stage Web3 startups. According to PitchBook Data, this is the largest new venture fund ever raised by a female founder. Her fund will invest in digital tokens, NFTs, decentralized finance (DeFi), and decentralized autonomous organizations (DAOs). [Note: Tim Ferriss spoke with Haun in 2021 and it's a fascinating interview.] ▸ BlackRock Sees The Rise of Digital Currency BlackRock’s CEO, Larry Fink, said in his shareholder letter that his global investment firm is studying digital currencies. Fink attributes the Russian invasion of Ukraine for accelerating interest in digital currency. While Fink seemed to focus on central bank digital currency, his language was broad enough to include all cryptocurrencies. "A global digital payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption. Digital currencies can also help bring down costs of cross-border payments, for example when expatriate workers send earnings back to their families." As more global financial companies study cryptocurrency and launch products, investor interest will rise. Also this week, investment bank Goldman Sachs surveyed its clients and found that 60% expect to increase their digital assets in the next one to two years, 51% currently hold crypto. ▸ Powell Discussed Digital Dollar The Federal Reserve is studying whether or not to issue a digital currency. Powell said this week that user privacy is paramount while also stressing the importance of the currency being "identity verifiable." It will be interesting to see how the Fed will ensure privacy while verifying a user's identity. ▸ Bitcoin Miners Get Creative CoinDesk profiled how some bitcoin miners are using their rigs to capture the excess heat generated from their computers and how others are finding energy sources to power their operations. ● MintGreen partners with Shelter Point Distillery in Vancouver to heat barrels of whiskey. It helps the aging process. ● PRTI in North Carolina developed a process to heat rubber tires and convert the gas into liquid fuel. The fuel is used to power their bitcoin mining servers. ● Upstream Data works with oil companies to capture natural gas that escapes from oil fields. They set up 250 small shacks in Texas and Wyoming oil fields that use the gas to power their mining computers. ● El Salvador is building a bitcoin mining operation on Conchagua volcano to use geothermal energy. CRYPTO CLASS - Crypto Remittances Remittances are payments of money from one party to another. In the crypto space, remittances typically refer to people sending money overseas to relatives who live in a less wealthy country. The International Monetary Fund estimated that the total total remittances to low- and middle-income countries was $597 billion in 2021. Some countries rely upon remittances. In El Salvador, 23% of its gross domestic product come from remittances. Sending money through a service such as Western Union has much higher fees than a crypto-enabled service. For example, sending $500 via a credit card could cost up to $26 with Western. Using Remitly, it's only $7.99. That is a 70% savings. One reason why El Salvador adopted bitcoin as its currency was to lower remittance costs. INFLUENCERS - People to follow Gary Gensler – @GaryGensler Gensler is the 33rd Chair of the SEC (US Securities & Exchange Commission). I became familiar with Gensler when I jumped into my crypto education. I watched his entire semester blockchain and crypto class at MIT. He's brilliant and I can't imagine any cabinet member knows more about crypto than him. However, knowledge of blockchain and crypto doesn't equate to support. Gensler started as SEC Chair somewhat adversarial to the crypto industry. It appears that his wings may have been clipped a bit after the crypto executive order was published two weeks ago. Once the executive order's reports are submitted to the administration, we'll see what regulatory power Gensler seeks for the SEC. RESOURCES – Books, websites, podcasts, articles CoinTelegraph This online crypto publication is a terrific free resource and is comparable to CoinDesk. I look at both websites throughout the week. Also, I'm awed by CoinTelegraph's cover art for their articles. The art below is an example. ↓ CRYPTO WORDS – Rug Pull A rug pull is a scam when creators of a project pump the value of their token and then disappear with the funds. There are three types of rug pulls: 1) Liquidity stealing – token creators withdraw all the coins and price goes to zero. 2) Limited sell orders – developers write code, making them the only party able to sell tokens. 3) Pump-and-Dump is an old school scheme where heavy promotion on social media drives up the price and developers sell their large supply of tokens. The sell-off drives the price down. Bloomberg reported on March 24, 2022 that federal prosecutors in New York charged two 20-year old men with bilking investors out of more than $20 million dollars. (See Bloomberg article.) The men created NFTs called "Frosties" which would have provided giveaways and access to a metaverse game. Frosties are still for sale on the NFT marketplace OpenSea. Hours after selling the tokens, they de-activated their website and transferred $1.1 million of cryptocurrency into their wallets. OH, ONE MORE THING – Thanks for reading! See you next week. Go to Crypto News for Realtors to read previous issues.
- El Salvador's Legal Currency is Bitcoin
El Salvador President Nayib Bukele led the effort for his country to be the first one in the world to adopt bitcoin as its legal currency. Bukele argued that crypto would allow 70 percent of El Salvadorians, whom don't have a bank account, to be part of a country's formal economy. It would also enable cheaper remittances from abroad and reduce the country's debt with the International Monetary Fund. Remittances are payments of money from one party to another. In the crypto space, remittances typically refer to people sending money overseas to relatives who live in a less wealthy country. The International Monetary Fund estimated that the total total remittances to low- and middle-income countries was $597 billion in 2021. Some countries rely upon remittances. In El Salvador, 23% of its gross domestic product came from remittances. Sending money through a service such as Western Union has much higher fees than a crypto-enabled service. For example, sending $500 via a credit card could cost up to $26 with Western. Using Remitly, it's only $7.99. That is a 70% savings. One reason why El Salvador adopted bitcoin as its currency was to lower remittance costs.
- Proof-of-Work and Proof-of-Stake
Proof of Work The Bitcoin blockchain is secure from hackers because of a mechanism referred to as Proof-of-Work. Unlike a traditional database that is housed in a central location with someone ensuring its security, the Bitcoin blockchain is distributed around the world in over 15,000 locations. As a distributed ledger, it is self-governing. Each location is a node. A node is essentially a large bank of computers. They validate the blockchain and compete to acquire bitcoin. The operation is referred to as bitcoin mining. The data in the existing blockchain and the new data that is added to it (in a block) is validated by everyone in the network. Here's how proof of work ensures consensus. (This is a bit complicated, but if I could grasp it, so can you.) Every bitcoin transaction contains essential data – the two parties' digital wallet addresses, the transaction date and time, and other information that a sender adds. About 500 transactions, or 1 MB of data, is in each block. The blocks are sequentially "chained" together. All blockchain data is public and the miners continually access new transactions. They take the transactions and convert it into a string of alphanumeric characters known as a "hash." The hash is always 64 characters regardless how much data is fed into the SHA256 hash calculator. The hash for a new block is created by taking the raw data from the first transaction and converting it into a hash. The raw data from the second transaction is added to the first hash to create a new hash. This process continues until there is a hash of all 500 transactions. Let me show you how it works. Imagine each paragraph of this article contains data from a bitcoin transaction. 1) Paragraph 1 "The Bitcoin blockchain is secure from hackers because of a mechanism referred to as Proof-of-Work." becomes this hash: c70de0ff57dd8b63106b5a996a82117242ccd6f93316ceddefdbbbc181796104 2) Paragraph 2 "Unlike a traditional database that is housed in a central location with someone ensuring its security, the Bitcoin blockchain is distributed around the world in over 15,000 locations" is added to "c70de0ff57dd8b63106b5a996a82117242ccd6f93316ceddefdbbbc181796104" and it becomes this new hash: 23c5adc507b44fd4b353d834f5089133f8e2d57b0fe4b667980ec86f5de79b92 This is repeated for all 500 bitcoin transactions – the requisite amount for a new block in the blockchain. While the miners are doing this, they are also competing with each other in a contest that is essentially a lottery. They are trying to find a hash that matches a previously created hash for the current block. The competing computers spit out randomly generated hashes until the winning hash is found. This requires massive computing power. The winning computer gets the honor to "seal off" the new block of transactions with the block hash and assign the next block number. (As of this moment, 727,518 bitcoin blocks have been mined. A new block is mined about every ten minutes.) The miner is rewarded with 6.25 BTC (about $250,000). Proof of Stake Since there is no central authority ensuring the integrity of a blockchain, a consensus mechanism is used to check the existing data and add new data. The Bitcoin blockchain uses the proof-of-work mechanism. Proof-of-work sets up a competition among Bitcoin miners to solve a mathematical problem that requires using a massive amount of computing power. This has a significant environmental impact. An alternative consensus mechanism is proof-of-stake. "Validators" will offer their coins as collateral for the opportunity to validate blocks on a blockchain. This is referred to as "staking." It only uses a small fraction of energy compared to the proof-of-work mechanism. The Ethereum blockchain is moving from proof-of-work to proof-of-stake. When it does, a validator will need to "stake" 32 ETH (about $110,000 at today's price). Validators are selected at random to validate the block. When enough validators verify the block is accurate, the block is closed.
- Crypto News for Realtors | Issue 07
MARCH 20, 2022 | Issue 07 RESIST THE HYPE AND URGENCY FROM CRYPTO EVANGELISTS For about a year, I've been learning about crypto, blockchain and its progeny – NFTs, deFi, DAOs, and the metaverse. The technologies are intellectually stimulating and it's been fascinating to watch politicians, the mainstream media, banks, corporate executives, crypto industry leaders, celebrities, presidents, and prime ministers talk about crypto. Crypto has been front page news since I started this newsletter. My biggest challenge has been deciding which stories to omit. However, in our little residential real estate corner of the crypto world, there is not much breaking news. When there is, I've noticed something troublesome. There are a handful of entrepreneurs that dominate the crypto real estate news and their messaging often has an air of superiority. "You can either join our movement and help create the future of real estate, or you can be a dinosaur and face extinction." What really irks me is when they quote Satoshi Nakamoto, Bitcoin's creator. He wrote, "If you don't believe or don't get it, I don't have the time to try to convince you." How obnoxious! Ignore the taunts and don't let their demeaning tone dissuade you. Any new technology has its pros and cons. Read, learn, and ask lots of questions. Be patient. Unless you are a software engineer or a super intellectual, this stuff is really hard to understand. Don't feel rushed or pressured into jumping on the crypto bandwagon. Also, we aren't alone. I'm happy that we have friends and colleagues in title, mortgage, and law who can work with us to understand how crypto, blockchain, and maybe even NFTs, can improve how we serve buyers and sellers. Today, I read a wonderful academic paper on the promise and challenge of blockchain and whether it can abrogate title insurance. This 20 page, footnoted paper made me realize how vital it is for real estate brokerage needs to dive deep into crypto issues. Do you think I should create a working group with brokerage, mortgage, title, and law to discuss these issues? I'd love to hear your opinion. As always, reach out to me if you have any questions about crypto. I'm here for you. Enjoy this newsletter, share it with your colleagues, have a great week, and stay crypto curious! Rich Hopen firstname.lastname@example.org 908.917.7926 PS. You can find all CNR newsletters here. CRYPTO & REAL ESTATE ▸ Challenges of Using Crypto in Real Estate Transactions As a real estate agent aspiring to be "crypto savvy," I'm humbled by the challenges of using crypto in a deal. One of the biggest misconceptions among crypto holders looking to buy real estate is the lure of tax avoidance if they buy a property directly from a seller with crypto. While a direct buyer-to-seller transaction could be done privately on the blockchain, it doesn't insulate either party from tax liability. The IRS states that a buyer who exchanges their crypto for property must recognize a capital gain or loss. The same tax rules apply to a seller who receives payment in crypto. The seller's basis in the crypto is the fair market value at the time it's received. Given the wild swings in price, that presents an interesting timing issue. When will the crypto change hands from buyer to seller? In addition to tax issues, some of the other problems are ensuring conveyance of the deed and payment, preparing the title documents, lack of title insurance in states prohibiting title insurance for crypto transactions, and paying other parties, such as real estate agents, counties, and states. If you're working with a buyer or seller and crypto is involved in the transaction, I'm happy to answer any questions and help you navigate the challenges. ▸ HSBC Follows JPMorgan Into the Metaverse A few weeks ago, I wrote about JPMorgan's purchase of a virtual space in Decentraland. This week, HSBC announced its acquisition of virtual real estate in The Sandbox metaverse. HSBC said, "When you think about the of the metaverse – or metanomics – there are opportunities in almost every market area." CRYPTO NEWS ▸ Ethereum Creator Graces Time Magazine Cover Vitalik Buterin, (see Crypto Influencer in Crypto News for Realtors, Issue 01) laments how scammers, hucksters, and wealthy crypto investors who flaunt their ostentatious lifestyle could lead crypto down a "dystopian" path. Reporter Andrew R Chow writes: "Buterin hopes Ethereum will become the launchpad for ... 'fairer voting systems, urban planning, universal basic income, and public-works projects.... If we don't exercise our voice, the only things that get built are the things that are immediately profitable.'" The article is an interesting biography of Buterin's life beginning in Russia and then emigrating to Canada where he learned how to read before he could sleep through the night. At 4, he started playing with an old IBM computer and coded at 12 in Microsoft Office Suite. At 18 Buterin started Bitcoin Magazine and wrote the Ethereum white paper in 2014. ▸ Eight Members of Congress Call Out SEC Chair For Using Excessive Enforcement Against Crypto Firms Following last week's executive order from President Biden that called for a coordinated federal approach to crypto regulation, a bipartisan group from the House questioned the Securities and Exchange Commission. The Representatives sent a letter with questions about onerous SEC document requests. US Rep. Tom Emmers tweeted "Crypto startups must not be weighed down by extra-jurisdictional and burdensome reporting requirements. We will ensure our regulators do not kill American innovation and opportunities." Elsewhere on the Hill, Senator Warren held a hearing on sanctions and introduced a bill giving broad authority to the Department of Treasury to regulate the crypto industry. In a widely tweeted exchange with crypto industry leader Jonathan Levin, co-founder of Chainalysis, Warren refused to learn from an expert. ▸ Miami and NYC Mayors See Huge Upside in Crypto Crypto-friendly Mayors Francis Suarez (Miami) and Eric Adams (NYC) spoke at a Web 3.0 conference. Suarez likes the idea of surpassing other countries by investing and supporting the new technologies. Adams said blockchain can fight income inequality. He is looking at providing food stamps on digital wallets and putting public records on the blockchain. Adams also said he's going to build a blockchain and crypto educational platform. He wants to give young people cryptocurrency so they can learn about the technology. ▸ Proof-of-Work Ban in Crypto Fails in EU Below, Crypto Class explains PoW and how it is keeps the bitcoin blockchain operational. This week, a committee of the European Parliament deleted language that was targeting cryptocurrencies like bitcoin. CRYPTO CLASS - Proof-of-Work The Bitcoin blockchain is secure from hackers because of a mechanism referred to as Proof-of-Work. Unlike a traditional database that is housed in a central location with someone ensuring its security, the Bitcoin blockchain is distributed around the world in over 15,000 locations. As a distributed ledger, it is self-governing. Each location is a node. A node is essentially a large bank of computers. They validate the blockchain and compete to acquire bitcoin. The operation is referred to as bitcoin mining. The data in the existing blockchain and the new data that is added to it (in a block) is validated by everyone in the network. Here's how proof of work ensures consensus. (This is a bit complicated, but if I could grasp it, so can you.) Every bitcoin transaction contains essential data – the two parties' digital wallet addresses, the transaction date and time, and other information that a sender adds. About 500 transactions, or 1 MB of data, is in each block. The blocks are sequentially "chained" together. All blockchain data is public and the miners continually access new transactions. They take the transactions and convert it into a string of alphanumeric characters known as a "hash." The hash is always 64 characters regardless how much data is fed into the SHA256 hash calculator. The hash for a new block is created by taking the raw data from the first transaction and converting it into a hash. The raw data from the second transaction is added to the first hash to create a new hash. This process continues until there is a hash of all 500 transactions. Let me show you how it works. Imagine each paragraph of this Crypto Class contains data from a bitcoin transaction. 1) Paragraph 1 "The Bitcoin blockchain is secure from hackers because of a mechanism referred to as Proof-of-Work." becomes this hash: c70de0ff57dd8b63106b5a996a82117242ccd6f93316ceddefdbbbc181796104 2) Paragraph 2 "Unlike a traditional database that is housed in a central location with someone ensuring its security, the Bitcoin blockchain is distributed around the world in over 15,000 locations" is added to "c70de0ff57dd8b63106b5a996a82117242ccd6f93316ceddefdbbbc181796104" and it becomes this new hash: 23c5adc507b44fd4b353d834f5089133f8e2d57b0fe4b667980ec86f5de79b92 This is repeated for all 500 bitcoin transactions – the requisite amount for a new block in the blockchain. While the miners are doing this, they are also competing with each other in a contest that is essentially a lottery. They are trying to find a hash that matches a previously created hash for the current block. The competing computers spit out randomly generated hashes until the winning hash is found. This requires massive computing power. The winning computer gets the honor to "seal off" the new block of transactions with the block hash and assign the next block number. (As of this moment, 727,518 bitcoin blocks have been mined. A new block is mined about every ten minutes.) The miner is rewarded with 6.25 BTC (about $250,000). INFLUENCERS - People to follow Brian Armstrong – @brian_armstrong Armstrong (39) is the CEO of Coinbase, the second largest crypto currency exchange volume. Armstrong founded Coinbase in June 2012. He joined Y Combinator and his startup teamed up with former Goldman Sachs trader Fred Ehrsam, who later left Coinbase. The company launched in October 2012. The platform allowed users to buy and sell bitcoin with bank transfers. Today, Coinbase has a $37.2B market cap. RESOURCES – Books, websites, podcasts, articles Kings of Crypto: One Startup's Quest to Take Cryptocurrency Out of Silicon Valley and Onto Wall Street This book follows the story of entrepreneur Brian Armstrong whose vision was to take bitcoin mainstream. Unlike many other crypto books, this is a page-turner that I read in two sittings. CRYPTO WORDS – Crypto Whales Whales are individuals, exchanges, or entities that own a large enough share of a crypto currency that when they place a large order to buy or sell, they can push the price up or down. The site Unusual Whales tracks them. OH, ONE MORE THING – Watch Mila Kunis masterfully explain the Ethereum platform... Thanks for reading! See you next week.
- When Crypto Stops Feeling Like a New Thing
In the fifteenth century, Johannes Gutenberg invented the printing press. His machine paved the way for book production and for the first time in history, reading became a skill people wanted to acquire. Did friends meet for a pint of ale and a bowl of pottage to discuss this new thing called reading? How may decades passed before reading lost its newness? In the twentieth century, homes became electrified. When electricity was a new thing, it must have felt miraculous for a homeowner to walk into their house at night and flick on a light switch. I remember color television being a thing. I stood in my friend's living room with a dozen boys staring in awe at the Phillies game being broadcast on a brand new RCA color TV. We couldn't believe it. The grass on the field looked so real. It was green! When does something new stop becoming a new thing? Every widely embraced technology goes through a transition from being noticed and talked about to becoming invisible and accepted. Social media was new, now it's part of our day. Cyrpto, blockchain, and NFTs are still a new thing. In five years, will crypto have become part of your life? I have no doubt.
- Smart Contracts
CRYPTO CLASS - Smart Contracts A smart contract is a computer program that automatically executes a transaction when certain conditions are satisfied. A simple smart contract metaphor is a vending machine. The buyer selects an item, inserts payment and the machine delivers the item. Smart contracts on the blockchain could include registering a vehicle, sending notifications, issuing a ticket, or even transferring ownership of real estate. When the transaction is competed, the blockchain is updated. Parties to the contract determine the rules that control the transaction and define a framework for resolving disputes. There are multiple benefits of a smart contract: ▸ Speed, accuracy, and efficiency. The contract is executed immediately after the conditions are met. Since there is no paperwork and no errors to correct, smart contracts are faster and more accurate. ▸ Transparency and trust. Since there are no third parties and all documents are encrypted, no one will question whether the information was altered. ▸ Security. Blockchain documents are encrypted and distributed. They are safe from hackers because a hacker would need to alter the entire chain to change a single record. ▸ Savings. There are no third parties, such as lawyers or banks, involved in the smart contract. This reduces transaction costs. Ethereum is the most popular smart contract platform.
- Crypto News for Realtors | Issue 06
MARCH 13, 2022 | Issue 06 ARE YOU FEELING UNSETTLED ABOUT THE FUTURE OF THE US DOLLAR? I am. The more I read about how the US economic sanctions against Russia could shake the entire global money system, the more concerned I become. I wrote about this last week after Biden announced the freezing of Russia's central bank reserves. The past week, I read several articles that I wanted to share with you. Here are a few highlights. Nic Carter, general partner at Castle Island Venture and cofounder and chairman of Coin Metrics writes: "It’s important to untangle the perceived morality of this action – a reaction to an unjust invasion – and its prudence. While seizing Afghan or Russian reserves may feel righteous and just, the immediate effect of such actions is to completely undermine the credibility of dollar debt as an international savings device." Credit Suisse interest rate strategist Zoltan Pozsar wrote: "Bretton Woods II was built on inside money, and its foundations crumbled a week ago when the G7 seized Russia’s FX reserves.” Federal Reserve Chair Jerome Powell said in response to a question about China and Russian relying less on the US dollar: "Over time though, I suppose it would diminish our status as the reserve currency. It’s also possible to have more than one large reserve currency, and there have been times where that was the case. So it’s not really clear.” Where does this leave bitcoin? Bitcoin supporters believe a fractured monetary system will drive more interest in gold and bitcoin. Time will tell. Thanks for reading Crypto News for Realtors and telling your colleagues about it. I'd love to add them to the email list. Send their full name and email to email@example.com. Let's keep growing our community of crypto-savvy agents! As always, reach out to me. I love meeting new colleagues around the US. I'm here to talk about any crypto issues you're contemplating. Enjoy the newsletter, have a great week, and stay crypto curious! Rich Hopen PS. You can find all CNR newsletters here. CRYPTO REAL ESTATE NEWS ▶︎ Are Real Estate NFTs Impractical? The seller of NFT-backed Tampa house said that a traditional sale would have been more profitable. In a fascinating interview with The Block reporter Anushree Dave, the seller, Leslie Assandra, explained why she sold her house as an NFT. Assandra started a crypto business and she wanted to "show people a practical example in real estate." Instead of minting her own NFT, Assandra hired Propy to mint the NFT, market the NFT, and manage the NFT auction. The cost for Propy's services was $14,700 plus additional fees. The winning bidder's auction price was $653,163 (210 ETH), but the property's reported MLS sale price was $631,790. The $21,373 difference covered Ethereum "gas fees" and other undisclosed fees. The property was also listed on the MLS with real estate broker Amy Heckler. Assandra and Heckler agreed that Heckler would receive a commission even if the seller accepted an NFT bid. Heckler's MLS listing language explained that the seller would defer accepting any offers until after the NFT auction. There was an open house and it was well attended. Several strong offers were submitted. Once the auction ended and a winning bidder was chosen, all NFT fees were paid. It then became clear to the seller that she would have made significantly more money if the sale was a traditional sale. When the seller was asked if she'd recommend selling a property as an NFT, she said, "The system is still clunky... you're doing it because you want to be part of that development process." After the auction ended, Assandra didn't sell her ETH cryptocurrency. She watched the crypto price take a wild ride as geopolitical events influenced the market. Between the NFT auction and March 8, 2022, Ethereum dropped in price from $3,110 to $2,2498. Her net NFT proceeds decreased by $124,327. Assandra said, "[T]his isn't for the faint of heart." CRYPTO NEWS ▶︎ Biden Issues Executive Order Requiring US Departments and Agencies To Study Crypto The crypto industry has been under a cloud of regulatory uncertainty because federal agencies and politicians have different interpretations of crypto. There is also jockeying for regulatory authority, a lack of understanding, and minimal department coordination. An executive order was issued this week that takes a big step in solving these problems. It lays out a path for the federal government to study an array of issues and produce reports. The order identified the administration's key priorities: Protecting US interests Protecting global financial stability Preventing illicit uses Promoting responsible innovation Promoting financial inclusion Promoting US leadership I'll touch upon a few items. If you want to read more about the executive order, see Biden Issues Long-Awaited US Executive Order on Crypto by Nikhilesh De. ▸ Central Bank Digital Currency CBDCs were frequently mentioned in the Executive Order. A CBDC is digital currency issued by a country's government and produced by its central bank. It doesn't fluctuate in value like crypto currency and it's not held in a bank account. Think of it as cash in your wallet, except it would be held in your digital wallet. Your digital cash balance is maintained on a digital ledger that is on a blockchain. Some opponents of a CBDC argue that the private sector should create digital currency. They point to PayPal, Venmo, and Zelle. However, these payment companies have transaction costs and can take three days or more to settle. Some crypto advocates point to stablecoins as a solution to crypto's volatility. Stablecoins are cryptocurrencies that are pegged to the dollar. Regulators are wary of stablecoins because there is a lack of transparency and consumer protections. Unlike the US, China jumped into CBDC and its digital currency, digital yuan (e-cny), received a lot of attention at the Olympics in China. The US Department of Treasury was tasked by the President to submit a report by late September on the future of money, payment systems, and CBDCs. ▸ Investor Protection The call for investor protection acknowledges that the government must understand the technology behind cryptocurrency and the problems with the current financial system. The executive order acknowledged that the current financial system isn't meeting the needs "in a manner that is equitable, inclusive and efficient." According to a senior administrative official on a press call, "Over five percent of American households are 'unbanked.'" Unbanked refers to those who do not use a bank or financial institution. He added that the US has the "highest percentage among G7 countries." (The G7 include: Canada, France, Germany, Italy, Japan, the United Kingdom, the US, and the European Union.) The barriers to banking in the US explains why 37% of underbanked people (bank customers who rely on cash) and 12% of unbanked own crypto. ▶︎ Justice Department Will Pursue People, Banks & Crypto Exchanges Who Aid Sanctioned Russians In response to concern raised by US elected officials, DOJ set up a task force to pursue those who help sanction evaders. This puts crypto exchanges on notice. It is interesting that this announcement comes after the Treasury released its annual National Money Laundering Risk Assessment and stated that moving funds through crypto exchanges is not an attractive option for sanctioned Russians. On March 17, 2022, the Senate Banking Committee will hold a hearing on sanction evasion. Jonathan Levin, the co-founder and Chief Strategy Officer of Chainanalysis will testify. Chainanalysis works with banks, business, and the government to analyze blockchain data. CRYPTO CLASS - Smart Contracts A smart contract is a computer program that automatically executes a transaction when certain conditions are satisfied. A simple smart contract metaphor is a vending machine. The buyer selects an item, inserts payment and the machine delivers the item. Smart contracts on the blockchain could include registering a vehicle, sending notifications, issuing a ticket, or even transferring ownership of real estate. When the transaction is competed, the blockchain is updated. Parties to the contract determine the rules that control the transaction and define a framework for resolving disputes. There are multiple benefits of a smart contract: ▸ Speed, accuracy, and efficiency. The contract is executed immediately after the conditions are met. Since there is no paperwork and no errors to correct, smart contracts are faster and more accurate. ▸ Transparency and trust. Since there are no third parties and all documents are encrypted, no one will question whether the information was altered. ▸ Security. Blockchain documents are encrypted and distributed. They are safe from hackers because a hacker would need to alter the entire chain to change a single record. ▸ Savings. There are no third parties, such as lawyers or banks, involved in the smart contract. This reduces transaction costs. Ethereum is the most popular smart contract platform. INFLUENCERS - People to follow Nayib Bukele – @nayibbukele El Salvador President Nayib Bukele led the effort for his country to be the first one in the world to adopt bitcoin as its legal currency. Bukele argued that crypto would allow 70 percent of El Salvadorians, whom don't have a bank account, to be part of a country's formal economy. It would also enable cheaper remittances from abroad and reduce the country's debt with the International Monetary Fund. RESOURCES – Books, websites, podcasts, articles Bloomberg Crypto This mainstream business publication keeps current on crypto issues. They also have a free email newsletter. CRYPTO WORDS – HODL, HODLER, HODLING In December 2013, BTC had fallen from $716 to $438. GameKyuubi was on a Bitcoin forum and he drunkenly announced, "I AM HODLING." Hodling became crypto slang for holding during price drops. OH, ONE MORE THING – Thanks for reading! See you next week. Go to Crypto News for Realtors to read previous issues.
- Web 3.0
Before explaining Web 3.0, let's take a quick look at the evolution of the web. Web 1.0 was the internet from 1991 to 2004. Websites were essentially static pages. A user would log onto the internet and access information from a website. As an OG ("old guy," not "original gangster"), I remember the excitement of being one of the first environmental lawyers in the US to launch a website in 1996. In 2004, Web 2.0 began and it ushered in the era of user-created content, the spark of social media. A handful of large tech companies control the applications that allow us to engage with each other. Our likes, comments, and time we spend on their sites gives them access to how we think and feel. They monetize our personal data. Over the last few years, we've seen the dark side of Web 2.0. There have been breaches of privacy, mis- and disinformation campaigns. Authoritarian governments have accessed this data, giving them power to manipulate public opinion. Web 3.0 offers a solution to these problems that are founded on decentralization. Blockchain technology will encrypt a user's data and distribute it over thousands of nodes. No company will be able to access or monetize the data. Here's how Web 3.0 is taking shape. ▶︎ Decentralized Autonomous Organizations (DAO) are an alternative to incorporating. DAOs are organizations based on rules that are encoded into software and controlled by its members. There is no centralized leadership and its members own the DAO. The largest DAO by market cap is Uniswap ($5.6 billion). Here's a fascinating example of how a group of like-minded people can come together to form a DAO. In November 2021, ConstitutionDAO was created. Its purpose was to purchase an original copy of the US Constitution that Sothebys planned to auction. In just a few days, the DAO raised $43.2 million in ETH cryptocurrency. The DAO lost the bid and refunded the money to its members. ▶︎ Decentralized Finance (DeFi) allows users to exchange currency and financial instruments without banks, brokerages, or other financial organizations. Some examples for DeFi include asset management, payment solutions, peer-to-peer (P2P) lending and borrowing, and digital identity. The DeFi market cap is $71.8 billion. See DeFi Pulse for info and links to top DeFi platforms.
Let’s start with the basics. Spreadsheets like those in Excel or Google Sheets easily store information. You probably keep a spreadsheet to manage your business or personal expenses. It’s a great tool for one person or a small group of people. When there’s a large amount of data that needs to be accessed by multiple users, a database is needed. A database usually structures its data into tables. A blockchain behaves differently. Data is gathered in groups or blocks. A block has a limited storage capacity and when the block is full, it is closed. It is then linked to the previously filled block. This continues and a chain of blocks are linked together – brilliantly referred to as the blockchain. One superpower of the blockchain is that the data cannot be changed or deleted. It is immutable. Here’s how that works. A blockchain doesn’t live on a single server farm in a warehouse. The blockchain data is spread out amount many network “nodes” throughout the world. According to bitnodes, there are currently 15,181 Bitcoin nodes. It’s decentralized. Spreading out the data allows for redundancy. Unlike a company that stores all its data in one location, if a power outage or natural disaster occurs at a network node, the blockchain isn’t impacted. It also ensures that the data isn’t changed. If someone running a node is a bad dude (yes, there are hackers who aspire to steal bitcoin) and alters data on their node, the other nodes in the blockchain will not be impacted. Blocks are stored linearly and chronologically. It’s an ingenious way to keep records. Blockchains can be public or private. The Bitcoin blockchain is public or “permissionless.” Anyone can join the network. All blockchains are secured with cryptography. Private blockchains are being used by companies such as Walmart for supply management. Healthcare providers are storing their patients’ medical record. Property records in county recorders’ offices are ripe candidates for blockchain. Go to Investopedia to learn more.