Bitcoins and Mortar

Obi Nwosu is the CEO and co-founder of Coinfloor, the UK's longest-running Bitcoin exchange. He has over 20 years’ experience building online marketplaces and bringing virtual currencies to tens of millions of people. Obi writes The Road to Bitcoin Hegemony, a weekly recap of some of the most impactful developments in Bitcoin.

Welcome to The Road to Bitcoin Hegemony, a weekly analysis of some the most interesting developments in Bitcoin and why they matter in Bitcoin's journey towards monetary dominance.

Bitcoins and Mortar

Everyone knows that an Englishman’s home is his castle, and the same goes for any homeowner around the world. It’s their shelter from storms, both meteorological and economic.

For decades, if not centuries, owning a house has eclipsed cash and even gold as the safest investment you could make. Since 1980, the average price of a house has risen tenfold, proving housing to be an excellent store of wealth when compared to the UK’s fiat currency, which inflated by a factor of four over the same period. If you put your equity into bricks and mortar, you can climb the property ladder, have something to pass on to your children — and of course, have a place to lay your head at night.

The benefits of home ownership are legion. Property has proven a great store of wealth in the last few decades: buy-to-let can provide a steady income; it’s collateral for loans; and, of course, it’s a home and a castle that protects your family.

But the near-universal desire to own your own property stems, in large part, from the lack of any alternative means of storing value. But home ownership is no longer a realistic ambition for many. The younger generation have been priced out of the market and can only look longingly at their elders’ who store a bit more wealth with each monthly mortgage payment, while their own monthly rent goes in some lucky landlord’s pocket.

So what’s a wannabe investor to do if they can’t get a foot on the ladder, but want a store of wealth that will survive the coming economic hurricanes, while also retaining the other benefits that a physical property confers?

The answer, of course, is to turn away from the traditional economy and look to its digital competitor. The exemplar of this parallel economy, Bitcoin, is not only quarantined from economic and physical disasters that can affect house prices, but also provides just as many (and better) benefits as owning a property.

Just think: where real estate provides physical security, Bitcoin guards against financial and digital risks such as inflation, hacking, and identity theft. Where a house can generate money through letting, Bitcoin lending—including from new non-custodial lending services we are seeing entering the market—provides another way of putting your investment to work. And your investment works just the same as collateral for fiat or crypto borrowing.

Of course, you can’t make a home in a Bitcoin. But by investing, you gain things that a pile of bricks can never provide, from a pseudonymous address in cyberspace to its biggest advantage over a house — the easy ability to subdivide your investment almost without limit. (Look out for this: 2021 will be the Year of the Satoshi.)

As a store of wealth, Bitcoin is peerless—and ahead even of property. As Raoul Pal explains, Bitcoin is the world’s only pristine asset; it represents financial freedom in a way that a terraced house can never rival.

What’s most compelling about comparing Bitcoin and property is the former’s capacity for growth. The property market is about as developed as it can be; it is already at a global scale and future growth depends on the gradual growth in population housebuilding. But Bitcoin is just beginning, and though it has soared in value this year, it still has so far to go. For the foreseeable future, Bitcoin will continue to grow and to capture market share from the Usual Suspects—stocks, gold, and real estate. This colossal opportunity dwarfs the returns on property, even during a housing bubble.

The time is coming when digital real estate will be more important than physical real estate. It may not be long before we start saying that someone’s coin is their castle.

Don’t Be a Dick Rowe

“Bitcoin is on the way out," and other bad career moves

Every Beatles fan knows the story of how they failed to get their first record deal. As they stood on the cusp of fame, the band’s manager Brian Epstein approached several labels, including Decca Records. The head of A&R at Decca, Dick Rowe, dismissed them with words that would go down in music history: “Guitar bands are on the way out, Mr. Epstein.”

In terms of bad career moves, it’s hard to beat Dick Rowe, the man who missed signing the Beatles. But there have been many other rock stars since then who went unappreciated before they found glory.

Bitcoin is one. We all remember the way Bitcoin was derided at the time of its birth, and how this mockery persisted through the first decade of its existence. And how, gradually, the sniping and predictions of its imminent demise faded away... before turning into a full-throated embrace of Bitcoin’s brilliance.

Where it was once fashionable to say that Bitcoin was on the way out, it’s now increasingly looking like a disastrous career move.

As financial institutions fall over themselves to join the Bitcoin revolution, everyone’s got an important decision to make. For most of us, it’s about our financial future. For others, it’s their reputation and career that’s at stake.

Don’t be a Dick Rowe: seize the moment before it slips away.