*UPDATE 10/10/2017 Please see an update on the portion of this article in regards to REcoin’s founder being charged with defrauding investors here.

In case you haven’t heard already, cryptocurrencies are meeting the world of real estate investing. It’s a very exciting prospect, so let me explain what’s going on.

Cryptocurrencies are very much like regular money in that you can use them to pay for many things. The best-known cryptocurrency right now is bitcoin. At the moment, you can use bitcoin to buy software on the Microsoft site, to book a plane ticket on Expedia, or even to withdraw actual dollars from a number of bitcoin ATMs around the country.

The value of bitcoin has been growing explosively over the past 12 months, and it recently crossed a symbolic threshold: One bitcoin is now worth more than an ounce of gold. At the same time, cryptocurrencies and regular money are very different. Cryptocurrencies are not issued by the government and are not backed by any real asset.

This has many people worried that bitcoin and the like are open to price bubbles. Well, several startups, such as Brickcoin and REcoin, are trying to tackle this exact problem by making bitcoin-like currencies, which are backed by a very real asset: property.

Here’s how it works. First, these startups make an initial coin offering. This is similar to the way traditional companies offer stock. It’s a way of raising money while putting a certain amount of the cryptocurrency into circulation.

“One bitcoin is now worth more than one ounce of gold.”

Second, the startup invests this money in a real estate investment trust (REIT). The value of the currency is then a reflection of the actual value of the underlying real estate investments. In theory, this means you get the best of both worlds: the flexibility and liquidity of cryptocurrencies like bitcoin, as well as the steady returns, the security, and regulatory oversight of a real asset such as property.

In practice, it’s still way too early to say whether this idea will work, and if it does, which of the real estate cryptocurrencies will emerge as the winner. In any case, this is certainly an interesting development that’s worth keeping an eye on.

However, there will always be room for traditional real estate investing. People love investing in real estate because property is a tangible asset less prone to volatility and market manipulation. Also, real estate allows for greater leverage than just about any other type of investment.

If you have any questions for me about this topic or any other topic related to real estate, don’t hesitate to give me a call or send me an email. I look forward to hearing from you soon.