Large Scale Transactions

An idea that really interests me is the question of how one might go about securely completing a large transaction. For example, lets suppose I wanted to buy a house or a plot of land. This amount might represent my entire savings in crypto. Obviously I would need some assurance that the flow of this money be traceable from buyer to seller.

Ideally, I imagine that there would have to be a smart contract that involves some kind of escrow. The funds would be locked until all the legal documents are signed by both parties. Then the parties would sign off on the sale and the funds would be released to the seller. Alternately, if the sale should fall apart for any reason, then the funds should automatically revert to the buyer. All this would have to be 100% secure without any chance of non-revertible loss.

I’m not up to speed on how things happen conventionally in real estate. I know differs by jurisdiction. In some places the system is more robust than in others. It generally involves both lawyers and banks. The authenticity of land-title documentation has to be verified to complete the transaction without the possibility of serious fraud. Perhaps this aspect of the transaction will always require the assistance of a dedicated professional who is a living, breathing human being.

The blockchain can make the transaction process easier, but hopefully not too easy – otherwise some take-the-money-and-run scenarios could emerge. Any transaction involves some degree of caveat emptor. The larger the transaction, the more ominous the concept of fraud. For many of us, buying and selling real estate will be the largest transactions we will ever be involved in, in our lives. It has to be secure.

At the same time, there is a very real reason to look at the possibility of using crypto to pay for real estate. What if I did have the appropriate amount (or a large fraction) available in crypto? With the current model, I would have to liquidate my crypto assets, convert them to fiat, move this money into a bank account and then complete the transaction in the conventional way (mediated by a banking institution). But the role of the banking institution (with all its inherent cost) is the very thing that crypto promises to obsolete. The whole point of crypto is that it can do everything that fiat currency can, only better – faster, cheaper and more cleanly.

I know that people are already using crypto to make large scale transactions, but these people are richer than I am. I’m guessing, for the most part, people using crypto accept a certain degree of risk. If your risk tolerance is higher, then this raises the potential as to the kinds of things you might try with crypto.

Right now banks have a role to play in real estate transactions. Banks hold and release funds in an appropriate way to ensure that the transaction is legitimate. This is fine as long as we already have access to significant amounts of fiat currency. But what if most of my savings already exist in the form of crypto? Wouldn’t it make much more sense to simply transfer the crypto to the receiving party? Perhaps in this case the lawyer or the real estate agent could serve as the intermediary, holding the funds until the identities of both parties as well as the legitimate ownership by the seller, have all been verified. Still, given the size of the transaction, there must be a protocol in place to ensure that at no point in the process – buyer to intermediary and intermediary to seller (or, in the case of a failed transaction, back to the buyer) – funds could end up mysteriously misdirected and irretrievably lost.

My question is two-fold: What is the progress on this in the near future? Is there a possibility of large scale real world transactions moving out of the hands of banking institutions and onto the blockchain? And if so, how well is Cardano suited for this?

I would like to own a piece of land one day. If that should ever become a reality, I need to save my money. I can’t save fiat, because fiat depreciates faster than I can earn it. Therefore Cardano (or if not ADA then some other crypto currency) may be a viable option for me to pursue this dream.

Oddly, in some sense, the prospect of using crypto for large transaction may be one of the most attractive immediate use cases. Those of us who are still employed in a regular job receiving periodic paycheques will always have access to small amounts of fiat currency. As there is no incentive for saving this money, the natural thing to do is to spend it on everyday purchases – groceries, gasoline etc. Since crypto holds its value better than fiat, the tendency would be to spend fiat first and hold on to crypto as a kind of reserve. However, when making a big purchase (a house or a car) we would have to tap our savings.