Jun 10, 2022
Get ready for a crash course in blockchain technology and how it is transforming the real estate industry.
Joining us today is Michael Tabone. He is an economist at Cointelegraph Research. A Ph.D. candidate, engineer, economist, and business strategist, he also provides strategic consulting to firms concentrating in the DeFi and blockchain space. Michael has co-authored several reports for Cointelegraph Research and writes a quarterly venture capitalist report published on the Cointelegraph Research Terminal. His Ph.D. dissertation is on DAOs and their practical applications in the world of business.
Listen in and learn why real estate investors should be paying attention to the crypto space!
[00:01 - 09:-30] Revolutionizing Real Estate
- Michael talks about his background
- There’s an unbelievable amount of money in crypto
- The applications of blockchain technology to real estate and other industries
- Tokenization of real estate assets
- 89% of security tokens are real estate
- The impact of blockchain on real estate transactions
[09:31 - 21:46] Getting Started in Crypto
- Learn about dollar cost averaging and the cold storage wallet
- Know about Bitcoin, Ethereum, and other cryptocurrencies
- Michael shares how he invests in crypto
- Talk to the experts
- Blockchain provides speed, liquidity, and transparency in real estate processes
- How to structure deals with blockchain
- Start accumulating a bit of crypto and get comfortable owning it
[21:47 - 23:23] Closing Segment
- Reach out to Michael!
- Links Below
- Final Words
Tweetable Quotes
“You can adopt this technology or not adopt it, but it's going to come like a tidal wave. It's going to be over you. You're not going to do it? Then your competitor is going to come out and he's going to do it.” - Michael Tabone
“This is only going to help people. You know, this isn't for the big, big, big boys. This is going to help the everyday person.” - Michael Tabone
“There are so many financial functions that you can do with it that are outside of what you would normally do as a firm with real estate.” - Michael Tabone
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Connect with Michael! Email him at michael.tabone@cointelegraph.com and follow him on LinkedIn. Want to know more about blockchain and digital assets? Visit Cointelegraph Research or check them out on Twitter!
Resources Mentioned
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Want to read the full show notes of the episode? Check it out below:
[00:00:00] Michael Tabone: Small amounts over a large amount of time, regular. Don't worry about it. Learn what a cold storage wallet is, throw that money in there and just let it sit. And you know, it doesn't matter what it fluctuates over time. There's like I said, in the beginning of this podcast, these VCs about throwing money into these projects, not because they want to lose money because they believe that there's actual utility behind these things.
[00:00:24] Michael Tabone: So the whole entire space, isn't a just digital dogs and all these kinds of things and, you know, illicit activities and stuff and, or crypto punks running around.
[00:00:47] Sam Wilson: Michael Tabone is an economist at Cointelegraph Research. He's a PhD candidate, engineer, economist and business strategist. He also provides strategic consulting to firms concentrating in the DeFi and blockchain space. Michael, welcome to the show.
[00:01:01] Michael Tabone: Thanks, Sam. Thanks for having me. Appreciate it.
[00:01:03] Sam Wilson: Pleasure is mine. Three questions I ask every guest who comes on the show: in 90 seconds or less, where did you start? Where are you now? And how did you get there?
[00:01:10] Michael Tabone: I started as an actor, trying to get my acting degree. I became an aerospace engineer. And then I got my degree in economics and a series of different jobs since then, reliability engineer, you know, almost every, janitor to the president of every company, like I think, and now I am also an economist for Cointelegraph Research.
[00:01:33] Michael Tabone: And hopefully, you know, the, sky's the limit for other projects where I'm a director of finance and also other kind of stuff. And this, this crypto space is crazy ever-changing, and we'll never know exactly where we ended up.
[00:01:45] Sam Wilson: No, no, we won't. And that's, that's one of the things we're going to look for today is find out how well your crystal ball is working.
[00:01:52] Sam Wilson: I'm kidding. This is, this is lots and lots of fun. We've had a lot of guests, or I should say a handful of guests come on the show and really talk about crypto, where they think crypto, where they think of blockchain is coming. Break this down for us. What do you see as the state of the industry right now? And then where do you see it going?
[00:02:11] Michael Tabone: So I'm lucky to be able to produce a venture capital report for Cointelegraph Research. And so I see the amount of investment that's happening in the space just every day. I'm in the weeds, in the details last year, there was 30 and a half, $30.5 billion worth of investment.
[00:02:31] Michael Tabone: But in the last three months, it was $14.6 billion of investment into the crypto space. So it's an unbelievable amount of money and the unbelievable amount of things that are happening in a whole bunch of different sectors, including the NFT sector, non-fungible tokens, and non-fungible tokens are on the blockchain, but they can't be broken up.
[00:02:53] Michael Tabone: They can't be segmented. So this fits right in with real estate. And there are some projects that are doing this kind of stuff, but there fits right in with real estate where your title is no longer going to be held on a piece of paper by the bank while you're paying off your mortgage. And then they send it to you on that final payment.
[00:03:09] Michael Tabone: They finally send it to you and you get to try to put that on you're in your safe. And hopefully it doesn't burn down, right? When the house burns down, now it's going to be on the blockchain. And it's going to revolutionize many, many, many things as an example, title insurance. So title insurance is, as you know, is a huge amount of money per year.
[00:03:30] Michael Tabone: Somebody has to go down to the town hall, pick to the records, all that stuff. But now I can just send you an address. You know exactly who owned it, where it went, you know exactly the trail and it's verifiable in seconds immediately, you can do it in a matter of minutes.
[00:03:45] Michael Tabone: It doesn't take any time then therefore title insurance, the industry, not only the search, but the insurance on it is tons of money. No longer necessarily needed because it's all on the blockchain. And then again, you don't have to worry about it burning down in your safe because it's on the blockchain.
[00:03:59] Michael Tabone: So all you need is that wallet, that address. And then there, if you're afraid of losing that, there's ways to secure that, too. So there's all these solutions that are, that are happening in the world. And it's, it's really fascinating.
[00:04:10] Sam Wilson: So one of the things that we're seeing in this space is that it's almost a dizzying pace just because the applications are just innumerable. It seems. So, at least for me, looking from the outside looking in, is that a fair analysis?
[00:04:22] Michael Tabone: It's fair for us experts, too. I mean, I do this all day long and I'm talking to somebody else, you know, I'll talk to I'll interview or talk to somebody else in this space who's, you know, ahead of an organization or something.
[00:04:33] Michael Tabone: And then I'll mention something and I go, I didn't hear about that. And then they'll mention something, I didn't hear about that. And, you know, it's so unbelievable. And there are so many projects across so many different things that, even if you were to keep your head glued 24 hours a day, so fast and moving.
[00:04:48] Michael Tabone: And it's really interesting. And like you said, it can be applied to many other things. Your medical information eventually will be on a blockchain where there's something called the zero-knowledge proof and all of these technological advances that allow you to only give out the information that you want.
[00:05:02] Michael Tabone: So if you apply for a job. You know, your resume would be on a blockchain. And you can just say to the employer, Hey, I only want you to know where I live and I only want you to know my social security number. And I don't want you to know, you know, X, Y, and Z about me, and you can hold those keys. Private.
[00:05:16] Michael Tabone: There's an unbelievable amount of very interesting applications for this. Now, a lot of people like to describe things that blockchain will not do, right? It's not going to cure cancer. It's not going to do anything, but there are some great applications for this. And like I said, the title insurance, not only for your car, you know, your, your house, your car will eventually also be a title that will be on the thing.
[00:05:38] Michael Tabone: And then when it comes down to giving it to your relatives and people in your will, probate has way less to do, way less work to do because it's on the blockchain, right? There's nobody really to hunt it down. It really is amazing. So what's really interesting is about a month ago, two months ago, this organization called Security Token Market, they produced a n amazing, it blew my mind, all about security, tokens, and security tokens are regulated and they go through an entire process with different regulators across the entire government and agencies in America and across the world.
[00:06:13] Michael Tabone: So when people talk about, you know, crypto is illegal assets and all that stuff, when we're talking about real estate, especially now it's extremely regulated and they go through an extreme process because it is a security, right? So it's really interesting that out of all the security tokens that exist, 89% of them are real estate and 87% are retail and 2% are commercial.
[00:06:38] Michael Tabone: The only 2% of that is commercial and 87% of that is retail. And there are tons of examples of houses being put up for sale. I think the first one was in Detroit, was put on Ethereum and it was an NFT, non-fungible token and was sold and so forth as a house because you know, the deed was there. So very interesting.
[00:06:57] Michael Tabone: So this is already happening. It's very, I mean, we're in the early stages and we're still learning all about it, but Security Token Market has done an amazing job of producing some information for us and producing information. So anybody who wants to get involved with that, I recommend you reach out to them, check out some of our materials on Cointelegraph Research, where they have reports with us.
[00:07:15] Michael Tabone: It's just really amazing stuff. If you're in the space, but you gotta be on top of it now because you know, the thing is, like you said, there's an ever-changing environment. And I talked to people in all different types of industries. And a lot of them say stuff about like, I want to keep control of this, or I want to do that.
[00:07:31] Michael Tabone: And I want to, and I'm like, you can do whatever you want. You can adopt this technology or not adopt it, but it's going to come and it's going to take it, it's going to, it's going to be like a tidal wave. It's going to be over you. You're not going to do it? Then your competitor is going to come out and he's going to do it.
[00:07:44] Michael Tabone: And all of a sudden, as an example, there's a very, there's a very famous story of this guy who wanted to buy like a bunch of Lamborghini's and Ferrari's and he wanted to buy like, 6 really high-end cars. And it was a Saturday morning. Well, their bank doesn't exist on Saturday morning, right? The bank is closed.
[00:08:00] Michael Tabone: There's no wire transfers, especially for the kind of, any kind of money we're talking about. So he calls up the dealership, says, are you on Coinbase? And they said, yeah, he goes, all right, I'm sending over the ETH. Sends over the ETH. Picks up delivery of the cars, right, with, you know, the temporary plates and he has possession of the cars in the weekend.
[00:08:16] Michael Tabone: So instead of waiting on, so with your clients, instead of waiting on a Friday night at eight o'clock, some guy goes, all right, I want to buy the house. I have to wait until Monday to have, all this stuff can be avoided. You can, because crypto is 24 hours a day, seven days a week can be traded all the time.
[00:08:30] Michael Tabone: You don't have to worry about saying these things, right. It's amazing. That's just the purchasing. We're not even talking about the mortgage of things yet because they're already, I'm sorry, I'm just going here. This is just amazing stuff. There are companies like Ledn, L-E-D-N, BNB Capital, Hoseki, Milo. Milo credit you can call up and you can get a mortgage that's backed by your crypto. So if you have, you know, if you had 10 Bitcoin, right, now, , you'd have like $400,000. If you wanted to take that 400,000 and put it up against collateral against the house, they will give you that mortgage. And that it's in a contract and boom, right?
[00:09:04] Michael Tabone: The same thing with LEDN, same thing, right? So you can use it for down payments on a house. So you don't have 10 Bitcoin. You only have half a Bitcoin. Well, half a Bitcoin is $20,000. So if you were having a starter home and you wanted to put 10% down with Bitcoin, you can do that and you want that way.
[00:09:17] Michael Tabone: You don't have to sell your Bitcoin either, right? You can use it as a lending platform to continue, so you can still continue to the bank Bitcoin and or other crypto, but you know, Bitcoin's the big one. And then you can use that as collateral. It's it really is amazing.
[00:09:30] Sam Wilson: Again, going back to this, the number of applications are innumerable. What are things, talk maybe directly to use me as an example, right? I'm an everyday, I'm a real estate investor. We're buying RV resorts. I'm raising money from, you know, from outside investors. What are some things I should be doing right now to not be the one caught in that tidal wave? As it, you know, you said the next thing you know, it'll be over you.
[00:09:55] Michael Tabone: Well, nothing I say is really financial advice. I'm not a financial advisor, right? So this is not financial advice. Do your own research, right? Famous lines for everybody, I always recommend to people that you want to look for, the things that are the most pristine assets. And that's why real estate was always been an asset that people want to buy because they are not making any more land, right? So that's why, that's why you want to buy something because they're not going to make any more. Well, as an example, Bitcoin is one of those things they're not going to make anymore. Once they get 21 million, once the miners have done their job, it ends in 2140 so way after we are long gone, right?
[00:10:31] Michael Tabone: And maybe unless crypto can solve that, too, but we'll be here for a long time. So Bitcoin will be here for a long time. And I recommend at least putting some money in to buying a little bit of that on a regular basis, do not run in and you buy, you know, $35,000 a night. I bought, almost bought a whole Bitcoin look at me.
[00:10:51] Michael Tabone: And then tomorrow, you know, COVID 21 strikes or COVID 22 strikes and the price of Bitcoin drops down and you go, oh, I wish I could have bought three. Instead, you should do something called dollar cost averaging. And you should do this with any kind of small assets. Unfortunately, you can't do this with houses, right?
[00:11:06] Michael Tabone: You can't dollar cost average in houses, but you can dollar cost average into Bitcoin or other cryptos over small amounts over a large amount of time, regular. Don't worry about it. Learn what a cold storage wallet is, throw that money in there, and just let it sit. And you know, it doesn't matter what it fluctuates over time.
[00:11:24] Michael Tabone: There's like I said, in the beginning of this podcast, these VCs about throwing money into these projects, not because they want to lose money. Because they believe that there's actual utility behind these things. So the whole entire space isn't you know, digital dogs and all these kinds of things and, illicit activities and, and stuff, and, or crypto punks running around. It's actual use cases and utility, not just of the NFT space, but, you know, there's Ethereum is the king of DeFi, still. We'll see if that continues in the future. We actually Cointelegraph Research did a whole report on Ethereum as potential dethroners so you may want to check that out too, but you know, they're the Blue Chips, Blue Chip cryptos are great to throw into and I'm a guy who's not against gold, so I just don't think it's as good.
[00:12:12] Michael Tabone: But they're actually, as crypto is like PAXG, which is a certified and audited cryptocurrency, which is backed by gold. Once you get a certain amount of that, you can actually trade it in and get physical gold delivered to you. So there's tons and tons of these kinds of things.
[00:12:29] Michael Tabone: And again, if you didn't, if you were afraid of fluctuations of price and oh, well, put it against PAXG, if you want to just let it sit there and just kind of write out and then use that as collateral against your house. So there's all of these types of functions that exist and there's way more than that, but that's like the beginner's guide is get a, I like the Strike app because the fees are almost nothing. And I set up an hour, I set up an hourly by for myself. This is what I personally do. And I buy a certain amount every hour. It automatically ticks. And when it gets to a certain amount, I send it to my cold storage wallet because not your keys on your crypto.
[00:13:03] Michael Tabone: And then it just sits there and I just let it accumulate. And I don't really look at the price of Bitcoin 'cause I worked in the industry. So I have no fear that it's good. I'm not like afraid it's going to be gone because I, and because I see it, it's just unbelievable. You know, Andreessen Horowitz is a perfect example. There is, a16z is what they go by and you know, they just set up a fund for $2.2 billion for stuff, right? It's just, you know, to, to go into the crypto space, it's really amazing. And somebody left a16z and created our own fund. That was $1.5 billion. So, you know what I mean?
[00:13:39] Michael Tabone: Like there's so much stuff going on to help Web 3.0 or the next iteration of, of the worldwide web. Really we’re in amazing times. And it's really, who's everybody in the real estate space to learn about it, get somebody in your office that understands this, you know, I would recommend, you know, contacting us or contacting Security Token Market.
[00:13:59] Michael Tabone: You know, talk to these guys. They're extremely busy. I tried getting them to have like a webinar kind of thing. Like, oh, we're too busy. We're so busy right now. But you know, bug these guys to get them some information, bug us, you know, we'll help you. You can go to research.cointelegraph.com or find us on Twitter, all that stuff.
[00:14:16] Michael Tabone: We're more than happy to help 'cause we'd love to see, we will have adoption. Adoption means that this is going to get bigger and this is only going to help people. You know, this isn't for the big, big, big boys. This is going to help the everyday person, the everyday person who doesn't have to spend the extra $20,000 in closing costs, reduce those closing costs down. That helps them out tremendously, right? The person who's got a billion dollars of closing costs was a write-off. The person who only has a $200,000 house and $18,000 of that is just shot because of the transaction costs that happened. We want to get that down, so we want to help out everybody. And that's what crypto does is it helps out the entire space.
[00:14:52] Sam Wilson: Agreed. Couldn't agree with you more. Are there things that we should be doing as we raise capital? That will allow, you know, 'cause one of the, one of the challenges that we run into is the illiquidity of our investments. You put 50 grand with me, Michael. And the only option you have is to take that and it gives you whatever that is.
[00:15:13] Sam Wilson: Maybe, maybe my shares are sold in this deal. A thousand bucks, you have 50 shares in the LLC. The only option you have is to go sell all 50 shares to one other investor and they take your place. And I traded a bunch of paperwork, both of you. And it's a total hassle.
[00:15:27] Michael Tabone: That's a fantastic question. And you're, and that's the exact thought that, that, that has gone into some of these deals. So you might have like a three-family home. So your family home takes in three, three rents. That house is broken into 1000, let's say the separate NFTs 'cause NFTs can be traded amongst all the, all of these investors.
[00:15:44] Michael Tabone: And of course, these investors would have to go through a KYC or a know your customer or AML process. So that way we know it's anti-money laundering process. So we know it's not just a random person, but once they jumped through those hoops and they got onto those lists and they got wait-listed, the illiquidity factor almost goes away.
[00:16:01] Michael Tabone: It becomes a liquid thing. I have 10 shares of the house. Every single month I get automatically in my wallet, I see 10 shares of those three rents. It's fantastic, right? It becomes immediate. If I need to sell five and I want to hold on to five of those shares of the, of the house. I just go home. I go at two o'clock in the morning and my PJ's and I put it on my phone and someone buys it and I no longer get those rewards in my wallet.
[00:16:27] Michael Tabone: But I also get the payment, right to myself, that minute automatically. It, there's, no, the paperwork is the signature I have. The way the blockchain works. It's basically like an accounting system. There's a debit, there's a credit, but there's a signature. So it's a three ledger accounting system.
[00:16:42] Michael Tabone: There's, the signature is the only thing that you have the control over. No one else can do that signature for you. And that's the power that gives it. That's amazing, right? The ledger is so immutable that I have to be the only person that can give it the authority. I can make the mistake of putting my signatures in my, the way I get my students, or I can put it on an iPhone cloud.
[00:17:01] Michael Tabone: I know I can put it on, like I can put it out in the world where Google, especially where it can get taken and stolen. Everything I do is written down in a little book. You know, I know high-tech we are right. Everything I have is written down a little book or it's in some kind of metal, these metal cases, which I will not open because these are my seed phrases or they're in these little, these little titanium, never going to burn down tabs that I may or may not have throughout the, have all my seed phrases on them. So I know we're talking about high-tech, but this is the, this is the technology that's going to save you. If I need to go back and get those keys, they're here, right? Not physically, they're there to get my keys back. This is a very, that's very long way past the time that we have here for the thing.
[00:17:39] Michael Tabone: And I hope that answered the question. I'm sorry.
[00:17:40] Sam Wilson: It does. Yeah, no, no, you're good. I mean, and again, there's, there's so much here to understand, especially from this side of it, which is, you know, the questions that my listeners will have is how does this affect me? What should I be doing to prepare? And how do we get in front of this, especially as deal sponsors, like, how do we get in front of this in such a way that either sets us up for success or, you know, or at least doesn't let us get completely crushed when, you know, whatever it is, comes on the line.
[00:18:10] Sam Wilson: And we're like, Hey, wait. So we're uploaded into the blockchain and then there's this and that and the other now. And suddenly we're still typing on typewriters while or rest of the world. You know, sending text messages.
[00:18:19] Michael Tabone: So absolutely. And there's tons of ways that you can structure this, but to kind of break it out past what maybe firms and small places have been doing over this time, if you can take a house and I can sell 95 and I can break it up into a hundred shares and I can keep five shares as the firm, you know, so someone comes in and goes, I really want to buy this house, but I, you know, I can't, it's a $500,000 house, but I don't really have anything to put down.
[00:18:44] Michael Tabone: Listen, we'll own a certain percentage of it. We'll put down that we'll keep that part of the house. You can keep 90% of it. We'll keep 10% of it will keep it in these NFTs. And then once you buy that off, you can buy off the rest of that 10%. Now the advantages that as you know, real estate has a tendency to increase over time.
[00:19:01] Michael Tabone: So by the time that person can buy off those 10 shares, it's probably appreciated in value, right? It gives me an opportunity to come in and go, all right. You know, we like your, we like your deal. It's not a loan. We own the house, but you know, when we give you and we give you a right to purchase it first, you know, of course, you can sell those things on secondary markets, too, as well.
[00:19:20] Michael Tabone: You know, that kind of thing. But I would recommend getting a hold of somebody who understands crypto, who understands this kind of stuff. You're not going to give them, I'm okay with people receiving fees, but you're not, you know, you're not trying to find somebody who's just going to sit in your office and be the crypto guy, and he's going to be on the phone because it's going to be a long time for this to get massive adoption, but you need to become aware of this stuff.
[00:19:41] Michael Tabone: So, one thing that I really like is MicroStrategy is one of the public firms that first started buying Bitcoin and they have the most amount of their balance sheets in the billions and billions of dollars. Hope.com is a big website that'll kind of bring you through the basics of Bitcoin.
[00:19:55] Michael Tabone: I think you really need to start learning about Bitcoin first as a basis to understand really the culture and how everything kind of works. Everything else has kind of built on that, on that bedrock. And, you know, we have, like I said before, we have some, some great reports at research.cointelegraph.com that go into detail on these things, like we have a DeFi one. DeFi is decentralized finance, which goes through the history of Bitcoin, Ethereum, Solana, Polkadot, Algorand, all of these up-and-coming blockchains. And Ethereum is the one chain that is used mostly there are others in the real estate space.
[00:20:33] Michael Tabone: And like I said, you make an NFT, it gets put on, gets made into a security token, and there's ways of doing that. But I would get somebody in just to give you the basics, understand, start reading by yourself. Unfortunately, there's no way to download this information to your brain with like a, like a club or something.
[00:20:48] Michael Tabone: It takes hours and hours, hundreds and hundreds of hours, but there are ways to do it. I recommend us and I recommend like hope.com as a, as a way to get introduced to it. But I would, you know, I would start slowly accumulating a little bit of crypto just to get comfortable owning because for people that are, you know, I hate to date myself.
[00:21:06] Michael Tabone: I was born in 82, so I, I have a period of time where I was, I didn't have technology. And then I had technology. There was, you know, I was both and the people came after me. Totally into technology, they get it. They're just like, oh yeah, yeah. I own an asset on a phone.
[00:21:20] Michael Tabone: People that are older than me are like, eh, I gotta, I want that deed in my hand, right? I get that. So I get both sides. The only thing I can tell you is you got to get used to that. It's not tangible here, but it's tangible on the blockchain. Once you understand that, then it kind of helps you to realize, all right, there are so many financial functions that you can do with it that are outside of what you would normally do as a firm with real estate. It's just crazy.
[00:21:47] Sam Wilson: Man. That's awesome. Michael, thank you for taking the time today to kind of give us the broad-scale picture of what's going on in the industry. I mean, where we are now and then really just get this ready for what may be coming down the line.
[00:21:59] Sam Wilson: I mean, that's a lot of moving parts there, but I think you, you really summed it up and you said, Hey, this is something you have to research. It's been a lot of time doing and researching just to understand it. And maybe the action items today aren't necessarily like, Hey, here's how we're going to implement this right away.
[00:22:13] Sam Wilson: But it's really just keeping our ear to the ground, I think, is what I heard more than anything and paying attention to it. So I think yeah, I appreciate you taking the time to come on and share with us today. Again, if our listeners want to get in touch with you. I know you mentioned this a few times already, but what is the best way to do that?
[00:22:28] Michael Tabone: To get in touch with me, you can go on, you can email me at michael.tabone@cointelegraph.com. My last name T-A-B-O-N-E. Michael Tabone. michael.tabone@cointelegraph.com. and, you know, find us on research, research.cointelegraph.com. That's our website, and, you know, feel free to contact me to have any questions and we'll help point you in the right direction if I can.
[00:22:54] Sam Wilson: Awesome. Michael, thank you for your time today. I do appreciate it.
[00:22:57] Michael Tabone: Awesome. Thanks, Sam. Appreciate it.