The largest transaction ever completed in Bitcoin, the virtual currency that approximates cash on the internet, was for $1 million worth of computer hardware. That’s impressive for a currency that’s only been around since 2009, but Jack Sommer hopes to top it — by a lot. The casino-owner-turned-developer is selling his 25,000-square-foot Las Vegas mansion for $7.85 million, and he’s willing to accept the whole sum in Bitcoin.
"It’s very volatile, and of course … there is a lot of speculation," Sommer says, referring to the wild price swings that have made some traders rich. "But there seems to be a growing amount of trade and commerce involving Bitcoin as well. So it gives me the confidence that we can accept it as a viable currency."
Two of Sommers’ seven children have been investing in Bitcoin since around 2010, the very early days of the experimental currency. They convinced their father that the fundamentals were sound even though the currency jumped from around $20 in early 2013 to more than $1,000 by the end of the year. "My kids started picking them up at $5 and then they went to over $1,000 and they were making all this money," Sommer’s wife Laura says. "What makes gold valuable? What makes a diamond valuable? What makes anything valuable? It’s what people want."
"What makes anything valuable? It’s what people want."
Bitcoin is not backed by any nation; its exact origins are unknown. Some governments have passively sanctioned it, others have stayed silent, and China has banned its use. Bitcoin is also far from mature. It’s designed to have a total supply of 21 million bitcoins, but only about half of those have entered circulation so far.
There is also the matter of the transaction itself. The Bitcoin protocol is designed so that anyone can transfer any number of bitcoins to another person directly, without any third parties or fees — it’d be like handing over a suitcase with $7.85 million in cash. That won’t fly with a large real estate transaction — taxes and brokers’ fees must be paid in dollars and there is normally a 30-day escrow period, an eternity in the volatile Bitcoin market.
In order to accommodate the oddball currency, Sommer expects he would write a contract denominated in US dollars with reference to the equivalent amount in Bitcoin as well as a minimum and maximum range in order to hedge against wild price changes. Other than that, it wouldn’t be much different than accepting euro or yen for the house.
The gesture is a bit of a stunt
The gesture is a bit of a marketing stunt — since advertising the Bitcoin angle, the Sommers have been swamped with interest from media and, to a lesser degree, potential buyers. They have had some Bitcoiners "sniffing around," including one who was interested in paying in a mix of currencies, which the Sommers are perfectly happy with. "It could be a blend," Jack says. "Part cash, part bit. Why not?"
Sommer is bullish on Bitcoin, but he’s also cautious. "I intend to eliminate the risks to the greatest extent possible," he says. Keeping that much money in Bitcoin would be too risky because of the chance of government interference or a market crash, so Sommer plans to convert the majority of the sum into dollars and keep perhaps $100,000 or more in Bitcoin for speculative purposes.
He’s not actually the first to offer real estate for Bitcoin; one Canadian woman offered her home for $1 million in the virtual currency and another Canadian man offered his home for $395,000 in Bitcoin. Bitcoin is increasingly accepted by merchants around the world, including two Vegas casino hotels, Richard Branson’s commercial space flight venture Virgin Galactic, and at least one college. Still, it’s far from mainstream.
"It’s actually good that not that many people know about it, because that means there are many more people who are going to know about it," Sommer says. "I think that it is graduating to become a trend. And hopefully it will sustain itself — at least until we sell the house."