What is a Bitcoin Mortgage?

What is a Bitcoin Mortgage?

First we need to know what a Bitcoin Mortgage is before we speak about What is a Crypto Mortgage?

First, you must know that this article is hypothetical and merely just our expressed opinions. It is not considered financial advice and any questions should be asked to your mortgage loan originator.

Bitcoin mortgages via government agencies to our understanding do not exist as of the time of this article. However, if Bitcoin mortgages or crypto mortgage lending were to exist one day, we would not be surprised. Let us discuss the potential below.

Bitcoin is the original cryptocurrency that transacted blockchain via a wallet using miners to power the transaction. Bitcoin is stored in a personal Cryptography wallet, the transactions of a crypto uses a blockchain. The blockchain is a database, it is the railing system that uses computers/nodes to verify that the transaction is valid, as the blockchain uses mutual distributed ledgers. The miners are the computers/nodes that help process the transactions solving complex algorithms on how best to hash/store the transactions, the winning miner gets paid a piece of crypto for this, thus a transaction fee. These miners create blocks made up of several transactions in the blockchain using processors. This powers the blockchain by using other computing power.

The computers/nodes validate these blocks that were created by the miners. Each transaction takes about 10 minutes to be worked by the miners. Several transactions can make up a block, making up about 1 megabyte. Once the 1mb block is complete, it then moves onto another block and is attached to the new block. This data structure is called a Merkle Tree. You may ask, How to send this crypto from one to another? Or what are the benefits of a crypto mortgage?

Benefits of a Bitcoin Mortgage

Bitcoin Mortgages vs Margin Loans – Margin Calls

There may be a private lender that might provide what they call a Bitcoin Mortgage, perhaps lending up to 50% or 60% LTV. However, it may be no different than obtaining a margin loan, which are borrowed funds pledged against your crypto.

Margin loans generally have features called ‘margin calls’. Meaning if your Bitcoin were to plummet in value, then you are responsible to come up with the difference immediately. These lenders have the ability to sell any Bitcoin that you may have as a down deposit if you fail to come up with the margin call, much like how margin calls work in the securities market. This is not our definition of a Bitcoin Mortgage, but rather a margin loan. We are not saying that this crypto ‘margin loan’ model is not beneficial to someone, however one must be prudent and do due diligence prior to this style as the risks can be great.

A Bitcoin mortgage to us means a loan solely based on itself, lent in in the same cryptocurrency and paid back in the same, and the lender and consumer either both take on the risk for the price of crypto or just the lender. It would be more ideal for only the lender to settle the loan in crypto rather than to have the customer pay in crypto due to risk. The borrower may have the option to pay in USD, it would be best for the price of Bitcoin may vary and could rise so high that the borrower would want to walk away from the property. The lender may subsequently sell the loan, which then gets pulled together in a CMO or CDO plain vanilla tranche.

This would be a Bitcoin backed mortgage, not a crypto currency mortgage deposit or crypto mortgage that has margin loan functions and features.

Buying Real Estate with Bitcoin – What is a Bitcoin Mortgage?

Even though there may not be an opportunity currently to have a Bitcoin Mortgage, this does not mean that you can not buy real estate with crypto.

There have been plenty of transactions made in Bitcoin to buy real estate, from a $1.6 million dollar property in lake Tahoe that accepted 2,739. In 2014 a Miami homeowner accepted about 80% of the purchase price in 455 Bitcoins and some cash for a $6 million dollar property.

However, even though there have been transactions made in crypto to buy property, this does not mean it is easy to accomplish.

In Conclusion – What is a Bitcoin Mortgage?

Most would never realize how large and complex Bitcoin really is. Crypto uses more energy than several small countries. The database structure is larger than some of the largest companies on earth. To date, it has never been hacked. It was created just a few months after the Lehman Brothers collapse. On January 3, 2009 the first Bitcoin was mined. There is a reason why this crypto is so popular, even though at times it can be fairly slow, especially to scale. a business. Bitcoin is also different from Ether, as Ether has features called a smart contract.

You've probably heard about cryptocurrency and blockchains in the news at some point and people are always talking about how these new technologies are going to revolutionize the financial world. More companies are starting to accept crypto payment options, financial institutions are discussing the possibility of a Bitcoin or cryptocurrency mortgage, and a lot of people are investing their money in cryptocurrency. But a lot of people are still a bit lost and when they try to learn more, they get stuck on all of the different terms.


The blockchain is based off of an older technology most people aren't aware of called cryptography, the hash (aka Merkle Tree/data structure) was the original base, where the nodes (or leaf) of the block of data.

Blockchain is essentially a decentralized database that keeps track of all the transactions on the network. It's composed of numerous blocks and each block contains information about a transaction. If someone tries to add an illegitimate transaction to the network, it will be rejected by everyone else who has access due to cryptographic hash functions which allow users on the network to verify if a transaction is legitimate. A blockchain is a publicly, and sometimes private, available ledger that anyone can see because it's decentralized and transparent, but each person who has access to the ledger will only have part of it since they will only be able to see the transactions relevant to them. Most people think of cryptocurrency when they hear about blockchain, but the technology actually has other uses as well.

What is a Bitcoin Mortgage?


Cryptocurrency is just a digital currency that uses cryptography to secure transactions and create new units. There are many different types of cryptocurrencies such as Bitcoin, Litecoin, Ethereum, Ether, Dogecoin, and Monero etc. Cryptocurrencies don't have a centralized authority and instead operate on a decentralized blockchain which also makes them more secure since malicious hackers can't just steal the entire blockchain and run away with it. Certain cryptos have a blockchain, these are called ‘coins’, when other projects or apps use a blockchain and may use their coin in order to run their project that probably have a utility or a functionality purpose, they may also create an ‘alt token’, which is essentially the projects ‘coin’.


This is the process of securing data by effectively transforming readable information into an unreadable format such as code. Cryptography has been around for hundreds of years, but cryptography used in digital currency is generally very different from other types of cryptography.

Symmetric-key cryptography was more than likely the only encryption until 1976. Where the key(s) are mutually shared by the person that sends the transaction, and the person that would receive the transaction. An example of this would be where you receive an encrypted email, by which you need a series of text to unlock the hidden message.

Public keys, also known as symmetric, created around 1976 by Whitfield Diffie and Martin Hellman, show that a public key no longer has to be kept private, unlike the private key. The public key could be used to view a file as it is a shared key. The basic concept of a crypto wallet, where one can send and receive ‘crypto’.

Proof of Work (POW)

Proof of work is a system that requires users to perform some type of work in order to show that they are honest members of the network. In cryptocurrency, this usually comes in the form of processing power which users dedicate to solving cryptographic hash functions so they can receive rewards for helping maintain the blockchain's integrity and security. Proof of work might be able to prevent artificial inflation by making new coins cost more to produce, thereby keeping a lid on excessive monetary inflation. Cryptocurrency mining is a common example of POW.


This is the process by which new coins are created. Mining takes place on a cryptocurrency network where users dedicate their computer processing power to solve cryptographic hash functions, which are essentially complex mathematical problems. The first miner to correctly get the correct answer is rewarded with a block of new coins and transaction fees from everyone else who decided to dedicate their processing power as well.

Cryptocurrency Wallet

A cryptocurrency wallet is a digital wallet that can store the public and private keys that let you access your funds and carry out transactions. Since cryptocurrencies aren't controlled by any authority, there isn't any bank or credit union that will hold onto your money for you, which means you're responsible for the security of your own coins. This means having a secure wallet that won't get hacked, so a lot of people choose to store their coins in an offline wallet on a USB stick or hard drive for extra security. However, this can come at extreme risks, such as losing or damaging the external drive.

Smart Contract

A smart contract is effectively an advanced type of traditional contract, but with computer programming language, that self-executes when certain conditions are met, sometimes also has a robotics function in the computer world. Cryptocurrency's decentralized nature makes it easy for smart contracts to exist without the need for a centralized third party because users validate transactions on the blockchain, making them trustless and secure. Smart contracts can be used for a variety of different transactions and, in the future, it is likely that they will replace the traditional mortgage process because it is more secure and efficient, as smart contracts may hold actual terms of a real contract, such as jurisdiction and offers, acceptance and consideration.


Hashcash is a proof of work system that was first implemented in the 1990s as part of an anti-spam scheme. The technology behind Hashcash is also sometimes used to verify cryptocurrency transactions based on their individual hashes and code. This is the method used by Bitcoin, although it has largely been replaced by more sophisticated types of proof.

MortgageQuote.com always tries to stay abreast of the market and look to invest in our technology.

What Is A Blockchain?

A blockchain is a network of computers, it is made up of a series of records, or blocks. Each individual block contains transactions that have been made since the last block was created. The blockchain is not controlled by a central authority, and the information is not stored in one place, making it incredibly secure.

Every time a new transaction happens, it has to be confirmed by other users on the network. After enough people have signed off on the process, this block gets added onto all of the previous blocks that were created in order to create one continuous chain.


A blockchain, in general, is a network of computers/nodes that have mutually distributed ledgers, meaning the ledgers are shared with one another, this is to verify transactions and values. Imagine you wrote a value down on a spreadsheet in your computer, then passed it around to everyone, the spreadsheet is your ledger. It is now mutually distributed to other parties. The ledgers are shared so everyone can view this open source and verify transactions, this creates transparency and trust. Imagine this network has 100 computers that communicate to each other. This is a blockchain.

If a crypto does not own a blockchain, then it is considered an alt token. Bitcoin blockchain can be relied upon for data, and hold transactions in the form of a ‘block’.

"For instance, if you wanted to do a transaction on the blockchain, you would send a Bitcoin to someone. If you were to send 3 Bitcoins/crypto from one person to another, you would want to make sure that the person really does have the 3 Bitcoins to send, or else the person who is getting the 3 Bitcoins might not get them. Typically, when you send the 3 Bitcoins, the network verifies with each other in the network that you do have this money, and as long as 51% agree that you do, then the transaction goes through."

What is the Bitcoin Blockchain?

Keep in mind, the Bitcoin network is independent, automated and does not have a bank or middleman overseeing it, other than the network itself as the network is distributed, so there is no single point of management.

A Merkle Tree was a main focal point in Satoshi Nakamoto’s paper called “Bitcoin: A Peer-to-Peer Electronic Cash System“. Satoshi Nakamoto is an unknown person that as of 2021 is a multi-billionaire. The first transaction was from Satoshi sending 50 BTC (Bitcoin) to Hal Finney (@halfin) on January 12, 2009; Finney then tweeted about it stating “running bitcoin”. Think of this as a structure similar to DNA.

This is an example of crypto, and is the basis of how this industry got started.

What is a Merkle Tree ?

A Merkle Tree, also known as a hash tree, is a data structure used in cryptography to efficiently and securely verify the integrity of large datasets. It is named after its inventor, Ralph Merkle.

A Merkle Tree is constructed by recursively hashing pairs of data elements until a single value, called the root or Merkle root, is obtained. Each pair of elements is hashed together, and the results are then paired and hashed again, until only one remains.

The Merkle Tree is used to verify that a particular element is a member of a large dataset without needing to download the entire dataset. To do this, a proof consisting of a subset of the hash values in the tree, along with the element to be verified, is provided. By hashing this subset of values along with the element, one can compare the results to the Merkle root. If they match, the element is verified to be a member of the dataset.

Merkle Trees are commonly used in blockchain technology to provide a secure and efficient way to verify the integrity of transactions and blocks in the chain.

What is Cryptocurrency?

In short, Cryptocurrency, or crypto for short, is a digital currency or token that is created by computer programming, it deals with cryptography. Cryptocurrency is not tangible, meaning it can not be touched physically, yet it has some kind of market or intrinsic value. For instance, if you have ever bought an item using digital tokens/credits, this is a similar concept. For the purpose of this article, you can imagine the following to be interchangeable: Bitcoin, crypto, cryptocurrency, digital currency.


The concept is similar to what if one person wrote you a check for $100, you attempted to cash it but later found out that it bounced, it’s not a good feeling. The purpose of the Bitcoin network is to verify transactions, as everyone (computer/node) has the same ledger copy.

You would accomplish this by having a Bitcoin wallet that holds your Bitcoin, just like how one would have dollar bills, loose change or credit cards. Yes, each wallet is very specific, as each crypto has its own wallet. Bitcoin should only go to Bitcoin wallets, and so forth as if you were to send another crypto to your Bitcoin wallet, well then good luck.

What is Bitcoin Mining?

If you heard of Bitcoin, then you might be interested in knowing what Bitcoin mining is. Bitcoin mining uses advanced computers to verify transactions and essentially becomes the middle-man of each transaction. The larger the network, the more secure essentially the system becomes since it should be harder to manipulate.

Bitcoin miners power the blockchain network. Transactions that are made on the blockchain must be verified by nodes, these nodes mine an algorithm in a battle of who can solve the mathematical equation first, with the winner receiving the fee. At one point in time, you could mine on a regular desktop computer, however, as time has progressed it has become harder to do this. Miners pay for computing power and electricity amongst other things.

There have been experiments with miners where they are stored, as they must be kept cool and not overheat. It has been said that people have grown vegetables in cold climates when before it was impossible due to the heat that the computers create. In general, the cheaper it is to use electricity, the more potential profit there is to be in the business of mining as it is an operational cost.

The Bitcoin Mining Process

The actual mining process involves using your computer's CPU power to solve complex math problems which are part of verifying transactions within the Bitcoin ledger. It is important for other users to verify transactions so no single person has control over the blockchain and it remains impossible to alter. Once a transaction has been verified, the person that solved the mathematical problem is rewarded with Bitcoin. This is known as 'mining', it is an essential part of the Bitcoin network, along with the digital wallet.

The amount of computing power required to mine Bitcoin is steadily increasing as the problems that must be solved become more complex. So, even though it is technically possible for a single computer, it would take an extremely long time. Instead, most Bitcoin mining is handled in huge server farms. The electricity or power used to generate these transactions on the network are that of a small country. If you operate a Bitcoin mine and hold Bitcoin or other digital assets and are not sure if the crypto can be used as assets or down payment for a new home, connect with MortgageQuote.com as we have relationships with various lenders whose programs may or may not accept them as mortgage programs vary all the time.

Bitcoin is generated through a process called mining and there is a finite amount of coins available at any one time, but what is mining Bitcoin?

It is completely decentralized and operates on a blockchain, which is a public ledger of all transactions across a peer-to-peer network. No private company or central bank controls the Bitcoin blockchain.

Cryptocurrency mining is the process of verifying transactions that are entered into the Blockchain digital ledger. A block is simply an individual entry in this grand ledger of transaction records. A miner is someone who devotes computing power, electricity, and time to solving complex mathematical problems in order to add transaction records to bitcoin's public ledger or blockchain. Once the mathematical problem has been solved and the transaction has been verified, the miner is rewarded with a Bitcoin. They are then free to do what they like with it, buy more and sell what they generated, etc.

Mining is open source and there are no restrictions based on geographic location. Anyone can mine any amount of coins at any time if he or she has the resources. In order to start mining Bitcoin, you need a Bitcoin wallet, hardware to hash or mine the coins, and a mining pool to join .

What Is Mining Bitcoin?

However, the computing power required to mine Bitcoin means that mining is out of the reach for most people, who can't afford it. Instead, many people invest in mining operations that are designed to mine multiple cryptocurrencies at once.

If you earned Bitcoins or other cryptocurrencies and are curious to see if MortgageQuote.com can use them as assets for proof of down payment on your new home, then let us know your questions.

How Is Crypto Mined?

Crypto relies upon a method of mining, but how is crypto mined?

All of the transactions made using cryptocurrencies are stored on a public ledger called a blockchain, or a mutual distributed ledger. Each transaction is stored as a block of information and whenever a new transaction is made, it needs to be verified. Nobody is 'in charge' of the blockchain and it is completely decentralized, so transactions are verified by other users on the blockchain.

In order to verify a transaction, a series of complicated mathematical equations must be solved by a computer. This process is known as mining and once a user has verified a transaction, they are awarded with a new crypto. Once they have this coin, they can either hold on to it, sell it on, or use it to make a purchase, so it becomes part of the cryptocurrency economy.

Hugely powerful computers are needed to mine for cryptography and specialized software is used to solve the complex equations. These computers use a huge amount of processing power, so they can get very hot and need to be cooled down with fans or they could overheat. Most crypto mining is conducted by large operations and people can invest money to get a piece of the mined cryptocurrency.

Unfortunately, mining crypto on your own personal computer will take an incredibly long time, so you will have to purchase it if you want to start investing or using it to buy goods and services.

If you mine crypto and wonder if it can be used as an asset to help purchase a new home, MortgageQuote.com may be able to help you stay connected with all the new lender programs.


If one wanted to send a Bitcoin from Person-A to Person-B, then Person-A would go to their Bitcoin wallet. Send the Bitcoin to the wallet belonging to Person-B using the blockchain, which verifies the transaction. Each wallet uses a series of unique letters and numbers to identify it, much like a social security number. The blockchain is a mutual distributed ledger. A blockchain transaction is verified by many nodes, once 51% of the nodes agree the transaction goes through. There is no single point of authority for the blockchain, therefore no one controls it other than its peers, the distributed network.

Cryptocurrency Tax

Cryptocurrency is a popular new investment opportunity and there are new coins and tokens being released all of the time. Many people are moving away from traditional options like securities and other investments and putting their money into cryptocurrency instead. If you invested in cryptocurrency, you might have traded it a few times, accrued capital gains which means you might need to pay cryptocurrency tax. However, it is not paying more crypto to satisfy the tax bill, but paying fiat such as the US dollar. Cryptocurrency, according to the IRS, is considered property, so if you ever pay property taxes to your local city or county in crypto, you might actually be paying the IRS tax for the municipal tax you are attempting to pay. This might sound confusing, and it is, however you should know this is not considered tax advice as it is just educational, and you should seek the advice of a CPA.

What Taxes Do You Pay On Cryptocurrency?

It is generally a misconception that you can avoid capital gains tax and you could incur severe penalties if you fail to pay the tax that you owe. The IRS ruled that cryptocurrencies should be taxed in the same way as stocks in 2014.

The taxes owed are calculated based on your income and your holding period (how long you have owned the cryptocurrency). How much you will pay in taxes depends on the gain of value on your cryptocurrency when you sell it.

Short-term capital gains or losses are taxed as income, which means they fall under income tax rates. Long-term capital gains and losses mean the investor either held the investment for 12 months or more before selling it.

If you are new to investing in cryptocurrency, it is important that you record all of your long and short term gains and pay the necessary cryptocurrency tax on them or you could be penalized by the IRS. If you are interested to learn more if you can use cryptocurrency as proof of assets to purchase or refinance a home, connect with Mortgage Quote as lenders programs change all the time.