An upcoming Bitcoin () hashrate-backed product that could offer 10% to 13% returns shouldn’t be compared to failed products by BlockFi or Celsius as its returns come from proof-of-work, not “ponzi schemes,” claims the product’s creator Bitcoin mining firm Luxor Technology.
The legitimacy of Luxor’s hashrate-backed product was highlighted in an Oct. 17 What Bitcoin Did. Host Peter McCormack expressed concern at Luxor’s upcoming offering and discussed what a worst-case-scenario for Luxor’s product would look like.
Luxor’s Head of Derivatives Matt Williams told Cointelegraph that itsisn’t a repeat of products from BlockFi or Celsius because it’s backed by economic production.
“There is actual proof-of-work and demonstrable economic activity happening [here].” Williams said. “The return comes from miners giving up some of the margin that they would produce from their mining business to an investor that is financing their operation.”
“The main takeaway: the return comes from hashrate, not from pixie dust, ponzi schemes, or rehypothecation.”
Luxor’s product works through investors receiving a cut of loan repayments by posting Bitcoin as collateral to Luxor — which will then loan it to other miners to fund their operations.
The returns are created when hashrate is purchased from a Bitcoin miner at a discounted price and is then “locked in” when sold at a higher price. Bitcoin in the form of mining rewards come from that hashrate. Luxor estimates investor returns will range from 10% to 13%.
The process will be managed through Luxor’s upcoming hashrate marketplace.
Williams claimed the offering means miner’s are provided with “better” access to capital because they won’t have to sell their mined BTC to fund their operations.
“It can be a more economically viable option for miners because they can receive funding upfront while retaining ownership of their mined Bitcoin,” he added.
Luxor stressed it isn’t using its own mining pool and is only acting as an intermediary between investors and mining firms. “We only custody bitcoin for a very short period of time as we move funds from the buyer (investor) to the seller (mining firm),” Williams sai.
We understand your concern regarding rehypothecation, but to be clear again, there is NO rehypothecation with this product. The yield comes from mining rewards as stated in the podcast.
We’re happy to have a conversation on this topic to answer your questions and address your…
— Luxor Technology ⛏️ (@LuxorTechnology)
But those interested in making a return on their Bitcoin should tread with caution, says Joe Kelly, CEO of Bitcoin lending firm Unchained.
“Any investment or loan that requires a Bitcoin holder to part control with their Bitcoin should receive tremendous diligence and scrutiny,” he said.
“The bitcoin lending and borrowing markets are very nascent and we are likely to see repeats of the failures that happened with BlockFi and Celsius unless investors on the whole exercise extreme caution.”
Williams stressed the hashrate-backed product isn’t available to everyone, only those who pass the
TLDR:intends to take customer Bitcoin and loan it to well established mining companies looking for funding.
Luxor will do ‘due diligence’ on the recipient of the loan and the donor will immediately start receivingat a pre determined rate (ie 10-13%)
— The ₿itcoin Therapist (@TheBTCTherapist)
Williams acknowledged Luxor’s hashrate-backed product rightfully comes with “inherent trepidation” in light of the BlockFi and Celsius bankruptcies and noted that investors are taking on counterparty risk with Luxor.
To mitigate those risks, Luxor said it will only work with “reputable miners” and may even mandate them to post insurance.
Luxor did not share when the product will be available.
The WEBFI algorithm actively curates and presents current news from the Internet, delivering it in both written and video formats on our platform. Unlike many other news sources, WEBFI Network - News Balance Security is committed to a user-friendly experience. We refrain from displaying advertising within our content, avoid any redirects to external sites, and meticulously filter out any graphic content deemed unsafe, sensitive, or private. Our primary goal is to provide visitors with a distraction-free and secure environment, ensuring they receive the news they seek.
Importantly, WEBFI Network does not collect any personal information from our visitors, and we do not engage in newsletter subscriptions. We take pride in remaining entirely advertiser-free, thanks to the support of our contributors and our dedicated hosting service partners. It's crucial to note that the opinions and content presented on our platform do not necessarily align with WEBFI NETWORK's opinion, philosophy, or vision. We strongly uphold the principle of freedom of speech, welcoming a diverse range of perspectives and ideas.
🌐 Discover News Balance 🇺🇲 - Your Round-the-Clock Source for Unbiased News!
Experience a continuous stream of comprehensive, unbiased news coverage 24/7/365 with News Balance 🇺🇲. Our carefully curated playlist ⏯ delivers a harmonious blend of national and global politics, cutting-edge tech updates, weather forecasts, noteworthy events, and captivating entertainment news.
The best part? No subscriptions, registrations, or downloads required. Enjoy an ad-free news experience with News Balance 🇺🇲.
"Introducing Unstoppable Private WebFi Websites – Your Forever Digital Haven.
Experience a lifetime of ownership with WebFi – where your digital presence is a lifelong investment. Embark on your journey to own a private website for life.
Our private servers set the gold standard in security and performance, ensuring your website stays in top form. With our lifetime license, the days of fretting about hosting renewals are behind you.
Unlock your very own WebFi space granting you a perpetual haven for your projects, free from the burden of recurring payments. Your sole financial commitment? Domain annuities to your domain provider – nothing more!
Choose WebFi and own your digital future, secure, simple, and everlasting."LEARN MORE