A next Bitcoin (btc) Hashrate-backed product that could offer 10% to 13% returns should not be compared to failed products from BlockFi or Celsius, as its returns come from proof-of-work, not "Ponzi schemes," creator Bitcoin mining company claims of the product. Luxor Technology.
The legitimacy of Luxor's hashrate-backed product was highlighted in What Bitcoin Did on October 17. podcast. Host Peter McCormack expressed his concerns about Luxor's upcoming offering and discussed what the worst-case scenario would be for Luxor's product.
Luxor derivatives head Matt Williams told Cointelegraph that his hashrate backed product It is not a repeat of BlockFi or Celsius products because it is backed by affordable production.
โThere is real proof of work and demonstrable economic activity. [here].โ Williams said. "The return comes from the miners giving up part of the margin they would produce with their mining business to an investor who finances their operation."
"The main takeaway: Return comes from hashrate, not fairy dust, Ponzi schemes or remortgaging."
Luxor's product works through investors receiving a portion of the loan payments by posting Bitcoin as collateral to Luxor, which will then lend it to other miners to fund their operations.
Returns are created when hashrate is purchased from a Bitcoin miner at a discounted price and then "locked" when sold at a higher price. Bitcoin in the form of mining rewards comes from that hashrate. Luxor estimates investor returns will range between 10% and 13%.
The process will be managed through the upcoming Luxor hashrate market.
Williams stated that the offering means that miners will have "better" access to capital because they will not have to sell their mined BTC to fund their operations.
โIt may be a more economically viable option for miners because they can receive upfront funding while still retaining ownership of their mined Bitcoin,โ he added.
Luxor emphasized that it is not using its own mining pool and is only acting as an intermediary between investors and mining companies. โWe only hold bitcoins for a very short period of time while we move funds from the buyer (investor) to the seller (mining company),โ Williams said.
We understand your concern regarding remortgaging, but to be clear again, there is NO remortgaging with this product. Performance comes from mining rewards as stated in the podcast.
We are happy to have a conversation about this topic to answer your questions and address your...
- Luxor Technology โ๏ธ (@LuxorTechnology) October 27, 2023
But those interested in earning a return on their Bitcoin should proceed with caution, says Joe Kelly, CEO of Bitcoin lending firm Unchained.
Related: El Salvador launches first Bitcoin mining pool as Volcano Energy partner with Luxor
"Any investment or loan that requires a Bitcoin holder to give up control of their Bitcoin should receive tremendous diligence and scrutiny," he said.
โThe bitcoin lending and borrowing markets are very nascent and we are likely to see repeats of the failures that occurred with BlockFi and Celsius unless investors generally act with extreme caution.โ
Williams emphasized that the hashrate-backed product is not available to everyone, only those who pass the test. company due diligence controls.
TLDR: @LuxorTechnology intends to take Bitcoin from its customers and lend it to well-established mining companies seeking funding.
Luxor will perform 'due diligence' on the recipient of the loan and the donor will begin receiving it immediately. #Bitcoin at a predetermined rate (i.e. 10-13%)
โ The โฟitcoin Therapist (@TheBTCTherapist) October 27, 2023
Williams acknowledged that Luxor's hashrate-backed product comes with "inherent unease" 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 โreputable minersโ and could even force them to take out insurance.
Luxor did not share when the product will be available.
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