The Future of Not Selling for a Living
We talked about collateralizing Bitcoin and the potential of doing the same thing for HIVE Power here. Two weeks have passed since that post, and, I've seen yesterday this post of @taskmaster4450le talking about what was discussed in this week's INLEO AMA. Listening to the AMA is still on my to-do list, and I'll get to it at some point, but before then, Task's post could be a very good read for anyone interested in collateralizing their crypto assets at some point, particularly LEO in this case.
So, what's the gist of what's being discussed?
Thorchain introduced lending during this bull cycle. They only accept BTC & ETH as collateral, and have certain caps. Looks like the Maya protocol will also add lending, but they'll accept any token with a liquidity pool on Maya as collateral, and the caps are based on the liquidity in each pool. Interest rates on Maya will also be dynamic instead of fixed.
I don't think dynamic interest rates are very good for planning ahead when you take a loan, but it may be better for the stability of the system.
Why is this important for LEO? Because being one of the tokens with a pool on Maya, Arbitrum LEO can be collateralized to take out a loan once this feature is added by the Maya team. Task put out a quote from @anomadsoul as a potential process where the loan could be used to earn rewards in the Hive ecosystem that would pay the loan, all while building up the HP. I'll reproduce the quote here too:
Take your $LEO:$0.08 and collateralize it for a loan. Take the proceeds from the loan and buy $HIVE:$0.27. Power it up. Delegate the HP to @leo.voter to earn a 16% return. Use the LEO payouts to repay the loan.
The quote is easy and the process seems simple, but as always when you take out a loan it is important how much you end up paying for it (when everything is in the same unit of account).
Having the lending option for a HIVE-based token is a major thing, however, and only one of the benefits of the CACAO-LEO pool. Some already exist, as the ability to link LEO and other HIVE-based assets (HIVE, SPS, DEC, and for a short while HBD) with external ecosystems. The fact that LEO and the LeoDex interface benefits of the work being done by the Maya team is an immense advantage.
Also, LEO is on Arbitrum. I don't know enough about that chain, but I saw they have quite a few synthetic assets. As I was checking what other LPs Maya has that could be leveraged through collateralization, I saw the GLD/CACAO one. A Gold synthetic asset can be interesting.
Collateralization is used heavily by informed rich people as a way to never sell their assets while living off them. Nowadays it becomes more accessible to less wealthy individuals, whereas in the past it was more of a strategy of the wealthy. That involves some informed decisions and usually the ability to withstand some unfavorable market conditions longer than the average person. I am talking about products where the collateral is of a financial nature because in real estate collateralizing is more commonly used. But that practice grew out of the necessity due to the iliquidity of the real estate market. We can't say the same thing about something like... bitcoin. In this case, it's just their owners unwillingness to part ways to their holdings, and amassing more instead of selling. Which can be extended to something else too. Like HIVE Power as I mentioned in my post from two weeks ago, and why not, LEO, in its various forms? Hey, for people who still believe in the future of Splinterlands, SPS can also be among such assets you would rather collateralize instead of selling, in the future... To go even further, how about collateralizing land or rare GFL too?
Want to check out my collection of posts?
It's a good way to pick what interests you.
Posted Using InLeo Alpha
I also read the taskmaster article, and you sharing your thoughts here helps me understand it better. The idea of SPL assets being collateral in the future is nice. NFTs like land being used as collateral sounds similar to how it is in the real world.
Exactly. Particularly for iliquid assets like land (or even some very rare cards), collateralization can be extremely beneficial and already practiced in the real world. Didn't Matt want land in-game to mirror more of how things happen in the real world?
Wow bro the idea of using LEO as collateral is really good. It feels like a very great thing for crypto enthusiasts looking to leverage their assets without selling. Dynamic interest rates, though very tricky in my opinion since I'm not too experienced add a very unique twist.
It does, since I haven't seen it applied for lending in the crypto verse yet. But maybe I just missed or don't know the details about the products were it might already work like that.
If I delegate some Leo tokens to Leo voter, will the 16% interest be every month or per year?
You need to delegate HP to leo.voter to be rewarded, not LEO. The APR is 12% if you choose to receive liquid LEO as reward and 16% if you choose to receive staked LEO.
APR means annual return, so it's per year, not per month.
It sounds like an interesting idea but I don't think I want to take the risk. I think there is some risk but it does have a valid plan to work out. Maybe I'll consider it in the future though.
Loans do have an associated risk in general, that's true. I'd have to analyze things very carefully myself.
How much is SPS and can we buy without having a Splinterlands account?
SPS price is currently $0.00911 and hasn't been going well. You can check here or in many other places (it's called Splintershards, if you want to identify it when you search for its name online "sps price").
You can buy it from different places, but if use Hive-Engine, then the easiest is to buy it from the interface you use for Hive-Engine (TribalDex? BeeSwap? another?).
If you want to stake SPS however, you'll need a Splinterlands account. Since you have a Hive account, you already have a Splinterlands account (you simply login with your Hive account). They are the same. You can't earn rewards from playing the game without buying some extra stuff, but staking SPS and even renting it out after staking, I believe you can do without buying anything else except SPS.
Let me know if you have other questions.
Pushed this article through #news2threads. It will appear as a threadstorm later today.
Thanks, Task! Appreciate it!
Hope it all works out, but I am not putting my money into right now. This is a low risk cycle for me. Lost my ass in too many of these types of things last time around. Taking loans on anything that is a risk asset, including BTC or ETH can be dangerous if you don't know how to properly manage it. That's why my AAVE account is balanced out with USDT, USDC, and DAI and I really only borrow up to the amount that I have in stablecoins to advert the risk of liquidation.
Yep, I am on the cautious side as well. Particularly since we've had a recent example where liquidation happened for the founder of Curve Finance.
Oh is that what happened? I haven't been keeping up, too many real world issues going on right now for me, and crypto is boring these days. Wall Street sucked the life out of it.
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