Luxor Technology, a Bitcoin mining firm, has created a new hashrate-backed product that aims to offer investors returns of 10% to 13%. The company claims that this product is different from failed offerings by BlockFi and Celsius, as it is backed by proof-of-work and not “ponzi schemes.” In an interview on the What Bitcoin Did podcast, Luxor’s Head of Derivatives, Matt Williams, explained that the returns from the product come from miners giving up some of their mining margin to investors who finance their operations.
The hashrate-backed product works by investors posting Bitcoin as collateral to Luxor, which then loans the cryptocurrency to other miners to fund their operations. The returns are generated when hashrate is purchased from a miner at a discounted price and then sold at a higher price. The mining rewards from this hashrate are what provide the investor returns. Luxor estimates that investors can expect returns ranging from 10% to 13%.
One of the main advantages of Luxor’s product is that it provides miners with better access to capital. Instead of having to sell their mined Bitcoin to fund their operations, miners can receive upfront funding while retaining ownership of their cryptocurrency. This makes it a more economically viable option for miners.
It is important for potential investors to exercise caution when considering this type of investment. Joe Kelly, CEO of Bitcoin lending firm Unchained, warns that any investment or loan that requires Bitcoin holders to part control with their cryptocurrency should be thoroughly scrutinized. He believes that without extreme caution, we are likely to see similar failures to those experienced by BlockFi and Celsius in the nascent bitcoin lending and borrowing markets.
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Williams emphasized that Luxor’s hashrate-backed product is not available to everyone. The company conducts due diligence checks on potential investors to ensure they meet their standards. This helps to mitigate the counterparty risk that investors take on when participating in the product.
Luxor acknowledges the trepidation that investors may have due to the bankruptcies of BlockFi and Celsius. To address these concerns, the company only works with reputable miners and may require them to post insurance as an additional safeguard.
The specific details of when the product will be available to investors have not been shared by Luxor at this time. However, the company’s upcoming hashrate marketplace will likely play a role in managing the process.
In conclusion, Luxor Technology has developed an innovative hashrate-backed product that aims to provide investors with returns of 10% to 13%. This product differs from failed offerings by BlockFi and Celsius as it is backed by proof-of-work and economic production. While potential investors should exercise caution, Luxor strives to mitigate risks by working with reputable miners and conducting due diligence checks on investors. This product offers miners better access to capital and allows them to retain ownership of their mined Bitcoin. Overall, Luxor’s hashrate-backed product presents a unique opportunity for investors to earn returns in the Bitcoin market.
