Luxor Technology to Launch Bitcoin Hashrate-Backed Product Promising 10%-13% Returns
Summary:
Bitcoin mining firm Luxor Technology is launching a Bitcoin hashrate-backed product that it claims can offer 10%-13% returns based on proof-of-work. The system involves investors receiving a share of loan repayments by placing Bitcoin as collateral with Luxor, which then lends it to other miners. Profits are created from buying hashrate from a miner at a lower cost and selling it at a higher price. The release date for the product remains undisclosed.
Luxor Technology, a Bitcoin mining firm, has announced it is launching a Bitcoin hashrate-backed product promising returns of 10%-13%. The company asserts its product is not akin to failed ventures by BlockFi or Celsius, emphasizing its returns are derived from proof-of-work, not fraudulent schemes. This distinction was underscored during an Oct. 17 What Bitcoin Did podcast episode, where host Peter McCormack raised questions about Luxor's forthcoming product, and its potential ramifications.
According to Matt Williams, Luxor’s Head of Derivatives, their offering differs from predecessors because it's rooted in real economic activity. He posited that the return stems from miners forfeiting part of their prospective profit to an investor supporting their operations.
The product functions by allowing investors to garner a portion of loan repayments by depositing Bitcoin as collateral with Luxor. The firm then lends this to other miners to boost their operations. Profits emanate from purchasing hashrate at a reduced cost from a Bitcoin miner and selling it at a greater price. The investor's returns arise from the mining rewards related to that hashrate, with Luxor projecting yields varying between 10%-13%.
This operation will be facilitated via Luxor's impending hashrate marketplace. Williams highlighted the benefits the product offers miners, including improved capital access without the need to sells their mined Bitcoin. “The funding is received in advance, while still maintaining ownership of the mined Bitcoin,” he explained.
Luxor clarified its role as a mediator between investors and mining firms and stressed it doesn't use its own mining pool. Williams also reassured doubters that there's no rehypothecation involved.
Despite this, Joe Kelly, CEO of Bitcoin lending firm Unchained, advises caution to those contemplating making returns on their Bitcoin. He stated that any plan requiring a Bitcoin holder to relinquish control should be thoroughly examined, given that the Bitcoin lending and borrowing markets are still in their infancy.
Lastly, Williams emphasized that the hashrate-backed product is exclusively accessible to those passing Luxor's due diligence checks. However, he admitted that apprehensions surrounding the product are justified in light of previous failures by BlockFi and Celsius. In an effort to alleviate these concerns, Luxor plans to cooperate only with trustworthy miners and potentially require them to provide insurance. The company has yet to disclose when the product will be launched.
Published At
11/6/2023 2:04:52 AM
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