The Future is now
In recent news .... Goldman Sachs Offers Its First Bitcoin-Backed Loan (https://www.zerohedge.com/crypto/goldman-sachs-offers-its-first-bitcoin-backed-loan)
Authored by 'NAMCIOS' via BitcoinMagazine.com, "Goldman has reportedly offered its first ever lending facility backed by BTC as the Wall Street giant deepens its Bitcoin offerings. Goldman Sachs has offered its first bitcoin-backed loan. The arrangement, made popular over the past few years in the Bitcoin industry by newer companies, enables a bitcoin holder to obtain fiat money like U.S. dollars by putting up their BTC as collateral to the bank. If the price of bitcoin drops, the user may be required to increase their collateral, risking getting liquidated in case they fail to do so. The Wall Street giant lent cash collateralized by bitcoin owned by the borrower for the first time, a spokeswoman for the bank told Bloomberg. The deal was interesting to Goldman because of its structure and 24-hour risk management, she told the publication in an email.
Bitcoin investors have commonly leveraged the setup to increase their holdings when the price of the digital currency dips. Based on the assumption that Bitcoin’s decade-long history of price appreciation will continue in the future, the user chooses to acquire more bitcoin with credit, without having to pay with their own cash. The loan type is also popular in another use case: making purchases. With a bitcoin-backed loan, a bitcoin holder can pay for goods or services with cash – for example, to buy a house or pay medical bills – without needing to sell their bitcoin. Not only does the user keep their bitcoin stash (provided they pay out the loan when it matures) but they also don’t have to worry about tax implications from a BTC sale. Bitcoin-backed loans have also become popular among bitcoin mining companies, which earn revenue in BTC but need to pay for their operating costs in U.S. dollars or other currencies. Historically, miners would sell part of their produced bitcoin to cover expenses, but over the past couple of years big players in the industry have grown fond of taking out cash loans with their bitcoin holdings. Goldman’s entrance into the bitcoin-backed loan business represents a watershed moment for the industry in terms of liquidity, legitimacy and optionality available for consumers. Bloomberg did not report the details of the loan." The article obviously covers the most obvious points and indeed alludes to a watershed moment. Our takeaway is beyond the undoubted positive in terms of growing real-world utility and acceptance, Wall street is beginning the process of financialisation of crypto, or at the very least crypto's de facto champion - BTC. This has the defensive attribute of tying the crypto/virtual world to the real world and broadening that beachhead.
We say defensive attribute because, without that link, the virtual world of crypto would suffer much worse in a market crisis (as any and all speculative assets will). That would be damaging, clearly, for the grand designs of crypto/ Web 3.0. However with increasing utility and codependence between the crypto and real-world that risk diminishes. More importantly, there is a need to see tangible entities and industries that are susceptible to digitalisation being not only bridged between these worlds but enhanced if not disrupted for the betterment of all. That is the successful headline we all await. And, modestly, what we think our project and the introduction of an F-NFT platform with digitalised real-world assets can and will provide. As Prof Scott Galloway noted earlier this year: "NFTs offer digital commerce something the Internet lacks: scarcity and authenticity. A scarcity mentality is built into us at an instinctual level. Our cravings for sugar and fat (historically scarce) have resulted in an obesity crisis, because our instincts haven’t kept pace with industrial food production. Authenticity’s virtues are practical (we like to know where our food comes from and who we can sue if it makes us sick) and philosophical (if we buy music, is some of the money going to the artist who made it?). Limited options for credible scarcity and authenticity have rendered digital commerce chaotic. Napster broke the barriers of scarcity that were inherent to physical distribution of music on plastic discs. The pirating of digital goods of all kinds reduces both tech profitability and long-term innovation. Google put the news media into intensive care by reproducing its content (ending scarcity), and Facebook drove another nail in the coffin by de-emphasizing the source (neutering authenticity).
Enter blockchain. Bitcoin became a trillion-dollar asset class because it cracked this code. A dollar bill is worth $1 because only the U.S. Treasury can make it (authenticity) and we trust Uncle Sam to mint a limited number (scarcity). Bitcoin’s “proof-of-work” system likewise ensures scarcity (there will only ever be 21 million bitcoins produced) and authenticity (all are tracked on an immutable public ledger). NFTs offer the promise of scarcity and authenticity for digital goods. NFTs aren’t the only way to create scarcity and authenticity online — trusted, centralized entities such as banks (and platforms such as Twitter and Apple) do it within their verticals, and blockchain tech is evolving to address myriad environmental and security concerns. So the current implementation of NFTs may not be the best way, or even a good way (many reasons to be skeptical). But they’re … a way. A potentially widespread, inexpensive way to offer credible scarcity and authenticity online, opening up new vistas of digital commerce. Prospectors are rushing in." Our aspiration to fill this promise does not end there, as we are thinking beyond that goal as well. As we mentioned briefly in a recent blog commentary entitled "Bored Ape and beyond": "NFTs and BTC are stores of value, not currencies (they are finite issuances) and we have spilled much ink explaining why our real-world assets are finite stores of value and their digital versions carry that same distinction (plus a real-world value). Because these entities are stores of value they are NOT (despite the hype) currencies or indeed potential currencies. F-NFTs, herald the potential to open that door. It is of course for the market to decide and help mold what could be on that basis." For a short overview of the FIX00 project 🙂 please use this link: The Start of something new
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