Thread by @leonamschel

🧵1/ There is an emergence of a variety of lending products around bitcoin. #Bitcoin as a bearer free instrument serves as prime collateral.

Referring to an article I recently published: "Why bitcoin is prestige #collateral for lending". bitcoinmagazine.com/business/why-b…

2/Borrowing against your bitcoin makes economic sense for two reasons. First, there is a capital gains tax if you sell, and second, we are encouraged to spend fiat, not bitcoin, as long as the value of bitcoin is increasing faster than fiat interest rates.

3/ bitcoin should only be used to borrow against it, not to earn yield. Earning yield while being able to lose it all is not worth it. For lending purposes, you can use non-custodial solutions like @hodlhodl that are available. medium.com/hodl-hodl/the-…

4/ You can still have a cryptographic relationship with your bitcoin as a borrower. This prevents #rehypothecation risk, a practice whereby banks and brokers use assets posted as collateral by their clients for their own purposes.

5/ The fact that bitcoin transactions and addresses are publicly verifiable takes an enormous amount of risk out of the financial system. It allows for #proofofreserves. The #transparency requires a more ethical behavior from financial service providers.

6/ Bitcoin storage is pretty simple, there is no daily maintenance. In addition, #multisig wallets allow both lenders and borrowers to manage funds together and protect borrowers from the risk of bankruptcy of the lender.

7/ Today, the most common form of collateral used by a borrower to secure repayment of a loan is #realestate. This has created an exclusive financial system in which it has become increasingly difficult to build credit as real estate has become expensive and less accessible.

8/ Since #1971, after a series of economic measures enacted by Richard Nixon that established the end of the convertibility of the U.S. dollar into gold, the price of real estate has increased nearly 70x. frisby.substack.com/p/what-really-…

9/#Realestate has been priced away from its fair value based on its utility (it generates income and can be used for manufacturing purposes). It now serves primarily as a store of value for institutions and those who are trying to beat monetary inflation. bitcoinmagazine.com/culture/bitcoi…

10/ #Bitcoin allows for much easier access to credit than real estate. It is easier to access, buy, store, use and maintain. You can buy bitcoin for as little as a dollar. bitcoinmagazine.com/business/why-b…

11/ The use of bitcoin as collateral allows easy access to credit systems for developing countries. In places with little access to credit markets, bitcoin is adopted as a savings tool and will be eventually used for credit.

12/#bitcoin allows for a much more private financial system. A lender could use a cryptographic key to authenticate a borrower without requiring the borrower to reveal sensitive information that could then be leaked in the event of a data breach. &t=2017s

13/ #Bitcoin lending services will reduce the incentive for anyone to ever sell, which of course will have a positive impact on the price — see: “Bitcoin Is Venice,” page 161.

14/ The improved property systems in the West enabled economic actors to discover and realize the potential of their economic activity and generate additional productivity. Fiat money has distorted this system. #Bitcoin will restore it and expand it around the world.

S/o to everyone I referenced in the individual tweets on "Why bitcoin is prestige collateral for lending":

2/ @billbarhydt 5/@Nneuman & @CasaHODL 8/@DominicFrisby 9/@jimmysong 12/@lopp

bitcoinmagazine.com/business/why-b… #Bitcoin #collateral #lending