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?
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