For those who missed it, today was an epic day in the Leo-verse.
A week ago, on the @town-hall, I discussed the idea of LeoDex capturing value based not only on the development by the LEO team but also from what the Maya developers produced.
Today, we gained some insight into that.
LEO Moving Into Collateralized lending
How would you like to take out a loan against your $LEO? Imaging being able to access your liquidity without having to sell the tokens.
Could this be possible?
It will be once Maya rolls out its lending platform. This will be similar to THORchain with a few key differences. Here is how they were spelled out.
https://inleo.io/threads/view/khaleelkazi/re-taskmaster4450le-doxu31wd
It is the first one that is most important for this discussion here.
Maya will allow the collateralization of any asset that has a liquidity pool on that protocol. Since Leo already has the LEO:CACAO pool, it qualifies.
This means the questions asked above are going to be possible. People will be able to take their $LEO, if desired, and collateralize it. This means a host of possibilities open up.
It also means that one never has to sell the token. Instead of moving out of it to extract the value, simply take out a loan against it. After all, isn't this how the majority of real estate is purchased throughout the world? Don't people extract the value up front in the form of a mortgage to acquire the property?
Moving beyond real estate, this is a long standing approach by the wealthy. Warren Buffett said the best stocks to own are those you never want to sell.
If you believe LEO will keep appreciating over the long term, this means we could see a growth path that sends the price of the token higher.
Would you like to be a part of it?
To do so requires holding the token.
Accessing Liquidity
The challenge with anything of this nature is having the value "locked up".
Going back to the real estate example, what happens when people refinance their properties? Typically, they "pull the equity out". This is often referred to as using the house as "an ATM".
In spite of the derogatory nature of that statement, it is actually a smart move. The problem arises in the utility of what is pulled out.
Most commonly people will do that and buy a new car or take a trip. The smart ones use the money pulled out to invest in another property. This is how the holdings are allowed to compound.
What we are looking at here is no different.
Obviously, it is impossible to get specific without knowing the interest rates and other factors of the lending protocol. That said, as Leo grows, the potential exists for an assortment of financial tactics which can expand both Leo and one's individual holdings.
Ultimately, we are looking to access the liquidity of our holdings that, much like the real estate investor, can allow us to grow our assets.
For example, here is an idea that was posed by @anomadsoul.
Take your $LEO and collateralize it for a loan. Take the proceeds from the loan and buy $HIVE. Power it up. Delegate the HP to @leo.voter to earn a 16% return. Use the LEO payouts to repay the loan.
Do you see what we did there?
The individual still owns the original LEO. At the same time, this user acquired HIVE that is now powered up, enhancing one's holdings there. The delegation produces a revenue stream that can pay off the loan.
Once that is done, we can do a rinse and repeat.
USD Pricing
A key in all this is the denomination that is used.
All pricing is done in USD. That is the common unit of account when dealing with multiple assets. Hence, the amount of LEO requires will vary based upon the price of the token in dollars.
For example, if the price is 7 cents, then perhaps 10,000 LEO are required. On the other hand, a 70 cent price means 1,000 LEO equate to the same amount.
Looking at it another way, 10K LEO at 7 cents is $700. If the price moves up to 70 cents, it is NOW $7K. Think of this with respect to the liquidity pool as an example.
Would you like to be part of a 10x move? It would be disappointing to be optimistic about LEO but have to choose between LEO and HIVE. What if you could have both?
That is the difference. Most thing either/or. The wealthy, when it come to these matters, consider how to have both.
It would suck to ride LEO from 7 cents to 20 cents and then sell in spite of being wildly optimistic if the price ran to 70 cents.
How often has we seen this?
Collateralized lending could potentially offset this.
Naturally, the devil is in the details and we have no idea the exact structure of all this. When that is revealed we can get a better handle on the numbers and possibilities available to all of us.
For now, we can start considering ways to implement this into our financial plan.
Posted Using InLeo Alpha
This is a gamechanger, atleast for me. Not having to think about what selling price I have for Leo. Now I just think how I can leverage my Leo to build more wealth.
It gets Leo deeper into the #defi game, that is for sure. We see the ability to expand the options people have. Will all use it? No. But we will see how it works in the longer term.
This is a very interesting development. The Leo loan and staking trick sounds nice, but I doubt it will work for long; it sounds unsustainable. Making the denomination constant can help keep things stable in spite of the volatility of crypto. I'm excited to see how everything works.
It isnt a trick. How do you figure that. Dont real estate investors do this all the time?
They take the value of a property, mortgage it and then use the proceeds to buy another property which they rent out and get income from. Then the income from the properties are used to pay off the mortgage.
So you are saying this is an unsustainable trick?
I have heard of groups buying houses on loans, renting them out, and paying for the loan with rent. Last I heard they were having difficulty paying for it because of issues with maintenance, bad renters, and times where there are no renters. There are cases where it works, but I've seen cases where it doesn't.
As for how it will work with Leo, I don't know much about the tokenomics of Leo, and how the curation APR is calculated. Would more people delegating HP to the Leo voter not affect the APR? With more Leo tokens being printed, that could increase the supply, and maybe lower the price which could also affect the APR.
Of course there are cases where it doesnt work out. There are jobs that dont work out either.
Short changing comes to mind.
HIVE is high risk and LEO is a higher risk and now you believe borrowing from a higher risk holding is a good idea? !LOLZ
Not following the logic of borrowing from yourself to hold high risk digital asset. I suppose its a way of trying to prevent a bigger sell-off today and create hope for a higher price tomorrow. Maybe?
One must need high faith in LEO for this strategy to be fruitful. Not to mention the added risks from the extra steps in the process. Will have to wait and see how things unfold.
Certainly you have to be optimistic is the long term potential of LEO.
That said high risk for LEO is debatable. What metric are you using? With a market cap under $2 million, a small number. So what is the risk with it?
That is what each person has to decide for him or herself.
Let's call it relative risk. !LOLZ
Relative risk is the ratio of the probability of an event occurring with an exposure versus the probability of the event occurring without the exposure.
Start with Hive protocol usage and the risk of it not performing well compared to other blockchain. This has an impact on the performance of all layer 2 tokens on Hive, including LEO. When you add more complexities to any operation there is potential for added risk. Is there documentation on how LEO mitigates added risks?
I'm not a pessimist. Just cautious and aware of risk versus reward scenarios. I'm thinking now is a good time to accumulate Hive and buy LEO later at a lower price. But who knows what will happen?
lolztoken.com
Whether they like it or not.
Credit: reddit
@taskmaster4450le, I sent you an $LOLZ on behalf of fjworld
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That is for each to judge. Risk reward is a variable that is individual.
What is the potential of a 5x on Bitcoin versus Hive? What is the downside risk? That could be accessed in different ways.
One could say the 5x upside is easier for Hive but the downside offsets any potential there since it is far greater than BTC.
There was a time when the risk, according to many, was on Amazon and not on Sears. Many now think that Tesla is still more risky than say a GM.
Individuals have to size things up for themselves.
What is the bigger risk? Hive or Leo? That depends upon who you ask I suppose. You will get varying answers.
All good questions and yes , of course the answers depend on the individual assessing the risks. Some people are not very good at assessing risks so they rely on opinion of others.
As per possibility of anything going up 5 times; that's speculation versus calculated risk assessment.
If you fall in love with a token to the point you marry it for life, that is another level of high risk. Sometimes it is best to sell and buy back later.
Thanks again for the grey matter exercise. !ALIVE
lolztoken.com
Fo Drizzle.
Credit: reddit
@taskmaster4450le, I sent you an $LOLZ on behalf of fjworld
(1/10)
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Selling too early during a price surge can be frustrating, especially if the price skyrockets afterward. Collateralized lending might be a helpful strategy to avoid this, but the specifics are crucial.
It is a part of life of course. There is no way to know how the markets move. However, long term wealth is not achieved by buying and selling. Instead, it is done by holding and building.
Patience and consistent investment can never lose its course in terms of achieving sustatainable financial growth.
I thing being able take a loan against Hive will be important in the future so our stake can be used to finance other things and still be exposed to the price going up. A working financial sector and product is the oil for the economy, it allows people to take a chance on other venture without scarifying assets they do not wish to sell. It was a great advancement for Bitcoin, investors were suddenly able to buy a house or a boat to live in and travel the world while keeping their precious $BTC and still making money. We have to acquire assets for financial independence not sell them.
I am not sure it will be against Hive although that might happen at some point. It is LEO. There is no pool on Maya for Hive.
True but I was hoping it might come at some point if the ecosystem grows to several billions. Leo would be a first step but in the end I have faith in the Hive blockchain as a kind of mini silicone valley startup vibes for business where people come to it because they now they can find good tech mix with a good community and a proven model that makes apps on it thrive.
Well if you want it to be that, people actually need to build. We have more extraction than building going on.
That means more LEO in the LEO-CACAO pool instead of predominantly staked could be a better idea...
It depends upon what one is after. Obviously there is different utility. Staking allows for curation and influence on chain. The LP is more of a DeFi along with a process that is needed for some of the financial aspects of Leo related to Maya. We need a deeper pool to enhance the lending for example.
So the answer is both but people have to decide. Like the difference between HP and HBD in savings. Where one focuses the attention is personal.
Yes, but for the collateralization aspect, staked LEO on H-E doesn't count. It does count for other aspects you mentioned, however. And I imagine many people won't even be interested in collateralizing their LEO or other crypto assets, preferring to keep things simple.
You cant collateralize HE LEO. It is only available on Maya. To so any of that requires bridging the Leo across to Maya.
As for what people choose, there majority might opt to keep things simple. Then there are those who want to utilize the DeFi features for greater gains.
It is up to the individual. Those who are happy with powering up and curating can still do that.
This creates more outlets (utility) for Leo. That is all.
Absolutely! There is power in having different use cases.
Without a doubt. It appeals to different types of people.
It is why HIVE and HBD is so important. Not everyone is into speculation which HIVE is. In fact most of the investing world is into yield.
We can cater to both.
This is too early to be selling tokens and even the Leo token because one will definitely be losing out massive if one did so
Well I think if you take a loan and the put in HBD Savings then you have better outcome that doing this, but is a great opportunity there.
Maya's platform enables collateralized lending for LEO tokens, which creates substantial financial opportunities. Holders can obtain liquidity to invest in assets like HIVE and strategically compound their wealth by leveraging LEO without selling.
Ich weiß nicht was ich sagen soll