Luxor Technology, a Bitcoin mining firm, is set to release a hashrate-backed product that promises returns of 10% to 13%. However, the company claims that this product should not be compared to failed offerings by BlockFi or Celsius, as its returns come from proof-of-work, not “ponzi schemes.” In a recent podcast interview, Luxor’s Head of Derivatives, Matt Williams, defended the legitimacy of the product, stating that it is backed by actual economic production.
The hashrate-backed product works by investors receiving a portion of loan repayments by posting Bitcoin as collateral to Luxor. Luxor then loans this Bitcoin to other miners to fund their operations. The returns generated are a result of purchasing hashrate at a discounted price and selling it at a higher price, with the mining rewards earned from the hashrate contributing to these returns. Luxor estimates that investors can expect returns ranging from 10% to 13%.
Luxor is developing a hashrate marketplace to facilitate this process and provide miners with better access to capital without the need to sell their mined BTC. This allows miners to receive funding upfront while retaining ownership of their Bitcoin. The company emphasizes that it acts only as an intermediary between investors and mining firms and does not use its own mining pool.
While Luxor emphasizes the legitimacy of its hashrate-backed product, Joe Kelly, CEO of Bitcoin lending firm Unchained, urges caution to those seeking to earn a return on their Bitcoin. He advises that any investment or loan requiring Bitcoin holders to relinquish control of their assets should be subject to thorough scrutiny. Kelly warns that the nascent nature of the bitcoin lending and borrowing markets could lead to failures similar to those experienced by BlockFi and Celsius.
Williams acknowledges that there is inherent trepidation surrounding Luxor’s product due to the bankruptcies of other companies in the industry. To mitigate these risks, Luxor plans to work exclusively with reputable miners and may require them to post insurance. The company also conducts due diligence checks on potential investors to ensure the suitability of the product.
Luxor has not disclosed the exact date when its hashrate-backed product will be available. However, the company’s commitment to transparency and risk mitigation suggests that it is taking the necessary precautions to protect the interests of its investors and miners.
Overall, Luxor Technology’s hashrate-backed product aims to provide a new way for investors to earn returns on their Bitcoin by participating in the mining ecosystem. While caution is urged, Luxor’s emphasis on proof-of-work and economic production sets it apart from failed schemes in the past. As the product becomes available, it will be interesting to see how investors respond to this innovative approach to Bitcoin investment.