Luxor Technology, a Bitcoin mining firm, is gearing up to launch a unique hash rate-backed product, promising investors returns ranging from 10% to 13%.
This offering distinguishes itself from previous cryptocurrency lending and borrowing platforms like BlockFi and Celsius, which have faced controversy and skepticism.
In a recent episode of the What Bitcoin Did podcast, Luxor’s product was scrutinized for its potential risks.
However, Luxor’s Head of Derivatives, Matt Williams, clarified that their product stands apart due to its foundation in actual proof-of-work and tangible economic activity.
He emphasized that the returns come from miners willingly sharing a portion of their mining margins with investors who finance their operations, not from dubious schemes or rehypothecation.
The process revolves around investors providing Bitcoin as collateral to Luxor, which, in turn, lends it to other miners for their operations.
Profits are generated by acquiring hash rate from Bitcoin miners at a discounted rate and subsequently selling it at a higher price.
Luxor estimates that investors can expect returns between 10% and 13% through this mechanism, facilitated by Luxor’s upcoming hash rate marketplace.
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Importantly, Luxor operates as an intermediary between investors and mining firms, avoiding direct involvement in mining activities.
This structure allows miners to access capital without selling their mined Bitcoin holdings, offering them a more sustainable financial option.
Joe Kelly, the CEO of Bitcoin lending firm Unchained, advised caution for those considering investing or borrowing with Bitcoin.
He emphasized the need for diligent scrutiny and vigilance due to the nascent nature of Bitcoin lending and borrowing markets, referencing previous failures with platforms like BlockFi and Celsius.
Williams emphasized that Luxor’s hash rate-backed product will be available exclusively to individuals who pass the firm’s rigorous due diligence checks.
Luxor acknowledges the inherent apprehension stemming from past failures in the cryptocurrency lending space and plans to mitigate risks by collaborating only with reputable miners and possibly mandating insurance coverage.
While Luxor did not specify a release date for its product, it aims to provide a novel and more secure way for investors to leverage their Bitcoin holdings while supporting the mining industry’s growth.
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