#Bitcoin as the best #collateral The features of bitcoin make it one of the most valuable forms of financial collateral available in markets – and most people don’t know it yet! 👀   In the financial world, collateral is needed anytime that a person or corporation wants to increase its spending capacity via the use of #debt 🏦 , and it is used as a form of #guarantee to the lender in case the loan is not repaid within its schedule or the borrower defaults.   Shares in listed companies or private funds, real estate assets, bonds, commodities or other objects can be used as a pledge to borrow funds 💶 . But each of these types of collateral has some shortcomings linked to their nature, geographical location, liquidity, divisibility and other features.   Bitcoin’s properties, on the contrary, make it stand out as a high-quality collateral.   Bitcoin loans work under the principle of #overcollateralization ⚖ , so that by providing more collateral of what would be needed to obtain the loan, the lender has a greater #security package available. #Dynamic #collateralization techniques, allowing the volume of the collateral to vary based on its market value 🎢 , can be included in loan contracts so to leverage on bitcoin’s scarcity, which makes it likely to grow in value over time and therefore leaves the possibility to reduce the total collateral granted.   Bitcoin divisibility ✂ allow for a total adaptation of the collateral tailored to the target loan amount, where loans can now be extended to a wide variety of borrowers, including #micro-loans.   Bitcoin’s #portability allow for collateralized transactions to occur quickly and efficiently without the need to have physical presence and intermediaries.   Bitcoin #transparency makes sure that the collateral is highly verifiable ✅ at each moment over the loan contract, removing the need for any third-party to verify and confirm the existence, valuation and other crucial aspects of collateral management.   Moreover, bitcoin’s global accessibility 🌍 allows borrowers and lenders from different backgrounds to participate in collateralized transactions without imposing any geographical constraint. Such accessibility is a considerable step forward also concerning the inclusion of unbanked people onto an open monetary network, spurring innovation in many underdeveloped economies.   Applying automation procedures in the management of the bitcoin collateral can also strongly mitigate #counterparty #risk, as collateral management activities will be reduced to zero and no counterparty will directly have to manage the collateral, but all conditions can be verified via smart contracts instead of intermediaries.   I am excited to see another great real world application to Bitcoin and how it will develop in the future.

How does #collaborative #custody work and why it can be a key element for the future of bitcoin custody?   In response to the global financial crisis of 2008 and the consequent loss of faith in financial intermediaries, Satoshi created bitcoin as the perfect bearer-asset that would solve the problem of #trust when it comes to who is in control of your #money.   Asymmetric cryptography, via its public and private key pair, allows everyone to be self-sovereign as it permits to store wealth on the bitcoin network via encryption. Upon the creation of a digital wallet by a user, a new pair of keys is created which can be used to transact in a pseudonymous way. Self-custody, by allowing the user to store independently his private key represented by a combination of 12 or 24 words, can freely access his holdings anywhere in the world.   However, despite being the best option to be completely self-sovereign, storing private keys can become a burdensome task for non-technical people and it is a big responsibility as it leaves everyone entirely in charge over their own wealth. By not existing any intermediary in bitcoin, if stored and used correctly via non-custodial wallets, the loss or compromise of the private key would translate in lost access to the wealth stored in bitcoin.   To try to solve these issues and give more comfort to bitcoin owners, while encouraging them to remove their bitcoin from exchanges and custodial solutions, leader players like Unchained and @theBitcoinAdviser are working on collaborative custody solutions with the goal to improve the user experience and safety of storing bitcoin, by sharing the responsibility of owning private keys between different parties.   #Multi-signature (multisig) solutions allow to split the control over the private key among multiple parties (typically 3), therefore leaving a share of the private key to each party. Once somebody needs to initiate a transaction at a #multisig address, it would need 2 out the 3 keys to authorize the moving of funds.   This setup allows for enhanced security over your wealth by eliminating a single point of failure on who would otherwise store the single private key. Also, professional custodians can offer security enhancement via multi-factor authentications or specific approval workflows.   The most interesting part to me is that collaborative custody helps solve the problem of “what happens to my bitcoin if tomorrow I get hit by a bus”? Collaborative custody players support you in the creation of a succession plan over your wealth to facilitate a smooth transition and continuity over your assets’ ownership, so that in case of unexpected events, the bitcoin is not lost.   Collaborative custody is a growing solution among bitcoiners. The next bull run will likely push the wealth of many towards new highs. It would be interesting to see if #hodlers would still feel comfortable managing their private key or if they switch to new options.

Update on #Bitcoin #ETF #inflows and available supply.   Since the launch of the Spot Bitcoin ETFs in January 2024, these instruments have been buying significant amounts of Bitcoin. What is their trend and how does it impact the overall sector?   The approval of the Spot Bitcoin ETF from the #SEC has been a major step forward for global bitcoin adoption and recognition in the traditional financial world. Big #institutional #investors including pension funds, sovereign wealth funds, banks and insurance companies, to name some, were prohibited by their mandates to own bitcoin directly and were therefore excluded to participate in this asset class.   Grayscale Bitcoin Trust ($GBTC), with over 660,000 bitcoin, was the only product available to institutions before the spot ETF was approved but it suffered significant problems due to the redeemability mechanism of the shares and its related premium/discount on NAV. With the ETF approved, $GBTC was converted into an ETF and decided to keep its management fees at 1.5% of AuM, significantly higher compared to all other ETF issuers.   In the first weeks of trading, $GBTC outflows have been compensating total inflows from other participants ($IBIT of BlackRock, $FBTC of Fidelity or $ARKB of Ark Investments), as their fees were 3x to 4x higher than the other issuers. Such outflows, in the range of $350mln to $640mln a day, where offsetting most of the demand from other players and as such, ETF buying activity had a close-to-zero impact on bitcoin available supply.   However, since last week, outflows from $GBTC have slowed and are in the range of $70mln to $100mln a day. Current demand from the other nine issuers is strong and in the range of approx. $500mln a day, translating in a total demand of ca. 10,000 bitcoin a day, or 11x the current daily issuance of 900 bitcoin.   Considering that available bitcoin on exchanges is approx. 1.9 million (Coinglass) and that in two months the #halving would cut daily supply issuance to 450 btc, if demand from ETFs stays flat at ca. $500mln a day, the total bitcoin supply could fall to zero in 182 days!   I am no great fan of Bitcoin ETFs due to the shortcomings related to which instrument you are actually buying, instead of having direct access to the perfect bearer-asset in history. ETFs brings significant centralization issues to the table by keeping the underlying bitcoin in custody at crypto exchanges and TradFi institutions – while the whole purpose of bitcoin should be to eliminate intermediaries.   I am hopeful, however, that with the rise in price of bitcoin caused by more demand chasing an ever shrinking supply, people will spend more time and attention to understand the type of asset they own, to then eventually sell their ETF shares to buy and self-custody the underlying! #Bitcoin #BitcoinSpotETF #SpotETF #inflows #GBTC #IBIT #FBTC #ARKB #supplydemand

#Circular #economies based on #Bitcoin   After 15 years from its creation, people in the world which have an understanding of Bitcoin or have used it so far are still far below 10% of the global population. Many still don’t know, or better, don’t mind knowing, that the problems society is currently facing are brought by #broken #money. By not understanding the concept of money, people don’t feel the need to acknowledge Bitcoin and its value proposition.   Things are running decently smooth in the Western world, people have good ways to transfer money nationally for goods and services and Bitcoin is used by few as a saving vehicle, to keep some assets outside of the system. But in other parts of the world Bitcoin is used primarily as a medium of exchange for daily payments.   Despite #adoption rates are still low globally, the number of local bitcoin communities is steadily growing and it’s allowing the creation of circular economies.   In Central America, the case of @BitcoinBeach in El Salvador can be considered as the first attempt of people to use bitcoin for payments. Considering the high level of unbanked in the country, bitcoin and the #lightning network represent a way to allow the exchange of value for goods and services at high speed and very low cost. Needing only a phone and internet connection, bitcoin allows for inclusion to everyone, close to zero onboarding process and no need for a credit history.   In Uvita, Costa Rica, @BitcoinJungleCR is doing a similar job and is focusing on educating people about the benefits of bitcoin and the personal empowerment it allows. Many merchants are accepting bitcoin as payment and local bitcoin meetups are organized frequently.   In Lake Atitlan, Guatemala, @BitcoinLake and @Lakebitcoin are trying to teach merchants about bitcoin on onboard them on the lightning network. Hostels, restaurants, shops and tuk-tuk drivers are accepting Bitcoin for payment.   In South America, @BitcoinBeachBR is working on adoption in Jericoacoara, Brazil. Many merchants have embraced bitcoin and use Bitcoinize pos terminals to present bills to their customers and receive direct payments to their business wallets.   In South Africa, @BitcoinEkasi is training kids to surf and is educating them on the powers of a #decentralized money network, outside the reach of the state. Ghana has organized the first bitcoin conference in Africa and many local and international bitcoiners have gathered to understand the adoption and #innovation happening in Africa.   In Boracay, Philippines, and Danang, Vietnam, @BitcoinBeachPH and @BitcoinBeachVN are trying to follow El Salvador’s example and build a circular economy based on bitcoin. Neutronpay is used to onboard people on lightning.   The trend is clear and with #halving and institutional adoption coming in Bitcoin in 2024, I believe we will see the development of many more communities like these ones, as well as significant growth in the existing ones.

Why can #Bitcoin #blockspace be considered as a #commodity?   Understanding the implications of blockspace in Bitcoin is a crucial element to understand Bitcoin itself. Satoshi created Bitcoin in 2009 with a limited blockspace of 1 megabyte (MB). This choice was probably taken to prevent spam transactions and ensure the stability of the network during its early stages.   Such limit did not allow more than 2,000 to 3,000 transactions, depending on their size, per block. When Bitcoin was not known to many this limit was working well, but as its popularity started to grow, more transactions needed to be included in each block, driving transaction fees higher and creating network congestion.   Blockspace increasingly became a topic of debate within the Bitcoin community, where some argued that increasing the block size would allow more transactions per block, lowering fees and eliminating congestion.   But increasing the block size has significant implications for the #decentralization and #security of the network, considering the higher amount of MB that each block would weight on the #blockchain. Its consequences on the costs of the infrastructure would price out normal people from running #nodes and keep an entire version of the #ledger in their PCs, leaving the exclusivity to secure the network and validate blocks to small elites and corporations.   The #Blocksize #war of 2017 has occurred exactly for this reason, where some developers ultimately came to propose a #hard #fork of the Bitcoin blockchain to increase block size to 8 MB, without having much success.   Different upgrades made to the Bitcoin network such as #SegWit and #Taproot helped the Bitcoin network to improve transaction privacy, security and scalability without touching the initial block size limit hardcoded by Satoshi on the network.   If we think of Bitcoin as a global settlement network for billion $$ transactions, the #scarcity and #utility of block space as a commodity becomes quite clear. Just as #oil is used for #energy or #gold is used for jewelry and investment, blockspace is essential to inscribe valuable, immutable transactions in the blockchain.   Miners tend to prioritize transactions with higher fees, creating a market for blockspace where users compete to have their transactions included in the next block. Such fees represent the value that users pose on having their transactions confirmed quickly and securely on a censorship-resistant network.   Transaction fees can therefore be considered as the price for such a commodity, being captures by #miners for the work done in keeping the Bitcoin network secure.