The Evolution of Money

Entrepreneur Jim Rohn famously mused, “Time is more valuable than money. You can get more money, but you cannot get more time.” Mr. Rohn may have been more right than he knew because while time has infinite value, money, by itself, has none. Whether you’re holding a dollar, a franc, some yen, a metal coin, or a seashell, it has no value—not until someone wants it. This goes for anything that can be traded, but the reality is far harsher when it comes to the paper people carry in their wallets in the hopes of exchanging it for goods and services. At the same time, money is, in some ways, an important block in the foundation of modern society. Why? Let’s take a closer look at the evolution of money to find the answers.

A brief history of money

Bartering
Before people carried around pieces of paper that symbolized value, they would trade goods and services with each other to make transactions. Each possession had a relative value. This means that what it meant to the holder was not necessarily equal to what it meant to the person to whom they wanted to give it in exchange for something else.

Take, for example, a farmer who grew potatoes but needed tomatoes. The farmer may approach his friend who grew tomatoes and offer him 10 potatoes for 10 tomatoes. The friend may say, “Well, to part with these 10 tomatoes, I’m going to need 15 potatoes.” If the potato farmer agreed and had that many potatoes to barter, he would present them, make the exchange, and both parties would leave the transaction satisfied.

On the other hand, if the potato farmer approached a different farmer with the same proposition, the transaction may not go as planned. If the second farmer already grew potatoes, he may ask for something else. It could be corn, beets, or another type of produce. But the other farmer may also prefer a tool or some form of service from the potato farmer. Each transaction was, therefore, relative. Currencies, although abstractions of value, brought concreteness to previously relative transactions. One of the progenitors of modern currency was salt.

Salt
Salt itself used to be a currency (fun fact: this is how we got our name). Far more than a common seasoning, salt has been at the center of trade and culture for multiple millennia—to the point where the word “salt” is at the root of the word “salary.” Salt, as a flavor additive, has long been a valued commodity. The word “salad” comes from when the early Romans used to add salt to vegetables and leafy greens.

Before the large mass-production of salt became commonplace, the production of salt was a time-consuming process. And as people figured out different ways of producing it, its production was limited to maintain its value. Therefore, people with a salt surplus had a coveted commodity.

The Egyptians used to use it as part of their religious offerings. This lead to salt becoming the currency of choice while trading with the Phoenicians. The practice continued for many centuries and spread across much of the developed world. Marco Polo, while traveling through China in the 11th century C.E., noted how the Chinese used to boil water to create a salt paste that, when formed into a cake, was worth two pence.

Bronze castings
As time progressed, around 770 B.C.E. the Chinese began developing bronze representations of the things they were trading. For example, if a farmer wanted to trade a hoe for a hammer, he would present a bronze casting of a hoe and give it to a carpenter—or someone else—in exchange for a small bronze hammer. The bronze statue could then be exchanged for the real thing. This solved the problem of having to physically transport large or cumbersome objects to places of trade.

Coins
Soon, it became more practical to use coins instead of little castings of valued objects. This approach maintained the convenience of being able to carry an item in your pocket and added an extra convenience: the ability to easily manufacture them.

The manufacturing of money was first performed in Lydia, which is now in the west of Turkey. This was the first mint. Inside, people manufactured coins that represented value. Around 600 B.C.E., Lydia’s ruler, King Alyattes, made the first official state currency. The coins were manufactured using electrum, which consists of a naturally-occurring combination of silver and gold. Each coin was stamped with a picture, and each picture represented a different value. Thus was born the concept of denominations. This system of minting denominated money helped facilitate a more efficient trading system, propelling Lydia to being a powerful, wealthy empire.

Paper
The Chinese made the switch to paper currency around 700 B.C.E. The distribution and use of the bills were carefully regulated by the emperor. In fact, on the bills, there was an inscription warning people that if they counterfeited the money, they would, literally, lose their heads.

After some time, banks began adopting the use of paper money. Inside the bank would be an amount of gold that corresponded to paper money the bank could issue to individuals with whom they did business. For example, if someone deposited half a pound, or eight ounces, of gold, at the bank today, according to the rates at the time of this writing, it would give them $15,197.60. The person would then be able to use that paper to purchase goods and services.

If the individual went and bought a new horse, perhaps spending $8,000 of his money, the person who sold the horse could take that paper money to the bank. The bank would then give the horse-seller $8,000 worth of gold. This gave birth to the modern concept of money, with gold as the underlying asset of value.

Currency-based conflicts
As more countries adopted the use of currency, some took advantage of the, admittedly arbitrary, value of money. They would do things that would cause the value of another country’s currency to rise. On the surface, this may sound like a good thing. However, when a currency is inflated, the cost of the goods within the country goes up. This inflation is due to the fact that more work has to be performed to produce the goods being traded. If someone were to do the same amount of work they did before the currency was inflated, they wouldn’t get paid enough to cover their bills. With goods that cost too much, a country wouldn’t be able to trade with others that could help them build the weapons and armies they needed to engage in war. Currency battles for the sake of weakening another nation continue to this day.

Credit cards
Similar to how going from bronze castings to coins made transactions easier, going from paper to credit cards made buying and selling more convenient for 20th-century consumers. With a credit card transaction, the money of the individual is still held within a bank, but the credit card is used to make the transfer. This is made possible due to two concepts: fungibility and transferability.

When a unit of value is fungible, it has the same value as another unit with the same denomination. For instance, a $10 bill in Boston has the same value as a $10 bill in Los Angeles. And the same goes for an electronic transaction that provides access to $10 stored in a bank. Thanks to fungibility, an individual can put $1,000 into a bank and get a credit card that has a $1,000 spending limit. The transferability of money refers to the fact that money can be moved from one party to another. In a credit card transaction, this happens electronically.

The bank that supports a credit card transaction can also allow the person to spend more than they actually have by lending the individual money. The conditions of the loan agreement are contained within the credit card contract. In many cases, the individual may not have enough money in the bank to cover the transaction. Therefore, they agree to put at least that much, and often a percentage more, into the bank in exchange for the right to spend the money the bank lent them. The use of debit and credit cards and the process behind credit card payments are pivotal factors in the evolution of money. They set the stage for a crucial monetary concept: electronic payments.

Electronic payments
Electronic payments are at the heart of the culmination of the evolution of money. In many ways, electronic payments solve the original problem money sought to tackle more efficiently. When money was first conceived, it’s creators were trying to create an abstraction of value that was fungible, transferable, and easy to spend and accept. With credit and debit card payments, electronic transactions become commonplace while providing a solution for everything money was meant to be.

However, one problem still remained: the middleman. If you have someone working as a go-between that generates wealth by charging you to spend money electronically, how can you guarantee a transparent, trust-worthy, error-free, corruption-free transaction?

Enter cryptocurrency. With the onset of bitcoin, cryptocurrency became an efficient way to both provide an electronic, tradable abstraction of value and, once again, provide the world with a one-to-one, two-person transaction, devoid of a middleman. But the crypto movement wasn’t arbitrary. The signs have been there for years.

The historical signposts that pointed to cryptocurrency

Because cryptocurrency is such an innovative idea, it’s easy to lose track of the fact that it was born, not so much out of innovation but out of necessity. The modern monetary system has, in many ways, been broken for quite some time. For many decades, there have been signs pointing to the need for a better solution.

Interest rate manipulation
Perhaps one of the most powerful historic indicators of the need for an alternative to typical fiat currency was revealed in the 1970s. The interest rates, designed to help stabilize the United States economy, ended up doing the exact opposite. When the government manipulated interest rates to help slow the inflation of common goods, it ended up having the opposite effect. Inflation skyrocketed as certain goods saw huge leaps in their prices. While some people could afford to pay the higher costs, others couldn’t and had to go without essential items.

Even though companies selling their goods to other Americans during a period of inflation may benefit, those exporting American-made goods suffer. Because it costs more to produce goods in the United States, companies have to charge buyers from other countries more. Consequently, some goods become unaffordable for international buyers and they look to other countries to get what they need. This impacts the gross domestic product (GDP) of the country suffering from inflation, hurting their overall standard of living. Because the government can choose to print money anytime it wants, regardless of whether or not there’s enough gold to support the printed currency, inflation in the modern system can easily spin out of control. As in the 1970s, it can start with a poorly adjusted interest rate and have global implications.

With cryptocurrency, the supply of each token is either limited or controlled by the currency’s governance team—a group of individuals and token-holders who make decisions using a voting system. This helps control the inflation of each cryptocurrency. Also, because the currency isn’t hindered by national borders, you have one common means of purchasing goods and services, and its value is the same regardless of where you are.

The housing crisis
The financial crisis of 2007 was another bellwether for the global economy because it highlighted the corruption that can occur when you have profit-hungry “middlemen” involved in transactions. When someone wants to buy a home, they often have to get a loan from a bank. The bank decides who they will lend the money to, as well as how much they will make that person pay, in interest, for the right to use that money. In theory, the system makes sense. However, as the world saw in 2007, when the banks, hungry for profits, abuse the system and those involved, it can have far-reaching implications.

If the interest rate at which money is lent isn’t decided by a bank but by mathematical equations that take into account real supply and demand factors, the lenders can only earn more by lending more. Manipulating interest rates for the bank’s bottom line would be a thing of the past. Cryptocurrency also addresses the problem of predatory lending. The economic crash was partially a result of banks lending money they knew couldn’t be repaid—and then selling the problematic loan to another, unsuspecting, bank. When transactions happen between two people instead of three, the middleman, and his potentially greedy ambitions, are removed. Cryptocurrency, therefore, eliminates some of the major causes of the financial crisis of 2007.

SALT Lending: A historical turning point in the evolution of money

Throughout history, the utility, divisibility, verifiability, and fungibility of salt made it a perfect asset to be used as a method of trade and currency around the world. Through the products and services at SALT, the legacy continues. SALT is now bridging the gap between cryptocurrencies and traditional lending.

Even though cryptocurrencies are, in many ways, a superior monetary solution, they are still not yet widely accepted. With SALT, holders of crypto can get loans using their digital assets as collateral. You can then spend the USD or stablecoin you get any way you’d like. SALT empowers those in the cryptoverse, allowing them to turn the most innovative monetary solution since, well, salt, into liquid assets.

Learn more about SALT loans today!

Game Theory and Bitcoin: the Miners’ Perspective

Competition drives markets. In traditional financial markets, however, competition is limited to the production of goods and the buying and selling process. With Bitcoin, competition plays a far-deeper role. The minting of new bitcoin, as well as the processing and verification of transactions, are all made more efficient, accurate, and secure, thanks to competition. It’s no surprise, then, that game theory plays a pivotal role in the inner workings of the Bitcoin ecosystem.

A brief explanation of game theory

Game theory models the strategic interaction between players in a scenario with set rules and outcomes where the players are rational and looking to maximize their payoffs. In effect, it’s a more detailed, nuanced way of looking at how incentives affect how things get done.

For example, if your job is to shovel 100 pounds of stone into a hole and you’re all alone and have all the time you want, there’s no game theory involved. On the other hand, if someone else is given the same task and you’re each working with the same pile of stones, the dynamics of the situation change.

They change further if only the person who shovels the most gets paid. And, naturally, if you get paid according to how much you shovel, the outcome of your actions would change in yet another way. Each of these situations will be impacted by game theory and its many models.

Although Bitcoin seeks to espouse concepts like “fairness,” “transparency,” and others that are often incongruent with competition, game theory still plays a primary role in the Bitcoin universe.

How does game theory apply to Bitcoin mining?

Bitcoin mining involves solving math problems that are used to create new bitcoin and verify transactions. To continue with the stone shoveling example, if you have as long as you want to move the pile of stones, you may choose to take your time. Your shovel may move slower than if someone else were involved in the task because then the speed at which you shovel would determine whether you get paid more, less, or at all.

The fact that multiple miners compete to verify transactions and generate coins gives Bitcoin an inherent efficiency: The job gets done faster. To dig a little deeper, three types of game theory driving this process include zero-sum theory, congestion theory, and the Nash equilibrium. Let’s take a closer look at how these concepts work.

Bitcoin mining and zero-sum theory

Zero-sum theory dictates that the “winner” gets the spoils and everyone else walks away with nothing. In the mining of bitcoin, the first person to solve a problem gets the value associated with completing the task. Everyone else gets nothing. If you could take a snapshot of the nanosecond a particular hash is found, you would see one user getting rewarded for their work and the others getting nothing.

However, because the Bitcoin system requires so many problems to be solved all the time, in reality, many miners can earn a relatively steady income. The strategies they use are governed by two other game theory concepts — the congestion theory and the Nash equilibrium.

Bitcoin mining and congestion theory

Congestion theory stipulates that the amount each player gets depends on the resources they choose and how many other players choose the same resources.

For example, imagine there are two stations with trains heading to the same destination, and each train can hold only 10 people. One train station is five miles closer to the destination. If there are 100 people, and everyone goes to the closer station, one train will have to go back and forth 10 times. On the other hand, if some of the passengers go to the closest station and others go to the station farther away, there will be less congestion, and everyone will arrive at the destination sooner.

In Bitcoin mining, many of the decisions of the miners depend on congestion theory. If there was only one miner, all the spoils would go to her or him. On the other hand, Bitcoin is open to all, so each miner has to decide whether they will get in the game — and add to the congestion — knowing that more people are bound to get in the game, decreasing their chance of winning.

Once a miner decides to get involved, they then have other decisions to make regarding the equipment they choose. Faster equipment provides an advantage, similar to getting on the closer train. However, the quicker the equipment, the more electricity it takes to run, which increases the cost of mining.

If a miner’s earnings won’t sufficiently offset the cost of electricity, they may choose not to get involved. They may also choose to forego setting up a mining system and join a mining pool instead, where the electricity costs are absorbed by multiple participants. Congestion theory dictates which “train” each miner takes, as well as when and how they get involved.

In addition, the way the decisions of each miner affects the others is governed largely by another game theory concept: the Nash Equilibrium.

Bitcoin mining and the Nash Equilibrium

In the Nash equilibrium, named after mathematician John Nash from the movie A Beautiful Mind, each “player” recognizes that while they have similar goals, not everyone can get exactly what they want. Therefore, some will choose to settle for a less-desirable outcome, satisfied with the fact that they are at least getting something. All players agree to proceed, happy to share the spoils.

For example, continuing with the stone shoveling scenario, you may be stronger and faster than the other shoveler. Both of you agree to shovel for the same amount of time, but you get 70% of the money while the other shoveler only gets 30%. The other person could protest, but realizing that something is better than nothing, they agree to the terms. At this point, an equilibrium is established. At the end of the day, you both earn money and walk away satisfied.

The worldwide community of miners also follows Nash equilibrium principles. Some miners have more money than others and can afford to purchase the latest mining computers, capable of solving specific hashes faster than older models. Other miners may not have as much money, but they live in areas where electricity is less expensive. They can, therefore, spend less than wealthier miners who live in areas where electricity is more costly. Some live in places where it will never be profitable to mine, so they join a mining pool instead.

Each miner recognizes that their limitations dictate how much they will get. At the same time, all agree to participate, satisfied with their portion at the end of the day — even if it’s just a small fraction of a bitcoin.

How miners are incentivized

Zero-sum theory, congestion theory, and the Nash equilibrium only work because of the ways miners are incentivized and dissuaded from cheating the system. Before mining rewards are approved, the technical infrastructure enforces the “trustless” nature of the Bitcoin network. If miners do not adhere to protocol rules, their block submission will be rejected by other nodes in the blockchain. All network nodes including other miners verify the ledger entries packaged into a new block. If entries are considered invalid, or the block hash doesn’t meet network requirements, the miner’s result will be rejected and the 6.25 BTC will be awarded to another miner.

While the block rewards are enticing at current BTC valuations, there are other financial implications that compel miners to either continue or suspend network operations. No miner will win the worldwide competition each time a new block is added (~every 10 minutes), so they must weigh the probability of profitable successes. There are other factors to consider, too. For example, some miners may decide to bow out when electricity becomes too expensive. Others however, may have a longer time horizon and decide to accept the risk of energy expenditure, calculating that miner attrition will increase their chances of winning new block rewards. In other words, fewer miners in the network means more chances for the remaining miners to profit. For those adopting this viewpoint, the potential of solving enough blocks to maintain business profitability outweighs the risk of any short-term loss related to high energy costs.

How bitcoin is distributed

Every block consists of many small transactions. When a block is mined, the winning miner is awarded 6.25 bitcoin plus all transaction fees for each transaction they were able to package within the block. The more blocks you are able to solve, the higher your reward. In other words, you get a bigger piece of the pie. Hunger for more slices of pie incentivizes miners to purchase more powerful equipment or move to areas with lower electricity costs.

Game theory and the surety of the Bitcoin network

In a Nash equilibrium, although the individual participants would like to either get more rewards or a different type of reward, they agree to settle with getting something of value rather than nothing. The Bitcoin network compels miners to play by an agreed set of rules to add transactions to the distributed ledger, or their work will be summarily rejected. At the same time miners add security to the network by expending expensive energy that chains each new block to the preceding block via a well established mathematical algorithm.

Each miner is, therefore, a generator of new bitcoin liquidity as well as an auditor, checking the details of network transactions. Even though each problem solved involves a zero-sum game and congestion theory dictates how each miner approaches the task, everyone works in a happy Nash equilibrium.

In the end, game theory is an underestimated, yet essential, element of the Bitcoin network. As each miner plays their role, historical transactions are kept secure and new transactions unanimously approved, which helps maintain Bitcoin’s position as the number one digital currency in the world.

The Evolution of the Crypto Market and its Role in Asset-Based Lending

Originally published in ABF Journal

Cryptocurrency is a disruptor. Not only has it changed the way we conduct business, but it has changed the way we think. The most obvious manifestation of how cryptocurrency has disrupted our thought patterns is in the way we think about money — about who issues it, how to transact with it, how to put it to work and how to keep it safe. It also has changed the way we think about our government, our right to privacy and our financial freedom. What’s less obvious is how cryptocurrencies are disrupting the way we think about and participate in asset-based lending. The advent of Bitcoin catalyzed the creation of a myriad of cryptocurrencies, many of which became viewed as assets, yet at the time, there was no way for crypto investors to unlock the value of these assets without selling them. This is the problem SALT’s founders set out to solve in 2016 and in doing so successfully, made asset-based lending as we once knew it a thing of the past.

Creating a New Asset Class

As Bitcoin began to experience wider adoption following its release in 2009, it became clear that some investors were purchasing crypto to trade on a daily basis while others were choosing to invest long-term, viewing Bitcoin more as an asset than as a spendable currency. As more investors adopted this long position and began to think of cryptocurrencies as an asset class in their own right, the term “HODL” emerged in 2013 on a bitcoin-talk forum and has since become one of the most commonly used words in the crypto vernacular. This HODL culture has grown significantly over the years and has evolved to where investors are buying, selling and trading these assets not only for themselves but on behalf of others. This activity has taken the form of crypto portfolios and crypto funds, which offer access to this new asset class for individuals and allow them to diversify their portfolios while eliminating some of the overhead of learning how to purchase and safely hold cryptoassets. By providing a way to collateralize cryptoassets to secure a cash or stablecoin loan, SALT provides opportunities for individuals, businesses and capital providers to build and preserve wealth.

How to Lend Cryptoassets

As the first-ever crypto-backed lender, SALT has developed the technology and processes required to successfully lend against cryptoassets, giving borrowers a way to unlock the value of these assets without selling them. Take Bitcoin for example. It’s one of many cryptoassets we accept as collateral on our platform, yet it makes up more than 80% of the collateral securing our loan book.

What makes Bitcoin a strong form of collateral? The answer lies in Bitcoin’s combined characteristics. Like gold, Bitcoin is scarce, fungible, divisible, transferable and durable. It is also extremely liquid given it is traded on global exchanges every day. Additionally, as a decentralized asset, Bitcoin is highly secure. All of these properties make Bitcoin both a viable asset and a highly efficient form of collateral that has piqued the interest of some of the largest financial institutions in the world.

One thing to note is Bitcoin’s volatile nature, which can pose challenges specifically for the ABL market. However, SALT’s risk management technology effectively manages this volatility. Our technology includes real-time loan-to-value (LTV) monitoring, margin call and liquidation triggers, real-time notifications and the safekeeping of assets through institutional grade custody solutions. For example, our loan-to-value (LTV) monitoring system tracks the prices of assets 24 hours a day, 365 days a year, providing borrowers with the ability to monitor the health of their loan in real-time. If, during periods of heightened volatility, a borrower’s collateral declines in value and their LTV breaches our margin call threshold, we protect the borrower by issuing a margin call that prompts them to take action to restore the health of their loan. Actions borrowers may take include paying down principal or depositing additional collateral to recalibrate their LTV to an appropriate level (70%). If no action is taken and asset prices continue to decline, SALT has the ability and the right to liquidate collateral assets to preserve lender capital. The overcollateralized nature of our loans combined with our risk management technology and ability to liquidate assets enables us to protect the lender, and as a result, we’ve experienced zero losses of principal to date.

Choosing a Crypto-Backed Lender

SALT’s business model is attractive to crypto investors (e.g. traders and asset managers) and businesses (e.g. mining operations and exchanges) for a few reasons. First, we provide access to liquidity, offering loans ranging from $5,000 to the millions. Typical use cases include businesses seeking working capital to fund operational costs and large capital expenditures, or investors seeking leverage, diversification or risk management. Second, since our model is asset-based and requires overcollateralization, we do not rely on a borrower’s credit profile and can fund loans within 24 to 48 hours, assuming the borrower meets our strict AML/KYC requirements. Third, customers know their assets are safely and securely held with institutional-grade custody providers for the duration of their loan. Fourth, our loan process is straightforward and customizable. We allow borrowers to lend against a single cryptoasset or a portfolio of cryptoassets and offer flexible loan terms, including durations ranging from three to 12 months, LTVs up to 60% for individual loans or up to 70% for business loans, and competitive interest rates ranging from 5% to 12% depending on the borrower’s jurisdiction, loan amount and LTV. While we are no longer the only crypto-backed lender in the world, we are one of the few that incorporate a human element into our business model. Unlike completely automated lenders, SALT offers both phone and online support, and assigns each customer a loan support specialist at the time of loan origination. These human touches positively impact a borrower’s experience with the platform; they know that by choosing SALT, they will always have the option to speak with someone about their financial needs.

The Evolution of the Crypto Market and Tokenization

Since SALT’s founding in 2016, the crypto lending market has grown exponentially. According to a report from Credmark, the crypto lending market reached $8 billion in total lifetime loan originations as of Q4/19 and has since surpassed $10 billion following Q1/20. These numbers not only indicate the growing demand for liquidity among crypto holders but also the growing interest among capital providers to get involved in the crypto market. For example, we’ve witnessed an influx of both crypto native (BitGo Prime and Genesis Capital) and traditional financial institutions (Silvergate) that provide leverage and liquidity vehicles at the institutional level.

Another thing to consider regarding the evolution of the crypto market is that as the world becomes tokenized, the very definition of the term “crypto market” is changing. With the emergence of companies like Paxos and Harbor, we’re beginning to see increased tokenization of real-world assets like gold and real estate. At SALT we already accept Pax Gold (a gold-backed cryptoasset) as collateral on our platform and our vision for the future goes well beyond our current collateral scope.

The Role of Alternative Investments

As crypto becomes more widely accepted, a growing number of people are assessing their own risk profiles and determining the best way for them to participate in the crypto market. For those with lower risk profiles, the market has evolved in recent years to offer individuals or businesses indirect exposure to this new asset class. As previously mentioned, crypto portfolios and crypto funds are part of this evolution along with alternative investment companies like Cadence (portfolio company of Coinbase Ventures). Cadence is a securitization platform for private credit that grants access to exclusive high yield, short term investments traditionally reserved for institutions. In February 2020, we partnered with Cadence to offer prospective investors the opportunity to gain exposure to cash flows associated with a portfolio of underlying loans collateralized by cryptoassets. The first note of $500,000 was oversubscribed in five days and we have since worked with Cadence to issue $2.9 million in notes to investors to date. As more companies like Cadence provide structure, liquidity and indirect exposure to alternative asset classes like crypto, we expect to see even greater demand from investors seeking attractive risk adjusted returns.

Opportunities for Institutional Investors

There’s no doubt cryptocurrency has changed the way we think about asset-based lending. It has formed a new asset class and also has catalyzed the trend of broader tokenization — a trend that will inevitably expand the universe of collateral options and have a meaningful impact on the ABL industry. If you’re a decision maker at an institution and are interested in learning more, email [email protected] to discuss opportunities to build and preserve wealth in this rapidly evolving industry.

Halving Event Follow-Up Video with SALT and Bitcoin Magazine

Thanks to everyone who watched & participated in Bitcoin Magazine’s Halving live-stream celebration! To address some of the questions that came up during the event, our CPO Rob Odell sat down with CK from Bitcoin Magazine for a follow-up video.

Fireside Chat with Dirk Anderson and Rob Odell

In celebration of the 3rd Bitcoin Halving, our CPO Rob Odell and CTO Dirk Anderson joined Bitcoin Magazine for a fireside chat where they shared their Bitcoin stories and an update on SALT’s business model.

Halve you heard? Your Guide to Bitcoin Halving Events

While the world’s fiat currencies suffer from inflation as governments print more money to manage the COVID-19 crisis, Bitcoin, by design, is becoming more deflationary with each block confirmation. This is because Bitcoin creator Satoshi Nakamoto intended for Bitcoin to be the antithesis of government-controlled fiat currencies: “The root problem with conventional currency is all the trust that’s required to make it work,” wrote Satoshi in a post on the P2P Foundation Forum, “The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” In the post, dated February 11, 2009, Satoshi announces the creation of Bitcoin (along with a link to the earlier published white paper) and details its characteristics that make it anything but conventional. Among these characteristics is the fact that “everything is based on crypto proof instead of trust.”

In creating Bitcoin as a decentralized, trustless system, Satoshi ensured that it could not fall victim to the “breaches of trust” and inflation experienced throughout the history of fiat currencies. Unlike fiat currencies that are controlled and manipulated by governments and central authorities, Bitcoin follows a strict set of rules that have been embedded into its codebase or “monetary policy” since its inception. These rules include a hard supply limit of 21 million coins, the last of which will be mined around the year 2140. Currently, more than 87 percent of the 21 million bitcoin have been mined, meaning there are approximately 3 million remaining coins to be mined over the course of the next 120 years. The speed at which new bitcoin is mined and distributed is controlled by 30 precoded “halving” or “halvening” events (our Twitter followers prefer “halving”, so we’ll go with that from now on) that will take place every 210,000 blocks or about every four years until the last bitcoin is mined. In 2008 the block reward for miners was 50 newly minted bitcoin for each validated block. Following the first halving event in 2012, the block reward reduced by 50 percent to 25 bitcoin per validated block and then reduced by another 50 percent to 12.5 bitcoin following the second halving event in 2016. 2020 marks the year for the third halving event in which the block reward will be reduced to 6.25 bitcoin per validated block.

While we don’t know the exact date of the halving event (more on this below), we know it is fast approaching and is set to occur sometime this month. There’s been a lot of anticipatory chatter about the halving as people question and speculate on how it will (or will not) impact everything from the price of bitcoin to profitability and participation of miners in the network.

We’ve compiled what we consider to be the best available resources for understanding the Bitcoin 2020 Halving event and answering some of the most common questions around it.

When will the halving occur?

The answer to this question is contingent on the speed at which new blocks are created. Given the average block time is around 10 minutes and a halving event takes place every 210,000 blocks, the halving is estimated to occur on or around May 11. While there are various countdown resources that estimate within a day of one another, our favorites are the Bitcoin Halving Countdown from CoinMarketCap and the Bitcoin Clock, which “uses data from BTC.com to get the average block time for the past two months. It then uses this block time (currently 10.3125 minutes between blocks as of March 25, 2020) to estimate the halving date.”

Tell me more about the halving. What is it exactly? What is the intention behind it?

Whether you’re new to crypto or you’ve been in the game for years, we can all use a bit of a refresher when it comes to the halving event. If you’re new to crypto, we recommend starting with this video from We Use Coins regarding the need for Bitcoin and this video from CryptoCasey, which provides a straightforward explanation of blockchain technology, mining, and the upcoming bitcoin halving event. For a more humorous take on the benefits of “the currency of the future,” check out this video from Cameralla Comedy.

Running short on time? Try this episode of the 4-Minute Crypto Show, which offers a speedy, yet thorough explanation of halving events.

If you’re already familiar with the crypto basics and want more detail on the halving, this article from CoinDesk is an excellent resource. Not only does it include an illustrative explainer video that breaks down and simplifies the process, but the article also dives into:

For additional info on previous halving events and miners’ roles in the network, Michael Sweeney from The Block provides a solid explanation in his analysis, “The bitcoin halving: what it is and why it matters.”

Interested in learning more about the economics behind Bitcoin’s monetary policy? Take a look at this article from The Block’s Mike Orcutt or this guide from Block Geeks that provides a crash course on supply and demand, inflation, deflation, and market cap as it relates to bitcoin, as well as how incentivization for miners fits into the equation. Or if you really want to get into it, Bitcoin Magazine’s Peter C. Earle explains why the 2020 halving is particularly important. He calls out the difference between the old and modern definitions of inflation, noting that in the context of the modern definition which refers to “an increase in general price levels within an economy,” the fact that “with increasing value one bitcoin buys more over time, it is indisputably deflationary.”

“What’s noteworthy about this point, Earle writes, “is that, upon this particular halving, Bitcoin ‘inflating’ at a roughly 1.8 percent rate annually will nominally — and by then, quite possibly in real terms — be ‘inflating’ at a rate lower than both the Federal Reserve target of 2 percent per year and current, CPI-based estimates of real U.S. inflation of 1.9 percent annually.”

Tell me more about the miners. How will it impact who is currently mining and who will continue to profit? Will the halving result in mining eventually becoming monopolized?

Andreas Antonopoulos tackles these questions in this short video clip and notes that we don’t need to be concerned about the monopolization of mining because the amount of profit a miner generates is not contingent on the size of their mining facility but on the smoothness of their mining operation. So while there are multiple factors that play into whether a mining operation is profitable, larger operations do not necessarily have an advantage over smaller ones. Rather, it’s all about efficiency. “Halving will increase competition in mining,” he says, and in general it will be the least efficient miners that become less profitable.

Similarly, in an interview with Anthony Pompliano the CEO of Blockware Solutions Matt D’Souza states, “The efficient miner should not fear the halving, they should welcome it.” Why? D’Souza notes that “once we go through halving the miners’ revenue is going to get slashed in half” and we’re going to experience what he considers to be “a healthy cleanse of the network.” He predicts that if the bitcoin price is still at $8k or lower going into the halving, we may experience “extreme miner capitulation” where we may see up to 40 percent of the network shutting off due to high energy costs and reliance on outdated mining equipment. He notes that as these inefficient miners begin to pull out of the network following the halving, there will be an adjustment period from May to July as the network undergoes these changes. At that point, difficulty will kick in and margins will improve for those miners who are still in the game. “Mining is about survivability,” says D’Souza, “You just need to survive. If you survive, difficulty will adjust in the future and it’s going to improve your margins because the people that are inefficient… their bitcoin is going to go to you.”

What happens to miners once all of the bitcoin has been mined and there are no more block rewards?

After the final halving event takes place and the 21 millionth bitcoin is mined sometime in 2140 miners will no longer receive block rewards, but they will still collect transaction fees just as they do currently. While we don’t know for sure how miners will react once we reach this point, according to Adam Barone in his article published on Investopedia, “Even when the last bitcoin has been produced, miners will likely continue to actively and competitively participate and validate new transactions. The reason is that every bitcoin transaction has a small transaction fee attached to it. These fees, while today representing a few hundred dollars per block, could potentially rise to many thousands of dollars or more per block as the number of transactions on the blockchain grows and as the price of a bitcoin rises. Ultimately, it will function like a closed economy where transaction fees are assessed much like taxes.”

What about the bitcoin price? How will it be impacted by the halving event?

The short answer is that there is no shortage of predictions.*

To quote Antonopoulos regarding his thoughts on price predictions: “I think it’s mostly irresponsible to make predictions about price. It’s the same as astrology and reading tea leaves.” While we agree with him on this sentiment, many people in the cryptosphere have openly made predictions about what will happen to the price of bitcoin following the 2020 halving. So, if you’re one for speculation or you just find it fun to read about people’s theories and want to be aware of what some of the most well-known people in the industry are saying, here are a few links for you to check out:

How can I watch the halving event?

For the previous halvings, it was fairly common for people to throw watch parties to celebrate the halving event. Now with current social distancing measures in place, in-person parties are being replaced by live streams. Our pick for how to watch and celebrate the 2020 Halving is Bitcoin Magazine’s 21-hour Live Stream for which they’ll be sharing updates across their social channels regarding exact timing, but you can track their countdown here.

*This content is meant to educate and inform but should not be taken as financial or investment advice. Trading and investing in cryptocurrencies (also called digital or virtual currencies, cryptoassets, altcoins and so on) involves substantial risk of loss and is not suitable for every investor.

Uphold and SALT Announce Platform Integration to Seamlessly Connect 1.65M Uphold Users to SALT’s Crypto-Backed Loans

We’re excited to announce our partnership with Uphold — the leading digital money platform democratizing access to investments and payments using blockchain technology — to provide Uphold users with seamless cash or stablecoin loans using cryptocurrencies as collateral. Uphold users can now secure loans through SALT in as little as 24-hours against their holdings in Bitcoin, Ether, Litecoin, Bitcoin Cash, Dash, and as of today, XRP. The integration of the two platforms provides enhanced access to liquidity, enabling users to unlock additional value in their holdings.

In addition to bringing leading credit solutions to Uphold users, we’ve integrated Uphold wallets into our platform, allowing the company’s large and rapidly growing user base to access Uphold’s products through their dashboard. The integration streamlines the lending experience for shared users through seamless collateral transfers and loan proceed payouts.

“SALT has given its users the flexibility to access loans using their cryptocurrency holdings. Our integration with the SALT platform allows us to grow our service offering and provides another real-world use case for Uphold members,” said Robin O’Connell, Chief Revenue Officer, Uphold.

With a crypto-backed loan from SALT, Uphold users can unlock liquidity from their crypto assets without having to sell them. Unlike traditional financial institutions, we allow customers to use their crypto assets as collateral to secure a cash (USD) or stablecoin loan in as little as 24 hours, providing them with the opportunity to reach their personal financial goals including but not limited to funding a large purchase, consolidating debt, or accessing working capital to scale their business.

When applying for a loan through SALT, Uphold users can customize their loan by choosing their preferred loan type, loan amount, duration, and Loan-to-Value (LTV) ratio with options ranging from 30%-70%. There are no credit or income checks required and no origination or prepayment fees. With a crypto-backed loan from SALT, Uphold users can keep their crypto and get cash.

“Uphold has built an impressive platform that provides a seamless on-ramp into the digital economy and a simple method to transact across diverse asset classes. We’re excited to bring our leading crypto-credit products to Uphold’s global customer base and enhance our borrower experience through a direct integration with Uphold wallets on our platform,” added Jarrett Abraham, Director of Corporate Development, SALT. “Together, we’ll provide ultimate flexibility for crypto holders who need access to liquidity across a range of crypto assets and fiat currencies. This is an exciting strategic partnership for us that helps further our mission to accelerate the world’s ability to embrace crypto assets and participate in the token economy.”

About Uphold

Uphold is a digital money platform democratizing access to investments and payments using blockchain technology. With more than 1.5 million users globally, Uphold has powered ~$5.3bn in transactions (9/30/19). Uphold provides both retail customers and businesses worldwide with easy access to fiat and digital currencies, as well as precious metals. The San Francisco based firm is opening up global access to financial services that are either ‘hard to reach’ or simply not available in certain regions. Available through the web, iOS, and Android, Uphold is the only financial platform to publish its reserve holdings in real time. The company also has offices in New York, Portugal and London. More information can be found at www.uphold.com, or follow us on Twitter, Facebook, and LinkedIn. Uphold is registered with Fincen in the United States and is an EMD agent of an FCA licensed e-money institution in Europe. Uphold is not a lender, loan broker, or loan arranger and is not offering anyone advice or assistance in obtaining a loan.

Client Spotlight: Justin Podhola, Founder and CEO, Elite Mining Inc.

We learn a lot from the people who use our platform every day and enjoy collecting their feedback so we can use it to continue improving your experience with SALT. We spoke with our business client Justin Podhola, founder and CEO of Elite Mining Inc. — a company that generates mining capabilities through clean energy.

Tell us a bit about your background. How and when did you become involved in the blockchain/cryptocurrency space?
I’ve had quite a few years of trading experience overall. I started out trading on the US Stock Exchange over 10 years ago. Following that, I worked in real estate, building homes and flipping houses. I’ve always been a tech junkie, but I never really had a good place to put my knowledge and skills to work. Eventually one of my buddies asked me if I’d ever heard of Bitcoin, and while I was really interested in the technology, it didn’t make any sense to me at the time because I didn’t take the time to understand it. I started doing some research on it in 2016 and in early 2017 I decided to go ahead and take a chance on cryptocurrencies, and spent my life savings to start mining. I’m so glad I did because I’ve been so much better off because of it, and I’m able to contribute to an ecosystem that really resonates with me as a person.

Throughout the past couple of years, we’ve found there’s a strong need for proof of work and proof of stake, especially right now in the current markets for a lot of the smaller coins. They need more infrastructure built around them. Based on this research, I founded Elite Mining Inc. in late 2017. The business is profitable, but at the end of the day, the most important thing is that we’re able to provide security for blockchains. This market is ever-evolving and we’re looking forward to seeing where it goes.

Given your company focuses on clean mining, can you tell us about what that entails and why you decided to go that direction?
The current narrative around mining is that it’s going to harm the planet in the future — I’m really focused on not only squashing this notion, but on becoming the leader in clean and profitable mining. Bitcoin is sound money, and for our new cryptosphere to really lead the next generation of miners, we have to be focused on both reducing emissions and securing Dnet blockchains.

The sentiment is that being green with clean / renewable energy ends up losing you profits, but prior to founding the company, we conducted about six months’ worth of due diligence before we chose the state in which we wanted all of our facilities to be located. We wanted to be located in a geographic area that would allow us to scale into the hundreds of megawatts range and simultaneously be nearly 100% clean in our energy consumption for POW and POS (Proof of Work and Proof of Stake). Specifically and what ultimately made our decision is the fact that Washington State is the leading hydroelectricity-producing state in the nation, without a close second, but yet inherently has some of the lowest electricity rates in the entire world.

Washington State is inherently 91 to 92 percent all clean energy, which is the reason we chose it for our business. We looked at other states including New York, Montana, and Texas, but ultimately I was already living in the best state for what we wanted to do. The biggest pain point for renewable energy and mining is figuring out how to scale with it — we knew that operating out of Washington would allow us to do that. Having made this decision, we’re able to take advantage of some of the best electricity rates in the world and constantly deploy renewables on a distinct time scale within our operations to maintain the backbone of our operations, and at the same time lower our electricity costs in perpetuity.

Why did you take out a SALT loan and what made you choose SALT as your loan provider?
There are a few things that drew me to SALT. The first thing was the branding — I thought it was absolutely clean and genius. The SALT brand reminds me of Nike because it has a simple logo with strong meaning behind it. It’s a straightforward concept and given the colors and themes are good, I thought the company had a strong possibility of selling itself well. The next thing that caught my attention was SALT’s platform — it was extremely unique in the way the company built its tokenomics and membership benefits out of the SALT token. That really intrigued me, and as I conducted additional research, I learned early on that while I needed to cover the costs of electricity and of buying more rigs, there’d come a point where I’d want to try and keep as much Bitcoin and Ethereum as I could. I anticipated future appreciation, so I didn’t want to sell my assets. I figured that using SALT would put my business at an advantage because we could HODL all of our Bitcoin and Ethereum, use it as collateral, and generate additional income as a result of long-term appreciation. We don’t know where Bitcoin will be in two to three years, but by that point, if I hadn’t decided to do something like this now and use SALT to HODL my crypto, I would lose essentially 30–40 percent of my holding coin assets by having to sell them off to continue running my business. For me, using SALT was a no-brainer.

How is your SALT loan helping you accomplish your goals?
First of all, the SALT loan is enabling us to hold our assets, which is the most important attribute. Our most valuable assets are our Bitcoin and Ethereum, and while we also mine other coins, we’re able to sell into Bitcoin and Ethereum. Now that we’ve implemented SALT into our business model; we’re going to consistently contribute more to our BTC and ETH wallets on the SALT platform by adding more collateral over time. I can continue to add collateral as I go along, instead of paying bills directly by selling my Bitcoin and losing that future appreciation value. Then into the future, months down the road if I need cash, want to expand the company, ramp up operations for more rigs, or move to a new facility, I have the liquidity to be able to do so, yet I can still hold at least good chunk of my assets. To me that’s a powerful tool that’s going to add a lot to our company.

Would you consider a second loan with SALT?
Yes, and actually my second loan would likely be a personal loan. I’m bullish in the market right now and believe the market has leveled off for the most part, which triggers the trader signal in me for a green light to reduce margin calls and to be optimistic on long range trends for the value of my cryptocurrency.

What would you say to people who have cryptocurrency but may be skeptical about collateralizing it?
First of all, it’s important to do your due diligence, but I’d recommend going to SALT because they have a professional team and are an excellent company overall. They don’t waver in their terminology, and they’re good at communicating. Most importantly, they have excellent customer service — you can get ahold of them at any time.

There are a lot of scams out there, and there are a few lenders I would be careful of because they don’t have insurances in place if something were to happen to their lending solution. Knowing SALT has insurance is what gives me the confidence to take out a loan because at the end of the day I know they’re making sure to be extra cautious for their customers and that they have my best interests in mind. Additionally, security is number one, and I feel confident that SALT has an extremely secure platform, they have built their products on chain. SALT has developed their own tech stack, obtained their own licenses in the US and abroad, and they have an absolutely awesome SALT app on their phone that allows me in a blink of an eye to view and manage my assets via Smartphone 24/7/365. Through this ownership of these assets they have built, it allows them to really offer solutions to future clients that can grow in the foreseeable future. These aspects combined with their fast response time is why I would recommend them to someone looking for a crypto-backed loan. I’ve had experiences with other lenders and relatively speaking, they’ve been a little slow to get back to me. Given this is the 21st Century, I like things to be fast.

Are there any specific characteristics that you like about the SALT platform in particular?

  1. I love the automated margin call system. It enables me to be hands-off, so I don’t have to worry about checking my loan every single day. I’m a very busy person, as I’m currently running two businesses and have a wife and kids. I don’t want to be checking my computer every day for my LTV, so to me the automated margin system alone is worth choosing SALT — time is money.
  2. It’s extremely easy to apply for a loan. It took me just a few minutes to slide the scale over and figure out how much collateral I wanted to use and then two minutes to complete the application process. SALT responded quickly to me after I submitted the application.
  3. The platform is simple. It’s clean, and there’s not a lot of jargon to comb through, which makes it significantly easier to go through the loan process.

In your experience, what’s something about our process that you think may prevent people from taking out a SALT loan?
One thing I think might be hard for people to understand and may prevent them from taking out a loan is that at this point, it takes a lot of collateral to back your loan — potentially more than the average person would expect. However, what’s important to understand is that it’s an emerging market and SALT has a certain level of responsibility to its investors and lenders, so overcollateralization of your loan is a necessary precaution for the time being. They’ve compensated for this recently by coming out with new, ridiculously good interest rates.

If you were going to choose the next collateral for SALT, what would you choose and why?
I would choose Dash — I think it’s a no-brainer. Dash has great market penetration right now — it has a strong following and is a no-nonsense coin. I also think Zcash would be another decent choice, as it is garnering quite a bit of adoption currently as well.

SALT at ETHDenver 2019

As SALT has developed the technology necessary to support our lending business, we have opted to build a lot of our supporting services in house. As you scoff at why we wouldn’t just buy something off the shelf, remember how new the blockchain ecosystem is relative to other industries. We like to think we’re rational and always properly weigh our buy vs build options. After exploring the options, and in some cases buying them (much to our dismay), we’ve had to rely primarily on our talented dev team to build the systems, services and applications necessary to run our business.

Through many conversations with other blockchain companies, we have come to understand that some of these services would be valuable to helping build their business. Our first effort at separating a service and making it available to the public was a blockchain address and transaction monitoring service called Meerkat. You know, because Meerkats are always on alert.

The service allows anyone to subscribe (and unsubscribe) to specific Bitcoin, Litecoin, Dogecoin, and Ethereum (plus all ERC-20) blockchain addresses and transactions. Once you subscribe to a given address (or multiple addresses), you’re notified via your provided callback URL of transactions in or out of the address you’re watching. Subsequently, you can subscribe to a transaction so that you can be notified of its status updates (detected, mined, confirmed, etc).

To put this effort to the test, we chose to offer a $5000 prize at the 2019 ETHDenver Buidlathon (hackathon) for the best use of the Meerkat service.

There were some really creative submissions and we’re grateful that teams thought something we’d built could be useful to their project.

Ultimately, we picked Charity Watchdog as the winner because it supports the open and transparent ideals inherent to cryptocurrency. Their idea gives users the power and insight to choose whether or not to support a particular charitable organization. This is cryptocurrency at its finest. We hope Charity Watchdog continues their endeavor to bring transparency to charity spending. Below are some additional details about their project and a few other teams we want to give a shoutout to for creatively using Meerkat to BUIDL their project.

Thank you to each team for all of the creativity, hours and effort you put into leveraging Meerkat for your projects. We’ll see you all next year! In the meantime, keep watching via www.meerkat.watch.

Director of Product Experience Rob Odell answers buidler/hacker questions at the SALT table at ETHDenver.

SALT’S CHOSEN WINNER:

Project: Charity Watchdog

Team: Artem Kuznetsov, Peter Gao

Description: Charities are traditionally opaque with their spendings, with donors not knowing exactly where their money is being spent.

With Charity Watchdog, we bring accountability and transparency to charity spends by watching the transactions of charity wallets, and prompting the charities to provide receipt or some form of documentation as to where the money was spent within a grace period.

Any charity that is on the platform and does not provide proof of fund usage will be flagged for donor review. This gives users insight into charity spending and they can choose whether or not to support the charity based on its spending, proof of usage, or lack thereof. This helps put donors more in control.

How they used the Meerkat API: Charity Watchdog used Meerkat to watch and update their app as transactions were sent to various charities. It was the key component in being able to notify users in the app that a charity has spent funds. It’s then the charities’ responsibility to add the supporting evidence for transparency.

OTHER NOTABLE PROJECTS:

Project: Shares

Team: Mark Evans Josh Robinson

Description: Shares seeks to demystify the stock issuance process for startups by facilitating the creation and issuance of uncertificated shares in the form of ERC-20 tokens. You don’t need paper certificates, a spreadsheet, or a lawyer. Just five minutes and a wallet address!

The project used IPFS for hosting the dApp portion of Shares, which is responsible for creating an ERC-721 token (one per company) that represents ownership of their domain on DwNS (Decentralized Web Naming System) and provides an easy-to-remember URL (ex. acme.shares.dwns.io). Uncertificated shares are subsequently minted through an ERC-20 contract and are sent to a user-designated Ethereum address. The view layer for the dApp was made using VueJS. For the web app portion, they used NodeJS and Express and connected to the Twilio and Meerkat APIs.

How they used the Meerkat API: Shares combined Twilio and Meerkat to notify users via text message when shares were moved from a contract. The team passed the phone number into the callback URL so that any transaction alerts on the security contract would get sent via text message — an instant way to alert users of activity.

Project: ETH Dev Tools

Team: Aidan Musnitzky, Billy Rennekamp, Theo Ephraim

Description: ETH Dev tools is a chrome developer tools extension that acts like a swiss-army knife for dApp developers and curious users. The extension appears in a chrome inspector tab and comes with various modules that introspect the current dApp you’re using. The plugin is easily extensible for additional tools but already comes with four fully functional modules:

Logs — A network inspector that shows logs and details of all network interactions between your dApp and your RPC endpoint via the web3.js provider including request timing, parameter inputs and return values.

ABI Explorer — This section keeps a list of all contracts the dApp has loaded and scaffolds boilerplate forms based on the ABIs of those contracts. The auto-generated UI gives you access to all contract methods ready to be queried with calls and sends — this is similar to what’s possible with Remix or a verified contract on Etherscan, but without the context switching or compilation.

GraphQL Explorers — A GraphQL explorer that comes pre-populated with Infura’s EthQL endpoints as well as all of the most popular The Graph subgraphs including Uniswap, ENS, Dharma and others. These endpoints come with sample queries ready to ping all the most relevant and highly available content. There’s also the option to add a custom endpoint for easy access to any other available datasets.

Watcher — A tool for monitoring activity on any wallet address or contract. This service is provided by a websocket proxy listening for webhooks from SALT’s Meerkat. It’s easy to subscribe or unsubscribe to this data with a simple UI and websocket support from an Heroku instance.

How they used the Meerkat API: The ETH Dev Tools team creatively added Meerkat to their ETH dev tools chrome extension to more easily help dApp developers subscribe (or unsubscribe) to an address or a transaction right from their browser. For dApp developers, this helps speed up the troubleshooting process when trying to monitor and notify users of address activity.

Project: Balanced Crypto Portfolios with built-in investment capabilities automation

Team: Anibal Catalan, Leonardo Lower, Manuel Garcia

Description: Automated balanced portfolios hedged against DAI with investment capabilities to get returns from loans repayments from AAVE.

Hedge your crypto portfolio and lower overall risk due to volatility and correlation behavior by moving out part of it into a stable asset: MakerDAO DAI.

Build a balanced portfolio, they will rebalance it for you.

Don’t stop there, invest some DAI into a fund which will invest by funding loans in EthLend based on clear rules (eg.: amount, duration, MPR, LTV, etc).

Get returns from the loans repayments.

We provide you with bots and brokers that will take care of rebalancing and investing on the right loans.

How they used the Meerkat API: This team used Meerkat to subscribe and monitor wallet activity. This is fundamentally important for projects in the #DeFi, or decentralized finance, space as the main pillars of this movement are accessibility, financial inclusion and transparency. Meerkat makes it possible for users to be notified of all payout and rebalancing activity.

Project: Battle Bombers

Team: Franky Aguilar, Mark Pereira, Drew Harding

Description: Taking the mobile crypto experience to where it should be.

The makers behind Battle Bombers are taking the concept of mobile-first crypto applications to users and developers. Battle Bombers uses an architecture that accesses the full native extensions in mobile ecosystems, which really stretches the capabilities of cryptocurrency on mobile. This application shows that app developers and designers will be able to fully express their creative abilities on mobile platforms without restriction.

How they used the Meerkat API: This team was able to use Meerkat to provide their users of push notifications with an alert regarding activity on specific addresses associated with the games they were playing on their phones. Once alerted of activity on an address, Battle Bombers sends that alert to the user in the form of a push notification.

Project: ETHBackpack

Team: Josh Forman, Peter Hendrick, Ron Stoner, Sean Martin

Description: Live, on main-net chain, IT certifications and degrees. Show you have certificates such as CCNA, AWS Certificate, Certified Bitcoin Professional with an ETH Wallet address.

ETHBackpack can allow companies that distribute professional certificates on the Ethereum blockchain. Contract deployed on main net.

Individuals seeking employment or contract work can show their credentials in a public, verifiable way. Employers seeking to hire professionals could potentially search for applicants that have the certifications they’re looking for and verify such certifications.

How they used the Meerkat API: This team used Meerkat to notify users and watchers of a specific address that it had been updated with a new certification or degree.

Loan to Value (LTV) Explained

When you apply for a traditional loan, the lender uses your credit score, as reported by third-party credit agencies, to determine your credit worthiness or financial “reputation.” The higher your credit score, the lower the risk. To offset your credit score or in some cases even completely remove it from the equation, you can apply for an asset-backed loan. With this type of loan, you can offer up your assets — anything from your house or car to your stock portfolio — as collateral to act as “insurance” for the lender. In asset-backed lending, borrowers typically secure loans for an amount that’s less than the total value of the collateral.

The measurement of the balance of the loan relative to the value of the collateral asset is represented as loan-to-value or LTV. For example, you may have a loan for $320,000 for a home that is valued at $400,000, in which case your loan is 80% of the total value of the home.

As an asset-backed lender, one of the things that makes SALT unique is that we don’t even look at your credit score. With a SALT loan when you have collateral — whether you’re unbanked, haven’t accumulated credit, or have poor credit — you can still get a loan. Instead, SALT uses loan-to-value of your collateral to assign risk. As LTV is a measure of risk, the lower the LTV, the lower the risk for the lender (and therefore the lower the interest rate for the borrower).

How is LTV calculated?

Good question.

LTV is calculated as the loan amount in USD divided by the value of the collateral in USD, expressed as a percentage.

As an example, if you have a current loan balance of $100,000 and your total collateral asset balance is $200,000, you have an LTV of 50%. To make things easier, we’ve added an LTV Helper to the borrower portal that illustrates exactly how the LTV is calculated. See below.

Understanding LTV and how it’s calculated is essential to making an informed decision about your loan terms. Liquidation events benefit no one, which is why we provide the tools like our automated notification system to help you avoid them. Before you apply for a loan, you should ask yourself:

Once you answer these questions, you can choose the LTV that’s right for you.

Starting LTV

When you are taking out a loan against your crypto assets with SALT, you presently have 3 options for your starting LTV; 30%, 40% and 50%. The starting LTV will determine approximately how much (in terms of dollars) of the crypto asset you will need for that loan.

From the example above, for a $100,000 loan, you would need $200,000 in Bitcoin, Ether, Doge, or Litecoin to secure the 50% LTV loan option. For a 40% LTV, it would be $250,000 and for 30% LTV, it would be approximately $333,333.

Using LTV as a measure of risk, the 30% LTV option is the lowest risk.

Why is a lower LTV seen as less risk?

As the LTV goes up, the value of the underlying asset goes down. In the case of a crypto asset-backed loan, the value of Bitcoin, Ether, Litecoin, or Doge is trending down.

If the price of the crypto asset falls too low, the LTV will continue to increase. As it approaches 100%, there is a threshold where the collateralized asset will be sold to pay back the loan. This is known as the liquidation threshold. This threshold can vary from business to business and loan to loan.

For our example, let’s say the liquidation threshold is set to a 90% LTV.

When the LTV ratio reaches 90%, the crypto asset will be sold to reduce the LTV back down.

Timeout. Liquidations!?!

At SALT, we pride ourselves in having a robust notification system that relays important account activity to borrowers via our portal, text, phone calls, and emails. We give you control of how you want to be notified about each activity. You can be notified of everything from deposits and withdrawals to LTV warning thresholds.

As a borrower, you always have the option to transfer more collateral at any time.

Back to LTVs.

Why does this matter?

As you might be aware, the price of Bitcoin (or any crypto asset) can move up and down. As the price moves up, your LTV goes down. As the price moves down, your LTV goes up.

To build on our earlier example of a $100,000 loan with a 50% LTV, let’s use Bitcoin as the underlying crypto asset. In this example, let’s use $4,000 as the US dollar price of 1 Bitcoin.

Loan Amount = $100,000

Starting LTV = 50%

Price of 1 Bitcoin = $4,000

Doing the math $200,000/$4,000, you would need approximately 50.00 BTC to get a $100,000 loan with a 50% starting LTV.

Bringing it all together!

From above, assuming the liquidation threshold is set at 90% LTV, the price of 1 Bitcoin would need to go all the way down to approximately $2,222 to raise the LTV up to the liquidation threshold of 90% LTV.

A $100,000 loan with a starting LTV of 40%, would require 62.50 BTC at a price of $4,000 per Bitcoin. However, the 90% liquidation threshold would not be reached until the price of 1 Bitcoin went down to approximately $1,778.

Repeating the example with a 30% LTV, you would need 83.33 BTC at a price of $4,000 per Bitcoin and would reach the 90% liquidation threshold when the price of 1 Bitcoin was approximately $1,333.