The stable makeup of stablecoin

stablecoin, man with laptop staring at different fiat symbols

In 2008, Satoshi Nakamoto released the Bitcoin white paper, introducing the concept of a decentralized currency to the public. From that time on, many have turned to cryptocurrency for an alternative to traditional fiat currencies that offers decentralization, transparency of exchange, and ease of use—especially when it comes to international exchanges.

However, along with the plaudits have come disadvantages, notably the volatility of digital assets relative to the US Dollar. The perceived value of a specific cryptocurrency by investors can lead to wide fluctuations in the value of Bitcoin, Ether, and other types of crypto. This, in turn, can make cryptocurrency more difficult to use as a medium of exchange or store of value.

Enter stablecoins, an inherently less volatile option being considered the best of many worlds. They provide a desirable link between the stability of fiat currency and the decentralization and efficiency of cryptocurrency.

What are stablecoins and where did they come from?

Stablecoin is a catch-all phrase for cryptocurrency that is pegged to specific reserves or other asset types. More specifically, stablecoin is divided into four groups:

  • Fiat-collateralized stablecoins: Cryptocurrency assets secured against real-world currencies, such as USD Coin (USDC) and Gemini Dollar (GUSD).
  • Commodity-collateralized stablecoins: Cryptocurrency assets fixed against commodities, such as oil, gold, and silver. One example is Pax Gold (PAXG), which is one of the collateral types available on SALT’s platform.
  • Crypto-collateralized stablecoins: Algorithmic stablecoins that mint dollar equivalents based on the value of the crypto provided to backstop each unit.
  • Non-collateralized stablecoins: Stablecoins that automatically adjust its aggregate supply to maintain a certain price or pegged asset. 

The first stablecoins, BitUSD, and NuBits, came online in 2014 and were collateralized through various other cryptocurrencies. Also released in 2014 was RealCoin (now Tether), the first crypto to be backed by so-called “real” assets. Active dollar-based stablecoins today include Paxos Standard, TrueUSD, USD Coin, Tether USD, and Gemini Dollar.

How to use stablecoin for a crypto-backed loan

Though it might not be a strong addition to an investment portfolio, stablecoins are useful in many ways. For example, at SALT Lending, as a provider of crypto-backed loans, we accept stablecoins for:

  • Making direct payments on crypto-backed loans. Reimbursement via stablecoin is nearly instant, with minimal time lag between payment and acceptance.
  • Maintaining a more stable loan to value ratio on a loan, by boosting stablecoin holdings as part of overall collateral.
  • Depositing stablecoin at any time to protect the cryptocurrency collateral value during a market downturn. Stablecoin payments can be made outside of normal banking hours or holidays, unlike cash or fiat payments, meaning borrowers can manage loans without the need for a bank.

SALT also offers loan payouts via stablecoin or fiat currency. The advantage of a stablecoin payout is that only a stablecoin address is required, no bank account is needed.

The potential of stablecoins

Cryptocurrency enthusiasts see value in stablecoins given their decentralized properties, ability to facilitate better payment rails for global commerce, accessibility in unbanked jurisdictions, and programmability to streamline business operations.

Meanwhile, more traditional institutions are researching stablecoins for their potential in cross-border lending and overseas transactions without conversion into fiat, or sovereign currency. The Bank of Canada mentioned the use of stablecoin in its 2020 vision, focusing on it as a part of emerging payment technologies. Meanwhile, The U.S. Office of the Comptroller of the Currency released guidance indicating that national banks are free to hold reserve currencies for stablecoin.

While much of the world continues to rely on fiat currency for financial operations, digital currencies have been quickly disrupting this archaic financial infrastructure. Of those currencies, stablecoins could bridge the divide between cryptocurrency volatility, decentralized ownership, and providing banking solutions in otherwise untouched jurisdictions.

For more information about cryptocurrency loans and stablecoins, contact SALT Lending.

How to use a crypto-backed loan

how to use a crypto-backed loan, man writing on note pad 10 ways to use a crypto loan

If you need access to a loan, you’re probably considering the lineup of traditional options like credit cards, personal loans, business loans, and home equity options. They all base your ability to borrow off of your income, credit, and possibly your assets. But one option that isn’t as widely-talked about is a crypto-backed loan. It’s a new way to borrow that doesn’t factor in your credit and income as no personal guarantee is required. Instead, it’s a loan simply secured by your crypto assets. So how can you use a crypto-backed loan from lenders like SALT?

10 ways to use a crypto-backed loan

1. Pay off credit card debt

Credit cards have a place in our economy and can help you rack up rewards, but with interest rates up to 29%, they aren’t typically the best option for carrying balances. Crypto-backed loans, on the other hand, give borrowers a flexible way to access lump sums of cash with interest rates starting as low as 5.95%. 

If you have crypto, you can get a crypto-backed loan and use the proceeds to pay off high-interest credit card balances, consolidating them into one payment and potentially lowering your cumulative interest rate.

pay off credit card debt, image of man holding credit card

2. Make a large purchase

Whether you’ve been planning to make a purchase for a while, or an emergency popped up and took you by surprise, the proceeds of a crypto-backed loan can help you cover it. For example, say you want to take a family vacation to Hawaii. Instead of putting the flight and all the trip expenses on a credit card, you can take out a crypto-backed loan and then pay for everything in cash. This can help you avoid higher interest rates and any negative impact on your credit score.

3. Home renovations and improvement projects

From a burst water pipe to an unexpected HVAC repair, homeownership can be expensive. While it’s advised to have a rainy-day fund just for these occasions, even the best savers may find the final bill just out of reach. You may also feel reluctant to drain your emergency savings account to put your house back in order. A crypto-backed loan can quickly get you the cash you need.

man painting home, complete home renovations and improvement projects

4. Paying off medical debt

If you’re still opening bills every month thanks to that one time you broke your arm ten years ago, you are not alone. About 32% of American workers have medical debt and more than half have defaulted on it. Medical debt can be crippling to an otherwise healthy budget, and with payments lower than with other types of financing, it can take years and years to pay off. 

A crypto-backed loan may be just what you need to get that hospital or clinic to stop calling, and it’s often much cheaper than putting all of that debt on credit cards. Further, if your personal credit is maxed out, a crypto-backed loan can open up a new avenue of borrowing for you. 

pay off medical debt and bills, image of hospital and money

5. Planning a wedding

Even if you don’t want to spend too much on your big day, the average wedding in the US costs just shy of $40,000. From the dress and the venue to the flowers and catering, many expenses add up. Temporarily trading your crypto for cash can help you cover the big day without digging into savings or driving up your credit utilization. Cash payments to vendors can also sometimes get you a discount on services, giving you yet another reason to consider grabbing that crypto-backed loan before saying, “I do.”

plan and pay for a wedding, image fo couple and a wedding cake

6. Buying a house or real estate

Have you considered buying a property outright without the hassle or extra fees of a mortgage? A crypto-backed loan may be just the ticket to closing on that house deal. You’ll also be at an advantage as a cash buyer in an increasingly tight housing market; the seller may be more than happy to give you the deal since there are no additional lender hoops for either party to jump through. Cash obtained from a SALT loan is also free of those “extra” charges, such as loan origination fees.

Buy a home or real estate, new home

7. Starting a business

Even the simplest online businesses have startup costs. A crypto-backed loan can help pay for the costs like forming an LLC, building a website, and getting your first product manufactured. Don’t let another year pass with the excuse that you just don’t have the funds. If you have crypto assets, this can be the year you get your dream business going.

8. Upgrading mining equipment for mining operations or individual miners

Crypto miners have to evolve to survive, and that means investing in the latest, most powerful equipment. Being that you’re already involved in the crypto sphere, crypto-backed loans are a natural choice that can help you stay competitive and get every coin you can. Plus, it’s an investment that can help you not only pay off your loan and get your crypto back but also earn more.

upgrade mining equipment for bitcoin and crypto mining

9. Fund ongoing operational business costs

While new businesses benefit from getting a funding jump-start, existing companies can often use a little extra cash flow too. Whether you want to hire new employees, invest in marketing, expand your product offerings, or something else, business owners of all types are turning to crypto-backed loans to diversify their borrowing and take advantage of low rates through short-term loans.

fund or pay for operational costs

10. Reinvest or trade crypto

Serious crypto investors often need fiat to acquire more crypto. A crypto-backed loan that gives them access to cash can help them do so. With the crypto markets showing promise, and the rates on SALT loans very low, it’s easy to see how smart investors can make the numbers work in their favor to expand their crypto enterprises.

invest in crypto

SALT crypto-backed loans: Flexible funds with no personal guarantee

Whether you only need a few thousand dollars or a large lump sum, SALT loans can give you access to $5,000 or more in USD or Stablecoin. Secure your loan easily, with a single crypto asset, or through a combination of SALT-approved currencies. You’ll always know how your assets are doing, as SALT’s secure system and unparalleled customer support ensure that you can check in on your assets at any time. There’s no credit check needed, either. Once you deposit your collateral assets onto the SALT platform, you’ll be well on your way to getting the cash you need for whatever move you want to make.

Introducing SALT Connected Accounts – UPDATED (August 25, 2021)

UPDATE: Due to the fact that Zabo has joined Coinbase, they are shutting down the API for connected accounts, meaning we will no longer be able to offer this feature.  

Want to see all of your crypto assets in one place?

Now you can with SALT Connected  Accounts. 

This new feature allows you to add your external accounts and wallet addresses to track all of your crypto assets right from the SALT app.

With a holistic view of your assets, you can manage your loan more intelligently than ever.


iphone rendering

Get Started with SALT Connected Accounts

  • Download the SALT App

    Available today on the Google Play and App Store

  • Connect Your Accounts

    Connect up to 100 external accounts from the SALT app

  • Get the Big Picture

    Track all of your crypto assets in one place

Disclaimer: Link your cryptocurrency account via read-only API access or blockchain address tracking. Account data is for informational purposes only and will not constitute loan collateral.

SALT announces the SALT Card

Waitlist now open for the first crypto-backed credit card designed to help you HODL.

Today we announced our concept for the SALT Card, the first crypto credit card that lets you use your crypto to buy anything — from large purchases like vacations to everyday purchases like coffee and groceries– without selling or spending any of your crypto. Unlike other cards on the market that encourage you to spend your crypto, the SALT Card is designed to help you HODL and stack sats by earning bitcoin rewards on every purchase. No credit check required.

Already sold on the concept? Join our waitlist to stay in the know or keep reading to learn more.

Credit card - whether its for video
SALT Credit Card fanning out gif

How will the SALT Card work? 

With the SALT Card, your crypto is your credit. This means we won’t ask for your credit score or do a credit check because your digital assets (not your credit score) will secure your line of credit and determine your credit limit. 

We designed it this way because we know you want to get the most out of your crypto assets without having to sell them. 

How is it different from a crypto-backed loan?

While the SALT Card is secured by your crypto assets, it’s different from a crypto-backed loan in that you can choose to borrow only what you need, and you only pay interest on an existing balance. Like a traditional credit card, if you pay the balance off each month, you won’t owe any interest. Plus, by having a physical SALT Card, you will be able to use it in the same places and for the same purposes as the other credit cards in your wallet.  

What makes the SALT Card stand out? 

Here are just a few of the existing benefits. We’re still in the early stages of developing the card and are currently in search of a card partner.

Benefits of the SALT Credit Card

Once we have a partner on board, we will be able to finalize the card rewards and any additional benefits. In the meantime, we’d love to hear your input on what you value most in a crypto credit card. 

We’re excited to be launching a new product and hope you’ll join our waitlist to receive the latest updates in the development of the SALT Card.

If you are connected to a major credit card partner and are interested in working together, please contact [email protected] We’d love to hear from you and explore opportunities.

Disclaimer: By joining the waitlist you agree to receive marketing communications from SALT. The waitlist does not guarantee that you will receive a SALT Card. SALT Card will be subject to eligibility requirements, including geographic and suitability limitations. Fees and terms are not final and are subject to change at any time in SALT’s sole discretion.

Update regarding our supported collateral types

Effective May 25, 2021, we will no longer accept Dash and Doge as collateral for new crypto-backed loans, nor will we support future deposits of these collateral types, but for those who already have Doge and Dash on our platform, we will continue to support and monitor your collateral. Withdrawals will continue to be available as usual for anyone who currently has Doge or Dash on our platform.

We are constantly evaluating our current collateral types and considering new ones based on market conditions and other parameters. Given Doge and Dash do not meet our current collateral requirements, it is necessary for us to remove them from the platform at this time. While we are sad to say goodbye, it doesn’t mean it’s goodbye forever. And who knows? Between Elon’s tweets and Coinbase’s decision to list Doge, maybe one of these collateral types will be back before you know it. Only time (and market conditions) will tell.

In the meantime, we continue to support many beloved cryptocurrencies as collateral for crypto-backed loans including BTC, ETH, LTC, BCH, PAX, PAXG, USDC, TUSD and SALT.

Want to be kept in the loop regarding announcements and products releases? Sign up for our newsletter.

SALT Granted Extension on Form 10 Filing Date

A message from SALT regarding our Form 10 filing deadine

As previously announced, part of our settlement with the U.S. Securities and Exchange Commission (SEC) requires us to file a Form 10 to register our SALT Tokens under Section 12(g) of the Securities Exchange Act of 1934.

We have been working on the registration process and have been granted a further 30-day extension on our Form 10 filing deadline by the SEC. The Claim Form for purchasers of the SALT Token (applicable to those who purchased SALT Tokens directly from the SALT before and including December 31, 2019) will be available 60 days after the date of the filing of the 1934 Act Registration (or on the date seven (7) days after the 1934 Act Registration becomes effective, whichever date is sooner). For additional information about the claims procedure see the original SEC order.

Update: XRP and your SALT account

hand holding a wrench

In light of the uncertainty created by the recent SEC complaint involving Ripple/XRP, we are pausing support for all new XRP deposits on our platform.

Withdrawals of XRP will still be enabled for all users.

If you have any questions about your loan secured by XRP, reply to this email or contact [email protected]

How to Protect Your Anonymity Against Crypto Dusting Attacks

Understanding the nature of dusting attacks and airdropping can help you determine the best way to protect yourself and your crypto holdings from hackers and scammers.

Since Bitcoin’s debut to the public more than a decade ago, supporters have praised the benefits of cryptocurrency transactions including decentralization, transparency and anonymity. While these benefits certainly have their advantages, crypto’s nature also opens you up to a level of risk that has been realized through activities like dusting attacks and airdrops that often go completely unnoticed if crypto holders don’t know what to look for. Fortunately there are steps you can take to protect yourself from malicious entities interested in deanonymizing you. Understanding the nature of dusting attacks and airdropping can help you determine the best way to protect yourself and your crypto holdings from hackers and scammers.

The blockchain: Not as anonymous as you might think

Many people mistakenly think bitcoin is private. It’s anonymous, yes, but not private. A transaction is made up of input(s) and output(s). When you spend, you are creating a transaction using your address as an input. When you receive, your address is given an amount of bitcoin, which becomes the output. All of this transaction information (including the addresses involved, amounts and times of the transactions) are recorded on the blockchain. As that ledger is 100% transparent and public, so are your transactions. Any uninvolved party (people who have not transacted with you directly) examining the blockchain can see the cryptocurrency being received or spent — they just won’t know it’s you spending or receiving it because the owners of the addresses are not revealed. If the person you’re transacting with knows who you are however, they may be able to associate your blockchain wallet (and future transactions) with you, as anonymity only applies when referring to non-involved parties. And even still, a non-involved party may not know who you are from the beginning, but by watching blockchain activity, they may be able to figure it out if your wallet is maliciously “dusted” and use this information to deanonymize you in the future.

Dusting: Revealing your identity, one satoshi at a time

When you use bitcoin to pay for something, one or more addresses (UTXOs) are selected that most closely match the amount due and you receive an output UTXO with your change. For example, if you were paying for something equal to $400 and you had three UTXOs in your wallet equal to $5,000, $5, and $399, you could use the UTXOs equal to $399 and $5 and would receive a UTXO back worth $4. All of this information is recorded on the public ledger.

With dusting, a hacker or scammer sends very small amounts of a cryptocurrency (dust) to a large number of addresses. If you receive dust, you will have a UTXO in your wallet with a very small value. As you spend from your wallet, the attacker watches to see when the dust UTXO is picked up. When it is, they take note of all the other UTXOs that go along with it as well as what addresses they go to. When these entities study transactional patterns long enough, they can eventually identify all the addresses linked to your wallet, which means they can figure out how much crypto you have. If your account is of interest (you have large sums), they can work on figuring out it belongs to you, which can make you a target for anything from scams and phishing campaigns to cyber-extortion threats.

One reason dusting is so insidious is that the amounts of crypto sent to accounts are so very small; they are smaller than the minimum transaction fee required to use cryptocurrency. Most times, the dusting amounts are calculated in units known as satoshis; one satoshi equaling 0.00000001 bitcoin. Given the minuscule size of dust, the chances are pretty good that many people won’t notice them as they casually scan their cryptocurrency total.

Airdropping: Free tokens, potential scams

Airdropping is similar to dusting in that it adds small amounts of crypto to your wallet. But airdropping’s purpose is far less ominous. Companies that airdrop want to use you to spread the word about their great new cryptocurrency. As such, they will send free coins or tokens to your address (found on the public blockchain). Sometimes they send them free and other times they ask for something in return (like a tweet about the company and its currency). You might also actively encourage airdrops to your wallet in hopes that the new cryptocurrency will ultimately have a large payout. There are hundreds of airdrop lists and websites, all eager for your interest.

While the purpose of airdrops is often benign, problems come up when hackers and scammers reach out for more than your public wallet address. If you aren’t careful, you could be at risk from the following:

  • Private key theft. Private key theft takes place when an airdrop entity asks for the private key to your wallet. You should never give out your private key. While more savvy crypto users can spot such a scam, those new to cryptocurrency trading could fall victim to it.
  • Trolling/information collecting. Sometimes nefarious airdrop websites are used, not to promote currencies, but to gather data — such as email, wallet addresses or even social media information — that can be sold to third parties or used for future phishing attempts.

Protect your crypto from malicious dusting and airdrop attacks

Because cryptocurrency transaction information is public knowledge, it’s important to protect yourself, your holdings and your anonymity. In addition to ensuring anti-spam and anti-viral protection for your wallet, consider the following steps.

If you think you’ve been dusted, don’t move the dust. Look for wallet apps that allow you to “mark” small, unknown deposits in your wallet to prevent them from being used for other transactions.

Monitor your balance — 100% of the time. If wayward satoshis suddenly show up in your cryptowallet, you might have been dusted. It’s a good idea to find a wallet app with a push notification, which tells you when you receive new funds.

Don’t give out private information — ever. If a website — or other airdrop entity — wants more than your wallet address in exchange for tokens or coins, it’s a red flag. Be as wary of handing out your cryptocurrency information as you would be of providing fiat bank account log-in data.

Keep your anonymity in place

None of the above is meant to suggest that cryptocurrency trading or usage is dangerous. It is, however, a reminder that while transactions can be anonymous (when actually conducting a transaction you may potentially be revealing information about who you are to complete it, which can then be associated with your wallets), they aren’t private. Unfortunately, scammers and hackers are taking advantage of the very public blockchain technology to determine the identities of those behind cryptocurrency transactions.

The good news is that knowledge is power. You can protect yourself from malicious entities and preserve your anonymity by being aware of attacks like dusting and taking preventative action. Doing so will better protect you and your holdings while helping to ensure you don’t become victim to phishing or cyberextortion threats.

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

The Nash equilibrium helps motivate miners to do more than generate new bitcoin. Each miner has no choice but to play a role in making sure the network functions as it should. This is a part of the “pile of stones” each miner agrees to shovel.

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 worldC

 

How to Grow Your Business Capital Through Cryptocurrency

By Annabelle Pollack

Disclaimer: Buying cryptocurrency is risky. This article is for informational and educational purposes only and does not constitute investment or financial advice.

Cryptocurrency is reshaping the finance and business worlds. Not only has it challenged conventional thinking, but it has provided new avenues for entrepreneurs and business owners to start and grow their businesses in these uncertain times. Many of them have turned to crypto as a way to raise initial capital or to fund ongoing operational costs. If you’re seeking creative ways to grow your business capital through cryptocurrency, there are a few ways to go about it — the most important thing when it comes to getting involved with crypto is doing your research to identify the best avenue for achieving your business goals.

Choose the right cryptocurrency for your business

When it comes to determining which cryptocurrency is the ideal fit for your business, you have several options from which to choose. At the moment, there are already more than 1,000 unique cryptocurrencies in which you can transact. But just as there are blue-chip stocks, a guide to cryptocurrencies by FXCM details how some digital currencies are considered the “gold standard” of the industry. At the top is Bitcoin, which is regarded as the first incarnation of cryptocurrency and is projected to have a market capitalization of $1 trillion in the near future. Next is Ethereum, whose $83 billion market capitalization is poised to expand in the coming years due to its growth potential in the online sphere. Then, there is Litecoin, and its surging market cap of over $18 billion. Bitcoin, Ethereum, and Litecoin are seen as the strongest investments, with Yahoo! Finance noting how a high market cap is indicative of high investor activity. All three are extremely liquid, too, which means they can be easily sold at the market price. Each cryptocurrency is different and may boast specific features that others do not. Some factors to consider as you’re choosing a cryptoasset for your business are security, privacy, transaction speed, block times, market cap, liquidity, and the blockchain upon which the cryptocurrency is built. Once you identify which factors are most important to you, you can narrow down your options and choose the crypto(s) best suited for your business.

Buy and Trade Crypto

Once you’ve done your research, identified your cryptocurrency of choice, and learned the ins and outs of the industry, you can evaluate whether you’re confident enough in your knowledge to move forward with buying and trading digital currencies. That being said, it’s essential to prioritize safety and security regardless of whether you’re trading frequently or buying for the long term. A good way to do that is to find a reputable online cryptocurrency trading platform that can help you buy and trade crypto, as well as help protect your investments. Some trading platforms even offer crypto CFDs (not available in the United States) that don’t require a special wallet or exchange account, but will ask you to speculate on the direction of their price movements instead. You can also invest in several coins at the same time, as doing so may help you mitigate the risk that comes with putting all your eggs in one basket. This way, you’re more likely to see your business capital increase.

Get a crypto-backed loan

In an instance where you need cash but are unwilling to part with your crypto entirely, consider taking out a crypto-backed business loan. As the name suggests, this type of loan is secured by cryptocurrency, offering a way for you to get cash or stablecoin without having to sell your cryptoassets. The amount of cryptoassets you’ll be required to put up as collateral is contingent on a few factors including your loan amount, loan duration, and Loan-to-Value ratio (LTV). If this option appeals to you, a SALT loan might be just what you’re looking for. SALT accepts a dozen coins as collateral including Bitcoin, Ether, and Litecoin, and you can choose one or more of the offered collateral types to secure your loan. SALT also offers flexible loan terms, allowing you to choose your desired loan-to-value ratio from 30%-70% (amount borrowed divided by the value of your crypto), the duration of your loan (3–12 months), and whether you’d like to receive your loan proceeds in fiat or stablecoin. Interest rates are competitive, too. By taking out a crypto-backed loan, you can secure the funds to start a new business or operate and improve an existing one without selling your crypto.

Accept cryptocurrency payments

Another way that a business can generate further capital is to accept payments via cryptocurrency. For instance, Business2Community claims that businesses can lower the transaction fees involved during payment transactions due to the high number of peer-to-peer processing networks accepting popular coins. Compared to traditional methods like wire transfers and check payments, cryptocurrency can be a lot faster and more efficient. In addition, cryptocurrency transactions can be conducted directly between the business and the customer on the blockchain, which avoids the potential for third-party scams and external payment disputes. By accepting cryptocurrency payments, businesses can simultaneously grow their capital and streamline payment processes.

While there are significant risks that accompany cryptocurrency investments, doing your research and being diligent can help you significantly grow your business capital and fund new developments. Exploring different payment options and looking into specific coins can help you become more knowledgeable when it comes to determining the best way for you to start or operate your business.

 

The first card that lets you use
your crypto for everyday purchases,
without selling any of it.

The first card that lets you use
your crypto for everyday purchases,
without selling any of it.

Three SALT credit cards floating

The first card powered by your crypto,
not your credit score.

The first card powered by your crypto,
not your credit score.

Three SALT credit cards floating