SALT, Dash and Staking: SALT’s Rob Odell Interviewed by Dash News

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Recently we announced the support for Dash as collateral for loans, a feature we were excited to release given the demand from you along with the cryptocurrency’s potential to further financial inclusion around the globe.

Our VP of Product and Marketing, Rob Odell, recently spoke with Dash News about the platform, noting that $100,000 worth of Dash could secure a loan up to $70,000 — perfect for situations where you require cash but are reluctant to sell your cryptocurrency.

Rob qualifies the addition of Dash as “one of the most innovative inclusions that we’ve worked on since the launch of the platform.” We’ve integrated it in such a way that, while custody of the Dash itself is delegated to our platform, you retain the masternode rights so you can continue to earn payouts and voting rights from staking. With comprehensive insurance and the benefit of not commingling assets, this further ensures that SALT can provide you with highly secure storage options — something that may be more convenient and less risky than taking custody into your own hands.

This ability for you to maintain your masternode status, while utilizing your assets as collateral is an industry-first, and Rob dives into this further with Joël.

Listen to the full interview for more details and follow these step-by-step instructions to custody or borrow against your Dash with us and still run your masternode.

SALT Partners with NODE40 to Offer Fiat Loans for Dash Masternode Owners

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As part of our commitment to supporting the Dash community, we’re excited to announce our partnership with NODE40, the blockchain masternode hosting and monitoring provider. The partnership will provide expanded loan options for DASH masternode owners in tandem with the Dash community’s first masternode hosting service.

Given its long-term viability, its numerous use cases, and its level of adoption, Dash is an appealing collateral form for SALT’s platform. In our April 2019 announcement, we affirmed our commitment to support the Dash community and its mission, noting our respect for Dash’s two-tier network that uses masternodes to maintain the viability of its blockchain.

“Our development team has made a technological breakthrough and has advanced our mission by unlocking value and liquidity in cryptocurrency assets through collateralizing the Dash connected to masternodes,” said Rob Odell, VP of Product and Marketing at SALT. “Dash has quickly become our second most popular collateral option behind bitcoin and the community has reacted positively with a high volume of loan applications. We’re excited to work with NODE40 to increase our support for the Dash community and provide innovative solutions and services for masternode holders to get the most out of their assets.”

A Dash masternode serves to expedite transactions and scale the network by relaying them over a second-tier network. While Bitcoin’s second layer is an off-chain solution to scale, Dash runs an on-chain second layer using masternode operators who are incentivized by the network like miners in bitcoin. In March 2015, NODE40 was the first company to provide network infrastructure to host masternodes. According to dash.org, each masternode pays out approximately six Dash (currently just over $1000 USD) per month in mining rewards.

“Our companies’ shared dedication to customer service naturally brought us together when a mutual client wanted to take out a fiat loan using their masternode’s Dash. What attracted us to SALT was the caution with which things are done; they have a solid reputation of doing things by the books,” said Perry Woodin, Co-Founder and CEO of NODE40 and a Dash Trust Protector. “Having been a part of Dash from early on, we tend to do things conservatively, and that was important to us when evaluating how a loan is backed and if our customers would be protected in the case of an audit. With SALT we share the vision of being cutting edge while playing by the rules not only to protect ourselves, but to bring legitimacy to the industry.”

DASH holders must prove ownership of 1,000 DASH to obtain masternode status and have the right to vote on treasury proposals and receive recurring payouts. However, if at any point, the Dash is moved, the node will be brought offline and will downgrade immediately, stripping the node of its master status. With SALT’s new system, Dash holders can move their Dash to our platform and maintain their masternode status as well as their voting and payout rights, all while using the associated funds as collateral for a loan.

The key to this software integration comes from a recent Dash update, DIP3, which introduces pro registration transactions. Instead of referring to another transaction from the network to sign a message as proof, a “proreg tx” refers to an output produced by the transaction itself, which in turn acts as proof of ownership. Dash holders can now collateralize the Dash connected to their masternodes by parking their funds in our insured cold storage — the signature used to move those funds validates ownership, allowing users to continue participating in the network.

If you’re interested in using your Dash to secure cash loan with us, visit https://saltlending.com/dash/ to get started.

What to Expect When the Value of Your Collateral is on the Decline

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Your collateral is what protects your loan. It’s why SALT doesn’t need to perform income checks or credit checks when issuing a loan. But cryptocurrencies are volatile, so what happens if the value of your collateral begins to fall? Declining collateral value negatively impacts your Loan-to Value-Ratio (LTV) — that is the amount of outstanding principal still owed on your loan divided by the value of your underlying collateral: Outstanding Principal / Value of Collateral. LTV is the key metric SALT uses to determine the health of a loan. The lower the LTV, the healthier the loan. If the value of your collateral goes up, your LTV goes down. If the value of your collateral goes down, your LTV goes up. It’s that simple.

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Choosing your Loan-to-Value (LTV)

When choosing your LTV, the most important consideration is your risk tolerance. We offer starting LTV options of 30%, 40%, 50%, 60%, and 70%. If you go with a 30% LTV, you are choosing the safest level of overcollateralization, or cushion. With a 70% LTV, you won’t have to deposit as much crypto to begin with, but you’ll have the least amount of cushion. The higher the starting LTV, the higher the risk. Choose the LTV option that’s right for you.

What can you expect from us when your collateral declines in value and your LTV begins to rise? Lots of notifications.

If your collateral continues to go down in value, your LTV will steadily climb. As your LTV crosses certain critical thresholds (75%, 83%, 88%, and 90.91% as of the time of this writing) SALT’s robust monitoring and notification technology kicks in to help protect your loan.

  • At 75%, we give you a heads up, letting you know to monitor your loan more closely given your collateral is declining in value.
  • At 83%, we inform you that things are not looking so good, and you may want to consider paying back some of the loan or depositing extra collateral.
  • At 88%, we issue a final warning to let you know that if you don’t pay back some of the loan or deposit more collateral, you run a high risk of having your assets liquidated.
  • At 90.91%, SALT is contractually obligated to liquidate a portion of your collateral in order to prevent the lender from losing their investment.

After all, lenders wouldn’t be willing to lend the money in the first place if SALT couldn’t guarantee its safety.

How you respond to a rising LTV and warning notifications is up to you. Here are the current options:

  1. Pay back a portion of the loan — You can make a payment in USD via wire or ACH, or you can make a payment using a stablecoin instead. SALT currently accepts PAX, USDC and TUSD. With this option, you are choosing to lower your LTV by paying down the principal on your loan.
  2. Deposit more collateral — You can quickly and easily deposit additional collateral (it can be the same collateral your loan is backed by or a different collateral type that we offer). With this option, you are choosing to lower your LTV by increasing the total value of the underlying collateral.
  3. Do nothing — You can choose to ignore the warnings. If your collateral continues to decline in value, SALT may eventually be forced to liquidate a portion of your assets on the open market.

We’ve done the math to show you how each of these options impacts your assets, remaining principal, and required payment.

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Based on the above calculations, if you want to avoid any loss of assets, it’s best to respond as quickly as possible with options one or two. Otherwise, option three is available if that’s what you prefer. Either way it’s important to think through the options and know where you stand before your LTV crosses our liquidation threshold.

Keep tabs on your loan health from anywhere via the real-time LTV widget on your web dashboard or by logging into your account through our mobile app.

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It’s on us to monitor your loan health and keep you updated. It’s on you to take action (or not take action) when your collateral value is on the decline.

Crypto — Coming Into Its Own

By Jenny Shaver 

A look at indicators of industry maturity and assessing the right kind of investment risk.

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(This article is adapted from a keynote speech delivered at the April, 2019 Crypto Invest Summit.)

I often get asked, whether it’s by former colleagues, or people I meet at social events, or even my dad, “Why would people invest in crypto? It seems risky.”

Depending on your investment strategy, sure, it’s risky. But…it’s a different kind of risky than it was even two years ago.

So, what’s changed?

Crypto asset performance isn’t correlated to any other asset class. It doesn’t move with fiat inflation or commodities prices. It’s not tied to the performance of a company like a security. That inherently creates risk but also opportunity for significant gain. This is a risk that we as an industry weather and accept.

The perceived risk my dad is referencing has less to do with crypto asset volatility and more to do with the perception that the crypto industry reflects the lawless, undisciplined behavior and unbridled speculation akin to the caricature of the wild west.

This perception is inaccurate.

I was having a conversation with a colleague about this very topic and he said,

“Our industry isn’t in a state of chaos like The Wild West. Our industry is more analogous to The Space Race.”

John F. Kennedy said of The Space Race, “We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard.”

Blockchain technology attempts to solve previously unsolvable problems. The complexity of the technology and the nascent nature of the regulatory framework, requires new and emerging expertise. It requires risk takers to set new precedents.

This pursuit has resulted in a pouring in of talent and capital which have given rise to increasing competition and meaningful industry advances. We are seeing this manifest via several indicators of industry maturity.

Broader Adoption

Despite the crypto winter, or bear market, or whatever we want to call 2018, we saw a nearly doubling of the amount of individuals who hold crypto assets. A survey published by Forbes suggests that crypto holders are skewing older and more affluent than previously thought.

UTXO analysis conducted by Delphi Digital suggests that most crypto holders who held a position longer than five years largely sold off their holdings, partly contributing to the downturn, but clearing the way for new investors seeking engagement with new types of products.

From an institutional perspective, traditional financial services and crypto financial services are converging. We are seeing validation of crypto assets in traditional companies incorporating crypto services or blockchain infrastructure.

Institutional adoption also extends to partnerships and service providers for crypto companies. Just in the past 12 months, I have seen an increased willingness of vendors and service providers to work with crypto companies. Companies who were saying “no” to providing services for us 12 months ago, are now actively trying to work with us.

Compliance

US-based crypto companies have made significant strides to create risk and compliance programs that are comparable to traditional financial institutions.

This includes a robust KYC/AML program, customer data protection standards, SOC compliance, compliance monitoring of blockchain addresses, and dedicated resources to oversee compliance programs.

As our industry attempts to navigate its purpose of removing barriers for transferring value, even regulatory barriers, compliance programs at this stage of our industry maturity, are a necessary step for broader adoption and mitigation of regulatory risk.

Insurance

Insurance has been a hot topic as of late because it’s a relatively new advancement in our industry. But it’s meaningful.

The fact that insurance providers are willing to underwrite affordable insurance policies for crypto-specific operations is a strong indicator that we as an industry are demonstrating the safety of holding crypto assets.

I urge investors to ask critical questions about the specifics of insurance programs — the coverage amount, incidents covered, and the claims and payout process and timeline.

The good news is that as our industry continues to prove itself, the competition amongst insurance underwriters will increase, which, in turn, will drive down costs.

Market Data Integrity

Our industry is dealing with our own data integrity issues just like any other high volume, high velocity industry.

Recognizing these gaps and the dependence on reliable market data to drive participation, there has been a surge of data research companies dedicated to improving the quality of market data.

The recent incident of BitWise calling out CoinMarketCap for overstating trading volumes, is a great example of our industry’s maturity in this area.

This is significant not just because companies like BitWise are expending resources to conduct due diligence on our industry’s leading data providers, but also because of CoinMarketCap’s acceptance of accountability to address the issue and improve their product.

It demonstrates that we are holding ourselves to a higher standard, and that investors will have increasingly accurate sources of information to make informed decisions.

Response to Scalability Challenges

JPMorgan announced earlier this year that it is investing in its Quorum blockchain infrastructure to facilitate payments in a more efficient manner using its dollar-backed JPM Coin.

It’s currently being piloted with a few institutional clients but is promising to revolutionize their payment processing.

To realize this potential will require blockchains to dependably support concurrent transactions at a scale that is not yet possible, or at least not yet largely practiced and tested.

Our industry is investing significant resources to solve this problem, and promising solutions are surfacing.

A second layer protocol solution, Lightning Network, is perhaps the most exciting advancement in the race for scalability.

For crypto to deliver on its potential of revolutionizing the transfer of value on a global scale, it must rise to meet the challenges of scale.

We’re working on it.

More Sophisticated Investment Products

What I see as the most exciting indicator of market maturity is the increasing diversification of product offerings.

Interest-bearing accounts are seeing promising early performance, futures and options are now available on select exchanges, as is trading on margin, and ETFs are on the near-term horizon.

What I have seen is an industry response to the unique nature of crypto assets and the needs of crypto holders. In crypto lending, for example, simply offering a crypto-backed, USD loan, does not address all market uses cases.

If 2018 has taught us anything it’s that we need products that drive market engagement in both bear and bull markets.

Our industry now offers several ways for investors to participate — directly through investing in crypto assets, less directly by offering fiat capital pipelines for interest-based products, or indirectly through investing in the growth of crypto companies and projects.

These options are allowing for a wider breadth of investor participation with varying risk appetites.

I return to the question, “Is crypto investing risky?”

When we empower a company like Charles Schwab to manage our wealth portfolio, we know there is some risk in the investment strategy but we don’t worry about them losing or mismanaging our money.

There are enough responsible companies in the crypto industry that can provide the same amount of assurance about the handling of your crypto assets. I encourage investors to seek out reputable companies and ask tough questions about their operations due diligence. Watch how companies respond to industry incidents like a hack or key compromise event. Our industry is still young and we’re still learning our vulnerabilities. The good companies will have a disaster recovery procedure that cure customer losses.

We have seen what happens when more resources are deployed to our industry. The result is more talent, innovation, and increasing sophistication that results in better products and better opportunities for investors.

Everyone wins.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of SALT Lending.

Considerations for Filing Taxes as a Crypto Holder in 2020

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Disclaimer: This article is for informational and educational purposes only and does not constitute tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors when filing your taxes.

While the tax deadline has been extended from April 15, 2020 to July 15, 2020 due to the COVID-19 crisis, it’s still a good idea to file as soon as possible, especially for those taxpayers who are expecting a refund. For crypto holders, it’s important to note that for the first time ever, this year every tax-paying American will be getting quizzed explicitly on their crypto activity. Indeed, the 2020 season will mark the first time the following question appears right at the top of the 1040 tax form:

“At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

This year however, federal tax forms ask about your bitcoin and other cryptocurrency activities, the latest move to more directly specify details for cryptocurrencies. The IRS is focusing on those who may be underreporting their crypto transactions or not reporting them at all.

What does this new sentence in your tax form this year really mean, and how should it impact how you report crypto in your 2019 taxes? To help understand, we asked SALT experts, along with our partners and friends at Node40TaxBitBlox and Friedman LLP.

Know Your Cost Basis

The first thing to know is that one is taxed on profit — the key figure to find out is the gain number. The most recent set of guidance from the IRS was released in October 2019 and it included a few methods of “cost basis assignment” mentioned therein. For those who aren’t accountants, this means one of a few ways to track profits and losses. Know your cost basis and what the IRS deems taxable. Most importantly, know your “gain number.”

Cost basis means the price at which you initially acquired an asset. For example, if you hold one BTC today, which you previously purchased at $9,000, and the price today is $11,000, the cost basis is that acquisition price of $9,000. So, the unrealized gain number (without selling) and the realized gain number (if you were to sell) is the net between today’s price and the cost basis, meaning in this case $2,000.

Cost basis can also mean the fair market value of the asset on the date of acquisition. For example, you received one BTC from work as compensation for services on 1/1. The value of BTC on 1/1 is $9,000. Later when you sell one BTC at $11,000, the then fair market value of $9,000 would be the cost basis, and you would realize $2,000 gain. The fair market value can be determined using a reasonable method, such us prices on any third-party independent trading platforms, as long as the same method is applied consistently for all your crypto transactions.

Loan collateral does not count as a transaction

For SALT customers, it’s important to know that your crypto held as collateral for a cash or stablecoin loan does not count as a taxable transaction unless your collateral is liquidated; a liquidation is a taxable event. If your collateral increases in value during the course of your loan term, this does not count as a gain or taxable action unless the collateral is sold. According to Friedman LLP, should you have a business loan with SALT, take note that business interest is deductible and subject to limitations (generally 30% of adjusted taxable income if the business had more than $25 million gross receipts). While interest on personal loans is generally not deductible, it may be deductible if you are self-employed and you use the loan for your own business or if you are employed but you use the loan to make other investments that generate income (the loan then becomes a business loan or investment loan).

First-In-First-Out (FIFO)

First-In-First-Out (FIFO) is the default accounting method. Your cost (the price at which you purchase a crypto asset) is calculated at the initial purchase date. So, if you buy a Bitcoin in January, another in March, and sell one in June, the “cost” isn’t from March, but January. The first “in” is the first purchasing transaction. First “out” is the first one sold. With digital currency the date of purchase and sale are clear in the coins and tokens themselves, making reporting much easier.

The aforementioned guidance from the IRS clarifies how to calculate your gain number.

By way of example: assume you purchase one BTC on 1/1 for $10,000, one BTC on 2/1 for $15,000, and then sell one BTC on 3/1 for $12,500 — your taxable gain or loss using first-in-first-out is computed by taking $12,500 of proceeds less your cost basis of $10,000 (which comes from the earliest purchase of BTC). This results in a $2,500 taxable gain.

While FIFO is the default method, the IRS makes it clear that the Specific Identification method can also be used if a taxpayer can document unique digital identifiers such as a private or public key. The acceptance of specific identification is favorable for taxpayers, as it allows taxpayers to assign their highest cost basis lots first, which in return minimizes their tax liability.

More details on this specific topic can be found over at Taxbit’s blog here.

Be Careful Using 1099s from Exchanges

If you have been buying crypto through exchanges, the exchange may have sent you a 1099-K or 1099-B form. Even if you did not receive these documents, all the 1099 methods of calculating income are still valid for you. The exchange calculates and reports gross proceeds, meaning that it is on the taxpayer to provide information on the cost they paid to acquire said assets and reported in the capital gains section, otherwise known as IRS 8949.

Specifically, form 1099-K reports gross proceeds, which the IRS interprets as income. The number reported on form 1099-K is not counted as income however, as cryptocurrency trading carries cost basis and is to be reported in the capital gains and losses section of a taxpayer’s tax return. Form 1099-B reports cost basis when available and makes it easier for you as a taxpayer to complete your required IRS 8949. Some cryptocurrency exchanges may not send you anything at all. Regardless of which form you receive or don’t receive, your responsibility as a taxpayer is to use the information to complete your IRS 8949, which reports your capital gains and losses.

Verify the Data You Receive

The crypto industry is still relatively new and while the exchanges and trading technology may have some advanced reporting features built in, the institutions built around that technology are still new. With traditional securities, there is a clearinghouse, a broker, and well-established financial statements that make it easy to determine your taxes. With cryptocurrency, many of the exchanges are still in the process of refining external reporting standards. This means that, as a user, the level of completeness in reporting expected from NYSE cannot possibly be replicated by virtually any new institutions.

According to data by NODE40, the reports generated by cryptocurrency exchanges will be incorrect for about 80% of cryptocurrency traders. We can’t fault the exchanges because there is simply no way for them to determine the cost basis of the assets you’ve been moving around. For this reason, it’s important to consider using a third-party platform that can calculate the gains and losses on your cryptocurrency as you move it from exchange to exchange or wallet to wallet.

Conclusion: Educating Ourselves is Essential

Crypto accounting and tax reporting can be daunting and complex, which is why staying engaged with news and trends is essential to understanding the evolving landscape of crypto taxation. Especially in the U.S, the IRS is taking more steps to introduce greater guidance and clarity. But without proper education and trained professionals, navigating crypto tax can be tough.

Tax preparers and investors rely on 1099 forms in traditional markets — crypto is no different. Without it, the burden of responsibility shifts to the investor, requiring them to keep track of all of their crypto activity for the year. This includes tracking every crypto-related transaction, like fair market value based on the date of purchase or sale of assets.

All of this information is vital for preparers to determine cost basis and properly calculate gains and losses. Therein lies the primary challenge. Some crypto accounting and management platforms have emerged to solve this growing industry need for smarter solutions. Industry giants need reliable, accurate and smart tools.

Because crypto remains a new field and exchanges are widespread around the world, not all exchanges report in the same method. This is why the savvy users will double check the work of the exchange, a task for which there are now new tools available. These errors can have a massive tax impact, particularly when it comes to tracking the cost of acquisition of the asset over time. Luckily there are tools that exist that can provide traders and crypto entrepreneurs with intelligent support.

Taxes are a part of life. This year hundreds of millions of Americans will be reminded explicitly of the existence of digital assets — a good thing for the industry that will drive greater awareness and adoption of cryptoassets. If you’re already a crypto hodler or trader, diligence is key to successfully filing your 2019 taxes this year. Whether you use a third-party tool or rely solely on exchanges to track the movement of your assets, it’s crucial that you know your gain number and verify its accuracy, that you review the IRS guidelines, and that you use trusted sources to educate yourself on what to report and how to go about it.

SALT Adds DASH as Collateral and Offers a Way to Maintain Your Masternode

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We’re proud to announce that we now accept DASH as collateral.

Better yet, if you own DASH that’s being used for a masternode, we’ve also developed a way for you to maintain your masternode status, voting rights and payouts and still use it as loan collateral. To do so, follow these instructions before you deposit your DASH into your SALT collateral wallet.

Like other cryptocurrencies, Dash enables anyone, anywhere in the world to make quick, easy and cheap payments at any time without going through a central authority.

Given its long-term viability, its numerous use cases, and its level of adoption, Dash is an appealing collateral form for our platform. Aside from that, we chose Dash as our next collateral type for two primary reasons:

  1. We support the Dash community and its mission
  2. We respect Dash’s two-tier network and use of masternodes to maintain the health of their blockchain

The Dash Mission

In his interview with Cointelegraph, CEO of Dash Core Group Ryan Taylor notes that Dash offers “tremendous value to society,” particularly for people that live in areas with minimal financial freedom and poor quality financial systems: “I would love to see Dash first adopted in some of the poorest and most financially oppressed markets in the world, so that as Dash grows, we bring those people up with us.”

By providing increased financial freedom, secure technology, and irreversible, speedy transactions, Dash is increasing access for people to participate in the global economy regardless of where they’re based. We support this mission and recognize it as one of the most significant ways blockchain technology can change people’s lives — and the world — for the better.

The Dash Network and Masternode System

In a separate, more recent interview with Anthony Pompliano, Taylor explains the concept of masternodes and how unlike the Bitcoin protocol, which allocates 100% of the network’s revenue toward mining, the Dash protocol is designed such that the block reward is split into three parts: 45% of the revenue goes to miners and 45% goes to masternode operators who service the network. The remaining 10% goes to a proposal system where the proposals are voted on by the masternode operators and the highest ranking proposals pay out as part of a monthly budget. This two-tier infrastructure ensures that network participants are incentivized to “keep the network happy.” Masternode operators in particular have a vested interest in doing what’s best for the network to maintain its health.

In explaining the masternode system further, Taylor notes that you have to prove ownership of 1,000 DASH in order to obtain masternode status, though he makes it clear that “as soon as that money is moved, your node downgrades immediately.” While that’s true in most cases, we’ve developed a way for you to maintain your masternode status even after you move your Dash to the SALT platform.* With these step-by-step instructions, you can custody your Dash with us and still run your masternode.

For questions about taking out a Dash-backed loan or to custody your Dash with us, visit us at https://saltlending.com/ or call us at +1 720–897–3710.

  • Dash used as collateral for a loan with SALT may be liquidated, in whole or in part, according to the terms of your Loan Agreement. SALT is not responsible for maintenance of a masternode or any disruption to or downgrade of any masternode for any reason, which may result from a liquidation of loan collateral or any other applicable term or terms of your loan agreement.

SALT Now Offers Loan-to-Value (LTV) Options Up to 70%

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We have increased our range of Loan-to-Value (LTV) options, allowing you to tailor the loan product that is right for you. In addition to our existing 30%, 40% and 50% LTV options, you can now select up to a 60% or 70% LTV, allowing you to unlock even more value from your crypto holdings.

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While starting your loan at 70% LTV means you need less loan collateral to get started, it may lead to higher risk for you as the borrower. This is why SALT has been focused on creating tools that allow you to manage the risks associated with your loan based on your own tolerance.

● Customizable notification system — When you sign up for a SALT account, you automatically receive email alerts about your account activity. From our website or mobile app, you can customize your notifications even further by opting in to calls, texts and/or push notifications.

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● Loan-to-Value (LTV) monitoring system — This near real-time system reports your loan health (in LTV) and portfolio value through the life of your loan. Even when you aren’t watching your portal for updates, our automated notification system helps keep you up-to-date via calls, texts and emails so you’re alerted during volatile market conditions.

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● Mobile app — Our mobile app allows you to register for an account, monitor your collateral and loan status, and deposit or withdraw assets.

Download the app for iOS and Android.

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● TrueUSD and USDC — With the recent addition of these stablecoins to our accepted collateral types, you can stabilize your LTV at anytime by transferring TrueUSD, USDC, or a combination of the two directly to your account — even on nights, weekends and holidays.

SALT Expands Lending Opportunities to Businesses in Australia

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Having participated this week in the ADC Global Blockchain Summit held in conjunction with the South Australian Government and the Australian Digital Commerce Association (ADCA) in Adelaide, SALT is actively incorporating its technology services into the burgeoning Australian market. With a particular focus on strategies and practical applications for business growth via blockchain technologies and systems, SALT spoke to the Summit’s key topics from experience intersecting business, public policy, and the regulatory environment.

Australia has demonstrated a keen interest in developing its blockchain industry. The Ministry for Industry, Science and Technology today announced a blockchain roadmap with AU$100,000 in federal funding for “regulation, skills and capacity building, innovation, investment, and international competitiveness and collaboration.” Working directly with blockchain businesses at the ADC Summit, SALT is deploying its Software as a Service packages, which allow traditional companies to easily add cryptocurrency and blockchain offerings into their product portfolio including lending technology, wallets, monitoring, and blockchain analysis. With Australia’s continued commitment to developing blockchain services responsibly, SALT looks forward to working with interested parties and stakeholders across the Australian market to bring their vision into reality.

Crypto companies looking for extra liquidity to expand their businesses, such as exchanges or mining companies, can join SALT and apply for a crypto-backed loan.

As SALT continues to grow, we remain focused on further expanding our technology products, allowing both crypto and traditional companies to integrate blockchain services into their software stacks.

Evaluating Interest-Bearing Crypto Accounts

By Zev Shimko, Jenny Shaver and Blake Cohen

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The latest offering in crypto custody is an interest-bearing crypto account. Although marketed similar to cash deposit savings accounts offered by traditional banks, the structure of this type of interest-bearing crypto product is more closely analogous to securities lending and should be viewed as such when assessing the risks associated with placing crypto in an interest-bearing account.

There are certainly benefits to interest-bearing crypto accounts — namely the ability to earn a return on a custodied asset beyond its possible appreciation value. However, those interest benefits aren’t without their own risks. Here are some important considerations when assessing if an interest-bearing crypto account might be suitable for your risk appetite*:

When opting for an interest-bearing product, your crypto assets may be commingled (where funds belonging to one party are mixed with those of a second party), and rehypothecated (practice whereby a broker or lending agent uses assets in their possession, but owned by their customer, to invest with or lend to a third party). In this structure, your funds may be taken by your custodian (acting as a lending agent), pooled with other assets owned by other customers of your custodian, and lent to a third-party. As a result, and in return for interest payments, you may forfeit several rights associated with your crypto assets. For example, you may be unable to quickly withdraw your crypto in whole or in part and you may lose, due to the commingling of your assets with assets owned by other customers, the ability to independently verify the security of your assets on-chain. Instead you may be supplied with a percentage statement or value statement regarding your interest in the crypto collateral you deposited into your account.

With a traditional bank savings account, your cash deposits may be lent to other financial institutions and vetted borrowers who have a multitude of options for generating wealth with the borrowed funds. In many cases, these traditional bank accounts are also insured and operate within strict regulatory guidelines and limitations on the collateral percentage, number of parties, among other restrictions for and to which the deposited assets can be lent, distributed, and relevered. These regulatory guidelines and restrictions prevent traditional financial intermediaries of this type from participating in some high-risk lending behaviors when it comes to their customer assets, but do not, generally, prohibit the rehypothecation of deposited assets under certain conditions. These intermediaries then cover their costs, not by the fees charged on the interest-bearing customer accounts, but through the income generated by lending and investing those assets during the rehypothecation process. While this process seems straight forward and analogous to what might happen with the crypto you deposit in an interest-bearing account, some additional crypto market specific comparison will help to highlight the difference in rehypothecated use between cash denominated and crypto denominated accounts.

While there are certainly financial institutions which take short and long positions on various currencies, the typical use case for rehypothecation in cash accounts is the lending or investment of the cash deposited directly to a third-party and not for direct speculative purposes in that asset. However, for many institutional crypto holders, the primary use case for generating returns with crypto assets is often to take a speculative position on the asset itself. An institution with a bearish view on the market, for example, may look to short sale opportunities — borrowing crypto and immediately selling it in hopes of a future purchase at a lower price to close the position. The institution will only net a profit if the value of the crypto falls below their initial sale price, which means you and the counterparty borrower are betting on opposing outcomes. As a HODLer of crypto assets, it’s important to understand the motives of each party involved aside from what traditional rehypothecation in cash accounts might suggest. This comparison highlights the operational difference in the rehypothecated use of cash deposits and crypto deposits in interest-bearing accounts and should motivate anyone seeking to deposit their crypto into such an account to carefully inspect the intended and permitted uses of the assets they plan to deposit.

Any custodian or intermediary entrusted with your crypto may be required to act in a responsible capacity either by their position as a custodian or fiduciary or by some applicable regulatory regime. However, there are still strategic and operational choices which may put your assets at risk. For companies offering interest-bearing crypto accounts, how might they be regulated? Traditionally chartered banks, for example, are regulated by the FDIC and must carry insurance and maintain fractional reserves to address withdrawal, and other requests without becoming overextended. Lending intermediaries are also often required to maintain capital reserves to cover risk exposure of defaults in capitalized accounts and through bonds or other insurance policies.

Given that crypto regulation is scant, the savvy crypto account holder may want to make a detailed investigation of how and through what methods companies offering interest-bearing crypto accounts have structured their risk mitigation. For example: Does the company carry insurance for your assets? What is the claims process in the event of an incident? In a relatively nascent industry, transparency of risk mitigation protocols should be table stakes for any interest-bearing products. In addition to the primary lender or custodian involved, downstream market participants face similar responsibilities as any loss throughout the ecosystem may lead to direct counterparty effects.

As an extension of assessing operating risk, a savvy account holder should also understand how counterparty risk is being mitigated and which or what counterparties may be involved. When it comes to borrowers of your crypto assets, who are they and how have they been vetted for their own operational risk? Should a third-party default on their obligation, what are the implications for your account? For loan agreements, it’s important to know how they are being structured to mitigate default risk. For example, in securities lending, borrowers are often required to post collateral. In this case, it’s important to understand what the lender is doing with the collateral and how the collateral account is being managed. Is the collateral itself being rehypothecated to earn additional returns? If so, what are those direct or indirect investments and how risky might they be? Transparency and accountability are key and so is a keen eye for the fine print.

Since all-time highs, the price of Bitcoin has dropped roughly 80%, with the largest recent weekly drop of 22% and one-day drop of 12%, both in November 2018. Heightened volatility is no stranger in the cryptocurrency world as the market can turn meaningfully in a period of days, or even hours. It is important to take note of an extended lock-up period (or simply a delay in withdrawal) associated with any interest-bearing deposit account as any delay in or restriction on your ability to liquidate or transact your assets may subject you to additional market risk. Alongside normal course market volatility, an increase in borrowing crypto for the purpose of a taking a short position, especially if undertaken by a large subset of holders in a particular asset, may potentially exacerbate any downward pressure on price, heightening lock-up risk through increased intensity in negative peak volatility.

Before depositing crypto into an interest-bearing account, take a look at the fine print. Returns initially quoted may carry restrictions on the period of time they are available, may require additional deposits or transfers, and may have additional caveats regarding market conditions and other impediments. It is important to understand the process and any notice requirements or promises made by your lender or custodian for any changes to the quoted interest rate. Depending on the size of the custodian or lender, interest bearing accounts which carry guaranteed interest rates may require significant cash outlays by the custodian or lender as a cushion for the quoted returns. Understanding the custodian’s cash and balance sheet position may also be important depending on the amount of crypto being deposited.

There is a place for interest-bearing accounts in the crypto ecosystem and as the market matures so will the terms and safeguards associated with these accounts. In the meantime, you must seek transparency for how your funds may be distributed and how risks are being mitigated. It’s important that you request adequate information, and that you handle your crypto assets with a full understanding of the risks and tradeoffs. Happy HODLing.

  • None of the information contained in this post should be taken as investment advice or any suggestion for or against the suitability of any interest-bearing, custody, or other crypto currency product for any investment, diversification, or market strategy. Salt does not offer investment advice. Please speak to your advisor, tax accountant, and/or legal counsel regarding the suitability, risks, and legality of any crypto market position or strategy. Salt is not a bank and is not FDIC insured. Please see www.saltlending.com for additional information, references, and disclosures.

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

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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.

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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.

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.

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.

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.

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.

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.

  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.

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.

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.