For those who missed it, today was an epic day in the Leo-verse.
A week ago, on the @town-hall, I discussed the idea of LeoDex capturing value based not only on the development by the LEO team but also from what the Maya developers produced.
Today, we gained some insight into that.
LEO Moving Into Collateralized lending
How would you like to take out a loan against your $LEO? Imaging being able to access your liquidity without having to sell the tokens.
Could this be possible?
It will be once Maya rolls out its lending platform. This will be similar to THORchain with a few key differences. Here is how they were spelled out.
@khaleelkazi/re-taskmaster4450le-doxu31wd
It is the first one that is most important for this discussion here.
Maya will allow the collateralization of any asset that has a liquidity pool on that protocol. Since Leo already has the LEO:CACAO pool, it qualifies.
This means the questions asked above are going to be possible. People will be able to take their $LEO, if desired, and collateralize it. This means a host of possibilities open up.
It also means that one never has to sell the token. Instead of moving out of it to extract the value, simply take out a loan against it. After all, isn't this how the majority of real estate is purchased throughout the world? Don't people extract the value up front in the form of a mortgage to acquire the property?
Moving beyond real estate, this is a long standing approach by the wealthy. Warren Buffett said the best stocks to own are those you never want to sell.
If you believe LEO will keep appreciating over the long term, this means we could see a growth path that sends the price of the token higher.
Would you like to be a part of it?
To do so requires holding the token.
Accessing Liquidity
The challenge with anything of this nature is having the value "locked up".
Going back to the real estate example, what happens when people refinance their properties? Typically, they "pull the equity out". This is often referred to as using the house as "an ATM".
In spite of the derogatory nature of that statement, it is actually a smart move. The problem arises in the utility of what is pulled out.
Most commonly people will do that and buy a new car or take a trip. The smart ones use the money pulled out to invest in another property. This is how the holdings are allowed to compound.
What we are looking at here is no different.
Obviously, it is impossible to get specific without knowing the interest rates and other factors of the lending protocol. That said, as Leo grows, the potential exists for an assortment of financial tactics which can expand both Leo and one's individual holdings.
Ultimately, we are looking to access the liquidity of our holdings that, much like the real estate investor, can allow us to grow our assets.
For example, here is an idea that was posed by @anomadsoul.
Take your $LEO and collateralize it for a loan. Take the proceeds from the loan and buy $HIVE. Power it up. Delegate the HP to @leo.voter to earn a 16% return. Use the LEO payouts to repay the loan.
Do you see what we did there?
The individual still owns the original LEO. At the same time, this user acquired HIVE that is now powered up, enhancing one's holdings there. The delegation produces a revenue stream that can pay off the loan.
Once that is done, we can do a rinse and repeat.
USD Pricing
A key in all this is the denomination that is used.
All pricing is done in USD. That is the common unit of account when dealing with multiple assets. Hence, the amount of LEO requires will vary based upon the price of the token in dollars.
For example, if the price is 7 cents, then perhaps 10,000 LEO are required. On the other hand, a 70 cent price means 1,000 LEO equate to the same amount.
Looking at it another way, 10K LEO at 7 cents is $700. If the price moves up to 70 cents, it is NOW $7K. Think of this with respect to the liquidity pool as an example.
Would you like to be part of a 10x move? It would be disappointing to be optimistic about LEO but have to choose between LEO and HIVE. What if you could have both?
That is the difference. Most thing either/or. The wealthy, when it come to these matters, consider how to have both.
It would suck to ride LEO from 7 cents to 20 cents and then sell in spite of being wildly optimistic if the price ran to 70 cents.
How often has we seen this?
Collateralized lending could potentially offset this.
Naturally, the devil is in the details and we have no idea the exact structure of all this. When that is revealed we can get a better handle on the numbers and possibilities available to all of us.
For now, we can start considering ways to implement this into our financial plan.