Long-term holders of bitcoin know that keeping their bitcoin safe is the most important priority for their future. But, depending on their financial situation, they also may be interested in safely putting their stack to work. Many chose to take out dollar loans against their bitcoin, because the need for dollars in today’s world is still prevalent. But this poses some risks to their bitcoin. Risks that the Bold card, a bitcoin-backed credit card, solves in an elegant way with our innovative offering.
Bitcoin loans in many cases means giving up the keys to your bitcoin in order to earn yield off the bitcoin. Andreas Antonopoulos’s “Not your keys, not your coins” applies here. Once you do that, you have a bitcoin IOU from a company that now controls your bitcoin. You have to completely trust that company to remain solvent and that their lending practices don’t get them in trouble in difficult markets. Market conditions like today’s, where we’ve seen more than a few companies’ business models go bankrupt, leaving their customers with nothing. Their bitcoin, having been rehypothecated and lent out to other parties, is never returned, or, at best, gets tied up for years in legal battles. But even if the counterparty holding your bitcoin can be trusted, and your bitcoin is safe, there are further issues about taking out loans against your bitcoin.
First of all, term loans have an administration fee that means you want to take out the whole amount necessary in as few loans as possible, to reduce the cost of the loan to you. On top of that, you also start paying interest on the loan amount right away, every day. So now the bitcoin hodler has effectively got to manage a float of fiat. His savings are no longer in the soundest money on the planet, they are sitting in his chequing account.
This is where Bold’s upcoming offering steps in.
Instead, the bitcoin hodler will be able to deposit their bitcoin into a multi-signature collaborative custody arrangement, and is able to keep a key to their bitcoin so that they can see that their savings are safe on the blockchain. As we all know, the blockchain forces transparency on all parties, and that bitcoin can not move without it being permanently recorded for all to see. That key means you know that the bitcoin are not being rehypothecated, they just sit on the blockchain in a multi-sig setup that protects the bitcoin holder from single points of failure and improved operational security since the keys are now spread in multiple locations across the agreed parties. So your bitcoin is safe and sound.
Once deposited, Bold offers you an instant credit card worth 35% of the value of the bitcoin. Now you can spend dollars anywhere cards are accepted. Use it on everyday purchases or go travel the world. The Bold card lets you do that. But here’s the best part. You can spend dollars, just like a credit card, for a month, accumulating a balance within your credit limit. Upon month-end, a statement arrives. If you pay it off (either in fiat or in bitcoin), you do not pay any interest. In the bitcoin loan example, you have already been charged an admin fee plus daily interest for 30 days. Pay it back and you realize how expensive that can be. It may be useful in some cases, but the cost-benefit only makes sense if you really need to do it. Should that be the case, a Bold customer can make that choice upon receiving the statement, and carry a balance, choosing instead to start paying interest after the first month.
The math is simple, and the choice is clear. Bold will be the safer, less costly and more convenient option for spending against your bitcoin.
Bitcoiners everywhere are looking forward to unlocking the buying power of their bitcoin, without selling it. Join the list to get updates and early access to Bold.
