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219 sats \ 2 replies \ @SimpleStacker 11h \ on: What do people mean when they say Bitcoin bond? bitcoin
Ignoring the security risks, there's good reason to buy a bitcoin bond: to put your bitcoin "to work" and earn you even more bitcoin. As to why someone might sell a bitcoin bond: because maybe they need capital now and maybe they can get it for a lower interest rate than by selling a fiat bond.
There's potentially good reason for a bitcoin bond buyer to be willing to accept a lower interest rate than a fiat bond, because fiat is constantly devaluating but bitcoin is not.
One thing worth pointing out though is that fiat bonds are basically backed by the money printer. We can always expect to be paid back the nominal value of our treasury bonds because the US govt can just print the money to meet its obligations to bond holders. Same won't be true with bitcoin bonds... there will be a very real risk of non-repayment, not to mention all the security risks involving your keys.
Note: Also, I'm referring to simple versions of bitcoin bonds where you pay bitcoin upfront to receive some more bitcoin later. I'm not sure about all the other fancy financial instruments. You'd have to study each individually to figure out what they're all about.
Putting your bitcoin to work...I definitely believe credit and debt are productive parts if the economy, so loaning out bitcoin (buying old school bitcoin bonds) certainly makes sense...but I am pretty sure the value of my dollars isn't going to go up. If I loan out my bitcoin and bitcoin's price jumps, I now have a lot more on the line (assuming the loan is denominated in Bitcoin).
One thing I should have mentioned is that in the BPI proposal, earnings from bitbond appreciation is supposed to be tax free.
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Yeah I actually think it is a big risk for both parties, and I wouldn't want to participate in any such trade. But figuring out how to make credit and debt work in a bitcoin standard is gonna be important, if we want the world to move more towards using bitcoin as the standard monetary unit
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