Lava has developed a self-custodial Bitcoin borrowing platform. In contrast to conventional crypto mortgage companies that take custody of customers’ belongings (and generally interact in dangerous practices like rehypothecation), Lava is self-custodial and leverages native bitcoin good contracts (DLCs) to allow a safer borrowing expertise. The platform’s main product is the Lava Vault, out there on cellular and desktop, which serves as a safe, self-custodial pockets and borrowing interface. It makes use of superior security measures, comparable to device-based safe chips for personal key administration and biometric/two-factor authentication, to make sure person funds stay secure. Lava additionally presents encrypted backups to mitigate the chance of fund loss from a single level of failure.
Lava’s Loans product additionally allows customers to borrow {dollars} in opposition to their Bitcoin holdings, offering liquidity with out requiring them to promote their Bitcoin. That is notably interesting to Bitcoin HODLers who wish to keep long-term publicity to BTC’s potential appreciation whereas accessing money for rapid wants. Lava’s distinctive Discreet Log Contract (DLC) expertise allows it to offer these loans on a self-custody foundation, decreasing counterparty and rehypothecation threat.
Stablecoin Integration – LavaUSD
Lava has launched its personal stablecoin providing – LavaUSD – to mix Bitcoin with dollar-based spending. LavaUSD is redeemable 1:1 for the US greenback through reserves invested in money and extremely liquid devices. The reserve portfolio accommodates a mixture of short-dated US Treasuries, in a single day US Treasury repurchase agreements, and cash market funds all custodied with companions comparable to BlackRock and Constancy. LavaUSD allows customers to make funds wherever on the planet frictionlessly.
Right here’s why they launched it:
- On the spot and International: LavaUSD extends the soundness of the US greenback to a world person base whereas sustaining the trustlessness and safety of contemporary cryptography. All transactions are instantaneous and settle 24/7/365, with assist for fast on and off-ramps to fiat currencies all over the world.
- Decrease Value: as programmable digital {dollars}, transactions are less expensive and extra environment friendly to course of thereby avoiding pointless charges and friction within the fiat banking system.
- Rewards: LavaUSD makes it simpler to distribute yield, factors, and different unique advantages to customers.
- Safety: Lava is ready to present bigger establishments detailed stories testifying to the backing of LavaUSD on demand whereas “it was extraordinarily tough to get in contact with the assist groups of different giant stablecoin issuers” says the staff. Lava’s stablecoin reserves are held in segregated, bankruptcy-remote accounts with regulated monetary establishments. This ensures that the reserves are absolutely protected and stored separate from the working funds of Lava the corporate, the issuer, or its custodians. Even within the unlikely occasion of chapter, these reserves stay accessible and are safeguarded to make sure full backing of all issued stablecoins.
- Cross-Chain Swaps: The platform helps stablecoins on different networks (not simply Bitcoin), utilizing atomic swaps to make sure debtors obtain stablecoins whereas lenders safe Bitcoin collateral. Over time, Lava plans to increase assist for a number of networks, probably together with Bitcoin-based stablecoin options as they mature.
The staff has attracted vital funding. Since inception Lava has raised $30 million from buyers together with Khosla Ventures, Founders Fund, and Susquehanna Worldwide Group with angel participation from establishments together with the Qatar Funding Authority, Google, and Franklin Templeton amongst others.. In December 2024, it raised $10 million in a Collection A spherical co-led by Khosla Ventures and Founders Fund, with notable buyers like Keith Rabois and Peter Thiel concerned. Extra lately, Lava raised a Collection A for an extra $30 million financing spherical with buyers like Qatar Funding Authority and Bijan Tehrani. FULL DISCLOSURE: UTXO participated in Lava’s seed spherical.
The Case for Spending BTC vs. Spending {Dollars}
Final week, this tweet by Caitlin Lengthy and amplified by our favourite Bitcoiner in Congress Cynthia Lummis obtained vital pushback from some bitcoiners, offended on the concept of perpetuating the fiat system as an alternative of transaction instantly with Bitcoin, because it was meant by Satoshi.
(Particular S/O to our Bitcoin Journal OG Mike Germano and PubKey extraordinaire Thomas Pacchia for thus graciously holding beers – wine is best!)
Spending BTC instantly with retailers or people is commonly hailed as a step towards Hyperbitcoinization—the hypothetical state of affairs the place BTC turns into the dominant international foreign money. This strategy strengthens Bitcoin’s community impact, encourages adoption, and aligns with its peer-to-peer philosophy, bypassing intermediaries like banks. Nevertheless, this technique faces vital hurdles. Firstly, BTC’s worth appreciation potential stays substantial. Historic information reveals BTC’s worth has surged from negligible ranges in 2009 to over $100,000 by early 2025, pushed by finite provide (capped at 21 million cash) and rising institutional curiosity (e.g., MicroStrategy’s treasury technique). Spending BTC now dangers forgoing future positive factors, particularly as halvings and market dynamics proceed to constrain provide in opposition to rising demand.
Secondly, tax situations in lots of jurisdictions, together with america, impose restrictive burdens on spending BTC. Within the U.S., the IRS treats BTC as property, which means every transaction triggers a taxable occasion. Promoting or spending BTC at a revenue incurs capital positive factors tax—as much as 37% for short-term positive factors or 20% for long-term holdings—primarily based on the distinction between buy worth and sale worth. This complexity discourages direct spending, as customers should observe value foundation, report positive factors, and navigate administrative overhead, typically outweighing the comfort of BTC funds. As an illustration, a $1,000 BTC buy spent at $10,000 would set off a $2,800 tax legal responsibility (assuming a 28% efficient price), making dollar-based spending through stablecoins a extra tax-efficient various.
Why Holding BTC Outweighs Spending Now
Given BTC’s upward trajectory, spending it now might undermine long-term wealth preservation. Analysts counsel BTC may attain $200,000 or extra by 2030 if present traits persist, pushed by inflation hedging and a weakening fiat system. Spending BTC at present costs locks in worth at a fraction of its potential, particularly when options like Lava’s lending mannequin present liquidity with out forfeiture. Furthermore, the tax burden amplifies this disincentive, as frequent transactions erode web returns. This aligns with the “HODL” philosophy, the place retaining BTC maximizes appreciation whereas utilizing borrowed {dollars} or stablecoins meets rapid wants.
Mitigation Technique: Purchase-Again Mechanism
To steadiness the need to spend with BTC retention, a buy-back technique presents a realistic resolution. After borrowing {dollars} in opposition to BTC through Lava’s platform, customers can spend these funds whereas committing to repurchase BTC at a later date when market situations or private funds permit. This strategy leverages Lava’s self-custodial lending (with its 7.5% curiosity value) to entry liquidity with out promoting, preserving the unique BTC stash. The buy-back could be timed to capitalize on market dips or post-tax season liquidity, probably at decrease costs, enhancing total holdings. For instance, borrowing $10,000 in opposition to 0.1 BTC (valued at $100,000) permits spending, with a buy-back of 0.09 BTC at $90,000 later, netting a achieve if BTC appreciates additional. This technique mitigates tax publicity by deferring gross sales and aligns with long-term appreciation targets.
As Hyperbitcoinization looms on the horizon, the strain between saving in Bitcoin and spending in {dollars} displays a pivotal second for BTC’s evolution. Holding BTC maximizes its scarcity-driven potential—fueled by finite provide and rising adoption—whereas tax complexities and volatility discourage direct spending. Stablecoins and lending fashions supply a sensible workaround, preserving Bitcoin’s long-term worth whereas assembly rapid wants. Till BTC absolutely transcends fiat, this duality—hoarding a revolutionary asset whereas leaning on conventional foreign money—might outline the trail to a Bitcoin-dominated future, and this future is being construct by Bitcoin corporations!
Guillaume’s articles particularly might talk about matters or corporations which are a part of his agency’s funding portfolio (UTXO Administration). The views expressed are solely his personal and don’t signify the opinions of his employer or its associates. He’s receiving no monetary compensation for these Takes. Readers mustn’t take into account this content material as monetary recommendation or an endorsement of any explicit firm or funding. All the time do your personal analysis earlier than making monetary selections.
This put up Save in Bitcoin, Spend in {Dollars}: Is This The Means Earlier than Hyperbitcoinization? first appeared on Bitcoin Journal and is written by Shinobi.
