Lava has developed a self-custodial Bitcoin borrowing platform. Not like conventional crypto mortgage providers that take custody of customers’ property (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, obtainable on cell and desktop, which serves as a safe, self-custodial pockets and borrowing interface. It makes use of superior security measures, resembling device-based safe chips for personal key administration and biometric/two-factor authentication, to make sure person funds stay protected. Lava additionally presents encrypted backups to mitigate the chance of fund loss from a single level of failure.
Lava’s Loans product additionally permits customers to borrow {dollars} towards their Bitcoin holdings, offering liquidity with out requiring them to promote their Bitcoin. That is notably interesting to Bitcoin HODLers who need to keep long-term publicity to BTC’s potential appreciation whereas accessing money for instant wants. Lava’s distinctive Discreet Log Contract (DLC) know-how permits it to supply these loans on a self-custody foundation, lowering 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 by way of reserves invested in money and extremely liquid devices. The reserve portfolio comprises a mixture of short-dated US Treasuries, in a single day US Treasury repurchase agreements, and cash market funds all custodied with companions resembling BlackRock and Constancy. LavaUSD permits customers to make funds anyplace on the earth frictionlessly.
Right here’s why they launched it:
- On the spot and World: LavaUSD extends the steadiness 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 Price: 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 reviews testifying to the backing of LavaUSD on demand whereas “it was extraordinarily tough to get in contact with the assist groups of different massive stablecoin issuers” says the group. Lava’s stablecoin reserves are held in segregated, bankruptcy-remote accounts with regulated monetary establishments. This ensures that the reserves are totally 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 develop assist for a number of networks, probably together with Bitcoin-based stablecoin alternate options as they mature.
The group 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 Sequence 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 Sequence 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 supposed by Satoshi.
(Particular S/O to our Bitcoin Journal OG Mike Germano and PubKey extraordinaire Thomas Pacchia for therefore graciously holding beers – wine is healthier!)
Spending BTC instantly with retailers or people is usually hailed as a step towards Hyperbitcoinization—the hypothetical state of affairs the place BTC turns into the dominant world foreign money. This strategy strengthens Bitcoin’s community impact, encourages adoption, and aligns with its peer-to-peer philosophy, bypassing intermediaries like banks. Nonetheless, this technique faces vital hurdles. Firstly, BTC’s value 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 good points, particularly as halvings and market dynamics proceed to constrain provide towards rising demand.
Secondly, tax circumstances in lots of jurisdictions, together with the USA, impose restrictive burdens on spending BTC. Within the U.S., the IRS treats BTC as property, that means every transaction triggers a taxable occasion. Promoting or spending BTC at a revenue incurs capital good points tax—as much as 37% for short-term good points or 20% for long-term holdings—based mostly on the distinction between buy value and sale worth. This complexity discourages direct spending, as customers should monitor value foundation, report good points, and navigate administrative overhead, typically outweighing the comfort of BTC funds. For example, 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 by way of stablecoins a extra tax-efficient different.
Why Holding BTC Outweighs Spending Now
Given BTC’s upward trajectory, spending it now could undermine long-term wealth preservation. Analysts recommend BTC might attain $200,000 or extra by 2030 if present tendencies 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 alternate options like Lava’s lending mannequin present liquidity with out forfeiture. Furthermore, the tax burden amplifies this disincentive, as frequent transactions erode internet returns. This aligns with the “HODL” philosophy, the place retaining BTC maximizes appreciation whereas utilizing borrowed {dollars} or stablecoins meets instant wants.
Mitigation Technique: Purchase-Again Mechanism
To stability the need to spend with BTC retention, a buy-back technique presents a practical resolution. After borrowing {dollars} towards BTC by way of Lava’s platform, customers can spend these funds whereas committing to repurchase BTC at a later date when market circumstances 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 might be timed to capitalize on market dips or post-tax season liquidity, probably at decrease costs, enhancing general holdings. For instance, borrowing $10,000 towards 0.1 BTC (valued at $100,000) permits spending, with a buy-back of 0.09 BTC at $90,000 later, netting a acquire if BTC appreciates additional. This technique mitigates tax publicity by deferring gross sales and aligns with long-term appreciation objectives.
As Hyperbitcoinization looms on the horizon, the stress 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 instant wants. Till BTC totally transcends fiat, this duality—hoarding a revolutionary asset whereas leaning on conventional foreign money—could outline the trail to a Bitcoin-dominated future, and this future is being construct by Bitcoin corporations!
Guillaume’s articles particularly could focus on subjects or corporations which are a part of his agency’s funding portfolio (UTXO Administration). The views expressed are solely his personal and don’t characterize the opinions of his employer or its associates. He’s receiving no monetary compensation for these Takes. Readers shouldn’t take into account this content material as monetary recommendation or an endorsement of any specific firm or funding. All the time do your personal analysis earlier than making monetary selections.
