A (15:16)
I think we'll see a lot of it in the coming years for sure. The main gating factor is for large credit investors, pensions, insurance companies, sovereign wealth funds, to take on board Bitcoin as a tool that can improve credit returns. They've taken on board many tools to improve credit returns over time. You know, you can think of many things that have been hedges. You could also think of leverage, other structuring techniques. So Bitcoin is only the latest in a series of approaches to structured credit, at least in our view, where you can introduce a new building block to create more robust financial structures. But the motivations for it are really high, both for borrowers frankly, as well as for lenders. Because if you're a borrower, let's say, and I'll use commercial real estate as an example, but to your point, it does absolutely apply to small business lending or agriculture lending, or even residential mortgage finance. That's a very interesting application of this structure. We could talk about it. But if you have, let's say a $10 million commercial real estate assets got good tenants, it's producing dependable rent roll, you can underwrite that over time. And a bank has made a loan to it, maybe some years ago, they started out, let's say it was a $7 million loan. And now over time it's amortized down to, I don't know, six and a half million. So the borrower is going for refinancing, they can go and they could refinance it in the, in the conventional bank market. Although there are just all of the normal challenges associated with that from a market point of view. Sometimes the banks are more interested, less interested. There are harder markets and softer markets, but also prepayment penalties. Once you have the loan, you might have to have it for a certain period of time where you're not allowed to repay the loan, so you're locked out from repayment or you have to pay a premium or perhaps an amortization schedule that requires a lot of the cash flow to go and pay down the loan over time so it's not back ended. It's more happening over time. What we do, we look at that situation, we say, well, what if we were to make a 7.5 million or an $8 million refinancing the use of proceeds, of course, first would be to repay the existing indebtedness. So we would have a first mortgage on the building, but then with the remainder, instead of cash out, it's bitcoin. In, in this example, a million or a million and a half buys bitcoin that serves as additional collateral for the loan. So now the loan is supported by two assets in the financial package. There's the physical asset, the building, and then there's the bitcoin. It's really powerful because if something goes wrong with the loan, for whatever reason, of course that's not what any lender hopes for. But if something like that were to happen, just like a traditional lender, we could collect against the physical asset. But a physical asset, it's idiosyncratic. It's a specific asset, and it's not divisible. You can't just easily sell off a portion of the building. You have to sell the whole building. And you have to find someone who wants to operate and is prepared to own and finance and manage that particular asset. That's why usually it takes 12 to 24 months for a bank to work out a complex recovery process. It's not just overnight. We have that collateral. We have that same exact security, but we also have supplemental collateral in the form of the bitcoin. Bitcoin has two things going for it. Number one, it's very easy to collect against because it is fungible, liquid, verifiable, transparent, all of the things that bitcoin is divisible. You don't have to collect against all of it. You could collect against some of it. So it's easier mechanically to collect against from a collateral point of view. The other thing it has going forward is that over time, it has tended to appreciate very powerfully. If you start with a million or a million and a half dollars worth of bitcoin in this structure, chances are over the course of two years, four years, six years, that will have appreciated considerably, and the loan to value will therefore be coming down. And so the cushion, let's say that you have being driven from the bitcoin component of the collateral is really very powerful and very helpful from a downside mitigation perspective. And then on the other side, assuming something does not go wrong with the property, which is of course what we're underwriting too, and what we're aiming for and expecting when the loan is eventually repaid, we share in the upside of the bitcoin with the borrowers, and that presents a very powerful return stream for both the borrower and for the lender. The borrower gets to redenominate some of their equity out of fiat and into bitcoin on projects that they know and like that's extremely useful. And we get to introduce some bitcoin asymmetry into the credit returns, which is also extremely interesting. And that gives us actually flexibility, I would say, on some of the other terms that conventional lenders can't compromise on, like prepayment penalty, like the interest rate, like the amortization structure. So it's a very dynamic, like I said, it's a very dynamic building block for credit.
