INVESTMENT OPPORTUNITIES

A Cryptocurrency Exchange is akin to an Ameritrade, or like brokerage service, for the stocks and securities industry. These are online platforms which allow individuals, businesses, and institutional investors the ability to trade cryptocurrency or digital assets on the open market; examples of these would be: Coinbase, Binance, and Crypto.com.

The process of Staking is when an individual or business loans cryptocurrency or other digital asset, which they own, to an exchange for a predetermined duration of time and a guaranteed yield (return %) over that duration. This loaned asset is held by the Exchange for the duration of the staking period and is returned to the owner at the conclusion of this period. The asset can then be re-staked with the Exchange or sold on the open market.

The Exchange takes the staked crypto and lends it to users on its platform in a process called Margin Trading. A user on the Exchange can trade on Margin and borrow, from the Exchange, up to 10x their account holdings value for use towards a short term trading position. The Exchange charges its users up to two percent (2%), of the underlying cryptocurrency value, per 24 hour period to borrow the cryptocurrency for their short term trading position*

In the How-it-Works illustration below, the Exchange would be collecting daily fees, on a revolving basis, from its users which are trading on Margin. The Exchange passes along a portion of these fees to the individual or business which staked their cryptocurrency with the Exchange.

*Fees charged by the Exchange are an estimate for illustration purposes only and are subject to change due to market conditions.

Leonine Holdings owns 10,000 DOGE*, which it holds on the Coinbase Exchange platform. At the time of purchase, DOGE was trading at 2.00 per coin; therefore Leonine’s position is worth the equivalent of $20,000usd.

*DOGE is an actively traded cryptocurrency which increases and decreases in value due market fluctuation. However, the amount of staked DOGE can never increase nor decrease and remains a constant of 10,000 coins (for purposes of this illustration).

Leonine Holdings agrees to stake its 10,000 DOGE on Coinbase for 30 days with a guaranteed return of 11.99%.

Leonine Holdings transfers its 10,000 DOGE from its holding account to the Coinbase staking account. At the time of transfer DOGE was trading at 2.00 per coin, which will be the base figure for the calculation of the 11.99% return in 30 days. Once the transfer is complete, the contract commences and Leonine’s DOGE is locked in for a 30 day period.

Robert Harris is an individual trader on the Coinbase Exchange. Robert has the equivalent of $2,000usd in his trading account and is taking a short term position in DOGE with anticipation it will move higher in the near future. Robert uses his account holdings to purchase 1,000 DOGE at 2.00 each, then uses the 10x margin feature to leverage his position of 1,000 DOGE to 10,000 DOGE; essentially borrowing 9,000 DOGE from Coinbase at a daily rate of 1.33% of the underlying cryptocurrency value. Coinbase has the ability to lend these 9,000 DOGE due to Leonine’s staking position.

After 3 days DOGE is trading at 2.40 and Robert wants to sell and exit his position in DOGE, which is now valued at the equivalent of $24,000usd. Once Robert’s position is closed his account auto repays the following to Coinbase: 9,000 DOGE borrowed at 2.00 per coin and 3.99% (1.33% x 3 days) of the underlying cryptocurrency value: $18,000usd (DOGE borrowed) + $720usd (3.99% interest) = $18,720usd. Robert’s position was worth the equivalent of $24,000usd at the time it was sold, leaving Robert with a gross profit of $5,280usd less his initial account holdings of $2,000usd for a net profit of $3,280usd.

Upon repayment to Coinbase of the 9,000 DOGE, the Exchange has the ability to relend those same DOGE to another user for the remaining 27 days of the staking contract.

At the conclusion of the 30 day staking contract between Coinbase and Leonine Holdings, Coinbase returns the 10,000 DOGE to Leonine. Along with the original 10,000 DOGE, it also pays the 11.99% return in DOGE. The 11.99% return is calculated off the strike price of 2.00 which DOGE was trading at the start of the staking contract. Coinbase pays the equivalent of $2,398usd (in the form of DOGE) to Leonine in return for the 30 day staking contract. DOGE is trading at 2.10 when the contract expires. In addition to the original 10,000 DOGE Coinbase deposits 1,142 DOGE (equivalent of $2,398usd @ 2.10 per DOGE) into Leonine’s account to cover the 11.99% return. Leonine’s account now holds 11,142 DOGE, valued at the equivalent of $23,398usd. Leonine can either sell the DOGE on the open market and invest in another cryptocurrency or it can re-stake its holdings in DOGE.