Understanding Digital Money and Digital Yield

The new business model of building on top of digital credit to create digital money and digital yield can be roughly categorized into two different architectures. 

1. Debt-based, tranching structures 
2. Full-reserve, spendable balance structures 

This article gives a general overview of these models, with an analysis of economic implications. 

Digital Credit, Digital Money and Digital Yield 

To get started, I will define these terms. Digital Credit is the credit-like instruments issued by corporations with large Bitcoin balance sheets. Today they are five Nasdaq-listed perpetual preferred equity—STRC, SATA, STRK, STRF, STRD—and all five are the top five most liquid preferred equity securities in the United States. Digital Credit is L2 because it is built on top of Bitcoin, which is L1. 

Digital Money and Digital Yield are the L3 products that could be built on top of Digital Credit. 

Now obviously, Bitcoin is Digital Money. In this article I am using the terms popularized by Michael Saylor in corporate bitcoin discourse to describe the economic ecosystem that is emerging on top of public company issuance of Bitcoin-linked securities. 

Under that paradigm, Digital Money refers to something that holds a very stable fiat-denominated value that is built on top of Digital Credit. And Digital Yield refers to something that concentrates and amplifies the yield of Digital Credit. Both Digital Money and Digital Yield are L3, since they exist on top of L2 Digital Credit.