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This is an opinion editorial by Max Keidun, the CEO of peer-to-peer bitcoin exchange Hodl Hodl.

The bitcoin lending space has suffered from several major issues in recent months and years, from the fallout of the Terra/Luna crash, impacting Celsius and BlockFi, and now FTX as well, to liquidity crunches given the sustained price drawdown, varying accusations of market manipulation and more.

All of these have led to significant losses, bankruptcies and a complete reshaping of the lending market. Many users have lost faith in bitcoin-based lending products and the market appears to be at its historical bottom, both in terms of volumes and public confidence.

As usual, the mainstream media blamed these crises on Bitcoin itself. But is any of this Bitcoin’s fault? Does it make Bitcoin any less attractive? Does it even mean that we shouldn’t consider bitcoin as lending collateral? No!Bitcoin Is Super Collateral, It’s The Lenders Who Have Failed

While Bitcoin's code is law, custodial lending platforms are trusted third parties, owned and managed by private entities. Trusted third parties are security holes. This was true before Bitcoin, and it is still true today.

Furthermore, most bitcoin lending platforms are poorly conceived, poorly developed and poorly managed. This doesn’t necessarily imply bad code. The code can be well written, properly audited and verifiably secure, but there may still be poor incentives that emerge from the design of the lending platforms. If the focus is to treat bitcoin as if it were a yielding asset, we are likely in for trouble.

The longer the “bitcoin lending” industry goes on, the clearer it becomes that most involved do not really understand how yield is generated. And as the saying goes, if you don’t know where the yield comes from, then you are the yield. What it really means is that your bitcoin is being used as the principal for risky investments, and it is likely only a matter of time before the house of cards starts to collapse.

I believe that the proper focus for integrating bitcoin into intermediated lending is to appreciate how valuable and unique bitcoin is, and to treat it as something to be borrowed against: to understand that bitcoin is super collateral. But what makes it so unique?

We can identify twelve characteristics that make it so:Bitcoin Is Liquid

Bitcoin is an extremely liquid asset. It is traded 24/7, with no weekend breaks and no banking holidays. Massive liquidity pools across a variety of fiat currencies are available globally. For lenders, this means that if you want to convert your collateral into fiat, you can do it instantly — either because the borrower has been liquidated or because the loan was repaid from the collateral.

This also allows for the hedging of risks. Bitcoin may be the only kind of loan collateral which can be instantly and dynamically hedged: a serious competitive advantage.Bitcoin Is Programmable

Bitcoin enables the creation of programmable lending products and ownership mechanisms. Among other benefits, this feature allows us to solve the problem of trusted third parties by building non-custodial lending mechanisms and storage systems. For example, we can distribute collateral claims or create conditional logic for redemption that will be automatically executed by the Bitcoin network, not the whims of a centralized financial institution.Bitcoin Is Scarce

There will only be 21 million bitcoin.Your collateral is getting more valuable over time, which means there is less incentive for you to sell, and likely more lenders who are willing to accept it. Bitcoin Is Flexibly Transparent

Bitcoin allows us to enable selective transparency of your assets when useful, but also allows complete anonymity when desired. In a lending scenario, for example, you can easily prove to a lender that you own and control the collateral under consideration.Bitcoin Is Sovereign

Bitcoin is yours. You have keys to your bitcoin just like you have keys to your house and your car. Bitcoin is your personal property. If you use a house or a car as collateral, you won't own it — your lender would. With bitcoin, you can still conditionally own it during your lending agreement. In fact, with the right tools, you can not only use but continue to use this collateral during the period of the lending agreement.Bitcoin Is Secure

Bitcoin is protected cryptographically, economically and socially. It is sensible to think of Bitcoin's lowest-level network security expanding to the set of tools built on top of it. For example, you can distribute ownership of your collateral between multiple independent parties, use offline wallets and utilize many more security methods.Bitcoin Is Market Driven

Bitcoin is the essence of a market-driven asset. The price of bitcoin reflects the market almost instantly, and it's not determined by one or several individuals. It is extremely difficult to manipulate the price of bitcoin. Bitcoin costs almost the same in fiat in any part of the world and is determined by a global market. Bitcoin Is A Real-Time Asset

Not only can we track the price of bitcoin collateral in real time, but Bitcoin's blockchain allows you to track your collateral address in real time also. Any price fluctuation can be reacted to appropriately. As mentioned, there are no weekends or holidays, and the market is always open to everyone, so nobody will close the market on a Friday and open on a Monday with different prices.Bitcoin Is Objective

Bitcoin is honest. Bitcoin in Miami costs the same amount of fiat as it does in Lugano or Riga. Bitcoin doesn't care whether you like it or not. The price of bitcoin cannot be determined by your personal views or your forecasting capabilities. To borrow against bitcoin, you only need to have bitcoin. Your credit history, social score or anything else is irrelevant to the lender as long as you have the collateral to borrow against.

Take real estate, for example. The same amount of money can buy you different properties in different countries with the same levels of economic and social development. What makes the difference then? Why can you buy a mansion on the coast of the Mediterranean in Spain or Italy and, for the same amount of money, you won’t be able to afford a proper house in the Bay Area in the U.S.?

It’s due to humans' irrational valuation capabilities. Because real estate valuation is primarily based on human factors, banks evaluate your property as either too expensive or too cheap, depending on market conditions and their plans.

Or take stocks, for example. Your stocks in a certain company can have good underlying conditions and great potential growth opportunities, but suddenly the CEO of this company can tweet some stupid thing, and you are losing money or getting liquidated. Meanwhile, Bitcoin is fair.Bitcoin Is Global

Bitcoin is globally accessible and globally distributed. For lending, this means that you can borrow remotely from anyone in the world, and you can lend money using bitcoin as collateral to anyone in the world. Bitcoin is neither limited to, nor exclusively exposed to, specific local markets.Bitcoin Is Digital

In a digital age, with digital commerce, we need digital collateral. Bitcoin is already online. It's here, on your machine, your phone, your cold wallet. Bitcoin allows you to borrow remotely and instantly. There is no need to digitize bitcoin as you need to do with real estate, land, cars or any other assets. It's already digital. Bitcoin Is Decentralized

There is no single point of failure in Bitcoin. Bitcoin has been attacked multiple times, and yet it is growing and expanding globally. No committee or person is responsible for Bitcoin. Having decentralized collateral significantly decreases your dependence on single events and failures of companies or people. You are protected by a distributed network. Will Lending Ever Match Bitcoin’s Potential?

Powerful collateral requires powerful tools. Is it possible to build lending tools that will match bitcoins' value? In order to do so, we all need to take a step back and check Bitcoin's white paper.

After reading Bitcoin’s white paper, you will understand that in order to build a successful lending product (in fact, any type of Bitcoin product!), you need to meet three main criteria. If your product has all three, congrats you have passed the test. Let's call it “The Satoshi Test.”Your service should be non-custodial. Remember: not your keys, not your coins. When using custodial lending platforms, you are exposed to the risk of losing your collateral completely. Because, as soon as bitcoin hit platform wallets, they are no longer yours. This is exactly what happened to customers of the many lending and trading platforms that have failed in 2022.Bitcoin is a peer-to-peer, electronic cash system. Once again: peer to peer. Instead of acting like a middleman, you need to provide technical tools for individuals or businesses to operate with each other. Or you can be a business that will allow customers to directly interact with your platform. A good example is a platform that allows customers to buy bitcoin directly into their own cold storage. Your platform should be Bitcoin only, meaning that the only collateral you should work with should be bitcoin. Shitcoins are risky, and shitcoins' code is a ticking time bomb. By integrating many blockchains into your product, you are exposing the most valuable to the most vulnerable.

There is an extra criteria that could be met: anonymity. If you are building non-custodial, Bitcoin-only, peer-to-peer products, this can and will allow you to offer anonymity and better privacy for your customers because security is not full without anonymity and the data of your customers should be protected, as well as their funds.

A good way to pass The Satoshi Test is to utilize multisig. Multisig is a simple and secure yet powerful tool. It allows you to offer peer-to-peer interactions to users, leverage non-custodial escrows and use only Bitcoin. It also allows you to offer better privacy for your users.

Take, for example, a multisig setup with three keys where the consensus mechanism is reached by entering at least two keys. This is called “two-out-of-three Bitcoin multisig.” In that type of setup, you — as a technical tool provider — can become one of the key holders, but you won’t have full control over customer funds (because you only have one key!), thus ensuring that these funds won’t be moved and rehypothecated. For example, the lender will have one key, the borrower will have another one, and the provider will have the third key. This kind of setup will allow users to verify that funds are only used by them, and that all parties must act according to rules in order to reach consensus, and that no single party can act in a dubious and shady way.

In fact, there are already powerful platforms that use Bitcoin multisig and offer peer-to-peer interactions. These platforms can provide lenders and borrowers from all over the world with easy two-out-of-three multisig setups, where each side (including the platform itself) has one key. The multisig is created on Bitcoin’s public blockchain, meaning that you can check your collateral at any time through any block explorer. And the best part is that no funds can be rehypothecated because the platform itself only has one key that ensures that every involved counterparty is acting in a good and professional way. Proper Lending Platforms Might Be Useful For HODLers

Although the lending market at the moment is experiencing turbulence and contagion effects, it is a good time to educate yourself about proper lending platforms that might be useful for any true HODLer in the future. As soon as we enter the next bull cycle, there will be less incentive to sell bitcoin and more interest in holding it for the long term and borrowing against it. Be prepared, because bear markets don’t last forever. HODL and learn!

This is a guest post by Max Keidun. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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What a Trump presidency would mean for global wars and European security

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What a Trump presidency would mean for global wars and European security

Donald Trump says he would end Russia’s war in Ukraine should he return to the White House – but any rushed deal will likely leave Kyiv much weaker and European security in even greater peril.

Another major flashpoint a Trump presidency would immediately seek to influence is the escalating conflict between Iran and Israel.

Mr Trump came close to direct war with Tehran during his first term in office and prior restraint could well give way to direct confrontation this time around.

US election latest: Harris and Trump make final pitches

Then there is the overwhelming longer-term challenge posed by China, with North Korea another growing headache especially after Mr Trump tried but failed to woo the leader of the hermit state during his first stint as commander-in-chief.

President Donald Trump meets North Korean leader Kim Jong Un, Wednesday, Feb. 27, 2019, in Hanoi. (AP Photo/ Evan Vucci)
Image:
Mr Trump meets North Korean leader Kim Jong Un in 2019. Pic: AP

With the US election on a knife edge, hostile and friendly capitals around the world have been gaming what a second Trump White House might mean for their respective national interests and for the most pressing global security threats.

Mr Trump’s track record of unpredictability is a challenge for traditional foes – but also for Washington’s closest allies, in particular fellow members of the NATO alliance.

The Republican nominee has made no secret of his frustration at how the US has for decades bankrolled the security blanket that protects Europe.

During his first term as president, Mr Trump threatened to withdraw the US from the alliance – a move that would almost certainly sound its death knell. His rhetoric did help to spur allies to dig deeper into their pockets and spend more on their militaries, though.

But the damage of years of underinvestment is deep and the pace of recovery is too slow for European NATO allies and Canada to credibly stand on their own as a potent military force any time soon.

Republican presidential nominee and former U.S. President Donald Trump and Ukraine's President Volodymyr Zelenskiy meet at Trump Tower in New York City, U.S., September 27, 2024. REUTERS/Shannon Stapleton REFILE - QUALITY REPEAT
Image:
Meeting Volodymyr Zelenskyy in New York in September – but what would a Trump presidency mean for Ukraine’s war with Russia? Pic: Reuters

In terms of immediacy when it comes to global crises, the impact of a Trump victory on 5 November would be felt most acutely by Ukraine and also by Iran.

The presidential candidate has repeatedly claimed that he would quickly end the Ukraine war, though without explaining how or what peace would look like.

In an indication of where his priorities lie, however, he has accused Ukrainian President Volodymyr Zelenskyy of being the “greatest salesman on earth” for securing tens of billions of dollars in weapons and other assistance that Washington has given to Kyiv.

Russia's President Vladimir Putin and U.S. President Donald Trump are seen during the G20 summit in Buenos Aires, Argentina November 30, 2018. REUTERS/Marcos Brindicci
Image:
Pic: Reuters

Yet – coupled with Ukraine’s willingness to fight – that military aid is the biggest reason why Ukraine has managed to withstand almost 1,000 days of Vladimir Putin’s war.

Stop the flow of American weapons, and Ukrainian troops – despite their own ingenuity and the support of other allies – will simply lack the firepower to keep resisting the onslaught.

Democratic presidential nominee and U.S. Vice President Kamala Harris meets with Ukraine's President Volodymyr Zelenskiy, in the Eisenhower Executive Office Building on the White House campus in Washington, U.S., September 26, 2024. Ukrainian Presidential Press Service/Handout via REUTERS ATTENTION EDITORS - THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY.
Image:
Kamala Harris believes US support for Mr Zelenskyy and Ukraine is vital. Pic: Reuters

By contrast, US vice president Kamala Harris, who is vying for the top job, has made clear that she views continued support to Ukraine as being as vital to US and Western interests as it is to Kyiv’s – a far more familiar stance that echoes the view of her NATO partners.

While US support for Ukraine would undoubtedly change under a Trump administration, that is not the same as facilitating a complete surrender.

The former president – who portrays himself as the ultimate dealmaker and has adopted a new election slogan – “Trump will fix it” – will not want to be held responsible for the total absorption of Ukraine into Mr Putin’s orbit.

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How does the US election work?

Putin and Iran

His relationship with the Russian president is a particularly interesting dynamic.

When president, he infamously said he trusted Mr Putin’s denials over his own intelligence agencies when it came to claims about Russian interference in the 2016 US election.

But with the right advice, might a future President Trump be able to use his connection with Mr Putin to the West’s advantage?

At the very least, it adds a new level of unpredictability – which is perhaps the most important element when it comes to assessing the potential impact on the world of a second Trump term.

Donald Trump said 'as long as I'm President of the United States, Iran will never be allowed to have a nuclear weapon'
Image:
Donald Trump said in 2020 ‘as long as I’m president of the United States, Iran will never be allowed to have a nuclear weapon’. Pic: Reuters

On Iran, in stark contrast to his approach to Russia’s war in Ukraine, a future President Trump may well back much greater US military support for Israel’s conflict against Tehran and its proxies – perhaps even direct involvement by US forces in strikes on Iran.

Mr Trump has an even tougher stance towards Tehran and its nuclear ambitions than Joe Biden’s administration.

His decision to rip up a major nuclear deal with Iran was one of his most significant foreign policy acts during his four years as president.

It is also personal, with Iran accused of hacking the Trump campaign in recent months – an attack that would surely only heighten tensions with Iran during any second Trump term.

On election night, Sky News will have access to the most comprehensive exit poll and vote-counting results from every state, county and demographic across America through its US-partner network NBC.

You can find out more about Sky News’ coverage here.

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What a Trump presidency would mean for global wars and European security

Published

on

By

What a Trump presidency would mean for global wars and European security

Donald Trump says he would end Russia’s war in Ukraine should he return to the White House – but any rushed deal will likely leave Kyiv much weaker and European security in even greater peril.

Another major flashpoint a Trump presidency would immediately seek to influence is the escalating conflict between Iran and Israel.

Mr Trump came close to direct war with Tehran during his first term in office and prior restraint could well give way to direct confrontation this time around.

US election latest: Harris and Trump make final pitches

Then there is the overwhelming longer-term challenge posed by China, with North Korea another growing headache especially after Mr Trump tried but failed to woo the leader of the hermit state during his first stint as commander-in-chief.

President Donald Trump meets North Korean leader Kim Jong Un, Wednesday, Feb. 27, 2019, in Hanoi. (AP Photo/ Evan Vucci)
Image:
Mr Trump meets North Korean leader Kim Jong Un in 2019. Pic: AP

With the US election on a knife edge, hostile and friendly capitals around the world have been gaming what a second Trump White House might mean for their respective national interests and for the most pressing global security threats.

Mr Trump’s track record of unpredictability is a challenge for traditional foes – but also for Washington’s closest allies, in particular fellow members of the NATO alliance.

The Republican nominee has made no secret of his frustration at how the US has for decades bankrolled the security blanket that protects Europe.

During his first term as president, Mr Trump threatened to withdraw the US from the alliance – a move that would almost certainly sound its death knell. His rhetoric did help to spur allies to dig deeper into their pockets and spend more on their militaries, though.

But the damage of years of underinvestment is deep and the pace of recovery is too slow for European NATO allies and Canada to credibly stand on their own as a potent military force any time soon.

Republican presidential nominee and former U.S. President Donald Trump and Ukraine's President Volodymyr Zelenskiy meet at Trump Tower in New York City, U.S., September 27, 2024. REUTERS/Shannon Stapleton REFILE - QUALITY REPEAT
Image:
Meeting Volodymyr Zelenskyy in New York in September – but what would a Trump presidency mean for Ukraine’s war with Russia? Pic: Reuters

In terms of immediacy when it comes to global crises, the impact of a Trump victory on 5 November would be felt most acutely by Ukraine and also by Iran.

The presidential candidate has repeatedly claimed that he would quickly end the Ukraine war, though without explaining how or what peace would look like.

In an indication of where his priorities lie, however, he has accused Ukrainian President Volodymyr Zelenskyy of being the “greatest salesman on earth” for securing tens of billions of dollars in weapons and other assistance that Washington has given to Kyiv.

Russia's President Vladimir Putin and U.S. President Donald Trump are seen during the G20 summit in Buenos Aires, Argentina November 30, 2018. REUTERS/Marcos Brindicci
Image:
Pic: Reuters

Yet – coupled with Ukraine’s willingness to fight – that military aid is the biggest reason why Ukraine has managed to withstand almost 1,000 days of Vladimir Putin’s war.

Stop the flow of American weapons, and Ukrainian troops – despite their own ingenuity and the support of other allies – will simply lack the firepower to keep resisting the onslaught.

Democratic presidential nominee and U.S. Vice President Kamala Harris meets with Ukraine's President Volodymyr Zelenskiy, in the Eisenhower Executive Office Building on the White House campus in Washington, U.S., September 26, 2024. Ukrainian Presidential Press Service/Handout via REUTERS ATTENTION EDITORS - THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY.
Image:
Kamala Harris believes US support for Mr Zelenskyy and Ukraine is vital. Pic: Reuters

By contrast, US vice president Kamala Harris, who is vying for the top job, has made clear that she views continued support to Ukraine as being as vital to US and Western interests as it is to Kyiv’s – a far more familiar stance that echoes the view of her NATO partners.

While US support for Ukraine would undoubtedly change under a Trump administration, that is not the same as facilitating a complete surrender.

The former president – who portrays himself as the ultimate dealmaker and has adopted a new election slogan – “Trump will fix it” – will not want to be held responsible for the total absorption of Ukraine into Mr Putin’s orbit.

Please use Chrome browser for a more accessible video player

How does the US election work?

Putin and Iran

His relationship with the Russian president is a particularly interesting dynamic.

When president, he infamously said he trusted Mr Putin’s denials over his own intelligence agencies when it came to claims about Russian interference in the 2016 US election.

But with the right advice, might a future President Trump be able to use his connection with Mr Putin to the West’s advantage?

At the very least, it adds a new level of unpredictability – which is perhaps the most important element when it comes to assessing the potential impact on the world of a second Trump term.

Donald Trump said 'as long as I'm President of the United States, Iran will never be allowed to have a nuclear weapon'
Image:
Donald Trump said in 2020 ‘as long as I’m president of the United States, Iran will never be allowed to have a nuclear weapon’. Pic: Reuters

On Iran, in stark contrast to his approach to Russia’s war in Ukraine, a future President Trump may well back much greater US military support for Israel’s conflict against Tehran and its proxies – perhaps even direct involvement by US forces in strikes on Iran.

Mr Trump has an even tougher stance towards Tehran and its nuclear ambitions than Joe Biden’s administration.

His decision to rip up a major nuclear deal with Iran was one of his most significant foreign policy acts during his four years as president.

It is also personal, with Iran accused of hacking the Trump campaign in recent months – an attack that would surely only heighten tensions with Iran during any second Trump term.

On election night, Sky News will have access to the most comprehensive exit poll and vote-counting results from every state, county and demographic across America through its US-partner network NBC.

You can find out more about Sky News’ coverage here.

Continue Reading

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‘My family are all Republicans but half are voting Democrat,’ says Arizona voter as swing states prepare for election

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'My family are all Republicans but half are voting Democrat,' says Arizona voter as swing states prepare for election

The sprawling state of Arizona was once reliably Republican but in 2020 that changed.

Joe Biden became only the second Democrat to win here since 1948, winning by less than 11,000 votes, and polling suggests Arizona could once again be won and lost by the narrowest of margins.

Above Phoenix, Dobbins Lookout provides a panoramic view of the rugged Grand Canyon State.

Many of the people there to watch the Friday night sunset were contemplating a consequential decision.

Those include Jennifer Montero and her fiance Richie Garcia, who say their vote on Tuesday is based on their economic circumstances.

“Prices have gone up like crazy,” said Ms Montero, “and then, especially now that I’m wanting to get married and have kids, I definitely want to be able to go to McDonald’s and afford a spicy for a dollar like they used to be.”

Until 2020, Arizona was reliably Republican
Image:
Until 2020, Arizona was reliably Republican

The couple are of Mexican descent, in a state where one in four voters are Latin American and the debate about immigration is complicated.

More on Arizona

For Mr Garcia, being born in America means the border is less of a concern.

“Times are changing. I think a lot of the Hispanic community was very inclined to vote Democrat due to immigration status, but my parents are citizens. I believe that immigration status doesn’t really matter to me much anymore,” he said.

Less than 30 minutes away in downtown Phoenix, people were already beginning to vote at a drive-through polling centre.

Rene Rojas, a life-long Republican who voted Democrat for the first time
Image:
Renee Rojas, a lifelong Republican who is voting Democrat for the first time

One of them was Renee Rojas, a lifelong Republican voting Democrat for the first time.

Ms Rojas, who is of Native American and Latino descent, says that decision is down to Donald Trump.

“Recent rhetoric and the changes of the Republican Party just made me realise that things are not going the way they should be,” she said, before adding, “My mom, my grandmother is a Republican. She’s Navajo. You know, my other family members and friends, they’re all Republicans, but half of them are voting Democrat this year.”

US election latest: Harris and Trump make late bid to woo voters

Ms Rojas’s thoughts on the prospect of trouble after the result are a reminder of the strong Conservative values of the state she lives in.

“I’m an Arizonan. I have a gun myself, I have several different kinds of firearms, heavy machine guns and handguns. So I am a proud gun holder and people will demonstrate the way they want to as long as they’re not hurting anybody.”

A drive-through polling centre in downtown Phoenix
Image:
A drive-through polling centre in downtown Phoenix

For other drive-through voters like Peter Orozco, the choice was a simple one, about stability.

He feels the current administration will maintain the foreign policy status quo.

“We can’t politically make any big changes, especially on an international scale, you know, because if we get somebody else president other than what the existing presidency is, it could be World War Three,” he said.

26-year-old mortgage broker Dane Jenson (right) made a joke "Swifties for Trump" sign in Arizona
Image:
Mortgage broker Dane Jensen (R)

In Arizona, there are other voters who feel the state is worse off since the Democrats came to power.

They include Dane Jensen, a 26-year-old mortgage broker.

For the last few days, Mr Jensen has been standing outside another polling station in Scottsdale with a “Swifties for Trump” banner.

He made the banner as a joke to try to ruffle the feathers of people voting for the Democratic party, which the singer has endorsed.

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About Swift, he said: “That’s like someone like that who has a private jet and is flying around the country who is, in my opinion, creating more fossil fuels and bad energy for the environment than any one person.

“And for you to sit there on your high horse and billions of dollars, and tell people what you think should happen when you’re already set for life, I don’t really agree with that.”

Read more:
Should we fear Trumponomics?

University students handed cookies for voting early
What happens if there’s a tie in the US election?

Beyond celebrity endorsements is an economic and social reality in Arizona, which Mr Jensen and all the voters in the state will recognise.

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“I’m born and raised here. So I know that area as well as anyone. But, you know, crime, the border economy, those are really important issues, they’re everyday issues,” he said.

It’s those everyday issues in a handful of vital places like Arizona that will decide an election hinging on the tightest of margins.

On the night, Sky News will have access to the most comprehensive exit poll and vote-counting results from every state, county and demographic across America through its US-partner network NBC.

You can find out more about Sky News’ coverage here.

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