Firm Title: Lava
Founders: Shehzan Maredia
Date Based: January 2022
Location of Headquarters: New York, USA (with some distant staff)
Quantity of Bitcoin Held in Treasury: N/A
Variety of Staff: 7
Web site: https://www.lava.xyz/
Public or Non-public? Non-public
Shehzan Maredia desires to make custodying Bitcoin simple.
That is why he based Lava, an app that he and his staff have created that enables customers to buy bitcoin, transact with each bitcoin and stablecoins globally and now maintain their bitcoin in self-custody with out having to jot down down a seed phrase.
Maredia is one among a rising record of entrepreneurs within the Bitcoin house who believes that seed phrases — lists of 12 to 24 phrases used to recuperate funds from misplaced or stolen cryptocurrency wallets — are hindering mainstream adoption of bitcoin. He thinks that seedless alternate options to self-custody will assist onboard the lots.
“I spotted that seed phrases have been a giant barrier to adoption,” Maredia advised Bitcoin Journal, “and I went down the rabbit gap [to make] one thing higher.”
After months of R&D, Maredia developed an answer that’s now on the coronary heart of the design of the Lava app: Lava Vault.
Lava Vault
After testing quite a lot of completely different self-custody setups, Maredia and his staff arrived at a novel multisignature resolution that grew to become the spine of the Lava Vault.
“We constructed this two-of-two restoration resolution for self-custody the place you may connect one a part of the two-of-two to your cloud account and the opposite is a 4 digit PIN,” he defined.
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“If I’ve your 4 digit PIN, I can not steal your cash as a result of I haven’t got entry to your cloud account. If I’ve entry to your cloud account, I haven’t got your 4 digit PIN, and I can not brute drive it,” he added.
Maredia and the staff at Lava name this design the Lava Sensible Key, they usually imagine that it’s serving to to offer easier self-custody for individuals who in any other case may not wish to tackle the accountability.
“We’ve truly seen a bunch of individuals utilizing it that beforehand would have simply purchased bitcoin and saved it on Coinbase,” he stated.
What’s extra, Lava Vault works seamlessly with Lava Change, one other product Lava just lately rolled out.
Lava Vault + Lava Change = Auto-Onboarding To Self-Custody
It’s usually difficult for brand spanking new Bitcoin customers to inform the distinction between a custodial pockets that an alternate offers and a self-custody pockets. It may be overwhelming for somebody new to Bitcoin to undergo the method of shifting their bitcoins from an alternate pockets into self-custodial pockets, particularly if the alternate affords each (e.g., Coinbase).
Lava removes this issue, although, because it permits customers to buy bitcoin inside the app — at the most effective fee accessible — earlier than robotically sending that bitcoin into self-custody.
“Now we have this alternate aggregator we’ve constructed,” stated Maredia.
“If you wish to purchase bitcoin at this time, you need to work out which alternate — Kraken, Coinbase. So, we work with quite a lot of them. We all know what worth they give you based mostly in your order, and we simply route you to the most effective alternate via Lava,” he added.
As soon as customers make their buy, the bitcoin exhibits up of their Lava Vault.
“That is tremendous helpful if I’m making an attempt to onboard customers to self-custody,” stated Maredia. “Now, I can inform them to obtain on to self-custody, which largely will increase the probability that they’ll proceed to make use of self-custody.”
As soon as customers have their bitcoin or stablecoins in self-custody by way of Lava, they’ll use both asset to make transactions permissionlessly with anybody on this planet. And shortly they may even be capable of borrow {dollars} in opposition to their bitcoin with out having to show their bitcoin over to a 3rd celebration.
Lava Loans
Maredia and the Lava staff just lately launched a beta model of a brand new product known as Lava Loans, which Maredia describes as a “self-custodial model of BlockFi.”
BlockFi, now defunct, was a platform that allowed customers to make use of bitcoin as collateral for a mortgage. The primary distinction between a platform like BlockFi and Lava is that customers had to surrender custody of their bitcoin to BlockFi to make use of the service.
“Lava Loans is the primary solution to borrow in opposition to your bitcoin with out giving it to a custodian or bridge,” stated Maredia.
Maredia created this product as a result of he each noticed the demand for it and wished one thing like this for himself.
“There’s quite a lot of Bitcoiners who don’t wish to promote their bitcoin,” shared Maredia.
“I don’t wish to promote my bitcoin both, as a result of it’s appreciating. I’d somewhat borrow in opposition to it at a decrease rate of interest than it’s appreciating,” he added.
He additionally observed that the opposite strategies of borrowing in opposition to one’s bitcoin are each extremely inefficient and costly.
“There are billions of {dollars} of bitcoin-secured loans occurring with custodians or with Wrapped Bitcoin (WBTC),” he defined.
“To get Wrapped Bitocin, you need to take your Bitcoin, KYC your self, put it on an alternate, pay charges to mint it, pay a bunch of community charges to maneuver it onto Ethereum after which when you’re executed utilizing Wrapped Bitcoin, transfer it again to your alternate, pay additional charges to unwrap your Bitcoin and transfer it again to self-custody. And also you in all probability have tax obligations for wrapping your Bitcoin, too,” he added.
“I wish to get these folks utilizing native bitcoin. We are able to improve the market dimension of people who find themselves utilizing precise bitcoin as collateral.”
Discreet Log Contracts (DLCs)
Lava Loans employs a selected kind of sensible contract on Bitcoin known as Discreet Log Contracts (DLCs).
Maredia defined that DLCs are safer than the kinds of sensible contracts usually deployed on different main crypto networks.
“DLCs are fascinating since you’re mainly simply utilizing the Bitcoin layer one to lock your Bitcoin and launch it beneath some predefined set of situations,” he defined.
“[As opposed to] sensible contracts on Ethereum or Solana that consistently preserve getting hacked, DLCs are mainly a bunch of pre-signed transactions that you just encrypt. You virtually get formal verification of your system by default, as a result of you understand that the cash that’s locked within the sensible contract between you and your counterparty can solely be moved beneath this predefined set of situations that you’ve got verified,” he added.
“So, there’s quite a bit much less technical threat versus writing arbitrary code deployed on the EVM that anybody can poke round with and exploit.”
Maredia additionally shared that the Lava staff consists of quite a lot of engineers who contributed to early DLC requirements.
“There’s in all probability like 10 folks, quite a lot of which work at and contribute to Lava proper now, who learn about this tech,” defined Maredia, who additionally shared that the potential of DLCs has but to be totally realized largely due to how new the expertise is. “Not too many individuals learn about [DLCs, but] that’s as a result of the tech is early and we’re constructing it.”
Transfer Slowly And Safeguard Issues
In contrast to many within the crypto and broader tech house who take the “Transfer quick and break issues” method, Maredia and his staff are analytical and thorough. They like to conduct analysis and take a look at merchandise rigorously earlier than bringing them to market.
“We have been doing quite a lot of R&D during the last two years,” stated Maredia.
“We have been experimenting with a number of issues. Even earlier than we constructed Lava Sensible Key, Lava Change and Lava Loans, we had been experimenting with quite a lot of other ways to do loans, to do self-custody safety and to do on-ramp and off-ramp,” he added.
“This new self-custody safety resolution is a product of the final eight to 10 months of experimentation.”
Maredia added that whereas Lava Loans is probably going months away from going reside, the beta model of the product has been functioning effectively and offering he and his staff with vital suggestions.
“Every little thing’s coming collectively,” he concluded.
Lava is a portfolio firm of UTXO Administration, a regulated capital allocator centered on the digital belongings business. Bitcoin Journal is owned by BTC Inc., which operates UTXO Administration. UTXO invests in quite a lot of Bitcoin companies, and maintains vital holdings in digital belongings.
