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 Workers: 7
Web site: https://www.lava.xyz/
Public or Personal? Personal
Shehzan Maredia desires to make custodying Bitcoin straightforward.
This is the reason he based Lava, an app that he and his group have created that permits 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 listing of entrepreneurs within the Bitcoin house who believes that seed phrases — lists of 12 to 24 phrases used to get well 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 plenty.
“I spotted that seed phrases have been a giant barrier to adoption,” Maredia instructed 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 a variety of totally different self-custody setups, Maredia and his group 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 possibly can 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 am unable to 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 am unable to brute power it,” he added.
Maredia and the group at Lava name this design the Lava Sensible Key, and so they consider that it’s serving to to supply less complicated self-custody for many who in any other case won’t wish to tackle the accountability.
“We’ve truly seen a bunch of individuals utilizing it that beforehand would have simply purchased bitcoin and stored it on Coinbase,” he mentioned.
What’s extra, Lava Vault works seamlessly with Lava Trade, one other product Lava not too long ago rolled out.
Lava Vault + Lava Trade = 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 trade supplies and a self-custody pockets. It may be overwhelming for somebody new to Bitcoin to undergo the method of transferring their bitcoins from an trade pockets into self-custodial pockets, particularly if the trade gives each (e.g., Coinbase).
Lava removes this issue, although, because it permits customers to buy bitcoin inside the app — at one of the best fee obtainable — earlier than routinely sending that bitcoin into self-custody.
“We have now this trade aggregator we’ve constructed,” mentioned Maredia.
“If you wish to purchase bitcoin at present, you must determine which trade — Kraken, Coinbase. So, we work with a variety of them. We all know what value they give you primarily based in your order, and we simply route you to one of the best trade by way of 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 attempting to onboard customers to self-custody,” mentioned 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 through Lava, they will use both asset to make transactions permissionlessly with anybody on this planet. And shortly they can even have the ability to borrow {dollars} towards their bitcoin with out having to show their bitcoin over to a 3rd celebration.
Lava Loans
Maredia and the Lava group not too long ago 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 technique to borrow towards your bitcoin with out giving it to a custodian or bridge,” mentioned 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 a variety 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 quite borrow towards it at a decrease rate of interest than it’s appreciating,” he added.
He additionally seen that the opposite strategies of borrowing towards 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 must take your Bitcoin, KYC your self, put it on an trade, pay charges to mint it, pay a bunch of community charges to maneuver it onto Ethereum after which when you’re accomplished utilizing Wrapped Bitcoin, transfer it again to your trade, pay further charges to unwrap your Bitcoin and transfer it again to self-custody. And also you most likely have tax obligations for wrapping your Bitcoin, too,” he added.
“I wish to get these individuals utilizing native bitcoin. We are able to enhance the market dimension of people who find themselves utilizing precise bitcoin as collateral.”
Discreet Log Contracts (DLCs)
Lava Loans employs a particular kind of good contract on Bitcoin known as Discreet Log Contracts (DLCs).
Maredia defined that DLCs are safer than the forms of good contracts usually deployed on different main crypto networks.
“DLCs are attention-grabbing since you’re principally simply utilizing the Bitcoin layer one to lock your Bitcoin and launch it below some predefined set of situations,” he defined.
“[As opposed to] good contracts on Ethereum or Solana that continuously preserve getting hacked, DLCs are principally a bunch of pre-signed transactions that you just encrypt. You nearly get formal verification of your system by default, as a result of you understand that the cash that’s locked within the good contract between you and your counterparty can solely be moved below this predefined set of situations that you’ve verified,” he added.
“So, there’s loads much less technical danger versus writing arbitrary code deployed on the EVM that anybody can poke round with and exploit.”
Maredia additionally shared that the Lava group consists of a variety of engineers who contributed to early DLC requirements.
“There’s most likely like 10 individuals, a variety of which work at and contribute to Lava proper now, who find out about this tech,” defined Maredia, who additionally shared that the potential of DLCs has but to be absolutely realized largely due to how new the expertise is. “Not too many individuals find out about [DLCs, but] that’s as a result of the tech is early and we’re constructing it.”
Transfer Slowly And Safeguard Issues
Not like many within the crypto and broader tech house who take the “Transfer quick and break issues” method, Maredia and his group 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 a variety of R&D over the past two years,” mentioned Maredia.
“We have been experimenting with a number of issues. Even earlier than we constructed Lava Sensible Key, Lava Trade and Lava Loans, we had been experimenting with a variety 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 dwell, the beta model of the product has been functioning properly and offering he and his group with necessary suggestions.
“All the pieces’s coming collectively,” he concluded.
Lava is a portfolio firm of UTXO Administration, a regulated capital allocator targeted 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 important holdings in digital belongings.
