BTC015: Bitcoin & Peer to Peer Decentralized Lending w/ Max Keidun from Hodl Hodl (Bitcoin Podcast)We Study Billionaires - The Investor’s Podcast Network
- 752 views
- 3 Mar 2021
In this episode, you'll learn:What are the primary differences between peer to peer lending/borrowing and centralized lendingHow is HodlHodl different than solutions being provided on platforms like EthereumDo lenders even care about what borrowers are doing with the funds?What are some of the risks associated with peer to peer lending/borrowingHow does HodlHodl manage regulator constraintsWhat is the significance of keeping 1 of 3 keys when lending & borrowingBOOKS AND RESOURCES MENTIONED IN THIS EPISODEFollow Max's platform on TwitterCheckout HodlHold.comGet a FREE book on how to systematically identify and follow market trends with Top Traders Unplugged. Trade domestic and international shares all from one stockbroking account with CMC Markets.Get twenty-five percent off your first two orders of Literati, a one-of-a-kind book subscription. Start them on a literary journey like no other today.Automate your money with M1 Finance. Get $30 when you sign up for free today. Take your business to the next level by hiring the right people with ZipRecruiter.Listen to the top stories, the top posts and tweets and conversations about those stories, as well as behind the scenes analysis of ALL the latest tech news every single day with TechMeme Ride Home.Have everything you need to grow online with Squarespace. Use code WSB to save 10% off your first website or domain purchase.Push your team to do their best work with Monday.com Work OS. Start your free two-week trial today.Create automated investment portfolios of diversified, low-cost index funds with Wealthfront. Get your first $5,000 managed for FREE, for life.Browse through all our episodes (complete with transcripts) here.Support our free podcast by supporting our sponsors.
You're listening to Teip. Hey, everyone, welcome to our Wednesday release of the show where we're talking about Bitcoin. A few weeks ago, we talked about Bitcoin borrowing and lending on a centralized platform like Block VI with Zach Prince. Today, we're talking about the same subject matter, but we're talking about doing it in a peer to peer decentralized marketplace. My guest today is Max Ketan, and he's the founder of the borrowing and lending platform Hoddle Hoddle. Throughout the show, we talk about the differences that peer to peer lending might offer the market how risk is managed when you're lending to a person you don't even know or have any idea what they're using the funds for, how this type of platform is riskier and also less riskier than centralized platforms and what this might all mean for the future of finance.
I learned a ton through this discussion, so sit back and enjoy this fascinating conversation on the new world of finance that's being constructed right before our eyes.
And you're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Kristen. All right, so here I am with Max. Max, welcome to the show. Hey, Preston, thank you for having me. And our team as well. So, yes, thank you very much. This is where I want to start.
Max is just really kind of the basics, because I had Zac Prince here on the show a couple of weeks ago. He's obviously talking about a much more centralized way of lending and borrowing. And you guys are going about this in a completely different way. You guys are going peer to peer and you're just providing the platform for two people to to come together and to lend and borrow to talk us through what this really means and just give us the basics.
We've launched the landing platform, which is called Land at Full Throttle, in October 20 20. It's actually based on technology that we've been using for three years before that in our trading part, which is more to Bitcoin to two out of three. So basically the multisite, as you can call it, a Maspero, let's call it like that, it's easier to understand a for non-technical people. So it's a nice girl with three keys. HP is distributed between the parties that are involved in this specific contract, whether it's a trading contract or a lending contract.
Let's let's talk about just a bar. It's beer to beer. And there are three keys. One key goes to the lender, one key goes to borrower, and one key goes to platform. In case there is a dispute, we can engage in that dispute. We can understand who is the right person, who is the wrong person. And we can together with another with another party, we can allocate funds towards the winner. So basically, Scrollworks, in a pretty simple way, you need to kiss the tree in order to release funds from that aspro.
So basically there's a game theory in there. So you need to reach a consensus in dispute, for example, in order to do something with this financing. This is what this means. It's also called non-custodial. It means that Hoil itself cannot move your funds alone with our one key. And it also means that we don't have any follow in set as custodial services to block fee or any other facility or platform out there to. You're not effectively depositing your bitcoin, do you will use as a collateral to our system.
You are effectively depositing it on the Bitcoin block. Change the address is unique, is generated each time for each in contract. And why it's Peer-to-peer because you can go on our platform, you can post your own, though, for which your own terms, your interest rate, whether you want to borrow or whether you want to lend money, you just need to find a counterparty, which is also most of the time it's just individual retail person already actually see some interest from institutional players that are approaching us as well, although it's only three months since the launch.
MIDDLEMORE So yeah. And that's why it's we're so basically you are becoming effectively a lender or borrower and you can become on your own terms so you can publish for example, I'm ready to pay 10 percent interest. I need to borrow fifty thousand worth a few is the tea or use DC or whatever. And I want to do it for like, say, six months and you publish your offer and it's purely peer to peer interaction. There's no central authority and in that case only provides the technical tools for you to perform all actions that you actually need to perform.
So that's how it works. I'm curious how many times you guys have had to step in as the third party in a dispute to release funds. Has that happened since you guys have launched? Actually, we're lucky, but there wasn't any dispute yet on the landing platform, on the trading platform, they are there because it's like the trading platform. There's there's a higher frequency of trades, their higher frequency of different contracts. And people sometimes there's also some kind of level of not very honest people on the platform, which is any peer to peer platform.
They have this issue. So there should be a dispute resolution system, which we have in place. But most of the time disputes are solved between two parties because there's again, there's a game theory. One party doesn't want to leave Bitcoin on and throw another body wants to preserve the reputation or whatever. There's always some kind of interest in that. So most of the time, we're actually not needed and we don't even own scientists because they solve this issue between themselves.
Let me ask you this. So most people that are accustomed to this decentralized finance, this DFI, that most people, when they hear that they immediately think Ethereum or finance or whatever, how are they solving a dispute in escrow when the two parties can't come to an agreement that funds should be released? What's their method for doing that? I actually don't know. I know that some platforms are using the same approach that we have, so they have a key and they effectively try to solve the dispute and how well they bring an avatar in and they're trying to solve this dispute.
Some contracts on the theory are I wouldn't say they're they're a bit more sophisticated, but they're a bit more difficult. So there's some kind of level of automation. So basically, if you perform A, B, C, D action, you will be able to effectively pull out faster or something will be performed. So most of the time there's some kind of level of automation to that which on the one hand is good. On the other hand, as we see from our experience, people always find a way to negotiate terms that they like.
So that's the basically I'd I wouldn't say that land on soil is purely decentralized because we still have websites and we still have some central points of our infrastructure and system. But we are moving in that direction. I would say we are semi decentralized and we are not trying honestly. We're not trying to compete with other outgoing Coinbase solution. We're trying to compete here with custodial solution that it actually majority of solution in Bitcoin. And if you are familiar with four principles of Bitcoin, the one core principle that everyone should know is not your keys, not your coins.
So obviously what we're doing, we're trying to bring very complicated non-custodial solution to mass market so that people actually can educate themselves, learn and understand what is the way. So basically, by the words of Mandalorian, this is the way.
And so what you're really getting at is you have a key. And in a lot of these other services that you're you're outsourcing that trust to them in order to manage. And although it takes two out of three keys in order to complete the transaction for borrowing and lending, you've said that since you've launched, you've never had to adjudicate or step in to be that third key. The other party has always supplied it. I'm kind of curious how many loans is that that you've never had to step in as a as a third party in order to adjudicate the escrow?
Yeah, we recently published our results for first three and a half months, actually the first four months. So it's more than the loans that were issued through our peer to peer platform. And again, not by our station, but it's peer to peer. This is an awesome thing. It's more than three million of you. Is the value already issued for first four months? What would you say the normal loan value is? That's the average value is ten thousand and actually with Bitcoin price rises a day, appetite's also rising.
So people are, for example, we have now outstanding demand for we have the borrower full for us and we're willing to borrow one million effectively. So this is available and the API is actually around 16 percent. So it's one million per year and it's fixed 16 percent with the average LTV around 50, 60 percent. So that's the numbers we're talking about. Anyone listening to this is immediately saying, who in the world is paying these interest rates because the interest rate that you're saying isn't just for that one particular million dollar loan.
You can you can go out, you can create a contract for ten thousand dollars and you're fetching these kind of interest rates of 16 percent. Correct? That's basically the average, so there are short term loans, which obviously with fire. So there are some short term loans like, let's say one month and a year I sold them. These are the loans that actually progress. They have made around 40 percent or 50 percent. People are taking this money in order to maybe leverage their position in Bitcoin, maybe leverage their position in other crypto.
We're not asking what they do with this. And we actually don't want to know that. We don't care. We don't care because it's like basically cold as a rule. Of course, we have some rules to reach the consensus, obviously, as as a as I mentioned previously, we're not naive that there will be no disputes as the volume rises, as the people appetites rises, as the more and more people stepping in. Of course, there will be disputes.
Not all of them will be unnecessary. People are there's one bad person or persons. There must be a misunderstanding at some point. Might be. So it's OK. We're used to that. We have a system in place. We're trying to solve that. That's how it goes. So people who are new to all this and they're hearing you and I both say we don't care what they do with it, their minds are exploding because that's just not how their their understanding of of loans work.
Typically, there's a loan officer. They're looking at all all of your background, whether you're able to repay it. But what we're talking about is an over collateralized loan.
So what I want to do really simply is I just want to role play a scenario here where I'm going to be the depositor, you're going to be the borrower. And let's just walk through an exchange on this platform. So I would log into Hoddle Hoddle and let's say I want to lend out ten thousand dollars USD on the platform. So I would put up a contract that says I'm willing to to lend the ten thousand dollars USD at 16 percent interest rate for the next six months.
And those would be the terms that I would include on the loan that I'm hoping that somebody else will be willing to become a counterparty on. So I put that up on your platform and then let's say you're the borrower, you come along and what do you do at that point? Well, obviously, I found your offer. It's good for me, so I'm happy to pay you 16 percent APR and confirmed that I'm interested, then ultimately the contract is created upon the creation of a contract.
You have this key, which is called payment password. So basically you even encrypt your key with the payment for the payment. Password effectively is an encrypted key to the zero. So we both enter this key and then the system understands that we're serious about that and it creates a unique multi signature escrow account or address on the public bitcoin lock chain. And you can actually go and double check this address on any block explorer there is. You can double check that it's fresh, there's zero account in that zero sum.
But then effectively, as the borrower send to this escrow account, needed amount of money, let's say the LTV ratio is 50 percent. So I'm sending and I'm saying roughly twenty thousand worth of Bitcoin with a current price, let's say zero point for Bitcoin. I'm sending to this espero. Which is double the amount that I'm with you. So I'm giving you ten thousand and you're basically depositing twenty thousand in escrow. Yeah, because let's say you are altagracia, a 60 percent loan to value ratio of 60 percent.
You can also set up 70 percent loan to value ratio. So I will effectively need to deposit less than 20 percent. So it's it's it's up to you and up to me to decide which ultimate ratio is fine. So I send it to the Aspro. As soon as it gets three confirmations, we inform everyone. Basically, the contract is moving to another station. We form everyone. Hey, guys, bitcoins are in that. So it's safe to proceed with the loan paid and you send ten thousand.
Let's say you want to see, as you mentioned to my stable point address I received that I confirmed that I received that. Actually there's always double checking. You know, when you send you attach to the transaction. When can you confirm that you've made a payment? I, on the other hand, need to confirm that I received these funds. And only after we do that, the contract is in stage and we're good to go. And in six months, I repay you of the amount that you've loaned it to me with the interest that I can also repaid earlier.
I can also do by artillery payments or in case if I don't have stable coins anymore, let's say I spend them all and I don't have them. But before any price increase significantly, I can cover your loan with bitcoins from espero. This is how it works.
So now my concern is the person who made that deposit is, let's say the price of the escrow is going down significantly and it's coming down to the value of my initial deposit of ten thousand. How quickly am I able to get the escrow to be released to me before the value actually of the escrow starts going below my deposit? I'll talk about the speed at which something like that, please. We sent four different types of notifications to borrower because he's the man in charge in that case who needs to understand what he will do effectively to avoid the liquidation, what he can do.
He need to balance his LTV ratio because as soon as LTV ratio will go to 90 percent, he will be effectively liquidated. What he can do in order to prevent this liquidation. Real fast, when you say they'll be liquidated, when the value gets to 90, which is LTV gets to 90, which is approximately 10 percent higher than my deposit. So if my deposit. It doesn't work like that, it's it's a bit different, different. You can actually check it out on our frequent ask questions.
There's a pretty simple guy. What does that percent LTV equate to as far as over collateralized debt? We have the poor diets of Alert's margin for one is seventy five percent of them to eat. Another one is 80 percent of failed to another one. Ninety five percent are real to me and 90 percent is the final force liquidation. For now, you have basically time to react until the ratio reaches 90 percent of all. To be active to your ratio reaches 90 percent.
The contract will be automatically transferred into forced liquidation sale and the collateral will be automatically liquidated. When you say an LTV of 90, the loan is still over Collateralize, but it's getting closer to my deposit of ten thousand, it might be at eleven or twelve thousand, whatever the 90 percent LTV means.
Yeah, it's true, it's true, and we have old calculators, so basically you see in your contract, you as a lender also can can be prepared for that. You can see that as well of the loan to value ratio changes. And we actually are going to add some interesting features that we're also going to inform with notification the lender prior to the actual liquidation so he can be prepared for that. If you want to if you're hedging your risk, you obviously want to do perform some actions because you need to sign the release transaction from this multi sig escrow.
As I mentioned during the previous conversation with you, we're working on adding more automation to this to this feature so the liquidation can be done fully, automatically. We're going to improve this process and let's say two or three months. So, yeah, because that's basically how it works. The interesting part is actually that you can avoid being liquidated. And we have I think on the market we have we are one of the few companies that actually platforms, let's say, that actually have different types of options, how you avoid how you can avoid that liquidation.
So first one, which is obvious, adding more collateral to the aspro so you can just effectively sell more Bitcoin to the escrow and your LTV ratio will go lower. Now, the second part is you can do an early repayment, which is another obvious thing. So you can if you see that, you will be soon liquidated and you want to avoid that. You want to have your precious Bitcoin back in your pocket or in your wallet. You can do that earlier, baby, or you can also balance.
And that says that you can make Portela repayment. Let's say you don't have I don't have ten thousand that I owe you. I have three, four thousand so I can send three, four thousand and system will automatically recalculate LTV ratio and I will be good to go. So we actually experience that already when there was like some loans with higher LTV ratios, 70 percent and some clients was actually pretty close to liquidation rates. So they just some of them just added more collateral and some of them did just do the early repayment or.
I can tell you as a person who first started just looking into this experimenting, whatever you want to call it, the LTV ratio was a little bit confusing because when I hear LTV of 50 percent, I'm thinking that the escrow is 50 percent of my deposit. But that's not the case. It's double the amount. And then my deposit. Thanks, Portlanders. Is that all loans that are issued through the the lending platform are over collateralized and also the good thing that in case of liquidation, you will not only receive the body of the loan.
So basically, the amount that you but also you will receive the full interest. That borrower actually owns you. You got to love that. Let's take a quick break and hear from his sponsor.
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All right, back to the show. And again, the good thing about the lender, that lender doesn't pay any fees. We consider that lenders are liquidity providers, and the only person who pays for basic origination fee or any type of fee are borrowers. So because they need money, so you need money, you will pay. And I'm providing money. So I don't need to pay. I'm just giving you my liquidity. I love the logic on that.
That's awesome, and then, like you said, it encourages more people to provide more liquidity to your system. Let's go back to the why the rates are so high. I know. I know from from a lender standpoint, it's just like just doesn't matter because everything's over collateralized. Then they're going to the escrow will be liquidated if it's going down to include the interest. But what are some of the things that you're hearing that people are doing with the borrowing?
Are most people going levered into Bitcoin? Is would you say that that's the typical trait or do you just really have no idea? We actually saw the interesting case is that three days ago there were published a borrower, if he published his offer, which was stated in the description that I want to borrow money for my wedding. So the guy was obviously borrowing money for his wedding. But most of the cases, of course, as with most of these five platforms, people are just leveraging their position into Bitcoin or other points.
But there are also cases where people just they don't want to sell Bitcoin and they just want to have some bonds to pay, to convert, to disable coins to Fiat and then move to their accounts. Or they're they're actually already multiple options with payment cards where you can top off the payment cards with SABL coins and you can just use it as any other payment cards. And I think that's one of the use cases that many people who are a bit skeptical about stable coins, they're undervalued.
And this is use case because there will be more and more stable coin based payment cards. And there will be at some point, there will be no difference between topping up your payment cards with stable coin or with Fiat actually will be way more easier with doing this with stable coin because it's faster. It's peer to peer. You can prove that you actually send us and I think there's already I so that there's already some major companies, whether it was Visa or MasterCard, they already signed with access, which is a stable point that I still supported in our platform, that we signed the agreement that they are going to go that way.
You're bringing up a really fascinating point that I've had a lot of discussions online with people saying and you hear this narrative and I find it a really funny narrative, people are saying, oh, as soon as central banks come out and issue their their tokenized dollar or their tokenized euro, it's going to put an end to Bitcoin. And I'm just smiling and laughing, thinking the exact opposite, because what they're really doing with these coming into the central bank digital currency realm is they're providing a token that has immediate clearance.
The traditional fiat has many hours, if not days to clear. And that's the reason why a platform like yours is using tokens of stable coin tokens is because, you know, when somebody sends it that you have a public address that confirms that it has cleared. So you've had private market come in and the private market has provided the solution to a situation that the market desires, which is immediate clearance. And these central bank digital currencies just haven't. They're just late, right.
They just haven't gotten there yet. So I'm of the opinion that the central bank digital currencies are only going to speed up the rate at which Bitcoin is becoming a dominant store of value because they're providing these on ramps. Because if I have a central bank digital currency that's in dollars, I'm going to prefer that every day of the week over a USD token. Right. And so the things that would start flowing onto your platform would be the central bank digital currencies instead of these tokens being issued by private entities.
And I'm assuming your you agree with that. We agree with that because we will effectively mean that there's a pat on top of the technology, so as you mentioned, there will be a clear ledger that will allow you to understand that actually the payment was made or repayment was made. And again, I'm not advocating for central bank digital currency. Don't get me wrong here, because I still believe that building some new fancy stuff on top of a broken system is just doesn't work.
They're going to continue to be debased, and I think that's the thing that most people aren't thinking is it doesn't matter whether they tokenized it or they keep the system that they've got right now, it's going to continue to be debased in order to make up for all the fiscal issues that are that exist all over the planet. And that's the reason that the debasement is happening. But what's going to be nice is you're going to have a token that's going to immediately clear, which is what you need for a platform like this, especially when you get into the over collateralized debt process.
Right. Like if I'm making a deposit of ten thousand dollars and my escrows dropping down below the value that I deposited, I wouldn't be able to get that back immediately. I don't want to have to wait for it to clear.
I want to immediately talk to us a little bit about what you guys have in the works for streamlining activities, because one of the things when I'm going through all these comments that people left me on Twitter, one of the things that they commented on was how can it feel more like a centralized system and not so peer to peer so that its ease of use and things like that are a little bit easier. Talk us through some of your initiatives.
We already announced it's a public road map that we're going first of all, we are going to build API for a landing platform. It's actually already in the process. So hopefully by two months from now we will be able to release the API, which will effectively allow you to automate many things on your own that so institutional players, they will be able to switch to or basically connect with our API and Altimari, a lot of things that are currently there and able to also do retail guys for like more sophisticated building terminals or building several types of software that will be able to do that.
Also, I think that the API for the landing will effectively make us one of the few Bitcoin based lending platforms that actually have an API. So you will be able to build your solutions on top of all the lending markets. And this will effectively means that we will become lending platform or the core of the lending Bitcoin lending peer to peer bitcoin lending, which we're aiming for. We're also making some more like streamlining automation process, more effort towards education.
We're going to publish actually in a few days from now, very simple to guide through how to publish your own rules for how to make a contract, how to make an offer. Also, again, to do whatever. So it's going to be simple. We're going to simplify our UX UI. We're going to add more automated feature like matchmaking, for example, when you publish your offer. And we know that there's on the other side of the list, there is an offer which matched your criteria.
So then you don't need to browse there for at least it will just effectively send you the request. Hey, here's another offer. If it matches your offer, like, let's say ninety five percent, just click accept and you are good to go. So we're working on that. And I know that people are asking. We need to simplify. We need to simplify. We need to simplify. It's good. But to be honest, you guys need to check it.
Custodial lenders and you need to you need to go through onboarding process with custodial lenders. And then you will be back and you will understand how simple we already built the system because there's a difference. Of course we cannot or it will be hard for us to automate like some things, because it's still to bear market. It requires your own education and some manual work, but it also increase your security level, your privacy level. Well, basically, as we see Social Security, your profit level, because from the standpoint of the lender, if you compare us with peer-to-peer lending, with custodial lending, at some point we actually have double the rate that you have a new Custodio platform.
The risk is really on it, on the technical side, whether you actually have the technical competence to perform all the actions you need to perform. I would say it's even simpler. We are trying to decrease that risk as well, because I saw that you have some comments and one of the major comments is actually what we should do in case the problem is down. How do we retrieve the Aspro? So we already published in The Guide for that.
So there's like four steps. I can just guide you through this. So let me just first explain what you're getting into here, so the big risk that a lot of people were commenting on is what happens if your website goes down, if the servers let's see, there's an attack against your servers or whatever. What in the world does a person do, either counterparty do in order to adjudicate the loan? So there are steps. This isn't something that actually prevents the exchange from happening.
So walk us through this. Four things. So first of all, you need to understand one crucial thing. We only have one key. So even if we will go down, you still effectively both lender and borrower, they have their own keys and they have two keys in summer, which effectively can release funds. That's the first thing you need to understand. The second thing you need to understand, comparing to the study of platforms, you can impact that process.
If custodial platform goes down, like, for example, Mt. Gox, you cannot do anything. So basically, you just need to wait for them to resolve this issue. And obviously, you need to wait. Now, there are people who are waiting years and years that the issue will be resolved. And also the thing that actually you were on the podcast with Peter McCormick and American Photo, and he mentioned that if the custodial lending platform will go down and they even if they're insured, most probably you will receive back part of your funds, but you will receive it and you won't receive your bitcoins because that's how it works.
So in this case, you will be able to retrieve Bitcoin. Now, the sense that you actually need to do if, for example, there's a doomsday and wear down and there's still funds in escrow. So the first one you need to open the browser console, you do it by pressing F 12. And what's the data being sent to the server when you create your payment for the payment? Password again is your key. Now, after you enter your payment password, you will see that, amongst other things.
And this is pretty important. Encrypted version. Doesn't know your payment password. And if you will lose that and I'm trying to be like two to one people, if you lose a payment password, don't think that we're acting as a custodial platform, who can just say, hey, here's your payment password, do that? We don't know that. That's also the buyer being non-custodial and being your own bank. Nobody told you that being your own bank is easy.
It's pretty hard, to be honest. An encrypted version of the private keys being sent to the server. You actually can copy that encrypted key and using the same algorithm which uses decrypt the key using your payment password, you need to remember that your counterpart actually needs to do the same. So what we suggest, if you're over paranoid and you want to be safe, and sure, when you engage in contract, just exchange contact details like emails. So in case the platform goes down, obviously the lender wants to receive user payment and obviously the borrower wants to receive his bitcoin back from the collateral.
Now, the first step, you will then need to write some code that would actually construct a release transaction and use that GI to sign it and then broadcast the same transaction. And as I mentioned, however, your counterparty needs to reproduce the same steps and in fact, the transaction cannot be broadcast until it's fully science. So step four assumes that you already have a partial a transaction. The first step is actually the most complicated because you need to construct some kind of code and you actually need to have a technical thing.
Now, we thought about it as well and we received some requests. So in upcoming months, we're about to release, let's call it emergency doomsdays software, which is effectively allows you to retrieve coins from escarole, even if we're down at some point. So the only thing you will need to do then you basically go through our security guy, you write down your encrypted password and you just contact your counterparty and there will be a software that will help you to release this coin from the Maspero.
When I hear these kind of conversations, I always try to put myself in the audience and say, what are they thinking? The next question is from what they're hearing and all I can really say is based on this conversation we're just having, we are so early, we are just so early in this process of where this is all going. And it's and it's just fascinating for me to be sitting here watching this entirely new system being constructed right next to the old legacy system.
And you can't expect any of it to be just full proof as you're literally constructing an engineering and building this stuff in real time. And here we are talking about what's being made. And it's just fascinating to me to to see how something as catastrophic as a site going down, even though a simple solution doesn't exist today. In a couple of months, there will be things in place that are allowing two parties that don't even know each other. I don't even know what you're doing with the funds that I'm that I'm lending.
But yet I'm still being protected through over collateralized debt and the funds sitting on the block chain that neither one of us are touching this escrow fully. Right. But yet all these checks and balances are in place and we can still allow the release of funds, even with the website going down. Now, like you said, it's a little complicated today, but in a year from now, it's not going to be it's just amazing to hear some of this stuff and the kind of see the direction that's all going.
I had a comment actually yesterday also, I checked the pulse that you mentioned that you are talking with us today, and there was one guy who fell back and was recently on the conversation in a clubhouse with one of representatives of custodial lending platform, and he effectively said that non-custodial multi signature tack is basically worthless because you still don't have access to funds. You still need to have. A second key is actually pretty simple answer. Non-custodial doesn't mean that you have a full access over your funds, especially if you're engaging with other counterparty because the counterparty actually have their own interests.
Non-custodial effectively means that you are removing full control of the funds from the third party or from another person over your files. So this is what it means, doesn't means that trading, lending, borrowing noncustodial, you will have a full control over your funds. It means that you will have some leverage to avoid being fully controlled by other parties. That's what it means. And also in lending the important think it means no recapitalization risks. So basically your bitcoin there stays collateral.
They're not giving away to some guys for trading with them or lending them at a higher rate or doing whatever they're doing. And I'm not saying it's bad. Obviously, all this process is done on the serious custodial platforms are being protected and maybe they're even insured or whatever. But it's like what we are trying to build here is actually tools that will allow you to effectively become your own bank as a law to say nobody told you that being your own bank is easy.
I'm a former private banker for 10 years. I know how difficult and how complicated the banking system is sometimes, especially with within. But you want to have some freedom. You want to have financial freedom. You want to have privacy. You need to learn. These are tradeoffs. So let's talk a little bit about lightning network and interests that might be kind of a competitor, I don't know if you would view it as a competition, but when I'm thinking about, hey, if I have Bitcoin, how can I collect interest on it?
I really kind of arrive at two solutions. I can do what you're offering here with Hardell, Hoddle, and then the other one is going to be on my full node. I open up a channel. I basically plug those bitcoins into the channel and then the network can use and route those via IOUs between other nodes and I'll be able to collect interest off of that. What kind of interest rate do you actually kind of foresee in the Lightning Network by opening a channel relative to the interest rates that you might get on a platform like yours?
Hoddle, Hoddle. So the main difference is that we don't offer Bitcoin lending, so you can only borrow against using Bitcoins, basically use users as a collateral. Now, the lightning cool technology, which you're talking about is actually the first technology since lightning was introduced. And I'm actually pretty excited about and we are speaking with lightning steam. We actually and some more groups around lightning. So I'm pretty excited about that. I'm not sure what will be the rage there and what are the rates there, because I'm leaning more forward than that.
Noncustodial Bitcoin lending will earn you less than Custodio Bitcoin Lendix. Why? Because there's less security risks. So there's a trade off. You want to hold your keys, you want your Bitcoin to be noncustodial. If you want to stay partyline in charge of what is happening with your bitcoin, most probably you will receive less interest than you will do it with depositing your bitcoin and giving it away to a third party. I would say that even with two, three, four percent annual rate on your bitcoin, but still being able to keep it noncustodial, this will be a perfect for you because you will still earn some interest.
You will keep your Bitcoin and you will actually support the Lightning Network as well. Well, what we are looking at is that we're going to introduce during this year multiple solution, how you can land your Bitcoin using our our tax. Some of these solutions will be actually pretty stupid in terms of technical development, let's say like that. But they're a bit more wiser in terms of cash flow management. So some of this solution will be actually effectively using other product levels like liquid and lifea.
So why do we want to build? We also looking to the lighting for technology. We were pretty excited about that. I think this is the way to go. But I'm also hoping that we will be able to release other types of solutions. So the person who is less sophisticated may go to Colorado and choose what he wants to do, which is Bitcoin, whether he wants it to end it in one way or another or in a third of the way.
Some of these solutions are still pretty. A long way to go because we are we are waiting for other product level improvements in order to be able to build on. Some of these solutions will be already presented in a few weeks from now. But I am excited about why do so many guys, people are saying pay the rates will be crazy on a Bitcoin landing, non-custodial? No, guys, I think the rates will be low two, three, four percent.
But the main advantage is that you will keep your keys.
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Yeah, I think that makes sense. The logic that you're going about thinking, because really it's just a risk profile, especially as this gets more mature, like maybe in the interim you might see some of the numbers be different. But just intuitively that that makes a lot of sense what you're saying. So here's the question I got for you.
If we could just warp ourselves into the future five, 10, 15 years into the future. Describe the environment that you think that all of this is going to look like. Definitely my maybe it's naive, I don't know, vision, but I truly believe that in landing, if we're talking about landing, let's let's talk first about landing and then we can go on or like use cases. So in landing, I think that there is a significant chance that peer to peer lending will if a huge chunk of custodial lending that we have now.
So non-custodial lending can potentially disrupt the custodial lending, it won't be necessary bigger than custodial lending because you still have like institutional big players. They have a huge liquidity pools. But again, as I mentioned, there are some institutional big players that are already approaching us. And they're also considering to offloading their liquidity because they see the rates are higher and they're happy to provide some liquidity to retail markets. I don't think that in terms of trading, for example, I usually compare trading and lending.
So in terms of trading, I think custodial exchanges still will be bigger than non-custodial. Why? Because they have a huge liquidity pools and there's a frequency of trading there. You can fast to complete your orders on custodial trading. And that's what's important for day to day traders. For example, I do believe that decentralized trading where noncustodial trading will rise and there will be some technologies that will actually effectively make it happen better. Like, for example, there's a technology which is called RGV, which is built on top of lightning, which is actual layer three already, which will effectively allows you to construct different types of decentralized applications.
I think that there will be more in the more peer-to-peer, more and more decentralized solutions, but they will just coexist with with the custodial solution and centralized solution, because there is always a two types of people, those people who are happy to trust anybody. And they just used to that. What I think the amount of that type of people will be lower and lower in the future because people are eventually educate and people will eventually sell some shifting from being custodial to non-custodial.
I think the user interface of a lot of these platforms are going to feel like their custodial, even though they're. That's actually one of the things that I'm looking forward. We're constantly improving the user interface and we actually considering building at some point we might start building some high frequency to centralize the change as well so that that can be something we're looking into that we've been approached by several product developers. They know us. They want to work with us.
They know that we can actually sell complicated non-custodial solutions to the market and then they trust us with that. But that's the future. And again, I do believe that in 10, 15 years, Bitcoin will grow bigger. And it will definitely we will have it as, let's say, digital gold standard. I would say, though, that there will be more and more supply chain solutions with different use cases like example, liquid is actually cytosine, which is perfect for traders because you can effectively send a huge amount of money between exchanges.
It will cost you like one five cent, maybe like that, and it will be delivered almost instantly. So pretty fast now. Lightning, on the other hand, is actually evolving, in my personal opinion, as a payment solution for retail investors. So you can just the funny joke about coffee buying Bitcoin with a coffee, you will be able to do that with like and as soon as there will be many different types of payment solution payment cards that are supported by, I think we will see that this thing will involve, but everything will eventually be around Bitcoin.
And I'm just hoping we will be able to absorb the best practices from other like block chains. We will be able to build languages and solutions that will compete with those that exist at the moment. And eventually we will be dead because I believe the Bitcoin product will have the best people and not trying to say bad things about other products. There is also smart people out there. But I think the good thing about Bitcoin is that we have the biggest liquidity pool at the moment.
So basically in terms of cartelization and bitcoin also attracts a lot of very, very smart people. I saw Tranda amazing young developers that are actually shifting the industry. There's this guy, Ben Kaufman, who is doing this picture wall that he's 19 years old. The guy reinvented Multa signature wallet as it is. So he's like 19 years old guy, if I'm not mistaken. So the industry will evolve through Bitcoin will be here. Just take it or leave it.
You can close your eyes and think that it will disappear, but they will not. So effectively, I think. Listen to your podcast with Zach from blog feed. And there's a right there's a right direction of all the things that custodial solution will be more towards institutional interests and non-custodial solution will be more towards retail interest. And we don't know which interest will be effectively bigger. We believe that at the moment institutions are bigger. Yes, but the recent beef with Wall Street, bad guys, GameStop, so that actually if you have a huge movement, you can destroy effectively any institutional interest that is out there.
So when you guys started the platform and you had previously mentioned that Bitcoin is pretty much used as the collateral between the two parties, a lot of people are asking, when am I going to be able to take my Bitcoin and deposit it and collect interest on my Bitcoin when there's some type of capability like that going to be enabled? We're talking about Bitcoin lending, as I mentioned across this year, we're going to release some features that will allow you to do that.
It's really hard to perform. We're looking into different protocols, not only on Bitcoin, but also, as I mentioned, Liping and Liquid. What makes it difficult, because to me, it's from the outside, I'm just looking at it like, well, what's the difference between me depositing one Bitcoin versus one USD? See what makes it complicated? The difference is very easy when you deposit why you can collect interest on your Bitcoin on custodial platforms, because you deposit with them and they just lend this Bitcoin to institutions or to other players.
And these players are using complicated trading strategies or lending strategies. They're earning actually more on top of your Bitcoin and then they just paying you part because they're using your asset in their own strategies, different types of strategies. Now, with non-custodial, your bitcoin stays in multi signature escrow. And effectively, we cannot do that anything we cannot send as Bitcoin to trading desks that can perform. So it's a bit more complicated. So with lightning, for example, with lightning bolt, you can already provide the liquidity, you can be non-custodial and you can earn some interest.
But we're actually working on different types of solution with different types of networks, and we're trying to figure out new ways that you can actually still hold keys to collateral damage like that and still burn interest on top of Bitcoin. So we're actually going to present a few of the simpler ways and solutions in upcoming weeks, let's say, in March. And we're going to build more complicated solutions like in six to nine months from now. And hopefully we will you will be able to collect interest on top of Bitcoin as well.
So when you think of scaling your platform, what is priority one or two on the list for scaling? The current priority number one, and we actually received an anonymous letter from one guy who wrote us, I think two weeks ago, there was a letter from one of I don't know whether he's user or he's just like, check it out. First of all, he mentioned that this is the simplest, most complicated platform I saw because, like, he smiled and he said I didn't saw that kind of simplicity, which is wrapped around the complicated things for a long time.
So that was his comment. And then another thing you mentioned that I think that you guys build something that could be potentially Amazon in 90s. So this could disrupt massively the lending markets in the future. But he mentioned the one thing that we are actually aware of and we're working on that it's not a technical side is actual liquidity. As I mentioned to you, we have outstanding amount of borrowers that are willing to borrow money at the bigger than the studio.
So basically 16 percent average APRA. And the liquidity is actually like when we see a huge liquidity provider coming to the platform, like, let's say huge liquidity provider of 12 million, 12 million will be out in three, four days, easily taken by multiple parties and allocated to multiple multi signature accounts where we're working at textually at the moment on partnering with some liquidity pools and liquidity providers who can actually offload liquidity in stable coins to to to the retail market.
That's one of our top priority suppliers items. We're building API apart. We are building new interesting features and building that the bitcoin lending stuff. Do you run into issues with people coming to the platform from a legal standpoint, so like, hey, I've got ten million dollars I can give you, but I run into these legal restrictions that I am a company that isn't allowed to be dealing in lending and borrowing type services because that's financial type services. Is that any type of concern or issue that you're running into?
With Peer-to-peer markets and as we are non-custodial, we leave all the legal stuff up on contract. So basically, for example, on trading part, we have the market decide how it performs. We just provide a technical tools for people to make a safe trade. There are actually traders in our trading platform that do KYC. These are like OTC desks that have licenses and they just use it as a necessary agent to basically even not as an escrow agent, I would say as a technical tool provider.
So they they believe that our escrow technology is pretty safe. They're using us, but they're doing all the legal stuff, taxation and all that stuff by themselves. Same with same with lending. It's up to you to understand what our implication, what our regulation, what our barriers for you in your own jurisdictions where you can issue a loan or you cannot. What are your corporate or you are not? And how does this work? So if there will be lenders who will effectively say we want to issue some loans, but we need to do KYC on people to whom we are Asian, they will go on a platform, they will post their offers and offer a description.
Right. We will need to do a verification of you or we will need to do due diligence of you. And people will decide whether they want to go with institutions or with legal entities or they want to wait a bit longer and find another partner who is a private individual who can send and give a loan and then make all the necessary things and all that stuff. So is there any thoughts on how a person could incorporate insurance into their contract? This is a question from Mark Mosse.
Yes, so regarding the insurance, as I mentioned previously, with Custodio platform, you might be insured, but you will receive only part of your deposited amount and you will most probably receive your part in Fiat. So let's say, as with Mt. Gox, the price of Bitcoin significantly increased during past years. People will still receive way more or less than Solander. So in our case, the main insurance will be our, as I mentioned, emergency software, which effectively allows you to return Bitcoin from the Aspro because, again, Bitcoin will stay there and you will be able cooperating with your counterparty to return this Bitcoin from the basket.
But again, I know that there are some lenders that are actually hedging their risks. They have some complicated lending strategies. And I think the main insurance that all loans are over collateralized there in Multiphasic and you can actually buy cooperation with your, let's say, counterparty, you can actually retrieve them at some point. So this is the main insurance is actually not financial insurance. It's technical insurance. That's what we are striving for, to provide a technical tool.
So you can do all things trustingly and you can be way more secure and ensure that everything will go fine. We've had some companies that approach as insurance. I don't know whether we are going to observe that and we are going to figure out that. But I think the main insurance is a technical part of our platform. That's that's the main thing.
Max, I can't thank you enough for coming on to have this conversation. When I think about the most exciting stuff that's happening in this space right now, it is literally you're sitting in the seat of the guy that's making all this this kind of stuff happen. And this this is the precipice of where my personal opinion, a lot of this stuff is going. So this was such a pleasure to have you on the show and have this conversation. And I applaud your efforts because this is this is fascinating stuff that you're doing.
Give people a handoff to your platform and anything else that you want to highlight. I want to highlight a few things, like, first of all, educate yourself, do your own research, always do your own research, whether it's the risks of being custodial, using custodial and non-custodial services, whether it's the risks of issuing loans and several stable ones, like we have this question, what will happen if Tizer will blow up and whether I should use better use D.C.?
We don't provide that kind of advice and it's peer to peer markets. It was meant to be like that. It's Bitcoin, you know, it's peer to peer electronic cash. It's what's written in white paper. Some people are wrongly quoting this in their own interest, but that's how it's written there. So do your own research. Educate yourself the systems peer to peer systems noncustodial. Of course, they might be a bit more complicated than custodial ones, but there are always trade offs like you have a bigger privacy, you have no risks of your bitcoin being land or being giving to someone else.
And you actually have at the moment higher interest rates and higher APRA as a lender. And it's always backed by Bitcoin, held in multi signature. As to educate yourself, please feel free to provide to us any feedback that you have. Our doors are open. We're trying to do the best. We know that you want to have this feature right now, but we are rather small team and we're working really hard on that. We're growing, but we're we're working really hard.
So we we actually applaud you for your support. Personally, you pressed in as well because you've been very supportive. Many people there support us. The main thing that I wanted to point out is peer to peer market. Nobody basically blocks you for publishing your own offer on your own terms. So if you don't find the offer that suits you, just the one that you want to accept or you want to lend or you want to borrow. And with that, we can we can together grow the liquidity and grow that market because we actually need your support.
As for the main land, dot dot com available globally, feel free to check it out, feel free to give your feedback, feel free to post here on offer is free, doesn't take much time. Finally start to becoming your own bank. Max, thank you so much. Hey, so thanks for everybody listening to the show, if you enjoyed the conversation, be sure to subscribe to the show on whatever podcast app you're using. We really appreciate that.
And if you have time, leave us a review. So thanks for joining us this week and we'll catch you next Wednesday. Thank you for listening to Te IP to access our show notes, courses or forums, go to the Investors podcast Dotcom. This show is for entertainment purposes only before making any decisions, consult a professional. The show is copyrighted by the Investors Podcast Network written permission must be granted before syndication or before casting.