Preston Pysh (06:05):
Let me ask you this. So most people that are accustomed to this decentralized finance, this DeFi, that most people when they hear that they immediately think Ethereum, or Binance, or whatever. How are they solving a dispute in escrow when the two parties can’t come to an agreement that fund should be released? What’s their method for doing that?

Max Keidun (06:28):
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 tried to solve the dispute, and help… Or they bring an arbiter in there trying to solve this dispute. Some contracts on Ethereum are, I wouldn’t say, they’re a bit more sophisticated, but they’re a bit more difficult. There’s some kind of level of automation.

Max Keidun (06:50):
Basically if you perform A, B, C, D action, you will be able to effectively pull out faster or it’s something will be performed. Most of the time there’s some kind of level of automation to that. We should know 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 both. That’s the basically idea. I wouldn’t say that lend on Hodl Hodl is purely decentralized, because we still have a website, and we still have some central points of our infrastructure and system, but we are moving in that direction.

Max Keidun (07:29):
I would say we are semi de-centralized, and honestly were not trying to compete with other outcoin-based solution. We’re trying to compete here with custodial solution that are 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.

Preston Pysh (08:11):
What you’re really getting at is, you have a key and in a lot of these other services that 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 into 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 third party in order to adjudicate the escrow.

Max Keidun (08:43):
We recently published our results for first three and a half months, actually for first four months. It’s more than the loans that were issued through our peer-to-peer platform, and again, not by us issuing, but it’s peer-to-peer. This is the important thing, it’s more than 3 million of USD value of already issued, for first four months.

Preston Pysh (09:08):
What would you say the normal loan valued is?

Max Keidun (09:12):
The average value is 10,000, and actually with Bitcoin price arises the appetite’s also rising. So people are, for example, we have now outstanding demands for… We have a borrower who are willing to borrow 1 million effectively. So that they’re available, and the APR is actually around 16%. It’s 1 million for a year, and it’s fixed 16%, with the average LTV around 50, 60%. So that’s the numbers we’re talking now.

Preston Pysh (09:47):
Anyone listening to this as 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 go out, you can create a contract for $10,000 and you’re fetching these kinds of interest rates of 16%, correct?

Max Keidun (10:05):
That’s basically the average. There are short-term loans with obviously with higher APR. So there are some short term loans like let’s say one month in APR, I sold them. These are loans that actually progress, they have APR around 40%, or even 50%. 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.

Preston Pysh (10:37):
Yeah, we don’t care.

Max Keidun (10:38):
We don’t care because it’s basically code is a rule. Of course, we have some rules to reach the consensus. Obviously, as I mentioned previously, we’re not naive that there will be no disputes as the volume rises, as the people appetites rises, as there 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, a good person. There must be a misunderstanding at some point, it might be. So it’s okay, we’re used to that, we have a system in place, we’re trying to solve that. That’s how it goes.

Preston Pysh (11:16):
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 understanding of loans work. Typically there’s a loan officer, they’re looking at all of your background, whether you’re able to repay it, but what we’re talking about as 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.

Preston Pysh (11:49):
I would log into Hodl Hodl, and let’s say, I want to lend out $10,000 USDC on the platform. So I would put up a contract that says, “I’m willing to lend the $10,000 USD at 16% 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. 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?

Max Keidun (12:18):
Well, obviously I found your offer it’s kind of good for me. So I’m happy to pay you 16% APR, then confirm that I’m interested, then automatically the contract is created. Upon the creation of contract, you have this key, which is called Payment Password. So basically you encrypt your key with the payment by password. Payment password effectively is an encrypted key with escrow. We both enter this key and then system understands that we’re serious about that, and it creates a unique multisignature escrow account, or address on the public Bitcoin blockchain.

Max Keidun (12:59):
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 accounts in that, zero funds in that. Then effectively I as a borrower send to this escrow account needed amount of money. Let’s say the LTV ratio is 50%. So I’m sending and I’m saying roughly 20,000 worth of Bitcoin. But with current price, let’s say 0.4 Bitcoin, I’m sending to this escrow.

Preston Pysh (13:29):
Which is double that the amount that I’m looking at you. So I’m giving you 10,000 and you’re basically depositing 20,000 in escrow.

Max Keidun (13:37):
Yeah, because let’s say your LTV ratio is 50%, loan to value ratio is 50%. You can also set up 70% loan to value ratio. So I will effectively need to deposit less than 20%. It’s up to you, and up to me to decide which LTV ratio is fine. I send Bitcoin to the escrow, as soon as it gets three confirmations, we inform everyone, basically the contract is moving to another station. We inform everyone, “Hey guys, Bitcoins are in escrow, it’s safe to proceed with the loan payment.”

Max Keidun (14:09):
And you send 10,000, let’s say, USDC as you mentioned to my stablecoin address, I receive that, I confirm that I have received that actually. There’s always double checking, when you send, you attached to the transaction link, and 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 borrowed stage, and we are good to go.

Max Keidun (14:36):
And in six months I repay you of the amount that you’ve lended to me with the interest rate. I can also repay it earlier. I can also do partial repayments, or in case if I don’t have stablecoins anymore let’s say, I spend them all and I don’t have them, but Bitcoin price increased significantly. I can cover your loan with Bitcoins from escrow. This is how it works.

Preston Pysh (15:04):
Now my concern is the person who made the 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 10,000. 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? Talk us through the speed at which something like that take place.

Max Keidun (15:30):
We send 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 needs to balance his LTV ratio, because as soon as LTV ratio will go to 90%, he will be effectively liquidated. What he can do in order to prevent this liquidation…

Preston Pysh (15:54):
Real fast, when you say they’ll be liquidated, when the value gets to 90, LTV gets the 90, which is approximately 10% higher than my deposit. So if my deposit…

Max Keidun (16:05):
It doesn’t work like that, it’s been different math. You can actually check it out in our frequently asked questions, there’s three simple guide-

Preston Pysh (16:16):
What does that 90% LTV equate to as far as overcollateralization?

Max Keidun (16:22):
We have four types of alerts, margin polaris, one is 75% of LTV, another one is 80% of LTV, another one 95% of LTV, and 90% is a final force liquidation. Now, you have basically time to react until the ratio reaches 90% of LTV. After the LTV ratio reaches 90%, the contract will be automatically transferred into forced liquidation stage, and the collateral will be automatically liquidated.

Preston Pysh (16:55):
When you say an LTV of 90, the loan is still over collateralized, but it’s getting closer to my deposit of 10,000. It might be at 11 or 12,000, whatever the 90% LTV means.

Max Keidun (17:09):
Yeah, it’s true. It’s true, and we have all the calculators. Basically you see in your contract, you as a lender also can be prepared for that. You can see that as well, how 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.

Max Keidun (17:36):
If you’re hedging your risk, you obviously want to perform some actions, because you need to sign the release transaction from this multisig escrow. As I mentioned during the previous conversation, when you were working on adding more automation to this feature. The liquidation can be done fully automatically, we’re going to improve this process in let’s say, two, three months, because that’s basically how it works.

Max Keidun (18:06):
The interesting part is actually that you can avoid being liquidated. I think on the market we are one of the few platforms let’s say, that actually have different types of options, how you can avoid that liquidation. First one, which is obvious, adding more collateral to the escrow. You can just effectively send more Bitcoin to the escrow, and your LTV ratio will go lower.

Max Keidun (18:32):
Now, the second part is you can do an early repayment, which is another obvious thing. 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 the early updating. Or you can also balance in that sense that you can make partial repayment. Let’s say, I don’t have 10,000 that I owe you, I have three, 4,000. So I can send three, 4,000 and system will automatically recalculate LTV ratio, and I will be good to go.

Max Keidun (19:06):
We actually experienced that already, when there was some loans with higher LTV ratio, 70%, and some of clients was actually pretty close to liquidation rates. Some of them just added more to collateral, and some of them that just do the early repayment, or a partial repayment.

Preston Pysh (19:28):
I can tell you as a person who first started just looking into this, experimenting whatever you want to call it. The LTV ratio is a little bit confusing, because when I hear LTV of 50%, I’m thinking that the escrow is 50% of my deposit, but that’s not the case. It’s double the amount in escrow than my deposit.

Max Keidun (19:48):
The good thing for lenders says that all loans that are issued through the Hodl Hodl 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, basically the amount that you’ve trans… But also you will receive the full interest that borrower actually owns you.

Preston Pysh (20:10):
You got to love that.

Max Keidun (20:13):
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 base for basically origination fee, or any type of fee are borrowers. Because they need money, 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.

Preston Pysh (20:38):
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 why the rates are high. I know from a lender standpoint, it’s just doesn’t matter because everything’s over collateralized and 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? Would you say that that’s the typical trade or do you just really have no idea?

Max Keidun (21:09):
We actually saw the interesting case is that, three days ago they were published a borrower, he published his offer, which was stated in description that I want to borrow money for my wedding. The guy was obviously borrowing money for his wedding, but most of the cases, of course, as with most of DeFi platforms, people are just leveraging their positioning into Bitcoin or other Altcoins.

Max Keidun (21:34):
But there are also cases where people they don’t want to sell Bitcoin, and they just want to have some funds to, I don’t know, to convert the stablecoins to fiat, and then move to their accounts. Or there’re actually already multiple options with payment cards where you can top up the payment cards with stablecoin, 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 stablecoins, they’re undervaluing this use case because there will be more and more stablecoin-based payment cards.

Max Keidun (22:14):
At some point there will be no difference between topping up your payment card, with stablecoin or with fiat. Actually it will be way more easier, if we’re doing this with stablecoin because it’s faster, it’s peer-to-peer, you can prove that you actually send this. I saw that there’s already some major companies, whether it was Visa or MasterCard, they already signed with Paxos, which is a stablecoin, and [inaudible 00:22:39] was supported in our platform. They already signed the agreement that they are going to go that way.

Preston Pysh (22:45):
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 tokenized dollar, or they’re 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.

Preston Pysh (23:15):
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 stablecoin 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 has immediate clearance, and these central bank digital currencies just haven’t, they’re just late, right? They just haven’t gotten there yet.

Preston Pysh (23:49):
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 USDC 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 you agree with that?

Max Keidun (24:18):
We agree with that, because it’ll effectively mean that there’s a fiat on top of crypto technology. As you mentioned, there will be a clear ledger that will allows you to understand that the actual 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. And because I still believe that building some new fancy stuff on top of a broken system is just doesn’t work.

Preston Pysh (24:50):
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 tokenize 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 exist all over the planet. And that’s the reason that the debasement’s 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 overcollateralization process, right?

Preston Pysh (25:17):
If I’m making a deposit of $10,000 and my escrow is 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 immediate settlement. 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 it’s ease of use and things like that are a little bit easier. Talk us through some of your initiatives.

Max Keidun (25:53):
We already announced there’s a public roadmap that first of all, we’re going to build API for our lending platform. It’s actually already in the process, hopefully in two months from now, we will be able to release the API, which will effectively allow you to automate many things on your own then. Institutional players they will be able to switch to our… Basically to connect with our API, and automate a lot of things that they’re currently they’re enabled to automate.

Max Keidun (26:22):
Also the retail guys who are more sophisticated in building terminals or building several types of software they will be able to do that. Also I think that the API for Hodl Hodl lending 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 Hodl Hold lending markets. And this’ll effectively means that we will become blending platform or the core of the peer-to-peer Bitcoin lending which we’re aiming for.

Max Keidun (26:58):
We’re also making some more streamlining automation process, more effort towards to education. We’re going to publish, show few days from now, very simple through guide through how to publish your own offer, how to make a contract, how to make an offer and how to, again, how to do whatever. 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 matches your criteria. So then you don’t need to browse their offer list, it will just effectively send you the request. “Hey, here’s another offer.”

Max Keidun (27:38):
It matches your offer let’s say 95%, just click accept, and you’re good to go. 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 your custodial lenders, and 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 some things, because it’s still peer-to-peer market.

Max Keidun (28:14):
It requires your own education and some manual work, but it also increase your security level, your privacy level. Well, basically, as we see it’s also secures your profit level, because from the standpoint of the lender, if you compare us with a peer-to-peer lending, with custodial lending, at some point we actually have doubled the rate that you have on your custodial platform.

Preston Pysh (28:40):
The risk is really on the technical side, whether you actually have the technical competence to perform all the actions you need to.

Max Keidun (28:46):
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 a Hodl Hodl is down, how do we retrieve the escrow? We already published the guidance for that, there’s like four steps, I can just guide you through this.

Preston Pysh (29:11):
Let me just first explain what you’re getting into here. The big risk that a lot of people were commenting on is what happens if your website goes down, if the servers let’s say, 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? There are steps, this isn’t something that actually prevents an exchange from happening. Walk us through this four things.

Max Keidun (29:35):
First of all, you need to understand one crucial thing. We only have one key, even if we will go down, you still effectively both lender and borrower, they have their own keys and they have two keys in some which effectively can release funds. That’s the first thing you need to understand. The second thing you need to understand comparing to custodial platforms, you can’t impact that process. If custodial platform goes down, for example, [moggoks 00:30:00], you cannot do anything.

Max Keidun (30:02):
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 in American Hodl. And he mentioned that if the custodial lending platform will go down, and even if they’re insured, most probably you will receive back part of your funds, but you will receive it in fiat, you won’t receive your Bitcoins, because that’s how it works.

Max Keidun (30:33):
In this case, you will be able to retrieve Bitcoin. Now the steps that you actually need to do, if for example, there’s a doomsday and we’re down and there’s still funds in escrow. First one, you need to open a browser console, and you do it by pressing F12. And what’s the data being sent to the server when you create your payment password? The payment password, again, is your key.

Max Keidun (30:55):
Now after you enter your payment password, you will see that amongst other things, and this is pretty important encrypted version, Hodl Hodl doesn’t know your payment password, and if you will lose that… I’m trying to warn people, if you lose a payment password, don’t think that we’re acting as a custodial platform who can just, “Hey, here’s your payment password.” We don’t know that, that’s also the part of 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.

Max Keidun (31:28):
An encrypted version of the private key is being sent to the server, you actually can copy that encrypted key and using the same algorithm, which Hodl Hodl uses, decrypt the key using your payment password. You need to remember that your counter party actually needs to do the same. What we suggest if you’re over paranoid, and you want to be safe, ensure when you engage in contract, just exchange contact details like emails. In case the platform goes down, obviously the lender wants to receive his repayment, and obviously the borrower wants to receive his Bitcoin back from the collateral.

Max Keidun (32:04):
Now the fourth sec, you will then need to write some code that would actually construe a release transaction, and use that key to sign it, and then the brokers 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 signed. So step four assumes that you already have a partial assigned transaction.

Max Keidun (32:28):
The fourth 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 doomsday software, which is effectively allows you to retrieve coins from escrow, even if we’re down at some point. The only thing you will need to do, then you basically go through our security guy, you write down your encrypted password and you’re just contact your counterparty. And there will be a software that will help you to release this coin from an escrow.

Preston Pysh (33:08):
When I hear these kinds 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 just fascinating for me to be sitting here watching this entirely new system being constructed right next to the old legacy system.

Preston Pysh (33:34):
And you can’t expect any of it to be just full-proof as you’re literally constructing and engineering and building this stuff in real time. And here we are talking about what’s being made. And this is fascinating to me to see how something as catastrophic as a site going down, even though a simple solution doesn’t exist today in a couple 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 lending, but yet I’m still being protected through overcollateralization, and the funds sitting on the blockchain that neither one of us are touching this escrow fully, right?

Preston Pysh (34:18):
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 in this, the kind of see the direction that it’s all going.

Max Keidun (34:34):
I had a comment actually yesterday also I checked the post that you mentioned that you are talking with us today, and there was one guy who told back, “Hey, I was recently on a conversation in clubhouse with one of representatives of custodial lending platform.” And he effectively said that non-custodial multisignature attack is basically worthless, because you still don’t have access to funds, you still need to have a second key.

Max Keidun (35:02):
Here’s actually pretty simple answer, non-Custodial doesn’t mean that you have a full access for your funds, especially if you’re engaging with other content partners, because the counterparty actually have their own interest. Non-custodial effectively means that you are removing full control of the funds from the third party, or from another person over your funds. This is what it means, it doesn’t means that trading, lending, borrowing non-custodial. 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.

Max Keidun (35:40):
And also in lending, the important thing it means, no rehabitication risks, so basically your Bitcoin there, stays in collateral, they’re not giving away to some guys who are trading with them, or lending them on the fire rate or doing whatever they’re doing. And I’m not saying it’s bad, obviously all this processes on the serious custodial platforms are being protected and maybe they’re even insured whatever.

Max Keidun (36:09):
But it’s like, what we are trying to build here is actual tools that will allow you effectively become your own bank. As I love to say, nobody tells 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 them. But you want to have some freedom, you want to have financial freedom, you want to have a privacy, you need to learn. These are the trade-offs.

Preston Pysh (36:40):
Let’s talk a little bit about Lightning network and interest 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 Hodl Hodl, 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 Lightening Network by opening a channel relative to the interest rates that you might get on a platform like yours Hodl Hodl?

Max Keidun (37:24):
The main difference is that we don’t offer Bitcoin lending, you can only borrow against using Bitcoins, Basically use it as a collateral. Now the Lightning Pool technology, which you are talking about is actually the first technology since Lightning was introduced that I’m actually pretty excited about. And we are speaking with Lightning team, we actually in some more groups around Lightning. So I’m pretty excited about that.

Max Keidun (37:52):
I’m not sure what will be the rates there, and what are the rates there, because I’m leaning more forward that non-custodial Bitcoin lending will earn you less than custodial Bitcoin lending. Why? Because there’s less security risks. If there’s a trade-off, and you want to hold your keys, you want your Bitcoin to be non-custodial. If you want to say partially in charge of what is happening when your Bitcoin, most probably you will receive less interest than you will do it with deposits and your Bitcoin and giving away to third party.

Max Keidun (38:27):
I would say that even with two, three, 4% annual rates on your Bitcoin, but still being to keep it non-custodial, this will be a perfect offer 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’re looking at, that we’re going to introduce during this year multiple solution. How you can lend your point using our tech.

Max Keidun (38:57):
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 cashflow management. Some of this solution will be actually effectively using other product or levels, like Liquid and Lightning. What we want to build, we’re also looking to the Lightning Pool technology, we were pretty excited about that.

Max Keidun (39:25):
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 Hodl Hodl and choose what he wants to do with his Bitcoin, whether he wants to lend it in one way, in another, or in third way. Some of these solutions are still pretty a long way to go, because we are waiting for other protocol level improvements in order to be able to build them.

Max Keidun (39:53):
Some of these solutions will be already presented in few weeks from now, but I’m excited about Lightning. I saw many comments people are saying, “Hey, the rates will be crazy on a Bitcoin lending, non-Custodial.” No guys, I think the rates will be low two, three, 4%, but the main advantage is that you will keep your keys.

Preston Pysh (40:13):
I think that makes sense, the logic that you’re going about thinking it, because it really it’s just a risk profile, especially as this gets more mature. Maybe in the interim you might see some of the numbers be different, but just intuitively that makes a lot of sense what you’re saying. 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 this is going to look like.

Max Keidun (40:42):
Definitely maybe it’s naïve, I don’t know vision, but I truly believe that in lending, if we’re talking about lending, but let’s talk first about lending and then we can go on or like throw other use cases. In lending, I think that there is a significant chance that peer-to-peer lending will create a huge chunk of custodial lending that we have now. So non-custodial lending can potentially disrupt the custodial lending.

Max Keidun (41:10):
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 a floating 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.

Max Keidun (41:38):
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 faster complete your orders on custodial trading, and that’s what important for day to day traders for example. I do believe that decentralized trading or non-custodial trading will rise, and there will be some technologies that will actually effectively make it happen better.

Max Keidun (42:05):
For example, there’s a technology which is called RGB, which is built on top of Lightning, which has 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 the custodial solution and centralized solution, because there’s always two types of people. Those people who are happy to trust to third-party, and they just used to that. What I think that amount of that type of people will be lower and lower in future, because people are eventually educate, and people will eventually sell some shifting from being custodial to non-custodial.

Preston Pysh (42:48):
I think the user interface of a lot of these platforms are going to feel like they’re custodial even though they’re not.

Max Keidun (42:57):
That’s actually one of the things that I’m looking forward, we’re constantly improving the user interface. And we’re actually considering to building, at some point we might start building some high-frequency decentralized exchange as well. That could be something, we’re looking into that, we’ve been approached by several protocol developers, they know us, they want to work out with us.

Max Keidun (43:19):
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, it will definitely will have it as let’s say, digital gold standard. I would say though, that there will be more and more site change solutions with different use cases, example Liquid. It’s actually side chain, which is perfect for traders, because you can effectively send huge amounts of money between exchanges. It will cost you one, 5 cents, maybe like that. And it will be delivered almost instantly, so pretty fast.

Max Keidun (44:07):
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 buying Bitcoin with a coffee, you will be able to do that with Lightning. And as soon as there will be many different types of payment solution, payment cards that are supported by Lightning, we will see that this thing will evolve. But everything will eventually evolve around Bitcoin, and I’m just hoping we will be able to absorb the best practices from other Blockchains.

Max Keidun (44:43):
We will be able to build languages and solutions that will compete with those that exist at the moment. And eventually we will beat that because I believe that the Bitcoin product will have the best people. I’m not trying to say bad things about other product, because there’s also smart people out there. But I think the good thing about Bitcoin is that we have the biggest liquidity pool at the moment. Basically in terms of capitalization, and Bitcoin also attracts a lot of very, very smart people.

Max Keidun (45:14):
I saw trend that there are amazing young developers that are actually shifting the industry. There’s this guy, Ben Kaufman, who is doing the Specter wallet, he’s 19 years old. The guy reinvented multisignature wallets as it is, he’s like 19 years old guy, if I’m not mistaken. The industry will evolve, Bitcoin will be here. Just take it or leave it.

Max Keidun (45:38):
You can close your eyes and think that it will disappear, but it will not. Effectively I think, I listened to your podcast with Zac from BlockFi, and there’s a right direction of albeit things that custodial solution will be more towards institutional interests. And non-custodial solution will be more towards retail interests. And we don’t know which interest will be effectively bigger, we believe that that institutions are bigger. Yes, but the recent beef with a Wall Street guys, GameStop saw that actually, if you have a huge movement, you can destroy effectively any institutional interest that is out there.

Preston Pysh (46:24):
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 is some type of capability like that going to be enabled?

Max Keidun (46:45):
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 chain Bitcoin, but also as I mentioned, Lightning and Liquid.

Preston Pysh (47:03):
What makes it difficult? Because to me, from the outside, I’m just looking at it like, well, what’s the difference between me depositing one Bitcoin versus one USDC, what makes it complicated?

Max Keidun (47:13):
The difference is pretty easy. 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 assets in their own strategies, different types of strategies.

Max Keidun (47:40):
Now with non-custodial, your Bitcoin stays in multisignature escrow, and effectively we cannot do that. Anything, we cannot send this Bitcoin to trading OTC desks that can perform. So it’s a bit more complicated. With Lightning, for example, with Lightning Pool, you can already provide the liquidity, you can be non-custodial, and you can earn some interest. But we are actually working on different types of solution, with different types of networks.

Max Keidun (48:10):
And we’re trying to figure out the ways that you can actually still hold piece to collateral. Let’s let’s name it like that, and still earn interest on top of Bitcoin. We’re actually going to present few of the simpler ways and solutions in upcoming weeks, let’s say in March, and we’re going to build more complicated solutions in six to nine months from now. And hopefully you will be able to collect interest on top of Bitcoin as well.

Preston Pysh (48:41):
When you think of scaling your platform, what is priority one or two on the list for scaling?

Max Keidun (48:50):
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 he smiled and he’s, I didn’t saw that kind of simplicity, which is wrapped around the complicated things for a long time, that was his comment.

Max Keidun (49:21):
And then another thing he mentioned that I think that you guys built something that could be potentially Amazon in ’90s. 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 site, it’s actual liquidity. As I mentioned to you, we have outstanding amount of borrowers that are willing to borrow money at the bigger rates than their custodial.

Max Keidun (49:50):
Basically 16% average APR, and the liquidity is actually like when we see a huge liquidity provider coming to the platform, let’s say [inaudible 00:50:01] to provide half million. This half million will be eaten in three, four days. With easily taking by multiple parties, and allocated to multiple multisignature accounts. We’re working at actually at the moment on partnering with some Liquidity Pools, and liquidity providers who can actually afloat liquidity in stablecoins to the retail market. That’s one of our top priorities apart of we are building API, apart we are building new interesting features, and building the Bitcoin lend next step.

Preston Pysh (50:36):
Do you run into issues with people coming to the platform from a legal standpoint? Like, “Hey, I’ve got $10 million, 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?

Max Keidun (50:58):
We’re peer-to-peer markets, and as we are a non-custodial, we leave all the legal stuff upon on concept bodies. So basically for example, on trading part, we have the market decide how it performs. We just provide a technical tools or people to make a safe trade. There are actually traders in our trading platform that do KYC. Then these are like OTC desks that have licenses. And they just use that as an escrow agent.

Max Keidun (51:27):
Basically even not as an escrow agent, I would say, as a technical tool providers. 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 peer-to-peer, same with lending. It’s up to you to understand what are implication, what are regulation, what are barriers for you in your own jurisdictions where you can issue a loan, or you cannot, whether you’re a corporation or you are not, and how does this work?

Max Keidun (51:59):
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 issuing. They will go on a platform, they will post their offers. In offer description they will write, we will need to do, I don’t know, 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 the legal entities, or they want to wait a bit longer, and find another partner who is a private individual, who can send a and give a loan and then make all the necessary tax things and all that stuff.

Preston Pysh (52:37):
Is there any thoughts on how a person could incorporate insurance into their contract? This is a question from Mark Moss.

Max Keidun (52:47):
Yeah, regarding the insurance, as I mentioned previously, with custodial 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. Let’s say as with moggoks, the price of Bitcoin significantly increased during past years, people will still receive way more or less than the moggoks on them.

Max Keidun (53:14):
In our case, the main insurance will be as I mentioned, emergency software, which effectively allows you to return a Bitcoin from the escrow, because again, Bitcoin will stay there and you will be able full parading with your contract party to return this Bitcoin from the escrow. 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 they’re in multisig, and you can actually by cooperation with your, let’s say counterparty, you can actually retrieve them at some point.

Max Keidun (53:58):
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 trust asleep, and you can be way more secure and sure that everything will go is fine. We’ve kind of had some companies that’d been approaching us in terms of 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 the main thing.

Preston Pysh (54:31):
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. 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 fascinating stuff that you’re doing. Give people a handoff to your platform. And anything else that you want to highlight.

Max Keidun (55:03):
I want to highlight a few things, 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 stablecoins. We have this question, what will happen if diesel will blow up? And whether I should use better USDC, we don’t provide that kind of advice to guys, it’s peer-to-peer markets, it was meant to be like that, it’s Bitcoin.

Max Keidun (55:34):
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 it’s how it’s written there. Do your own research, educate yourself. The systems peer-to-peer system’s non-custodial, of course they might be bit more complicated than a custodial wants, but they’re always a trade-off like you have a bigger privacy. You have no risks of your Bitcoin being lend, or being given to someone else.

Max Keidun (56:04):
And you actually have at the moment, higher interest rates, and higher APR as a lender. And it’s always backed by Bitcoin held in multisignature escrow. You need to educate yourself, please feel free to provide to us any feedback that you have. Our DMs are open, we’re trying to do the best. We know that you want to have this feature right now, but we are a rather small team, and we’re working really hard on that. We’re growing, but we’re working really hard.

Max Keidun (56:35):
We actually applaud you for your support. Personally, you pressed them as well, because you’ve been very supportive, many people that supports us. The main theme that I wanted to point out in peer-to-peer market, nobody basically blocks you for publishing your own offer on your own terms. If you don’t find the offer that suits you, just create the one that you want to accept, or you want to lend, or you want to borrow.

Max Keidun (57:02):
And with that, we can together grow the liquidity and grow that market, because we actually need your support. As for the main lend.hodlhodl.com available globally, feel free to check it out, feel free to give your feedback, feel free to post your own offers. It’s free, doesn’t take you much time. Finally start becoming your own bank.

Preston Pysh (57:26):
Max, thank you so much. Hey, so thanks for everybody listening in 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. Thanks for joining us this week and we’ll catch you next Wednesday.

Outro (57:43):
Thank you for listening to TIP, to access our show notes, courses, or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only, before making any decisions consultant professional. The show is copyrighted by the Investor’s Podcast Network, written permissions must be granted before syndication or rebroadcasting.