Company Name: Lava
Founders: Shehzan Maredia
Date of establishment: January 2022
Location of the head office: New York, USA (with some external staff)
Amount of Bitcoin in Treasury: n/a
Number of employees: 7
Website: https://www.lava.xyz/
Public or private? Private
Shehzan Maredia wants to make storing Bitcoins easy.
That’s why he founded Lavaan app he and his team developed that allows users to buy bitcoins, transact globally using both bitcoins and stablecoins, and now hold their bitcoins in-house without having to write down a seed phrase.
Maredia is one of a growing group of entrepreneurs in the Bitcoin world who believe that seed phrases (lists of 12 to 24 words used to recover funds from lost or stolen cryptocurrency wallets) hindering the mainstream adoption of bitcoinHe believes that alternatives to unconditional self-determination will help bring the masses on board.
“I realized that seed phrases were a huge barrier to adoption,” Maredia told Bitcoin Magazine, “and I went down the rabbit hole (to) create something better.”
After months of research and development, Maredia developed a solution that is now central to the design of the Lava app: Lava Vault.
Lava vault
After testing a number of different self-storage setups, Maredia and his team arrived at a unique multisignature solution that became the backbone of the Lava Vault.
“We built this two-of-two recovery solution for self-management, where you can tie one part of the two-of-two to your cloud account and the other part is a four-digit PIN,” he explained.
Meet Lava Vault, the best self-custody app for people who want to save in bitcoins and spend in dollars without sacrificing security.
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secure your assets with seedless, 2-of-2 recovery photo.twitter.com/nEIYIHD6Dg— lava (@lava_xyz) July 16, 2024
“If I have your four-digit PIN, I can’t steal your money because I don’t have access to your cloud account. If I have access to your cloud account, I don’t have your four-digit PIN and I can’t brute force it,” he added.
Maredia and the Lava team call this design the Lava Smart Key, believing it will make self-care easier for people who might otherwise not want to take on the responsibility.
“We’ve actually seen some people using it who previously would just buy bitcoin and store it on Coinbase,” he said.
Additionally, Lava Vault works seamlessly with Lava exchangeanother product that Lava recently released.
Lava Vault + Lava Exchange = Automatic onboarding to self-management
It is often difficult for new Bitcoin users to tell the difference between a custodial wallet offered by an exchange and a self-custodial wallet. It can be overwhelming for someone new to Bitcoin to go through the process of moving their bitcoins from an exchange wallet to a self-custodial wallet, especially if the exchange offers both (e.g., Bitcoin). Coinbase).
However, Lava solves this problem by allowing users to purchase bitcoins within the app – at the best available rate – before automatically taking those bitcoins into their own custody.
“We built this exchange aggregator,” Maredia said.
“If you want to buy bitcoin today, you have to figure out which exchange — Kraken, Coinbase. So, we work with a lot of them. We know what price they’re going to offer you based on your order, and we just send you to the best exchange through Lava,” he added.
Once users make their purchase, the bitcoins appear in their Lava Vault.
“This is super helpful when I’m trying to onboard users to self-custody,” Maredia said. “Now I can tell them to download directly to self-custody, which greatly increases the likelihood that they’ll stick with self-custody.”
Once users own their bitcoin or stablecoins through Lava, they can use either asset to transact permissionlessly with anyone in the world. And soon, they’ll be able to borrow dollars against their bitcoin without having to hand over their bitcoin to a third party.
Lava Loans
Maredia and the Lava team recently released a beta version of a new product called Lava Loans, which Maredia describes as a “self-managed version of BlockFi.”
BlockFi, now defunct, was a platform that allowed users to use bitcoins as collateral for a loan. The main difference between a platform like BlockFi and Lava is that users had to give up their bitcoins to BlockFi in order to use the service.
“Lava Loans is the first way to borrow money against your bitcoin without giving it to a custodian or bridge bank,” Maredia said.
Maredia created this product because he saw there was a demand for it and he wanted something like that for himself.
“There are many Bitcoiners who don’t want to sell their bitcoins,” Maredia said.
“I also don’t want to sell my bitcoin because it increases in value. I would rather borrow money at a lower interest rate than have it increase in value,” he added.
He also noted that other methods of borrowing money against bitcoins are very inefficient and expensive.
“Billions of dollars in bitcoin-backed loans are being made to custodians or to Wrapped Bitcoin (WBTC),” he explained.
“To get Wrapped Bitcoin you need to take your Bitcoin, KYC yourself, put it on an exchange, pay fees to mint it, pay a bunch of network fees to move it to Ethereum, and then when you’re done with Wrapped Bitcoin, move it back to your exchange, pay additional fees to unwrap your Bitcoin, and move it back into self-custody. And you probably have tax liabilities for wrapping your Bitcoin as well,” he added.
“I want these people to use native bitcoin. We can increase the market of people using real bitcoin as collateral.”
Discrete Log Contracts (DLCs)
Lava Loans uses a specific type of smart contract on Bitcoin called Discrete Log Contracts (DLCs).
Maredia explained that DLCs are more secure than the types of smart contracts commonly used on other major crypto networks.
“DLCs are interesting because you’re basically just using the first Bitcoin layer to lock up your Bitcoin and release it under some predefined conditions,” he explains.
“(Unlike) smart contracts on Ethereum or Solana that get hacked all the time, DLCs are essentially a bunch of pre-signed transactions that you encrypt. You get almost by default a formal verification of your system because you know that the funds that are locked up in the smart contract between you and your counterparty can only move under this predefined set of conditions that you have verified,” he added.
“So there is much less technical risk than if you write arbitrary code that is deployed on the EVM and that anyone can play with and abuse.”
Maredia also shared that the Lava team consists of a number of engineers who contributed to the initial DLC standards.
“There are probably about 10 people, many of whom are now working at Lava and contributing, who know about this technology,” explained Maredia, who also shared that the potential of DLCs hasn’t been fully realized yet, largely because of how new the technology is. “Not a lot of people know about (DLCs, but) that’s because it’s still early days and we’re working on it.”
Move slowly and protect things
Unlike many in the crypto and broader tech space who take the “move fast and break things” approach, Maredia and his team are analytical and thorough, preferring to do research and thoroughly test products before bringing them to market.
“We’ve done a lot of research and development over the past two years,” Maredia said.
“We experimented with a lot of things. Even before we built Lava Smart Key, Lava Exchange, and Lava Loans, we experimented with a lot of different ways to do loans, to do self-custody, to do on-ramp and off-ramp,” he added.
“This new self-custody security solution is the result of the past eight to ten months of experimentation.”
Maredia added that it will likely be months before Lava Loans goes live, but that the beta version of the product is performing well and has provided him and his team with important feedback.
“It’s all coming together,” he concluded.
Lava is a portfolio company of UTXO managementa regulated capital allocator focused on the digital asset industry. Bitcoin Magazine is owned by BTC Inc., which operates UTXO Management. UTXO invests in several Bitcoin companies and has significant holdings in digital assets.