Company Name: Wash
Founders: Maredia of Shehzan
Foundation date: January 2022
Headquarters location: New York, USA (with some remote employees)
Amount of bitcoin held in treasury: N/A
Number of employees: 7
Website: https://www.lava.xyz/
Public or private? Private
Shehzan Maredia wants to make bitcoin custody easier.
That's why he founded Washan app he and his team have created that allows users to buy bitcoins, transact bitcoins and stablecoins globally, and now hold their bitcoins in self-custody without having to enter a seed phrase.
Maredia is part of a growing list of entrepreneurs in the bitcoin space who believe that seed phrases — lists of 12 to 24 words used to recover funds from lost or stolen cryptocurrency wallets — are hindering mainstream bitcoin adoption. He believes that seedless alternatives to self-custody will help bring it to the masses.
“I realized that seed phrases were a huge barrier to adoption,” Maredia told bitcoin Magazine, “and I went down the rabbit hole[to make]something better.”
After months of research and development, Maredia developed a solution that is now at the heart of the Lava app design: Lava Vault.
Lava Vault
After testing several different self-custody configurations, Maredia and his team arrived at a unique multi-signature solution that became the backbone of Lava Vault.
“We created this two-of-two recovery solution for self-custody, where you can attach one part of the two-of-two to your cloud account and the other part is a four-digit PIN,” he explained.
<blockquote class="twitter-tweet”>
Introducing Lava Vault, the best self-custody app for people who want to save in bitcoin and spend in USD without compromising security.
Free, instant and global payments.
Buy bitcoin with the lowest fees available
Protect your assets with 2-in-2 seedless recovery image.twitter.com/nEIYIHD6Dg
—lava (@lava_xyz) twitter.com/lava_xyz/status/1813252712189895006?ref_src=twsrc%5Etfw”>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 and believe it helps provide easier self-custody for those who might otherwise be reluctant to take on the responsibility.
“We’ve actually seen a lot of people using it, when before they would have just bought bitcoins and stored them on Coinbase,” he said.
Additionally, Lava Vault works seamlessly with Lava Exchange, another product Lava recently launched.
Lava Vault + Lava Exchange = Automatic incorporation into self-custody
It is often difficult for new bitcoin users to differentiate between a custodial wallet offered by an exchange and a self-custody 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-custody wallet, especially if the exchange offers both (e.g., crypto-basics/what-is-the-difference-between-coinbase-and-coinbase-wallet”>Coinbase).
However, Lava removes this difficulty by allowing users to purchase bitcoins within the app (at the best available exchange rate) before automatically sending those bitcoins to self-custody.
“We have this exchange aggregator that we have built,” Maredia said.
“If you want to buy bitcoins today, you need to find out which exchange (Kraken, Coinbase). We work with many of them. We know what price they offer you based on your order and we direct you to the best exchange through Lava,” he added.
Once users make their purchase, the bitcoin appears in their Lava Vault.
“This is very helpful if 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 continue using it.”
Once users have their bitcoins or stablecoins in custody through Lava, they will be able to use any of these assets to conduct permissionless transactions with anyone in the world. And soon they will also be able to borrow dollars in exchange for their bitcoins without having to hand over their bitcoins to a third party.
Lava Loans
Maredia and the Lava team recently launched a beta version of a new product called Lava Loans, which Maredia describes as a “self-custodial 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 custody of their bitcoins to BlockFi in order to use the service.
“Lava Loans is the first way to borrow against your bitcoin without having to hand it over to a custodian or bridge,” Maredia said.
Maredia created this product because he saw the demand for it and wanted something like this for himself.
“There are many Bitcoiners who do not want to sell their bitcoins,” Maredia shared.
“I don't want to sell my bitcoins either, because they are appreciating. I'd rather borrow against them at a lower interest rate than if they are appreciating,” he added.
He also noted that other methods of borrowing using bitcoins as collateral are highly inefficient and expensive.
“There are billions of dollars in bitcoin-secured loans that are being made with custodians or Wrapped bitcoin (WBTC),” he explained.
“To get Wrapped bitcoin, you have to take your bitcoin, KYC it yourself, put it on an exchange, pay fees to mint it, pay a bunch of network fees to move it to ethereum, and then once you’re done using Wrapped bitcoin, move it back to your exchange, pay additional fees to unwrap your bitcoin and move it back to self-custody. And you probably have tax obligations for wrapping your bitcoin as well,” he added.
“I want these people to use native bitcoins. We can increase the market size of people using real bitcoins as collateral.”
Discrete Record Contracts (DLC)
Lava Loans employs a specific type of smart contract in bitcoin called Discrete Ledger Contracts (DLC).
Maredia explained that DLCs are more secure than the types of smart contracts typically implemented on other major crypto networks.
“DLCs are interesting because you’re basically using bitcoin’s layer one to lock up your bitcoin and release it under a predefined set of conditions,” he explained.
“(Unlike) smart contracts on ethereum or Solana that are constantly being hacked, DLCs are basically a bunch of pre-signed transactions that are encrypted. You almost get a formal verification of your system by default, because you know that the money that is locked in the smart contract between you and your counterparty can only be moved under this predefined set of conditions that you have verified,” he added.
“Therefore, there is much less technical risk than writing arbitrary code implemented in the EVM that anyone can manipulate and exploit.”
Maredia also shared that the Lava team is comprised of several engineers who contributed to early DLC standards.
“There are probably about 10 people, many of whom are working and contributing to Lava right now, who know about this technology,” explained Maredia, who also shared that the potential of DLC has yet to be fully realized, largely due to how new the technology is. “Not a lot of people know about[DLC, but]that’s because the technology is early and we’re developing it.”
Move slowly and protect things
Unlike many in the crypto and tech sector in general, who take the “move fast and break things” approach, Maredia and his team are analytical and thorough. They prefer to conduct research and test products rigorously before releasing them to the market.
“We’ve been doing a lot of research and development over the last two years,” Maredia said.
“We were experimenting with a lot of things. Even before we created Lava Smart Key, Lava Exchange and Lava Loans, we had been experimenting with a lot of different ways to do lending, to offer self-custody security and to offer network access and egress,” he added.
“This new self-custody security solution is the result of the last eight to ten months of experimentation.”
Maredia added that while Lava Loans is likely months away from going live, the beta version of the product has been working well and has provided him and his team with important feedback.
“Everything is falling into place,” 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 a variety of bitcoin businesses and holds significant stakes in digital assets.
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