Lava Vault: Streamlining Self-Custody
It can often be difficult for newcomers to Bitcoin to discern between custodial wallets provided by exchanges and self-custodial wallets. For those new to Bitcoin, transferring bitcoin from an exchange wallet to a self-custodial wallet can be daunting, particularly if the exchange offers both types of wallets.
Once users secure their bitcoin or stablecoins in self-custody via Lava, they can utilize either asset to conduct transactions without permission from anyone worldwide. Additionally, they will soon be able to borrow dollars against their bitcoin without relinquishing custody to a third party.
He pointed out that alternative borrowing methods against bitcoin tend to be both costly and inefficient. “There are billions of dollars’ worth of bitcoin-secured loans with custodians or Wrapped Bitcoin (WBTC),” he explained. “To obtain Wrapped Bitcoin, you must convert your Bitcoin, complete KYC verification, transfer it to an exchange, pay minting fees, deal with numerous network fees to transfer it to Ethereum, and once you’re finished with Wrapped Bitcoin, return it to the exchange, incur additional fees to unwrap your Bitcoin, and move it back to self-custody. You may also have tax liabilities for the wrapping of your Bitcoin,” he indicated.
Source: bitcoinmagazine.com
“This is immensely beneficial when onboarding users to self-custody,” Maredia stated. “Now, I can guide them to download directly into self-custody, significantly increasing the likelihood that they will persist in using self-custody.”
“Lava Loans stands as the first option to borrow against your bitcoin without needing to hand it over to a custodian or bridge,” said Maredia. This advancement is especially attractive for Bitcoin enthusiasts who hesitate to sell their bitcoin due to its rising value. “I also don’t want to sell my bitcoin because it’s increasing in value. I’d prefer to borrow against it at a lower interest rate than its appreciation,” he added.
Upon experimenting with various self-custody configurations, Maredia and his team discovered an innovative multisignature approach that ultimately became the foundation of the Lava Vault. “We created a two-of-two recovery system for self-custody where one part connects to your cloud account and the other is a four-digit PIN,” he described.
“If I possess your four-digit PIN, I still can’t access your funds because I lack your cloud account credentials. Conversely, if I can access your cloud account, I don’t have your four-digit PIN, making brute forcing impossible,” he elaborated. This framework, referred to as the Lava Smart Key, is facilitating easier self-custody for individuals who may otherwise hesitate to assume that responsibility.
Following extensive research and development, Shehzan Maredia and his team at Lava have crafted a solution that serves as the core feature of the Lava app: Lava Vault. This groundbreaking component is designed to make self-custody more straightforward for Bitcoin users, enhancing both accessibility and user experience.
Lava Loans: Borrowing Against Bitcoin Without Custodians
“If you want to buy bitcoin today, you must navigate which exchange—Kraken, Coinbase— to choose from. We collaborate with many of them. We understand what price they provide based on your order, and we direct you to the optimal exchange through Lava,” he continued. After completing their purchase, the bitcoin is automatically deposited into their Lava Vault.
Maredia and the Lava team have recently launched a beta version of a new offering named Lava Loans, which Maredia describes as a “self-custodial version of BlockFi.” Once operational, BlockFi allowed users to use their bitcoin as collateral for loans but required them to forfeit custody of their bitcoin.
Lava alleviates this complexity as it enables users to acquire bitcoin directly within the app—at the most competitive rate available—before automatically transferring that bitcoin into self-custody. “We’ve built an exchange aggregator,” Maredia stated.
“I aim to encourage the use of native bitcoin. We can expand the demographic of individuals utilizing actual bitcoin as collateral.”
“We’ve observed a significant number of users who previously would have purchased Bitcoin and kept it on Coinbase now leveraging it,” Maredia remarked. Furthermore, Lava Vault integrates smoothly with Lava Exchange, another recent addition to Lava’s offerings.
