Lava: Simplifying Bitcoin Self-Custody and Unleashing Its Potential
Shehzan Maredia, the founder of Lava, is on a mission to make Bitcoin self-custody accessible to everyone. He firmly believes that seed phrases, the traditional method of recovering access to cryptocurrency wallets, are a major obstacle to mainstream Bitcoin adoption. His solution? Lava Vault, a revolutionary self-custody app that eliminates the need for seed phrases altogether.
"I realized that seed phrases were a big barrier to adoption," Maredia told Bitcoin Magazine. "And I went down the rabbit hole [to make] something better."
Lava is a young company, founded in January 2022. With a team of seven dedicated individuals, they have been tirelessly developing innovative solutions to simplify the Bitcoin experience. Their flagship product, Lava Vault, is a testament to their commitment to user-friendliness and security.
Lava Vault: Forget Seed Phrases, Welcome Security
Lava Vault employs a unique two-of-two multisignature approach to self-custody, offering a secure and streamlined alternative to traditional seed phrases.
- One part of the "two-of-two" is linked to the user’s cloud account, while the other is a simple four-digit PIN.
- This design ensures that even if a hacker gains access to the user’s cloud account, they are unable to steal funds because they lack the associated PIN.
- The same logic applies in reverse: even if someone knows the PIN, they cannot access the user’s funds without also accessing the cloud account.
"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," explained Maredia.
This ingenious system, dubbed the Lava Smart Key, has proven to be a hit with users who previously shied away from self-custody due to the perceived complexity of managing seed phrases.
"We’ve actually seen a bunch of people using it that previously would have just bought bitcoin and kept it on Coinbase," Maredia shared.
Lava Exchange: On-Ramp to Self-Custody
Lava’s ambition extends beyond secure self-custody. They have also launched Lava Exchange, which simplifies the purchase of Bitcoin and automatically sends the newly acquired coins directly to the user’s Lava Vault.
"We have this exchange aggregator we’ve built," explained Maredia. "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 offer you based on your order, and we just route you to the best exchange through Lava."
This seamless integration of purchase and custody eliminates the cumbersome process of transferring Bitcoin from a custodial exchange to a self-custodial wallet, making the transition to self-custody significantly easier for newcomers.
Furthermore, Lava Exchange provides a unified platform for transacting with both Bitcoin and stablecoins globally, empowering users to leverage both worlds within a single, secure ecosystem.
Lava Loans: A Revolution in Bitcoin Borrowing
Recognizing the rising popularity of Bitcoin-backed loans, Lava has introduced Lava Loans, a self-custodial solution that allows users to borrow against their Bitcoin without relinquishing control.
"Lava Loans is the first way to borrow against your bitcoin without giving it to a custodian or bridge," Maredia emphasized.
Unlike traditional platforms like BlockFi (now defunct), which required users to cede custody of their Bitcoin for loan access, Lava Loans leverages Discreet Log Contracts (DLCs) to enable secure, self-custodial borrowing.
"There’s a lot of Bitcoiners who don’t want to sell their bitcoin," Maredia shared. "I don’t want to sell my bitcoin either, because it’s appreciating. I’d rather borrow against it at a lower interest rate than it’s appreciating."
Lava Loans addresses the inefficiencies and high costs associated with other Bitcoin borrowing methods.
"There are billions of dollars of bitcoin-secured loans happening with custodians or with Wrapped Bitcoin (WBTC)," he explained. "To get Wrapped Bitocin, you have 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 onto Ethereum and then once you’re done using Wrapped Bitcoin, move it back to your exchange, pay extra fees to unwrap your Bitcoin and move it back to self-custody. And you probably have tax obligations for wrapping your Bitcoin, too."
By enabling self-custodial borrowing with native Bitcoin, Lava Loans simplifies the process, reduces costs, and fosters greater use of Bitcoin within the lending ecosystem.
Discreet Log Contracts: Enhanced Security and Transparency
Lava Loans leverages Discreet Log Contracts (DLCs), a cutting-edge technology that promises security and transparency unparalleled in the world of smart contracts.
"DLCs are interesting because you’re basically just using the Bitcoin layer one to lock your Bitcoin and release it under some predefined set of conditions," explained Maredia.
"[As opposed to] smart contracts on Ethereum or Solana that constantly keep getting hacked, DLCs are basically a bunch of pre-signed transactions that you encrypt. You almost get formal verification of your system by default, because you know that the money that’s 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.
"So, there’s a lot less technical risk versus writing arbitrary code deployed on the EVM that anyone can poke around with and exploit."
This commitment to robust security is woven into the fabric of Lava’s DNA.
Move Slowly and Build Better
In contrast to the fast-paced "move fast and break things" mantra prevalent in the tech world, Lava adopts a deliberate and meticulous approach to product development.
"We’ve been doing a lot of R&D over the last two years," said Maredia. "We were experimenting with lots of things. Even before we built Lava Smart Key, Lava Exchange and Lava Loans, we had been experimenting with a lot of different ways to do loans, to do self-custody security and to do on-ramp and off-ramp."
This commitment to thorough research and rigorous testing ensures that each Lava product is well-refined and meets the highest standards of quality and security.
A Bright Future for Bitcoin Self-Custody
Lava’s innovative approach to Bitcoin self-custody, combined with its ongoing commitment to user-centric design and security, positions the company as a front-runner in the push for widespread Bitcoin adoption. By removing barriers to entry and simplifying the Bitcoin experience, Lava is empowering individuals to take control of their financial futures while unlocking the full potential of the Bitcoin ecosystem.
"Everything’s coming together," concluded Maredia. And as Lava continues to refine its products and explore new possibilities, the future of Bitcoin self-custody looks brighter than ever.
