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On Crypto Custody and Lending, with Dhruv Bansal@Unchained Capital


Satoshi&Co Daily Crypto Newsletter

April 30 · Issue #168 · View online
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Check out past issues of the newsletter along with more interesting crypto content as well as our recently-launched podcast series with leading crypto industry participants at our newly-launched website

In our 2nd episode, we host Dhruv Bansal of Unchained Capital. Dhruv talks about his background in physics and how he got involved in the cryptocurrency space. We discuss in detail custody solutions and on-chain and off-chain lending platforms and the use of data in blockchains. We also venture into Dhruv’s thoughts on Bitcoin and Ethereum. The summary of the podcast can be found below. While the podcast ‘cliff notes’ are fairly detailed, if you have some time, we highly recommend that you listen to our entire recording here. Dhruv does a great job of thinking through and articulating some topical, critical crypto subjects.
Story Behind the Creation of Unchained: In addition to being P2P money and a censorship-resistant store of value, Bitcoin transactions are also an invaluable dataset. Upon looking at the historical dataset of Bitcoin transactions, the conclusion that a majority of Bitcoin investors are long-term holders and around 60% of Bitcoins had not moved in the previous 12 months led to the creation of Unchained Capital. There was a need for a market where Bitcoin holders can leverage their Bitcoin holdings by borrowing against it to meet other financial expenses and the fact that no one else was doing it is where Unchained Capital started. You can refer to Dhruv’s seminal piece on HODL waves here.
Crypto Custody Landscape Right Now: Crypto exchanges are also obligated to store a fraction of their funds in hot wallets to meet the funding and withdrawal requirements of a large scale of users. This is obviously not the safest way to manage private keys because of the risks of external hacks are much higher. The importance of self-custody is criminally underrated currently. Crypto investors are still trying to wrap their heads around Bitcoin and how it works. So, it will take more time for users to figure out the risks of trusting someone else to manage their private keys and then eventually move to a much safer self-custody solution.  
Onchain vs. Offchain Lending Solutions: Onchain lending platforms look and sound much cooler than an Offchain software. However, onchain lending comes with its own set of difficulties that we have to deal with. As much as onchain lending and borrowing sounds exciting, they still have not figured out a way to convert your digital borrowings into fiat currencies, which is the need of the hour. Moreover, automating and having all the steps of a borrowing process onchain leads to several unpredictable outcomes because of the irrational nature and constant fluctuations in the fee markets right now. Offchain lending has the benefits of limited interaction with the blockchain as only the final transaction is settled on the blockchain and can offer fiat loans against cryptocurrencies in a regulatory-compliant way.    
Dhruv had earlier created this great graphic that captures the essential complexity of crypto. It has since been retweeted and reused multiple times and it would be remiss of us to not include it.
Meanwhile in Crypto Wonderland....
“NASDAQ to Add XRP Liquid Index”
Nasdaq exchange is adding Brave New Coin’s XRP Liquid Index tomorrow, sending crypto traders into a bull frenzy. The announcement comes within months of Nasdaq adding Brave New Coin’s (BNC’s) Bitcoin and Ethereum Liquidity Indexes – BLX and ELX. They are all part of the Nasdaq Global Index Data Service. The launch of crypto indices is clearly significant because it plays right into the mass adoption of cryptocurrencies. Institutional traders who may have been on the sidelines are being drawn into the space with the launch of each index.
“Coinbase Ventures Invests in Matic Network”
Ethereum-powered layer-two scaling solution Matic Network (MATIC) has today announced Coinbase Ventures, the venture capital arm of top-tier cryptocurrency exchange Coinbase, as an investor in its seed round. Matic Network – which utilizes sidechains for off-chain computation while ensuring asset security using the Plasma framework and a decentralized network of proof-of-stake validators – announced the Coinbase Ventures investment news via their Medium blog.
“ErisX Launches a Spot Exchange”
Aspiring crypto derivatives provider ErisX took one step closer to its ultimate goal Tuesday with the launch of a spot market. The exchange announced that it will immediately support dollar trading pairs with bitcoin, bitcoin cash, litecoin and ethereum, as well as bitcoin trading pairs with the other three cryptocurrencies at launch. While ErisX has a number of firms looking to trade on its platform at launch, it did not disclose any names.
“Bitfinex Plans to Raise $1Billion in an ICO”
Bitfinex, one of the world’s leading cryptocurrency exchanges has been the highlight of the crypto-verse following the NY AG/Tether news. It’s in the spotlight again after news broke out that it was planning an Initial Exchange Offering [IEO], with expectations of raising $1 billion in USDT. Bitfinex is also planning the launch of its own exchange token, reports stated.
Crypto Twitter Pick
Antonio Juliano
If at first you lost $850M, just run a $1B token sale #Bitfinex #easy
What We Are Reading / Listening To
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