How Bitcoin Millionaires Use Their BTC Without Selling It | Shehzan Maredia

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It's not just something you made, it's the privilege that you get to work with your hands.

It's building something that serves a purpose.

I think people are realizing personal finances are exceedingly complex.

I think people just want something a simple way to save.

I think Bitcoin really fits that.

In many ways, 90 plus percent of our users borrow against their Bitcoin to materially improve

their lives.

Why do people borrow against their Bitcoin?

One of the main use cases for borrowing against your Bitcoin on lava is actually buying a

house, which is very interesting.

So when I started lava originally, I thought a lot of our use case would just be leverage.

People borrow rings to buy the debt.

But what really surprised me is how many of our users, I would say 90 plus percent of

our users borrow against their Bitcoin to materially improve their lives.

And one thing that was very interesting to me about these users that we have that have

Bitcoin is a lot of them are actually not extremely high-income.

A lot of them are what you would call middle-income, but they've actually saved their way through

two generational wealth through Bitcoin.

So it's really interesting because I got into Bitcoin more than a decade ago in one of

the DCs of the community was that you could get save your way to financial freedom.

You wouldn't have to gamble your way to financial freedom.

And it's really inspiring to see a lot of our users that have saved their way to wealth.

And now our borrowing gets it to really materially improve their lives, you know, buying a nice

house, for example, is one of the most common use cases we've seen.

People use it to basically fund a down payment or a lot of people have actually used lava

to actually just purchase a finance or home purchase because they can't get a traditional

market just easily as well.

It's funny to say this.

I can't remember if I told a store in the podcast or not, but a couple of weeks ago, my wife

and I went to a medicine square garden for an event.

And as we were leaving, I got confused where I was.

I couldn't find the escalator to get down and a usher came over and he said, hey, are

you looking for the escalators?

Yeah, he said, okay, come on, let's go.

And I know we were in trouble because all of a sudden, as we're walking, he did like

a triple take and I was like, Jesus, so I got like a bugger on my nose or something

right.

And he was like, are you Anthony Palpeano?

And I was like, yeah, I think it's okay to say the SDS and he goes, I just want to thank

you.

He shakes my hand.

And he goes, I'm a millionaire because of you.

So my immediate reaction is like, it's not because of me, it's because of what you did.

Yeah.

But I said, what do you mean?

And he goes, I have an over a million dollars worth of Bitcoin.

Yeah.

And I said, had you get over a million dollars of Bitcoin, that's a pretty big deal.

And I think he thought I didn't believe him.

So he pulls out his phone and he opens up the Coinbase app and he shows me, he's got a

million and a half dollars worth of Bitcoin.

And I looked at him and I said, you know, how did you do that?

And he goes, I've just been saving my money and I've been buying Bitcoin every single time

I've had a paycheck for years now.

And he goes, but I'm really proud of myself that I didn't quit my job.

And he said, you know, I make over a hundred thousand dollars as an assured MSG, but I've

got this and I'm still working because I want to get to financial security and build

generation of wealth for me and my mom.

Wow.

And we were just like, dude, in what world is that story possible?

And I could probably name tens of people, hundreds of people maybe, I've met over the years,

but it's some version of that.

Yeah.

But I think what you're talking about is it's not somebody who is trying to gamble.

It's somebody who's looking to save, but they still need the liquidity if they want to

buy a house or do something there.

Exactly.

Well, I've actually noticed a lot of our users, we had a bus driver, a school bus driver

that borrowed more than a million dollars and he's still working though, but he has, you

know, generational wealth that he's borrowed a million dollars, borrowed a million dollars.

So it has more than a million, as at least as at least two million in Bitcoin that he

pledged as collateral.

And, you know, it's, I think it's just inspiring one, he's still working too.

He's saved his way to financial freedom and three, you know, he's borrowing to materially

improve his life through buying a nicer house, through helping his family.

So I think it is a very unique story of Bitcoin where, you know,

so far in Bitcoin's history, people have saved their age to financial freedom through

Bitcoin.

And I think that's going to continue with the next decade.

Let's talk about some of the risks that people run into in borrowing this stuff, right?

So you pledge Bitcoin, when you pledge Bitcoin, you think in borrow against it.

I think you guys do 50% LTV.

So if I put down a million dollars, I can borrow up to 500K.

When I do that, I could lose my Bitcoin though.

You could lose your, you could get liquidated.

All right, explain.

So one thing that's important to know, I mean, last week is a really great, um,

you know, last week, there was a lot of timely topic.

It's a timely topic, right?

So I could even just share some of the learnings we had last week.

So there's a lot that we do to make sure people manage their risk properly.

One is education.

Two is if their price of Bitcoin is dropping a lot,

we'll send people automatic notifications, you know,

we'll actually have a US-based client services team that will directly reach out

to people or email or their phone number if we have their phone number to make

sure that they can properly add collateral or repay down some of their loan.

But last week there was two things that was very interesting to me.

One, we have a feature called liquidation protection, which is 24.7.

If you have Bitcoin, that's not pledged as collateral on lava.

If the price is going to a certain LTV, we can automatically add it.

So if you're sleeping, you're on a hike in Spain or something and you just weren't

checking your phone, you just have extra Bitcoin.

We can automatically add it to collateral to prevent liquidation.

And we actually, uh, last week, because of how steep the drop in Bitcoin was,

we actually prevented a lot of people from getting liquidated.

And the other thing that was very interesting from last week is we actually saw

net new loan volume despite the price of Bitcoin going down, which is very interesting

because I think people, what they're doing when they're bar against their Bitcoin,

they're delaying the sale of Bitcoin, right?

They expect Bitcoin to be higher in the future.

So they are making a decision, either I'm going to sell my Bitcoin and take a taxable cost,

a taxable hit, or I'm going to think like delay it because I'm bullish on the price of Bitcoin.

And it is interesting because when Bitcoin price goes down,

you probably should actually see more net new volume.

And that's what we saw, you know, in fact,

we liquidated much less than 1% of our loan book last week.

So that also goes to showing me that a lot of our users,

we've always encouraged them to have much healthier conservative LTVs.

You know, the average loan book LTV, like I want there to go was 30%.

So we always, you know, encourage people to manage risk.

Our job is to build the tools that can help them do that, but ultimately it's their decision.

How do you think about what differentiates your platform versus

another platform where somebody can go borrow?

I think there's, we have the lowest rates in the industry right now.

I think there's two reasons for that.

One, we have the lowest cost of capital to we also have other business lines.

So we don't have to extract like as much revenue from our Bitcoin lending business.

I do think that there are a lot of other great Bitcoin loan businesses out there.

So I think there's like healthy competition.

I think there's a lot of growth to be had in this industry, largely around Bitcoin,

around stable coins, you know, there's a lot we're doing that is just hyper focused on building

the best products, having the best client services, but you know,

I think people should make their decision based on, I think there's a lot of great companies in the space.

Now, when you say lowest cost of capital, how do you have lower cost of capital?

I think that we just work with every single credit fund or bank that we can around the world.

And that actually is going to get, I think the cost of capital for us is actually going to go down

a lot more even this year, just because one regulation changed a lot in the last year.

Two, there's a lot more banks and other capital providers that are entering the space.

So I think the cost of capital does go down over time, especially over this last year or over this year.

And then when you think about those other revenue sources, explain kind of how you think,

okay, you own the relationship with somebody in terms of borrowing, what else can you do to serve them?

Well, people use us to borrow against their Bitcoin.

They also use us to buy Bitcoin, but we're also investing in our stable coin business.

So, you know, we have a lot of users right now on lava that are not really even Bitcoiners.

We expect them to be Bitcoiners in the future.

But they're people around the world that are converting their local currency into stable coins on lava.

You can hold stable coins there, you can earn yield on your dollars on lava.

And really what it is is providing people essentially a dollar bank account around the world.

And one of the things that I can't speak too much about right now,

what we're going to launch in a few weeks is the lava card, which run up the biggest concerns or issues

we've seen that I think is blocking stable coin adoption is that you have all these people around the world

that have that are getting paid in stable coins or getting paid in their local currency,

but they don't want to store their value in their local currency.

But they can't afford Bitcoin either because of Bitcoin's volatility.

So they're, you know, converting it to stable coins, but it's been really hard for them to actually spend those

stable coins, you know, withdrawing it to their local bank account can be very costly.

It can also take a lot of time.

So, you know, the card will let people spend in real time with no fees, no foreign exchange fees.

You know, the merchant doesn't have to accept stable coins directly.

They can just be on, you know, visa rails.

And I think that's going to be something that a lot of our users are already asked for.

And I think it's going to really also affect stable coin adoption.

When you think about those international users, how many of them are using stable coins already?

Versus you guys are the first kind of interaction they've had with crypto.

And then how do you think about which stable coins they can use?

Obviously, you know, Tether is kind of the king of the stable coin world.

The circle is the, you know, trying to position themselves as kind of the US regulated player.

But how do you think about what they can use?

We're pretty agnostic to the stable coin, like which stable coin it is.

I think all that gets like abstracted away.

You know, when you use PayPal, you don't know exactly which bank are like underlying there.

So I think that gets all abstracted away.

All of our loans are initially funded in stable coins.

And I think a lot of, there's a lot of value in that.

It's 24-7, you know, you can fund a loan over the weekend.

So I think people are, for a lot of people, we're the first times they've interacted with stable coins.

And we built lava from day one on stable coin rails.

And I think a lot of people are realizing, okay, one side bar against my Bitcoin on lava, I see stable coins.

Oh, it's cool. I can just move my money so quickly.

I can see where it's at when I'm, you know, sending the money.

There's no like holdups, no obscure,

like no unreliability in the payment rail.

So I think they're just purely just a better payment rail.

And a lot of people just want easy ways to spend their balance now.

And that's what the card is going to accomplish.

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What do you think the big challenges are for you guys moving forward?

Right? You're a small team that moves quickly.

It seems you're using technology to your advantage.

What are the things that you're trying to solve?

There's, I mean, we can always benefit from

smarter people on our team. We've been growing our team.

Our team, I think one of the best teams in the industry,

and we're growing very quickly.

I think all of our business lines are growing very well right now.

We're expanding.

There's a lot to do instead of just being global.

There's a lot to do to make the product work globally properly.

There's a lot of localization that's involved.

And that's something that we're really heavily focusing on.

And then our current user base,

that if they're in America or they're in another country,

we're also wanting to deepen how much we can,

like how much we can serve them, right?

So there's a lot of products that we're building.

The card is one of them, but there's a bunch of other ones

to really deepen in a region.

And then there's a lot that we're doing to also be better globally.

When you think about building these products internally,

one of the topics we've talked about a number of times today is artificial intelligence.

How much code that is being written at lava right now is being written by AI versus humans?

Really like almost none of it's being written by AI.

So I would say I'm more contrarian on the AI.

Trend, most of our engineers are very senior as well.

But also, we do experiment with the coding tools,

but I don't think they're actually that productive for more senior engineers.

Maybe for junior engineers, but I also have realized that

for the junior engineers of interview,

I've actually noticed that they seem a lot lazier

because they're replacing their thought with these co-generation tools.

So we actually are, we're backed by founders for the co-stars of the biggest investor in open AI.

But I'm actually a lot,

a lot of you ban it. Do you not let them use it?

I am, we have some strict policies because of privacy usage.

But we do have contracts with, for example,

anthropic to let people experiment with it.

But we definitely encourage people to be careful.

We do let people experiment with it.

We care about privacy.

So you can't just use any random tool,

but we're really careful about it.

And I've actually noticed for a lot of people,

it actually makes them worse engineers.

So my contrarian take is that they aren't that useful

and they actually maybe decrease productivity today.

How do you think that that's true when everyone also say in the opposite?

Well, I think this is a very long conversation.

But my, we got eight minutes and 45 seconds. Let's go.

I think there's a few things. I think one that you see all these layoffs.

But I actually think that I've interviewed so many engineers at this point.

I would say 99% of engineers are not good at their jobs.

You can actually lay off a bunch of people

without changing the productivity.

You know, I think probably like 0.1% of engineers

that even the best engineering culture, like Google,

are probably effective.

So I think you can actually lay off a bunch of people

while still keeping productivity.

And AI is a great excuse to do that.

I actually don't think that,

and I think like having a really good culture

can actually amplify each individual's person's productivity.

And I think that like being small, having a good culture,

having a very positive culture is,

I think there's a lot that we've done

to have a very effective culture.

But I think that there's a lot of things about code generation

that if you're not an engineer,

you might think at first glance,

oh, this is extremely valuable to me.

But a lot of times, I think with coding,

you want to be concise and precise.

Precise because coding is all about edge cases.

So, and one of the best ways to actually build a system

is like thinking through every single line of code

you write thinking through all the edge cases.

And AI is not precise.

And concise is with coding,

you really, really want to have very well readable code

because people are going to go in there

over time and read that code.

You want them to be able to read it properly.

So, and it's not good at that either.

And there's really like, we also do things that are quite difficult

from a technically speaking.

And so it hasn't really been that helpful for us.

You know, maybe for,

if there was like, so you were doing something super basic,

you could use it, but you know,

the other day, I like try to generate this like basic app.

And I probably could have written it in six hours.

The AI didn't really help me at all.

Just the experiment.

So we're constantly experimenting

because I think one thing is you don't want to be missing

a technology trend.

So every week, I'm trying our engineers

are trying to see if it's gotten better.

But it's not a big part of our culture

from an engineering perspective.

What are some of the things that you're using

that are new technologists,

you're using Bitcoin, stable coins, things like that?

Are there other technologies you guys are using internally

of the company?

They were like the most bullish on like Bitcoin

and stable coins right now.

I just think there's so much to do

around exploring Bitcoin and stable coins.

We're also very interested to see

where the tokenization space goes this year.

I think it's very early,

but we're definitely very interesting.

You know, stable coins are just tokenized dollars, right?

So we've already seen so much value

in that in expanding global access to dollars.

I think it's actually changes the dollars' supremacy

around the world.

And so we are interested to see if that affects

other capital markets too.

Is there anything that you think people are excited

about in the crypto world?

And you think is a zero or not interesting?

I'll probably get a ton of stuff in the crypto world.

I mean, like overwhelmingly,

I think the majority of stuff in the crypto world

is not interesting.

Yeah, I agree.

But like, what's an example?

What's the thing that people are most excited about?

The your most convinced is a zero.

Is a zero is...

I mean, I think like, you know,

a lot of crypto is like meme coins.

I mean, I think that's a scam.

Well, I think they'll always be around,

but it's not that interesting to me.

I think you could do that anywhere.

I think then there's like been all these like

infrastructure technologies,

like Ethereum and a lot of these other things

that I don't think are going to find.

Or at least are not going to win the,

like, you know, the most stable coins.

We don't even have Ethereum integration.

Like, you can deposit,

but everything on lava doesn't settle on Ethereum, right?

So I think that there's been a lot of experimentation

in crypto that I don't think will find real utility.

But I think there's a lot of also just like token pump

and dumps in crypto as well, right?

So what about the people that you hire?

Where are they coming from?

Are they coming from traditional tech?

Are they coming from finance?

Are they coming from other crypto companies?

So we generally hire people...

Definitely.

I don't think we've actually had a single person from crypto.

We hired two engineers.

I would say that the best engineers have ever met

in the Bitcoin world.

And then the large majority of our team is not actually

from the coin or crypto.

They're from just like Fintech.

And where do you find them?

Like, they're in New York, they're in San Francisco,

they're internationally.

Mostly in New York.

You know, we leverage our investors.

And then, you know, once you hire someone really good,

you can just ask them who else is someone

like that's really good that you work with.

And that's worked very, very well for us.

It's kind of like a graph.

You know, you find someone you really, really trust them.

You kind of graph out from there.

That's my approach to hiring.

Got it.

And then do you guys work in person or remotely?

Well, if you remote people,

we mostly work in person.

Okay. Is that an intentional thing

or just kind of where everyone ended up?

It's pretty intentional.

There's certain roles that I think

can only really be done in person.

There's certain roles that I think are fine to do remote.

All right.

There's not really been a very large Bitcoin-only

technology company built.

For the most part, I think that

there are companies, you know, like the Strikes, etc.

But most of the companies go more of the Coinbase.

Route, which is, okay, I got to go to a lot of coins.

And I go to a lot of products and services.

You guys seem to be much more focused in terms of what you're doing.

How big do you think a Bitcoin-only business can be

compared to the kind of Coinbase, lots of coins, you know, type of approach?

I think that it's very easy to make money and finance through gambling.

And I think right now what we have is, I call it a quiet gambling epidemic.

I think there's a lot of financial strategies that people are trying to sell to people

that are really just gambling in disguise.

And I think that's like a big matter.

I think most financial platforms out there, especially most modern

financial platforms out there are encouraging people to do things that are ultimately

going to lead to financial loss for their users.

So our focus, you know, I start from the problem.

I started lava because I think that personal finance is a necessarily complex.

And that if you are just a normal person, you are thinking about how to

do your craft and make money, but managing your finances is extremely complex.

And I think that really what I want to see is a world where people are just

easily saving their way to financial freedom, that they don't have to gamble, trade,

or become a professional investor, just to store and grow the value of their money.

And so I think that's what you've seen with a lot of crypto and trading and, you know,

prediction markets and all sorts of other things.

I think Bitcoin is a part of that saving solution, but we're really focused on just the savings

opportunities. So, you know, like I mentioned, almost every other crypto asset is just a,

it doesn't have, I think, really inherent value. So we're really focused on just the saving

solution. And, you know, I think that's, there's two opportunities in finance being, like,

more for traders or gamblers or for savers. And we're really focused on building for savers.

This is very in the weeds question. It's interesting thinking about saving and users.

Do you think anyone is ever going to take stretch STRC from strategy,

create a deposit account and rather than buy treasuries by digital credit. And now all of a sudden

they're paying, you know, 11, 11.25% and you could say to someone, hey, I've got a deposit account

that'll pay you six, seven, eight percent and they keep the difference.

I think people will probably do that. So one thing we do is right now if you're on lava,

you deposit dollars, you can earn a yield back by treasuries or you can earn a yield back by

funding Bitcoin backgrounds. But we've seen people choose both options because some people,

there's, you know, yield difference. There's like two and a half percent. So it's like four

or like six and a half right now. So I would say we've seen people choose both because some people

just don't want to take the risk of funding Bitcoin back loans. Though there's never been any losses

on that. And, you know, we manage our lending platform extremely securely. So I think we already

see that there is demand for both of those products. STRC or some of these other digital asset

treasury companies. I'm not exactly as familiar as six. What this financial instrument does,

but I could definitely see giving people optionality is valuable. But you guys offer six percent

or give or take. Yeah. And I, you're six and a half, yeah. Yeah. And so when they're doing that,

they're, you're taking their deposit, they're opting in and then you're basically lending it out

against the Bitcoin that somebody else is giving you. And so you kind of have both sides,

you have a Bitcoin collateral, but you also have the dollar. Yeah. Yeah, we have that. I mean,

we've actually seen. Now I know where they cost the capital so low. Yeah, we have that. And they

have institutional capital too. But we've actually seen a lot of users just decide not to actually

just use the treasury product because a lot of our, it's interesting because a lot of us serve

these Bitcoin holders, but we also serve these dollar users around the world. So, you know, I think

that over time they can, you know, grow into assets like Bitcoin or other assets that are maybe

more volatile in the short term. But right now most of these users just want something super safe,

you know, and that's why they go for just earning a year back by just treasuries.

My last question is, you know, a lot of people who build technology companies, you know, a lot of

engineers, do you feel like you're on an island because everyone is not as excited about Bitcoin anymore

and they're all excited about AI and prediction markets and all this other stuff? Or do you feel like

there's still a really core kind of group that's interested in Bitcoin? I think there's a lot of

people that are still interested in Bitcoin. And I think that I actually think right now the,

overwhelming majority of people are getting exhausted by like what I was mentioning. There's

like gambling epidemic. And I think people, I think people are realizing like personal finances

are exceedingly complex. I think people just want something a simple way to save, right? So, I think

Bitcoin really fits that in many ways. And I think that that like really focusing on the problem,

I think the problem that we're trying to solve it, lava has never been more important.

I agree. And I think that it's a natural crisis. Yeah. Keep stuffing all this gambling

down people's throats. But we'll see. All right. Where can we send people to go check our lava?

Just lava dot xyz. Lava dot xyz. Yeah. You got one of those you are else.

Yes. Yeah. All right. Thank you very much.