The Pomp Podcast - How Bitcoin Millionaires Use Their BTC Without Selling It | Shehzan Maredia

Starting point is 00:00:00 Ready to take your investing knowledge to pro level? This is Fidelity Connects, your daily edge in the markets. Get deep insights on real-time market topics that may impact your investment portfolio. Listen to Fidelity Connects on Spotify today and power your next move tomorrow. I think people are realizing like personal finance is exceedingly complex. I think people just want something, a simple way to save, right? So 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

Starting point is 00:00:37 which is very interesting so you know when i started lava originally i thought a lot of our use case would just be leverage you know people borrowing to buy the dip 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 you know a lot of them are actually not extremely high income a lot of them are what you would call like middle income but they've actually saved their way through to generational wealth through bitcoin so it's really interesting because you know i got into bitcoin more than a decade ago and one of the theses of the community was that you could get

Starting point is 00:01:17 save your way to financial freedom you wouldn't have to gamble your way to financial freedom and And it's really inspiring to see a lot of our users that have saved their way to wealth and now are borrowing against it to really materially improve their lives. You know, buying a nice house, for example, is one of the most 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 their home purchase because they can't get a traditional mortgage as easily as well. It's funny you say this. I can't remember if I told the story on the podcast or not. But a couple of weeks ago, my wife and I went to Madison 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.

Starting point is 00:01:59 And a usher came over and he said, hey, are you looking for the escalator? So he goes, OK, come on, let's go. And I knew we were in trouble because all of a sudden he says we're walking. He like did like a triple take. And I was like, Jesus, I got like a booger on my nose or something. Right. And he was like, are you Anthony Pappiano? And I was like, yeah, I think it's OK.

Starting point is 00:02:15 Yes, yes. 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 i said what do you mean and uh he goes i have over a million dollars worth of bitcoin yeah and i said uh how'd you get over a million dollars of bitcoin that's pretty big deal and i think he thought i didn't believe him so he pulls out his phone he opens up the coinbase app and he shows me he's got a million and a half dollars worth of bitcoin and uh i said i looked at him and i said you know how did you do that

Starting point is 00:02:46 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 $100,000 as an usher at MSG, but I've got this and I'm still working because I want to get to financial security and build generational wealth for me and my mom. Wow. And my wife and I left 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 that has some version of that.

Starting point is 00:03:20 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. I've actually noticed a lot of our users, we had a bus driver, a school bus driver

Starting point is 00:03:33 that borrowed more than a million dollars and he's still working though, but he has generational wealth that he's- Borrowed a million dollars. Borrowed a million dollars. So has more than a million in Bitcoin. Has at least two million in Bitcoin that he pledged as collateral. And, you know, I think it's just inspiring.

Starting point is 00:03:50 One, he's still working. Two, 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 way to financial freedom through Bitcoin. And I think that's going to continue over the next decade. Let's talk about some of the risks that people run into when borrowing this stuff, right? So you pledge Bitcoin. When you pledge Bitcoin, you then can borrow against it.

Starting point is 00:04:19 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 note, I mean, last week is a really great, you know, last week there was a lot. It's a timely topic. It's a timely topic, right?

Starting point is 00:04:37 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 U.S.-based client services team that will directly reach out to people over 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

Starting point is 00:05:11 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 uh going down which is very interesting because i think people sh what they're what they're doing when they borrow against their bitcoin they're delaying the sale of bitcoin right they they expect bitcoin to be higher in the future so they are making a decision

Starting point is 00:05:46 either i'm going to sell my bitcoin and take a taxable cost a taxable hit um or i'm going to think like delay 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 uh you know in fact we liquidated much less than one percent of our loan book last week so that also goes to show me that a lot of our users we've always encouraged them to have much healthier conservative ltvs you know the average uh loan book ltv like a month or two ago 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

Starting point is 00:06:28 platform versus another platform where somebody can go borrow? I think 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. Two, we also have other business lines, so we don't have to extract 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 healthy competition. I think there's a lot of growth to be had in this industry, largely around Bitcoin, around stable coins uh you know there's a lot we're doing that is just hyper focused on building the best product uh having the best client services uh but you know i think people should

Starting point is 00:07:02 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 the 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,

Starting point is 00:07:39 OK, 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 stablecoin 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 there are 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.

Starting point is 00:08:08 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, but we're going to launch in a few weeks is the LavaCard, which one of the biggest concerns or issues we've seen that I think is blocking stablecoin adoption is that you have all these people around the world that are getting paid in stablecoins 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 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, 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.

Starting point is 00:08:55 They can just be on Visa rails. And I think that's going to be something that a lot of our users already asked for. And I think it's going to really also affect stablecoin adoption. When you think about those international users, how many of them are using stablecoins already versus you guys are the first kind of interaction they've had with crypto? And then how do you think about which stablecoins they can use? Obviously, you know, Tether is kind of the king of the stablecoin world. I think Circle is the, you know, trying to position themselves as kind of the U.S. regulated player. But how do you think about what they can use?

Starting point is 00:09:26 We're pretty agnostic to the stablecoin, like which stablecoin it is. I think all that gets like abstracted away. You know, when you use PayPal, you don't know exactly which banks 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.

Starting point is 00:09:46 So I think people are for a lot of people were 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, OK, once I borrow 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.

Starting point is 00:10:12 And a lot of people just want easy ways to spend their balance now. And that's what the card is going to accomplish. Today's episode is brought to you by ArchPublic. I absolutely love these guys. ArchPublic is an agentic trading platform that automates the buying and selling of your preferred crypto strategies. Using sophisticated algorithms like the Intelligence, Arbitrage, and Oracle protocols, ArchPublic executes advanced automated crypto strategies, fully customized to your goals. Is your aim to accumulate Bitcoin during market dips, generate profits from Ethereum volatility,

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Starting point is 00:11:59 specialists will reach out to guide you through every step of the process. Whether you're transferring an IRA from a legacy bank, rolling over an old 401k, or starting fresh with new contribution, the Bitcoin IRA team is here to help you access real crypto in your retirement account. And here's the best part. As a Pomp podcast listener, you can earn up to $1,000 in rewards. All you have to do is add funds to your account. Search for Bitcoin IRA in the app store or visit Bitcoin IRA dot com slash pop and you can join 200000 Americans on their journey to upgrade their retirement. That's Bitcoin IRA dot com slash pop to upgrade your retirement today. What do you think the big challenges are for you guys moving forward? Right. You're a small team

Starting point is 00:12:41 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 you know we've been growing our team uh our team i think one of the best teams in the industry and we're growing very quickly um i think all of our business lines are growing very well right now um 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 you know if they're in america or they're in another country we're also wanting to deepen how much we can like

Starting point is 00:13:20 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 uh 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 um you know trend we most of our engineers are very senior as well but also we we do experiment with the with the coding tools but i'm not i don't think that they're actually that productive for

Starting point is 00:14:00 more senior engineers maybe for junior engineers but i also have realized that uh for the junior engineers i've interviewed i've actually noticed that they get they seem a lot lazier because they're like replacing their thought with these like co-generation tools um so we actually are you know we're backed by founders fund and costa the costa is the biggest investor in open ai but i'm actually a lot uh do you ban it do you not let them use it uh i am we we have some strict policies because of privacy usage but we do have uh contracts with uh for example anthropic to let people experiment with it, but we definitely encourage people to be careful. We do let people experiment with it.

Starting point is 00:14:38 We care about privacy, so you can't just use like any random, uh, tool, but we're, we're very careful about it. I've actually noticed for a lot of people, it actually makes them worse engineers. So my contrarian take is that, uh, they aren't that useful and they actually maybe decreased productivity today. How do you think that that's true when everyone else is saying the opposite? I think this is a very long conversation, but my, We got eight minutes and 45 seconds.

Starting point is 00:15:04 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. So 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.

Starting point is 00:15:30 and AI is a great excuse to do that. I actually don't think that, and I actually 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.

Starting point is 00:15:49 But I think that there's a lot of things about co-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 like actually build a system

Starting point is 00:16:08 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.

Starting point is 00:16:25 And there's really like, we also do things that are quite difficult from a tech, you know, 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, like try to generate this like basic app. And I probably could have written in six hours. The AI didn't like really help me at all. Just experiment.

Starting point is 00:16:48 So we're constantly experimenting. Cause 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 technology? You're using Bitcoin, stable coins, things like that. Are there other technologies you guys are using internally of the company?

Starting point is 00:17:09 I think we're 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 dollar supremacy around the world. And so we are interested to see if that affects other capital markets, too.

Starting point is 00:17:41 Is there anything that you think people are excited about in the crypto world and you think is a zero or not interesting? Oh, probably 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 i think people are most excited about that you're 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 it's i think that's just gambling i think they'll always be around but it's not that interesting to me i think you could do that anywhere i think

Starting point is 00:18:13 then there's like been all these like uh infrastructure technologies like ethereum a lot of these other things that i don't think are going to find uh or at least are not going to win the the like you know the most stable coins we don't even have ethereum integration like you can deposit but everything on on lava doesn't settle on ethereum right so i think that there's been a lot of experimentation in crypto that that i don't think will find real utility um but i think there's a lot of also just like token pumping 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

Starting point is 00:18:50 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 they're the best engineers i've ever met in the bitcoin world and then the large majority of our team is not actually from bitcoin 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 um you know we leverage our investors uh 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.

Starting point is 00:19:26 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? We have a few remote people, but we mostly work in person. Okay. Is that an intentional thing or just kind of where everyone ended up?

Starting point is 00:19:40 It's pretty intentional. There's certain roles that I think can only really be done in person. there's certain roles i think are fine to do remote all right uh there's not really been a very large bitcoin only technology company built for the most part i think that um 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 coin base lots of coins you know type approach i think that

Starting point is 00:20:19 it's very easy to make money in 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 there that people are trying to sell to people that are really just gambling in disguise and i think that's like a big meta almost i think most financial platforms out there especially most modern financial platforms out there are encouraging uh people to do things that are are ultimately going to lead to financial loss for their users. So our focus, you know, I start from the problem, like I started Lava because I think that personal finance is unnecessarily complex. And if you are just a normal person, you are thinking about how to do your craft and make

Starting point is 00:20:57 money, but managing your finance 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 uh 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's not it doesn't have i think really inherent value so we're really focused on just the savings vision and you know i think that's there's two

Starting point is 00:21:32 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 but since you're thinking about saving and users um do you think anyone is ever going to take stretch strc from strategy create a deposit account and rather than buy treasuries buy digital credit and now all of a sudden they're paying you know 11 11.25 percent 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 back loans

Starting point is 00:22:15 but we've seen people choose both options because some people there's what's the yield difference there's um 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 finding bitcoin back loans though there's never been any losses on that and you know we manage our our lending platform extremely securely so i think we 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 uh 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 six and a half

Starting point is 00:22:58 yeah yeah and so when they're doing that um 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 yep yeah we have that i mean we've actually seen now i know where the cost of capital is so low yeah we have that and then we have institutional capital too but we've actually seen a lot of users just decide not to i actually just use the treasury product because a lot of our it's interesting because lava serves 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

Starting point is 00:23:34 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 uo backed by just treasuries my last question is uh 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

Starting point is 00:24:09 exhausted by like what i was mentioning there's like gambling epidemic and i think people i think people are realizing like personal finance is exceedingly complex i think people just want something a simple way to save right so i think bitcoin um 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 at lava has never been more important i uh i agree and i think that it's uh a national crisis yeah keeps stuffing all this gambling down people's throats but we'll see all right where can we send people to go check out lava uh just lava.xyz lava.xyz yeah you got one of those urls yes all right thank you very much

The Pomp Podcast - How Bitcoin Millionaires Use Their BTC Without Selling It | Shehzan Maredia

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