It’s sunny summer morning in the Latvian capital Riga. How a north European country this small become an amazing epicentre of 4th industrial revolution is still a mystery.
I met with Max Keidun, CEO of HodlHodl in trendy “speciality coffee” coffee shop Rocketbean in a posh district of Riga.
HodlHodl is a P2P cryptocurrency exchange that allows users to trade directly with each other and doesn’t hold their funds (locking them in multisig escrow) instead of ownership. Because HodlHodl doesn’t hold any money (neither cryptocurrencies nor fiat) it isn’t considered a subject to complex compliance procedures. As a result, trades happen directly between users’ wallets so you don’t disclose your identity to the exchange.
AP: When and how did the idea of HodlHodl appear?
The idea was born about 3 years ago. My colleague Roman and I understood that there is no convenient and secure resource for the crypto currency exchange, purchase or sale. If you look at the root of the crypto-currency movement, it is obvious that confidentiality and the absence of an intermediary have always been one of the main ideas of revolutio n.Unfortunately, now many people forget about it.
Back then there was only one resource – Localbitcoins.com
It still exists. We also had the pleasure or the misfortune to use it: everybody’s first experience was extremely unpleasant, the resource itself wasn’t very convenient, everyone complained.Not much has changed since then. At some point we realized what to improve and how to do it, having understood three main things that led us to creating our own project.
- Establishing security (safety).
When we were working on P2P exchange , Bitcoin already had multisig-escrow tech. This technology made it possible to create transaction accounts and escrow accounts with several keys for signing: they don’t have to be created in your wallet, you can create them in a public blockchain, or BTC blockchain in our case. This ensures safety and security, as these funds aren’t centrally stored: we have only we have only one key to the multisig escrow, while the other belongs to the seller and is not stored on the exchange. If the exchange is compromised, client’s funds can’t be stolen: the most a hacker can get is one of two exchange keys, where the second is saef with the user. It is generated on the their device, making the access times more difficult.
- Working on UI-UX.
UI/UX of Localbitcons.com was way more complicated.
- The cost of the service.
We realized that as we don’t need to store and process customer payments, we can optimize costs. Our mission is half of what Localbitcoins charges
AP: In this case, how do fiat transactions work or, let’s say, bank transfers with credit cards?
Very simple.How does this mechanism work?
You open Hodl Hodl exchange website, sign up and create an offer. Let’s suppose you want to buy one BTC. You choose bank transfer or Paypal as a convenient way for you to pay. Then the deal is being considered and agreed by the other side leading to direct interaction: one person transfers the money to another.
We provide a platform and a technical solution for users to trade protected crypto currency among each other safely or just generally find each other to conduct transactions in the most convenient way.
We don’t deal with fiat funds or crypto-currency assets, because we don’t have cryptocurrency wallets, transactions go from the seller’s wallet into an escrow address and then into the buyer’s wallet.
AP: Okay then what about fiat money? Who records the type of funds transferred?
This is how the transaction happens. We met with you and created a contract; based on this contract HODLHODL generates a unique address on public BTC blockchain. When I see that the cryptocurrency came through, as a buyer I transfer my funds to your bank account. Once you receive the money, you click on the receipt button. At the same time, you enter your key, we enter ours and escrow BTCs are being realized in buyer’s favor.
AP: How many currencies do you support at the moment?
Two. BTC and Litecoin
AP: That being said, security is a significant issue that always grows exponentially. That aside, how do you earn from all of this? I saw that you are planning to take a certain percentage (fee).
We withdraw commission from escrow. We provide escrow services, generate a unique escrow account that you can always access through any blockchain explore to check the validity. This is publicly available information, in the event of disputes, we can resolve those, provide a structure. Due to this, we take our commission from escrow. There are 3 types of commission at the moment: 0,6, 0,55 and 0,5.
AP: Does it depend on the volume?
It does, but we have a referral program. If you come through a referral program and conduct one trade on someone’s referral program, you and that person both get 0.55 forever. If you didn’t come using a referral link, the commission will be 0.6. 0,5 is a commission awarded for long service, a percentage you get by reaching a certain amount of bidding.
AP: Do you have an API KEY?
We are, but then again the problem with API is that it’s also an opportunity for hackers. You’re more protected if you don’t have API. Everything rests on this.
AP: What are your plans for the nearest future?
We are going to be the only invited peer-to-peer exchange at this huge upcoming conference in Hong Kong, where all the largest stock exchanges meet. This is also where we will announce the launch of OTC trading desks. The plan is to work with large brokers and provide them with escrow services for bidding. At the moment, the websites we see store crypto with a centralized approach. We, on the other hand, can offer decentralized storage.
AP: Right, otherwise all the centralized OTC cryptocurrency doesn’t make any sense.
As I said, we can provide decentralized storage. Due to its technical developments, it is convenient and, most importantly, safe for large transactions. In our case, as I already said, we don’t store money, but generate keys through a convenient interface, the same way as we generate accounts through keys. We plan to open OTC trading in the near future. Soon aside from improving our version of escrow, we will be announcing our OTC broker, who will be tied to the HODLHODL. At the moment we have an escrow service with two keys and a third on its way, exactly for large transactions and the generic public. Among all, we are developing a new project “HOUSEHODL”. It is also based on a 3 escrow key system: only thing though, fiat funds will be replaced by real assets. That is how we will sell real estate, boats, business jets and other expensive goods for BTC, because at the moment bitkoin is convenient and suitable for large, expensive purchases. Because if you trade 1 million BTCs for a Dubai apartment, you immediately lose a headache called “increased commission for dollar transactions”. No one can block your transaction as you leave, it will come on Sunday or Saturday no matter what. You can do this at any time, remotely and cheaper with a sufficiently high level of security.
AP: How many people are there in your team?
We initially decided, that we value the quality of work more than the number of employees. Therefore it might have just been pure luck and a blessing: our team consists of somewhere around 10 people. Everyone is very good at coping with their tasks, more so, we plan to increase the number of people on the team, because the direction of the second project plus the OTC means we will have to expand.
AP: Tell me if I am getting it right, but there is no need for any license to do what you do because you don’t store or access funds directly, which makes you a technological platform?
Yes, we are just a tech-platform: no storing, processing or even standing next to money, that frees us from the need to be licensed.
AP: Will the OTC take the same route or will it be easier?
There are two possible OTC options:
- Whatever happens through our broker is a great deal. We meet a seller or a buyer who wants to make a purchase through us or through our partner.
- If we just introduce the seller to the buyer, it becomes their deal. In this case, we plan to act as a technical solution, the only thing we can do is introducing sellers and buyers. Transactions are carried out directly between each other through the service.
AP: I saw there is a very interesting analysis of countries statistics on your marvelous Telegram channel. How many users are there now, and where do most people come from?
Now with that in mind, I must say we announced we would launch this platform on February 23 of this year and put 0 cents into marketing.
AP: So it’s all solely through the word of mouth!?
Yes! Now there is more than 6 thousand registered users.
This is one of the cryptoworld advantages – if you have a good reputation, you don’t need to invest thousands into marketing, people with similar reputation will spread the word. We initially decided not to invest in marketing, so the only thing that helps us is our annual conferences. But as we don’t advertise ourselves there we don’t consider it marketing much.
AP: As far as I remember, the conference is focused more on Bitcoin development, so it’s more of a technical event ?
The conference indeed is more focused on Bitcoin development with a bit of politics and ideology thrown in, but all is still through the prism of technology. This is not a marketing event, we choose our speakers, sponsors and partners carefully. LLast year, we would receive several requests daily to advertise ICOs, yet we refused those. We could have made money on this, but in the end, we earned a reputation and this year we earned about 50% of the sales volume just in 2 weeks after announcing the event.
AP: Tell us how you got into this whole industry?
I come from the traditional financial industry, spent more than 10 years in financial institutions, did portfolio and project management. At some point back in 2013, one of my clients told me that there is such a thing as BTC and bankers will soon become useless. I remember how surprised I was. He got me hooked, and I started to dive into this topic. Somewhere in 2014, I noticed the new generation. They don’t know why would you need to go to the bank, these are the people who do everything remotely through their phones or laptops. I realized that the need for traditional financial bankers is likely to majorly decline. This was for me an incentive for further movement, plus IT and finance always attracted me. At that time BTC was the perfect mix of finance and IT, as it is, in fact, a financial tool, put on the IT-rails. For me, this isn’t just a financial instrument, it’s a whole movement, an ideology, an entire culture, that gave birth to everything crypto.
AP: Since we started talking about culture and philosophy of the whole movement, let’s elaborate on the opinion that BTC is a transitional stage, the first impulse of crypto currency and that later it will be destroyed by more interesting analogues. How do you generally look at all this currency galore, with all its different properties? We are now talking solely about decentralized solutions, not ripple those alike.
Frankly, at the moment I can’t think of a currency that could be a real competitor to BTC.There are cryptocurrencies, that can be an addition to BTC. I myself like Monero, mostly for its confidentiality.
But the overall dimensions, popularization and the amount of work in general, the number of developers, people who work inadvertently to develop this infrastructure. They do this because they want to develop their business.
Ethereum has its own foundation that can sponsor; they are trying to develop something, but it doesn’t cling to me at all: I don’t understand it, for me it is a time bomb, to be honest. We constantly see and hear: this smart contract was broken, that smart contract was broken, etc.
BTC also works almost without down time, it has a lot of practical application. I believe that many startups that were founded in 2012-2013, did not take one little thing into the account:they considered BTC a convenient means of payment while transaction fees were very low . When the fee increased, these startups lost everyone’s interest. Therefore, I believe that BTC is now a convenient payment method for large transfers and safe storage of funds. When some of the issues with the Lightning network are solved, BTC will also become convenient for microtransactions. Given that Jack Dorsey, the creator of Twitter, invested in Lighthing, many see huge potential in it.
AP: It amazing! Do you have any technological competitors at the moment? Analogues maybe? Besides Localbitcoins, let’s talk escrow.
Escrow… we have one. I can hardly call it a competitor, but yes, probably they are the closest to us with their solution.But this is a program that you have to install on your computer and for an ordinary person who wants to just go in and buy, it is far too complicated. But it’s perfect for those, who are in on a topic and for the anarchy and complete confidentiality! They are on open source project with the appropriate approach, where we are still a business project and approach it as such. We are just trying to make it simple, convenient, understandable, cheap for the average user. So that they eventually begin to understand the real value of not keeping their funds on some exchange. Because once BTC is transferred to a centralized exchange it no longer belongs to the user and while the exchange promises to keep that BTC for the user, de facto it belongs to the exchange. Not so with Hodl Hodl. This is a very important message to convey.
AP: Do you plan on developing any mobile applications? Is it a matter of security or rather time, resources and money?
We do want to produce a mobile version, an application for both the P2P exchange and our mobile service for real estate. However, those would most likely be auxiliary tools rather than basic ones. We believe that it is more safe to conduct operations from a stationary tool, a computer. Apps can be an auxiliary information tool that informs you of transaction completion or asking you to press a button. Perhaps, there will be an embedded live chat in the application. All this will act as an assistant, just in case you aren’t at your computer.