When security holds the key to opportunities
Unchained Capital, the crypto lending platform is boosting security for crypto-backed loans. They have partnered with Citadel SPV, who provides governance, administration, and accounting solutions. The solution includes Multisig components. Multi-institution features will add to the security.
Peer-to-peer (P2P) lending market is massive. Cision PR Newswire projects a US $897.85 billion P2P lending market by 2024 in a recent report. Can crypto startups make a splash in this burgeoning market? A crypto lending platform can indeed help. Blockchain technology promotes decentralization and cryptographically protects data. Smart contracts help uphold agreements. Sounds good, doesn’t it? The reality is a bit different. The technology needs work before it can help P2P lending.
Blockchain networks are secure. However, different networks use different technology. They aren’t interoperable, so users need 3rd parties for that. Centralized exchanges have stepped in to fill this void. They store users’ crypto in their central servers. This goes against the decentralization premise of the technology, and making matters worse, hackers often target centralized exchanges. Exchanges can sometimes recover some of the funds, since many operate in other countries, users have no legal recourse. Widespread crypto-backed lending requires institutional investors, but they won’t step into this unsafe environment without airtight security.
There are efforts afoot to improve crypto storage security. (Bank of America is working on such a proposal.) However, these are works in progress. The solution from Unchained Capital assumes importance in this context.
A partnership for multi-institutional security
Multisig protocols are preferred since they require multiple signatures. A transaction requires a majority of these signatures. This provides better security than just one digital signature. However, multisig alone isn’t enough. Several centralized exchanges already use multisig solutions, leaving leaves users dependent on the exchange. A multisig protocol alone can do little if the exchange goes rogue.
The Unchained Capital/Citadel SPV partnership is different. Their solution spreads the risk pool. A borrower will hold his or her private key, Unchained Capital also holds one, and a 3rd party key agent holds another. A transaction will require 2 of these 3 keys to proceed. This multi-institution guarantee adds to the power of a multisig protocol.
Crypto loan providers use ‘hot wallets’, and this is another security risk. Hot wallets hold multiple borrowers’ funds together. This increases the risk. Unchained Capital will use only cold wallets (e.g., Trezor and Ledger), which provides further security.
Because the concept of a crypto lending platform is relatively new, it needs to prove its mettle. Apprehensions of corporate mismanagement can dent their prospects, as the case with the SALT project shows. This is where Citadel SPV adds considerable value. Their team has over 25 years of industry experience. They specialize in legal, accounting, securities, and capital market finance.
Unchained Capital provides loans to long-term crypto holders in a fast and transparent manner. Block Telegraph has obtained a press release that quotes Joe Kelly, their CEO. Kelly is upbeat about their multisig, multi-institutional solution. Unchained Capital’s new secured solution may change the game, but theirs isn’t the only crypto lending platform making waves.