Bitcoin Magazine

Debifi: Leading Noncustodial P2P Bitcoin-Backed Lending Solution for Institutions

Founder: Max Kei (CEO)

Date Established: March 2024

Headquarters: Lugano, Switzerland

Status: Private Company

Max Kei stands out as a pioneer in the Bitcoin peer-to-peer (P2P) sector and brings a wealth of experience as a banker, positioning him perfectly to establish Debifi, a cutting-edge noncustodial, bitcoin-backed P2P lending platform tailored for institutional clients.

Kei’s journey in the Bitcoin realm commenced in 2017 with his contributions to Hodl Hodl, which swiftly emerged as a popular noncustodial P2P trading platform.

By 2020, he played a key role in rolling out Lend at Hodl Hodl, marking the first noncustodial P2P borrowing and lending solution in the Bitcoin ecosystem.

This service found acceptance mainly in regions like Latin America and Southeast Asia, facilitating microloans. Influencers such as Preston Pysh—currently a Strategic Advisor for Debifi—and notable cypherpunk Adam Back endorsed the offering, garnered great interest in the product.

As Kei points out, it’s the strong reputation of the team linked to Lend at Hodl Hodl (many of whom are now part of Debifi) that draws users to their new platform.

“Numerous lenders and borrowers choose Debifi due to our team’s extensive expertise,” Kei shared with Bitcoin Magazine.

“Clients express satisfaction as we have navigated various market downturns successfully,” he added.

“We have now expanded the original concept of Lend at Hodl Hodl into a dedicated service for institutional clients.”

A Journey from Banking to Bitcoin

Prior to embracing Bitcoin, Kei dedicated a decade of his career to private banking.

He left his banking role to devote himself fully to Bitcoin at the close of 2015, a decision driven in part by a significant encounter with a client.

“About a year prior to my departure, I was in a meeting with a client who showed me his phone and said, ‘At some point, I won’t need you because I have bitcoin,’” Kei reminisced.

The client sent $15,000 worth of bitcoin to a contact in Brazil, which prompted Kei to initially think he was misguided. However, it soon became clear to him that the client was onto something groundbreaking.

“I began my own exploration into Bitcoin and quickly recognized its authenticity,” noted Kei.

Shifting gears significantly, he spent eight years developing in the Bitcoin sector and now maintains that banks will still play a crucial role even in a hyperbitcoinized economy.

<p“Banks aren’t disappearing,” he clarified.

“They will transform into integrative suppliers for Bitcoin ventures, startups, and more. They will still operate as a foundational support system,” he elaborated.

This realization struck him when traditional financial institutions started expressing interest in the Lend at Hodl Hodl platform.

Setting Debifi Apart

Following the launch of Lend at Hodl Hodl, inquiries from institutions started pouring in, seeking to leverage the platform’s capabilities.

“They indicated a strong desire to engage in bitcoin lending,” Kei recalled.

“We recognized the need to create a distinct product separate from microloans and institutional lending. This insight led to the inception of Debifi,” he elaborated.

In 2022, Kei began strategizing for Debifi. By 2023, they secured funding from venture capitalists like Ten31 and Timechain to develop a minimum viable product (MVP). Debifi officially launched in March 2024.

The platform is currently in a beta phase, with plans for an official version rollout by the month’s end. However, Kei assures that Debifi is fully functional at present.

“Being in beta doesn’t equate to lack of operation—it’s completely functional,” he confirmed.

This leads us to the question: How does Debifi operate?

Understanding Debifi’s Functionality

Debifi operates through both a website and a mobile application, which work in harmony.

“Our mobile app serves as a key storage solution,” shared Kei. “It functions as a wallet to hold your private key, while contract transactions require engagement through the website.”

Users manage transactions, create escrows for loans, and repay loans via the mobile app.

Additionally, users have the option to utilize COLDCARD devices, such as the Mk4 or the Q, instead of the mobile app, with plans to incorporate support for various hardware wallets in the future.

“We aim to support devices like Jade from Blockstream, Ledger, Trezor, the Foundation Passport, and BitBox, as we strive to offer our clients flexibility,” Kei stated.

The collateral for loans on Debifi is housed in a multisignature (multisig) wallet that includes four keys, requiring three for transaction approvals.

“Debifi features a distinct multisig arrangement,” Kei explained. “All loans are secured in a 3-out-of-4 multisig wallet, contrasting with the more typical 2-out-of-3 configuration.”

Keys are held by the borrower, the lender, and Debifi, with the fourth key safeguarded by AnchorWatch. Kei argues that this fourth key enhances security significantly.

“With two institutions holding keys, even if both the lender’s and borrower’s keys were compromised, a third key would still be necessary,” he explained. “Eliminating AnchorWatch in favor of a standard 2-out-of-3 model could potentially leave us vulnerable to attackers who possess two keys.”

Loans through Debifi are overcollateralized, and forced liquidations are enforced if the bitcoin collateral value falls below an agreed threshold. The average annual percentage rate (APR) sits slightly above 10%.

Kei stated that their research indicated a willingness among users to pay this premium for noncustodial loans.

“In discussions with 300 Bitcoin enthusiasts, we presented them with two straightforward options for borrowing: a custodial loan at an 8% APR or a noncustodial loan at 11% or 12% APR. An overwhelming 91% preferred to maintain control of their keys,” he noted.

Users can secure loans of up to $1 million through the platform, with durations ranging from three to twelve months, and plans to extend to 24 months by April.

Debifi offers borrowing options in U.S. dollar stablecoins, U.S. dollars, euros, and Swiss francs, with efforts underway to incorporate British pounds, Brazilian reals, and Mexican pesos as well.

Debifi generates revenue through origination fees taken from collateral held in escrow and boasts a dispute resolution team to address repayment issues and other concerns.

Future Plans for Debifi

Recently, Debifi welcomed Preston Pysh as a strategic advisor to enhance networking and promotional efforts, as well as guide product improvements.

Furthermore, the company intends to collaborate with Blockstream’s Asset Management (BAM) division, which will utilize Debifi as a technical partner for institutions interested in launching bitcoin-backed lending solutions.

Beyond this, Kei mentioned several important partnerships are in development and will be revealed in the upcoming months.

In conclusion, he extended an invitation to institutions interested in collaborating with Debifi.

“Debifi enables seamless integration for institutions entering the bitcoin-backed lending space,” advised Kei.

“We provide complete infrastructure and offer onboarding alongside dedicated support. We supply essential tools,” he emphasized.

“Essentially, we serve as a one-stop shop where you can avoid the hassle of building this infrastructure from scratch, while directly communicating with potential customers. Best of all, as a liquidity provider, you incur no costs. Zero.”

One cannot help but observe that Kei and his team are on the verge of something significant.

This article Debifi: Leading Noncustodial P2P Bitcoin-Backed Lending Solution for Institutions originally appeared on Bitcoin Magazine and was authored by Frank Corva.