Galoy launches Bitcoin-backed loan software to set the basic work for open source banks

Founder: Nicolas Burtey

Date of creation: September 2019

Headquarters location: USA

Number of employees: 11

website: https://www.galoy.io/

Public or private? Private

Last week, Galoy launched Lana, a software that enables banks to accept Bitcoin as collateral for loans.

LANA helps the community and challenger banks (the banks Galoy hopes to use) provide Bitcoin-backed loans to all types of customers.

“Some banks may want to use it to sell retail, and some banks may want to use it to sell commercial customers or high net worth individuals,” Burtey told Burtey Magazine.

Burtey believes that when offering such loans to many customers, it believes that the current borrowing costs associated with such products will decline.

“If you want to get a loan with Bitcoin as collateral, the interest rate today is 12% to 15%,” Burtey said.

“The rates are high because there are few financial institutions that offer such products. Now, we see an opportunity that these regulations allow banks to do things with Bitcoin,” he added.

“We think a lot of banks want to enter this market.”

If Burtey is right in his prediction that banks are keen to offer Bitcoin-backed loans, this will not only lower interest rates on such loans, but will also introduce open source Bitcoin software into the banking industry, which could trigger new trends in the industry.

But it only takes one minute. First, some background on Galoy.

Galloy's History: From the Blink Wallet to Lana

Galoy was founded in September 2019 with the goal of getting banks to use Bitcoin from the very beginning, but it must stick with it due to the unfriendly regulatory environment.

So instead, it focuses on creating and supporting the blink wallet (originally called the Bitcoin Beach Wallet, the recently sold Galoy), a custodial Bitcoin and Lightning wallet, mainly in El Salvador, and then the global Bitcoin economy . .

“Galoy's mission was to board Banks to Bitcoin five years ago,” Burtey said.

“But over the past five years, the regulatory environment has been so bad that we decided to blink. The reason we are now focusing on the initial mission is because with the end of Choke Point 2.0 and the abolition of SAB 121, we think it's now helping banks adopt bits Excellent timing for coins.”

Burtey talked about his work on creating and developing a wink, sharing that he had to stop working on the project because it was difficult to continue managing it while also working to serve new types of customers.

“The blink is a B2C (business-to-customer) game, and it's hard to focus on too many things as an early stage startup,” Burtey explained.

He added: “Galoy is a B2B (business-to-business) driven business and we want to work with banks and financial institutions.”

“It’s nice to focus on just one thing.”

And, as mentioned before, it will be Lana now.

How Lana works

Lana is Galoy's software that helps banks integrate and manage subscription fees. With this software, banks can issue Bitcoin-backed loans based on the terms they create.

“We are not the ones who decide how much interest or something like that are going to charge for,” Burtey explained.

He added: “We provide banks with a platform to do this, and they can then find out their own capital costs, the duration of the loan, the liquidation price of Bitcoin in the loan and the price they want to borrow.”

“We are providing you with the software and helping you run and automate the software.”

Other things about galoy No What is done for banks is custody as the Bitcoin provided by the loans they issue. Each bank that works with the company is responsible for selecting its own custodian.

“You can go to Bitgo or Fireblocks or each loan has its own Multisig,” Burtey said. “We are unaware.”

That being said, Lana helps banks monitor Bitcoin in detention so that banks can realize whether collateral is approaching liquidation levels.

“The key to this product is risk management,” Burtey said.

“Bitcoin is volatile and banks will need a tool to indicate the risk it is calculating. So we will provide banks with dashboards to monitor this risk,” he added.

Who will use Lana?

Galoy targets community banks and other smaller financial institutions with this new product, mainly because they believe these smaller players will benefit the most from it – and large banks may not need this product.

“We don't think JP Morgan really wants to work with us,” Burtey said. “They may have built something like this on their own, and smaller banks, credit unions or small companies may not.”

Burtey also learned that smaller lenders merge Lana instead of building comparable things can save a lot of time and effort from these financial institutions.

“Our goal is to say, 'Look, you can develop it internally, which will take you six months, a year or more depending on how you know about Bitcoin,' “or us There are loan products as your service and you can start it faster. '”

As Burtey and his team enter their first round of smaller banks, not only will they make history and allow more banks to accept Bitcoin as collateral for loans, but they may change banks by introducing Open Open Business Trajectory – Source Software.

Open source Bitcoin banking business

Burtey's long-term vision for Galoy is to do more than just help banks issue Bitcoin-backed loans. As more and more banks begin embracing Bitcoin, he hopes to introduce open source software into banking.

However, it is important to note that Lana is not open source yet. It is fair source software, and under this license, the code becomes open source in two years.

“It's a latent open source system, but all of this works on Github,” Burtey said. “You can go try it, test it and use it alone.

Under the Fair Source License, no other company can sell products to banks except Galoy, allowing Galoy to profit while still using auditable code.

“We sell deployments and help banks plug in their custodians,” Burtey explained. “We are building publicly – but we want to generate revenue, too.”

In addition to helping banks implement Lana, Burtey also hopes to develop open source “core banking software” because he hopes to undermine the “core ledger” oligarch.

“The core ledger is where banks store account data, customer information and transaction details,” Burtey said. “This is the source of truth for banks.”

FIS, Fiserv and Jack Henry only have three companies that have the core ledger market.

“These are $100 million companies you probably never heard of, because all they do is focus on selling software to banks,” Burtey said.

“Our long-term goal is to disrupt the industry by making something open source,” Burtey said. “Today, there are no companies doing core banking with the idea of ​​open source, so we are working on it.”

Burtey envisions a world where open source software can make it easier for someone to create a Bitcoin bank. (For those who win in the name of “bitcoin” and “bank,” can I remind you that legendary Hal Finney himself wrote that Bitcoin-backed banks can be used as extension solutions.)

“Building a bank today is a very expensive and complex process,” Burtey said. “You have to pay $100,000 and just buy the core ledger technology.”

Burtey then mentioned his experience in starting a blink of an eye wallet, essentially, Bitcoin Bank runs on open source code and then proceeds.

“I just went to El Salvador and started my own bank because I wanted to do that,” Burtey said.

He added: “We need to reinvent how the Bitcoin world makes core banking software, and I think that's where open source is relevant.”

“That’s really why I think the world of banking and Bitcoin will be very different from the world of Fiat Bank, and I think we are one of the most cutting-edge companies.”