Unchained Capital Revamps Loans With Multi-Party, Multi-Sig Storage
Blockchain financial service company Unchained Capital will now offer multi-signature and multi-institution cold storage solutions for borrowers who leverage its crypto-collateralized loans service. According to a company statement, the cold storage solution will be multi-institution and collaborative with code-level controls for the safe storage of cryptocurrencies.
Earlier this year, Unchained closed a $2.9 million round of venture funding to fuel the innovation in its wealth management and financial services offerings for long-term crypto investors.
Unchained Capital offers loans to individuals and businesses, accepting only bitcoin (BTC) and ether (ETH) as collateral. The crypto lending service can fund loans between $10,000 and $1 million within 24 hours, offering 5.99 percent annual interest rate on loans over a period of six months or less. The platform currently provides loans in 43 states in the U.S.
Multi-Signature solutions require a series of keys to authorize a blockchain transaction, say three keys in total, where two would be required to sign a transaction. For most people who hold cryptocurrencies, they often use a single private key to authorize their transactions via their online or hardware wallets. A major problem with this custody option is that they are solely dependent on protecting a single private key. Losing this private key could result in loss of funds.
Unchained Capital's multi-signature and multi-institution cold storage solution is expected to safeguard the borrower's funds by distributing trust across three separate and independent parties: the borrower, the lender (Unchained) and an external third party. Two of the keys will be required for a transaction to be authorized.
To keep the counterparty risk low, Unchained Capital executed a Key Agent Services Agreement with Citadel SPV, to act as a third-party key agent which gives it the power to sign collateral-related transactions under certain circumstances.
According to the Citadel SPV website, “If you have a loan from Unchained Capital, the Security Agreement you executed in connection with your loan application will disclose whether a Key Agent is being used to secure your loan’s related collateral.”
Based on the press release, Unchained Capital will be hoping to distinguish itself in the crowded crypto lending market, that already includes BlockFi and Genesis Global trading, by focusing on cold storage and providing a dedicated on-chain address for investors' assets.
"We’re excited to be the first lender that can deliver on the promise of a decentralized platform for Bitcoin and Ethereum-backed loans,” Joe Kelly, CEO of Unchained Capital, said to Bitcoin Magazine. “Now Ledger and Trezor users can extend their experience of self-sovereign wealth into the context of secured loans."
According to Kelly, as a loan comes to term or is prepaid, Unchained Capital will sign along with the borrower to return the assets used as collateral. In worst-case scenarios where the loan goes into default, "Citadel SPV will work with the appropriate party to sign a transaction that moves the collateral."
Unchained Capital hopes its latest solution and the reduction of crypto lending risk will make the company's multi-institution custody solution the gold standard for “large, complex transactions.”
“Our custody solution is the foundation not only for safer loans, but many other classes of financial products as well,” Kelly added in the press release.
Crypto lending services have been getting a lot of traction. Earlier this week, Bitcoin Magazine reported BlockFi's expansion of its crypto-backed loan services to the international market. Unlike Unchained Capital that only accepts bitcoin or ether as collateral, BlockFi borrowers can also use litecoin or Gemini USD in addition to BTC or ETH.