Highlights From Bitrue x MELD’s “Ask Me Anything” Session on Twitter Space
23rd May 2023 — In another edition of Bitrue’s Twitter Spaces AMA, MELD, one of the top Cardano projects joined us. Bitrue had the honor of having Ken Olling, Chief Executive Officer of MELD to share some thoughts and insights with us in that session.
Ken Olling, the founder of MELD, has a diverse background in technology and entrepreneurship. With over 12 years of experience in the mobile and enterprise sectors, including work in the metaverse and financial spaces, Ken brings a wealth of knowledge to his current venture. Prior to founding MELD, he ran successful tech startups and had a 25-year career in designing and branding. Ken’s involvement in the crypto industry began around 2018, but it was the DeFi summer of 2020 that captured his attention and inspired him to apply real-world applications to blockchain technology and smart contracts. The idea for MELD’s lending and borrowing protocol originated from Ken’s observations of friends who held significant crypto investments but lacked liquidity. They were unable to access their assets for important life milestones without selling them, which incurred tax liabilities. Ken saw an opportunity to leverage the principles of DeFi, such as non-custodial and decentralized solutions, to create a protocol that bridged the gap between the crypto and fiat worlds. By allowing users to lock up their collateral and obtain cash, MELD aimed to provide a more efficient and tax-friendly solution compared to existing protocols like Aave and Compound.
Without further ado, let’s deep dive into the main Q&A’s of the AMA session below.
Q1. To kick things off, can you give us a brief introduction to MELD and how it differs from other decentralized finance (DeFi) based projects?
Sure. So like I said in the beginning, we started out as a lending and borrowing protocol, and then it became very clear that we needed to have control over the fiat side. So, you can think of MELD as kind of like a barbell. You have these two heavy elements on each end of it. So one end, you have a lending and borrowing protocol, the basics of DeFi, the ability to create debt in DeFi, and the ability to use that however you want, whether you want to use it just to create some liquidity. You want to short something, you want to long something. So the DeFi side covers this basic element. And then, on the fiat side, we have an electronic money institution.
So you have the ability to handle fiat legally. That’s on the fiat side, on the traditional finance side, and then sort of connecting those two together with the barbell is the MELD blockchain. So about a month ago, we launched a Layer 1 blockchain. It’s based on the Avalanche Subnet technology. We decided to do this for a couple of reasons. First and foremost, we wanted to create something that was capital efficient. So we wanted to have a blockchain that had very, very, very low transaction gas fees, right? So we wanted to be able to move capital around very efficiently. Free is not a realistic thing because it gets abused, but very inexpensively.
And we wanted to do that as a base layer to connect this DeFi protocol and then to connect the fiat banking side or the challenger bank, the neobank. So we wanted to be able to connect these two together via the blockchain, and we wanted to be able to get more exposure into the EVM world. So we started on Cardano. We still support Cardano. We’re working on bridging from and to Cardano. But we wanted to get access to Ethereum, Avalanche, and Binance smart chain (all of the EVM chains). And so, we decided to create our own Layer 1 with some basic principles behind it. One is the low transaction gas fees. Another is having a kind of native Bridging. So we have a partnership with MultiChain, which is the biggest Bridging protocol to be able to bridge to and from the MELD blockchain to all the other EVM chains. And we wanted to make sure that the Meld token was a truly native token across all of the blockchains. So a little bit similar to the way that USDC and USDT work. The MELD token is the MELD token across all chains, the same ticker. So we don’t have wrapped MELD or any of these kinds of things. We deploy all of our smart contracts, all our token contracts, onto all the blockchains. And we make it possible for people to move the MELD token across these chains naturally and intuitively. So the interface into this is the MELD app.
So we have a web app which is a wallet, a non-custodial wallet that allows you to first interface with all of these different blockchains and assets, interface with the MELD token and when we launch the Lending and borrowing protocol you’ll be able to interface with the Lending and Borrowing protocol that way. You have direct access, obviously, to the Meld blockchain as well as the other major blockchains (Ethereum, Bitcoin, etc). And in addition to that, we wanted to make it very efficient and simple for people to be able to stake their assets. So right now the way that the dApp ecosystem works is you end up putting your assets into something like a MetaMask and then you scatter them all over the place, and it’s very hard to keep track of what you’re doing.
And that’s great if you’re being a Degen and you’re trying to yield farm here and provide liquidity in this DEX here. But if you just simply want to have a very simple, straightforward, I just want to be able to generate a yield from my basic assets that I have in my bag, then that’s really what the MELD wallet was designed for. So you can bring your assets together. You can also use it to connect MetaMask or connect Nami from Cardano and use it that way so you don’t have to transfer your assets into the Meld Wallet. It’s this kind of centralized point still based on the non-custodial wallet that allows you to do these different things. So we wanted to bring these things together in a very holistic way to make it possible for people to lend, borrow, work, cross-chain, handle their Meld tokens as well as other tokens, and be able to generate a yield with those in a very straightforward manner.
Q2. With a project like MELD, there is definitely an amazing team working behind the scenes to put everything together. Can you explain a little bit about the structure of the team behind the projects, as well as any prominent investors or partners that support the project?
So, team-wise, we’re completely remote. We have around 50 employees, most of them are in the European (there are two or three time zones). We have a couple of people on the East Coast in the United States, and we have a couple of people in Singapore and Vietnam. In regards to investors, MELD is a bit unique in that sense. So when we launched, we did not start with an IDO or a private token sale or something like that. We actually created a new form of funding called an ‘ISPO’ — Initial Stake Pool Offering. And the reason why we did this was we saw that there was an opportunity to tap into the core mechanics of a proof of stake blockchain and we felt that it was important to give everybody access to the token.
So if you do an IDO or Initial Dex offering, then typically when you release your token, it gets bought up by bots, they tend to pump the price, and then they tend to dump on all the normal investors. So, we wanted to try and avoid that kind of mechanic. And so the way we did it is we created this thing called an ISPO, where we create stake pools, or we create node validators. And then, users can stake, or they can delegate their tokens. In this case, it was Cardano, it was ADA, and they can delegate their token to it. And the block rewards generated from that delegation were kept by the project. And in exchange for that, based on a specific amount, the Meld Token was airdropped to all of those users.
So the users didn’t actually pay for the token. They delegated their AMA to the blockchain to secure the network. And in exchange for securing the network and giving up their block rewards, we were able to then airdrop them assets, airdrop them MELD Tokens. So this was hugely successful. We launched on June 1 of 2021, and within the first 24 hours, we had $100 million delegated to the stake pools. And at the peak in October, we had over $1.3 billion delegated to the stake pools. So, it was an enormous success, a lot bigger than we had ever expected. And that’s what kind of started us off on our journey and what introduced us to our entire community. We have no big VC backers. We have a couple of Dows who have invested. Towards the end of the ISPO, we had a private token sale where were able to sell to a lot of private investors or private investors, and it’s really very community driven. So to this date, we don’t have any VCs that might change in the future, but as of right now, almost all of the MELD Tokens are held by community members.
Q3. How does MELD’s lending and borrowing offering cater to the needs of the fast-paced DeFi market and demanding customers?
So our current sort of timeline is we’ve launched the Layer 1 blockchain, and we’ve launched our wallet. So if anybody’s interested in getting the wallet, you can simply go to https://meld.com, and you can click on the app button in the top right corner. If anybody’s interested in early access, sign up for the Meld Neobank. Then you can go to https://meld.fi/signup and then you can sign up for that. So the Wallet has launched the Layer 1 Blockchain has launched. The Neobank will launch in Beta sometime in August, and then we will launch the lending and borrowing protocol in Q4.
Why does the world need another lending and borrowing protocol? So we’ve done some unique things with our sort of version of lending and borrowing. First, obviously, as I said, we’ve connected to Fiat Rails, so you can actually do a Bitcoin to Dollar or Bitcoin to Euro loan where you supply the Bitcoin, and you can borrow against that. But with all of the existing lending and borrowing protocols, if you supply an asset into a pool, then other people can borrow that asset. If few people or no people borrow that asset, then you’re not getting a yield from what you’re supplying. That means that your asset is just sitting there, not being used. That’s not very efficient. And so what we have done is we’ve said, “Okay, we have this pool with all these assets, let’s use those assets and stake them to generate a yield and make it possible for people that are supplying to get a much higher yield even if the assets are not being utilized.” So, if you supply ETH for it to be borrowed, but very few people are borrowing it, your base yield is still around 4%. Whereas if you were to supply ETH to AAVE, then I don’t know what it is right now, but I think it’s less than 1% or around 1%. That’s largely because nobody’s borrowing east. So we wanted to make it so that it was much more capital efficient for people to be able to borrow, sorry, for people to be able to supply. And so this creates when the capital is more utilized, then the whole system is much healthier. So this is what we really wanted to do with the lending and borrowing protocol.
Outside of that, it’s very similar to many of the other lending and borrowing protocols in the sense that you have the ability to supply, you have the option if you want to, then you can borrow against that. And then, if you’re interested, you can also be a liquidator. So same as Comp or the same as Aave. I guess one of the other unique characteristics is if you’re using something like Aave and you have AVAX tokens, then you have to use Aave and AVAX. And if you have Ethan, you have to use Ave on ETH, and you can’t kind of really aggregate these collaterals together and take out a loan against this aggregate. And so we wanted to ensure you could do that with the Meld lending and borrowing. So you can pull your Bitcoin, your Ethereum, your Cardano, your Avalanche, and your MELD, and they can pull together and borrow against all of them instead of fragmenting it across different blockchains.
We think that in the next bull run, one of the key drivers will be how to bring all these blockchains together. How can you make the blockchains look more like liquidity pools rather than isolated islands? In the same way that you have the New York Stock Exchange, and you have many different sources of funds that come together and trade in the New York Stock Exchange. We want to have a situation where you have each of these different blockchains that have liquidity in them, and that liquidity can move to the type of functionality or the type of yield that people are looking for, and then it could move back depending on the sort of risk requirements or parameters or preferences of each of the different users. So those are the basic differences between our lending and borrowing and what currently exists in the market. And so because we’re natively cross-chain, we want to be one of the DeFi primitives in the space, making it possible for people to use regardless of whether they’re on ETH, Fantom, Binance smart chain, or on Avalanche. We wanted to be able to bring these things together in an efficient way.
Q4. How does MELD differentiate itself from centralized institutions and traditional financial services, and what steps is MELD taking to ensure that the network remains decentralized over time?
So I think that covers a couple of different areas. First, it’s at the blockchain level, and so the MELD blockchain currently has 14 node validators so it’s not particularly decentralized, but it’s more than any of the other Avalanche subnets. We’ll be expanding that over the next year to 101 validators so we can do this. One of the other ways we’ve made it so that it’s more decentralized is we’re not allowing people to have multiple nodes. So you can’t have one person or one group that has a whole bunch of different nodes. And we’ve kept the amount of delegation pretty low on each of the nodes so that there’s not this massive barrier to entry for people to get in and to be able to run a node. So it’s not a domain exclusively for whales, is what I’m trying to say. So that’s one aspect of the decentralization.
The second is kind of following a lot of the norms in the space. So the MELD App is our wallet, all of the logic and all of the transactions, and everything happens exclusively in the front end. It happens in the browser. Nothing goes to the back end. We don’t get access to private keys. They never sort of pass through there. Everything is in the browser, everything is on the client side. So that’s another component. So you can think of it as all the logic sits with the user, and then the smart contracts are actually that you’re interacting with. The smart contracts are on the blockchain, they’re not with MELD. So we will be open-sourcing our wallet so that if anything happened to MELD, then people could simply pull down the source code from the wallet, and they’d be able to interact with it as if MELD was there, even though it’s not really there. So that’s another component to it.
And then the last part is almost kind of going the other direction in the sense that we’re building our own banking technology for our neobank. So MELD Finance has its own sort of technical stack. And what we’re effectively doing is we’re trying to take some of that technology and make it more crypto-friendly. So to give an example, if you decide you want to take out a loan and you put Bitcoin up as collateral, then you’ll see all of the transactions on-chain from the point where you supply that collateral all the way until you hit the bank. And so what we wanted to do is Web wanted to add one more step on-chain from the bank side. So in our banking stack, when we have that last transaction that gets the money you borrowed into your Fiat account, that transaction is put on-chain by the banking stack. So we wanted to make the banking side a bit more Web 3.0 friendly, make it a bit more transparent, doesn’t make it more decentralized. Not really a bank that handles Fiat as a regulated entity. So by definition, it’s not decentralized, but we do have plans in the future to make it possible for other electronic money institutions to interface with our lending and borrowing protocol. So then we wouldn’t be the only bank in town. So it’s not decentralization, but it creates variety and creates options for people to choose how they want to approach their problem and who they want to have to handle their Fiat if they want to handle Fiat. So on the Fiat side, you have to go through KYC and AML, all of the normal things you do if you’re going to be getting a deposit account. On the crypto side, they’re your keys, they’re your crypto. It’s a straightforward non-custodial wallet. It’s yours. When you connect your crypto wallet to the bank, there’s a connection.
If you decide to terminate your bank account, then they’re disconnected again, and there’s no association between the crypto wallet and the Fiat account. So we’re making it as decentralized as possible. We completely and 100% believe in the decentralization, and we have a very good argument for it. History has proven it to be much more efficient than centralization. So over the past year and a half, you’ve had the collapse of BlockFi, Celsius, Voyager, Vault, and FTX. All of these were centralized, regulated entities. So their counterparts in the DeFi space, Aave’s and Compound, and UniSwap, these decentralized systems had no problems. They were completely transparent. They were open to the public for everybody to see all of the transactions, making them much more resilient. We fully believe that this idea of decentralization and transparency on the blockchain is something that makes you stronger, not weaker.
Q5. What are the benefits of MELD’s instant crypto-backed loan services compared to traditional models of loans?
We have a basic line in the sand that we’ve set: we don’t like debt. Debt doesn’t really help anybody. Like the other lending and borrowing protocols, we’re using what’s called Lombard financing. So you put up an asset, and then you can borrow a percentage of that asset. So that’s the type of lending and borrowing that we wanted to be able to do, and we wanted to do it in as efficient a way as we possibly could. So that’s really at the core.
In addition to that, if you look at the number of clicks, the number of things you have to do to go from on to off-ramping your crypto to Fiat, you’re looking at 30, 40, or 50 clicks, depending on the solution that you’ve chosen. Each one of those is going to have gas fees. Each one of those might take a little piece off the top, and then when you exit, it depends on how you’re off ramping. It can be anywhere from half a percent all the way up to 11% to off-ramp. So it can be very expensive, and each step costs you gas fees. We wanted to make that entire process very efficient and make the costs involved in going from crypto to Fiat and Fiat to crypto as simple and straightforward, and cheap as we possibly could. On the exchange side, the banking exchange, we do half a percent for crypto to Fiat, and Fiat to crypto transactions. You can do it whenever you want, and it’s instant.
In regards to the lending and borrowing, we are keeping it pretty straightforward outside of making it a higher yield if you’re supplying. One of what I guess you call it a key product is what’s called a Genius Loan. And so we have this idea that if you put up your collateral and then you borrow against it, the collateral you’re supplying is generating a yield. And the amount that you’re borrowing is costing you interest. In many cases, that yield is going to be greater than the interest you’re paying for that loan. So this is a net interest positive situation. you can just kind of do it that way, and that’s no problem. Or you can set it up so that with the Genius Loan, all of the yields that you’re generating by supplying is going directly to pay down your debt. So it’s a self-paying loan. As the yield goes up, or as the yield clicks over, then your debt goes down and down, depending on market conditions, you could get a situation where that loan will pay itself off in three or four years. You never have to see it again. It’s a ‘set-and-forget’ situation.
These are some of the types of financial innovation that we really want to try and put out there and make available to people. We want to make this available to everyone. This isn’t just available to Degens, this is available to everybody all over the world. We want this to be so capital efficient that you can use it if you’re a stockbroker in New York or if you’re made in Brazil, it doesn’t matter. me
Q6. Can you explain the process and benefits of MELD’s Genius Loan, which offers self-repaying loans through trading fees generated by DEX aggregators?
So what you’re referencing is an early version of our white paper. Through the modeling and development phase that we’ve gone through, we’ve decided not to include DEXes in that process. We felt that it was too risky for the underlying asset. What we’ve done is, instead of that, we have staking.
So if somebody supplies an asset, then either that asset is borrowed, and so they’re going to be generating a yield from the interest paid on that loan, or it’s going to be staked, and there’ll be a yield paid on that. That’s the basic principle behind creating a much more high capital-efficient system. We call it a yield boost. With that, you have to decide what you’re going to do with the yield that you have. And one thing you can do is just keep it right. Just see the collateral amount go up and up. Or you can actually spend it and pay down the debt side. You can think about it almost like the opposite of compound interest. You have a compound interest where you get a yield, then it increases your base that you’re yielding with and then that yield is then going to increase and increase. So this is the opposite, this is actually taking, and it’s negative compound interest where it actually pays down on the debt side so that the amount of interest you’re paying on the debt side goes down and down and down. So both are both valid ways of working, both valid ways of structuring it. I think it depends a lot on what you’re doing with your lending and borrowing.
Let’s say you’re taking your Ethereum, and you want to borrow against that and buy a house. You want to set this thing up, and you want to forget about it. Then I think a genius loan is a much better solution because you can set it up and just leave it, and slowly but surely, the house loan will start paying itself off until, eventually it will pay itself off entirely. These kinds of mechanics exist in the world today, and we just wanted to make them really available to a broader audience. We wanted to make them available to everybody.
Let’s say you can only afford half a Bitcoin, but you don’t want to sell that half a Bitcoin, but you need some cash, then using something like this is a great possibility for you to be able to get some liquidity out of your Bitcoin. But at the same time, watch as Bitcoin goes up and up. And then, if you’re using the genius loan, then the payment on the actual principal of the loan goes down and down and down. There are lots of different ideas that we have in place to do beyond the Genius loan, but this is the sort of starting point, and we think it’s one of the better ideas in regard to making this type of lending and borrowing a little bit easier on your nerves and a little bit more predictable. Obviously, crypto is a very unpredictable space, especially right now.
Q7. We’re curious to hear more about MELD’s roadmap for 2023. Can you share any updates on the project’s advancement and the team’s resolution to accomplish its goals? What is Iron Fish’s roadmap for 2023, and what milestones can we expect to see achieved?
No. Roadmap-wise, we’ve launched our Layer I blockchain. We’ve launched our Meld wallet. We’ll be doing a big upgrade on the Meld App or the Meld Wallet in June. We’ll be launching beta access for the bank starting in August, and then that will continue to roll out throughout the year. And then, we will have the launching of the lending and borrowing protocol in Q4. So we’ve got a lot of sign-ups and a lot of early access interest in the Neo bank. We only have limited spaces for people that are available to get early access to the bank accounts before the end of the year. If anybody is interested, then now is the time for you to sign up. You can go to Meld Fi Signup in order to get early access. It’ll also make you eligible for a Meld AirDrop that’s happening later in the year. I recommend that if you’re interested in cross-border crypto Fiat on ramping and off ramping, then this is a great opportunity for you.
Q1. So, for your Neo bank, how many Fiat currencies are you supporting currently?
15. Dollars, euro, pounds, Singapore dollars, Hong Kong dollars, Canadian dollars, Australian dollars. I can’t remember off the top of my head now, but there are 15 of them.
Q2. If I withdraw through Fiat on my bank, is it instantly credited to my bank?
Yes. Instant credit. We have Sepa and Swift transactions in and out of the debit accounts in the MELD Neobank. Depending on the amount, that will sort of change how instant it is, just because of documentation. We have to make sure we have all the documentation in place in order to register the debt. But like anything under $100,000, straightforward, immediate, instant, and no problem at all. Above $100,000, it might depend on which currency you’re going to.
Q3. How can we, the community, contribute to the progress of the MELD? Do you have a governance module, or is there any ambassadorship or bulk bounty contest in order to enable for the adoptions in the future?
Absolutely. We have an ambassador program. So if you go to meld.com, about two-thirds of the way down the page and in the footer is a link to apply for the ambassador program. We’re accepting applications all the time, and we’re expanding the ambassador program out on a regular basis. Because we’re a very international protocol and we have communities all over the world, we’re looking for people everywhere when it comes to ambassadors, and we’re looking for people to be able to help us spread the word and be able to use the product and give us feedback in regards to the product.
Q4. So I want to ask about the Fiat lenders. I want to know if they have a certain mandatory time period from which they can withdraw the money from the platform. And how does the MELD ecosystem guarantee that the lenders will not suffer any form of possible liquidation?
There are no lockup times in regard to the Fiat lending. Once the capital has been put into your Meld Neo bank account, you can withdraw it and do anything that you want with it. It’s yours. And when it comes to liquidations, they are done by the community. They’re done by bots. We have a risk model that evaluates each token to make sure that the liquidation levels stay within a safe set of parameters. If a particular loan gets marked for liquidation, then any liquidation bot in the space can use the API and be able to liquidate the asset. You never actually formally default on the loan because it’s a Lombard loan. There’s no debt that’s actually created.
So all that happens is the loan has been paid off, and you get to keep the amount that you’ve borrowed, but the collateral is forfeited and handed over to the person who’s doing the liquidation. So we have no centralized liquidation system. It’s all community-based. This way, we create a fair and solid balance between all three of the different parties involved in carrying out lending and borrowing. Suppliers, borrowers, and liquidators.