Max Caidun: Products on Bitcoin blockchain are safer than on Ethereum
Who needs predictions on blockchain, what is the current situation at OTC market and why it is important to develop crypto regulation from scratch. These questions answers Max Keidun, co-founder and CEO of p2p crypto-exchange Hodl Hodl in his exclusive interview for LetKnow. News.
Tell us about yourself when you became interested in cryptocurrencies?
I came to cryptocurrency from the banking sector. In 2013, one of my clients told me about Bitcoin. At that time I was skeptical about it, but I ended up being interested in this phenomenon, as I always liked something related to finances and information technologies. And bitcoin seemed to me the perfect case that combines these two worlds.
Then in 2015, I received an offer to join one Bitcoin-related startup as a project manager. I peacefully left the world of traditional finances and moved on to cryptocurrencies and blockchains. At the moment I am the CEO and one of the founders of the peer-to-peer
crypto- exchange Hodl Hodl, as well as the organiser of the largest Bitcoin conference Baltic Honeybadger.
How the dynamics of visits and crypto-operations at Hodl Hodl has changed compared to 2018 and 2019?
We started in February 2018. Therefore, if you look at this year, then we have significantly increased the number of users and the number of trades and offers created on the site. As for the changes, we have more traders from the Russian-speaking segment:
Ukraine, Russia, Belarus, so, from Eastern Europe. And this is the main trend we are witnessing. Previously, most of our visitors were from America, but for legal reasons and because of certain risks associated with working with US residents, we decided to shut this market.
We can see growth, but it’s important to take into account the fact that we don’t invest in marketing at all. We are promoted by the community, our clients recommend us to their partners, and based on this, the client base of our platform is growing.
You are planning to enter the prediction market. Is this somehow related to the crisis?
No, this has nothing to do with the crisis and the bearish trend. It’s just all of our projects are driven by our own needs or the needs of our friends. We started Hodl Hodl because at some point my co-finder and I had the performed tradings on LocalBitcoins with great difficulty. My partner almost lost money because he did not understand how the system works. And under the guidance of other people, I had to wrestle for hours in order to start using this platform. Then we realised that we could somehow improve this system.
The same thing I can say about our project House Hodl. It’s a platform for real estate sale through a cryptocurrency account of the transaction.We launched it during a bullish trend, when the cost of Bitcoin exceeded $ 15,000. Then some people and some friends began to contact us with the proposals that our smart contracts would be ideal for buying real estate. Because then the price of Bitcoin was attractive and could be spent on expensive purchases.
The Predictions project grew out of the fact that we saw a certain dissatisfaction with similar projects, and realised that there are two types of sites on the market and we want to create a third type. Type 1 is - centralised sites that store funds in a centralised way with a centralised Oracle. Type 2 is supposedly complete decentralisation, as in Augur. While Augur is built on
Ethereum, we are built on Bitcoin. And I sincerely believe that the security of products built on Bitcoin is much higher than those built on Ethereum.
Therefore, we decided that it is necessary to make a third type of platforms - semi-centralised. Our semi-decentralisation lies in the fact that we keep funds decentralised. Each time a user creates a mutual contract, for example, that in three months at 12 o'clock in the afternoon, Bitcoin will cost $ 5000, some smart contract or multisig-escrow is created, on which each user places a certain amount of funds. When a contract reaches its execution point - it closes, and we look at the outcome of the contract: either these two participants in the transaction decide between themselves which of them is right and they enter their passwords-keys and send money to 1st or 2nd user. And if there is a dispute and one of them does not agree with the outcome of the event, for such cases we will have a centralised oracle who will act as an arbitrator for the dispute. Therefore, in the event of a dispute, Oracle will be able to resolve the dispute in one favour or another. This is the part that is centralised because the arbitrator is the one person who resolves the dispute.
It was my partner’s idea, because he was using one of the platforms and came to the conclusion that a centralised platform can manipulate its predictions. In addition, with the help of predictions you can hedge your risks. So, for example, you bought 5 bitcoins and expect that there will be growth. But in order to protect yourself, you can create a contract in case of the drop of the asset price and that’s how you can insure yourself against losses.
Is it possible to bet on some sporting events, for example, football matches?
You can bet on anything except for some illegal things. Because we do not want to associate ourselves with illegal actions. We will have a preliminary moderation of these offers and we will refuse offers related to illegal activities or announcements that are associated with events with outcomes that are difficult to determine.
Of course, we would like to focus on predictions that have anything to do with financial markets, for example, the price of bitcoin, oil and gold. But it must be kept in mind that all contributions are accepted exclusively in Bitcoin.
Hodl Hodl has launched a platform for OTC deals. How high is the demand for cryptocurrency between institutions?
This is not a platform, we just have our own OTC broker and he uses our infrastructure to carry out his transactions. The size of the OTC market in 2018 grew substantially. In 2019, due to the fact that the value of assets is attractive for purchase, but not attractive for sale, it is hard to find sellers. Because there is demand, it is high, but very few people want to sell an asset at that price.
It is especially difficult to find sellers who have real volumes, considering that many in every way try to deceive you.
How has crypto regulation affected your business?
We live in parallel worlds with regulation - something is regulated somewhere, but that does not affect us in any way. According to my observations, the cryptocurrency industry is in its infancy, as well as crypto regulation. We all are waiting for some clear rules of the game for stock exchange and brokerage activities, especially if such regulation would be in favour of crypto start ups - then I think everyone would enjoy it.
If there are legit, clear laws and people are not burdened with too many documents, this should benefit everyone. Because, normally, lawmakers do not strain themselves - they take the existing regulation in the financial sector and impose it with some minor corrections on the cryptocurrency industry, but this does not work. Because you have, on one hand, a startup of 5 people, and on the other hand, a bank where 500 people work. Startups do not generate revenues, but the bank generates. In addition, the bank has 100 people of lawyers and supervisors who can afford to comply with the standards that are prescribed in the law. And a cryptocurrency startup each of 5 people performs 10 more functions - so it’s not very correct and it is necessary to start this story from scratch and regulate this industry from scratch, and support this market, not destroy it in every way.
We hear quite often that the first country that would offer convenient registration conditions for location of a crypto company, that country shall win in the long term. Because now we have a lot of countries that are supposedly welcome and support cryptocurrencies, but in fact nothing happens.
There is an opinion that one of the main signals of crypto market cleansing will be a massive fall of crypto exchanges. Do you agree with this?
In general, the fact that many people pump up their volumes does not contribute to anything. The thing is that for me, as for a user, it makes no difference from whom I buy Bitcoin - from an exchange or some seller from another country. Because what would I care about the stock exchange somehow improving its statistics?
But if there were objectively clear rules of the game, accepted by market participants, that we show the real state of affairs rather than trying to puff their cheeks, the market would have cleared even more. On the other hand, we do not know what is going to happen in the future. The exchange, which shows some fake volumes, maybe in a year its volumes will be the same, but already real, and we are actually cutting it at the root. There is a good saying: Fake it till you make it and it does works in some situations.
But what to do with exchanges like ours? Hodl Hodl, for example, has no centralised cryptocurrency storage, all the funds stored at the users’. And we have no balance because we have don’t even have wallets.
The fact that the market is falling and cleaning is going on is great, it is wonderful. Because it leaves a lot of random passengers who jumped on the
ICO wave on this train and made a festival and a circus from all of it. Now we are testing for strength and this whole farce, that appeared in 2017 and was parasitising in 2018, it’s going to fall off by itself and that’s fine. The strongest survives and these market conditions show us that companies with the correct approach and strategies - they survive.
I think that a falling market is fine and every such cycle brings the market to a certain maturity. But the crypto industry is still in its infancy. For the formation of the asset market 10 years is a negligible period of time.
- What can turn the market in the other direction?
- I, myself, really look forward to see the story with Bitcoin-ETF continuing (bitcoin-fund traded on the stock exchange - ed.) As soon as we have this tool, it will mean that a huge pool of investors with huge liquidity will be able to invest in Bitcoin as an asset. That, respectively, will lead to increased attention and increase in the cost of Bitcoin.
It will be more difficult to manipulate the price of the asset, volatility should decrease, but nevertheless, in the long run, this will be a positive signal for a reversal of the bullish trend, but besides this there are many other factors that can push Bitcoin to grow.
For example, such events as halving (reduction miners’ rewards for extracted blocks - ed.) In 2021, the launch of some large projects, such as Bakkt, as well as a more favourable attitude to bitcoin by major states. Therefore, there can be a huge amount of factors for growth.
- What are the trends on the crypto market expected in the nearest future?
- I don’t really believe in ICO because it seems to me. More and more people have come to understand that the model, when you invest in a project that has not yet been implemented, does not work. This story is already in the past. When people get money in advance to develop a product, in most cases it is demotivating. Therefore, I think that in the nearest future we will see the extinction of insolvent projects. I want to believe that more time will be given to Bitcoin and more people will become Bitcoin maximalists.
I think there will also be a regulation story. But in general, it seems to me that for a bitcoin, a falling market is good, and for
altcoins this is negative and altcoins themselves will soon die off. I am not talking about any specific infrastructure projects. I mean some kind of cryptocurrencies that gradually collapse because people come to understand that there is no need to use them.