<\/p>\n
Creator:<\/strong> Nicolas Burtey<\/p>\n Establishment Date:<\/strong> September 2019<\/p>\n Main Office Location:<\/strong> United States<\/p>\n Staff Count:<\/strong> 11<\/p>\n Website:<\/strong> https:\/\/www.galoy.io\/<\/a><\/p>\n Is it Public or Private?<\/strong> Private<\/p>\n Recently, Galoy<\/a> introduced Lana, a platform that allows banks to accept bitcoin as security for loans.<\/p>\n Lana aids community and challenger<\/a> banks (the institutions Galoy intends to partner with) in providing bitcoin-collateralized loans to various customer segments.<\/p>\n \u201cSome banks may wish to utilize it for retail customers, while others may focus on commercial clients or high-net-worth individuals,\u201d Burtey shared with Bitcoin Magazine.<\/p>\n By extending such loans to a diverse clientele, Burtey is optimistic that the steep borrowing costs typically linked with these products will decrease.<\/p>\n \u201cInterest rates are currently between 12% and 15% for loans backed by bitcoin as collateral,\u201d stated Burtey.<\/p>\n \u201cThe high rates are due to the limited number of financial entities offering this kind of product. We see a chance now that regulations are permitting banks to engage with bitcoin,\u201d he added.<\/p>\n \u201cWe believe many banks will want to tap into this market.\u201d<\/p>\n If Burtey\u2019s forecast that banks are eager to provide bitcoin-collateralized loans turns out to be accurate, it will result in not only reduced rates for these loans but will also bring open-source Bitcoin software into the banking arena, possibly sparking a new trend in the sector.<\/p>\n But more on that point shortly. First, let\u2019s delve into some history about Galoy.<\/p>\n Founded in September 2019, Galoy aimed from the outset to enable banks to utilize bitcoin, though it had to pause this initiative due to an unwelcoming regulatory landscape.<\/p>\n Consequently, it redirected its focus to creating and supporting Blink wallet<\/a> (initially referred to as the Bitcoin Beach wallet, which Galoy has recently divested), a custodial Bitcoin and Lightning wallet primarily used in El Salvador and subsequently in bitcoin circular economies<\/a> worldwide.<\/p>\n \u201cGaloy\u2019s objective was to onboard banks to Bitcoin five years back,\u201d said Burtey.<\/p>\n \u201cHowever, due to the unfavorable regulatory climate over the last five years, we opted to create Blink. With the cessation of Choke Point 2.0<\/a> and the repeal of SAB 121<\/a>, we believe now is the ideal moment to assist banks in adopting Bitcoin.\u201d<\/p>\n Burtey reflected positively on his experience in developing and expanding Blink and noted that he had to halt his work on the project purely because it would be too challenging to continue managing it while also attempting to serve a new category of clients.<\/p>\n \u201cBlink operates as a B2C (Business-To-Customer) model, making it difficult for an early-stage startup to juggle multiple initiatives,\u201d Burtey clarified.<\/p>\n \u201cGaloy is a B2B (Business-To-Business) focused enterprise, and our goal is to collaborate with banks and financial organizations,\u201d he continued.<\/p>\n \u201cIt’s essential to concentrate on a single objective.\u201d<\/p>\n And, as stated, this sole focus will now be on Lana.<\/p>\n Lana is software that Galoy assists banks in integrating and administering for a subscription fee. With this platform, banks can provide bitcoin-collateralized loans based on their own terms.<\/p>\n \u201cWe do not dictate the interest rates or any similar aspects,\u201d Burtey clarified.<\/p>\n \u201cWe offer banks the infrastructure to accomplish this, and they can determine their capital costs, the loan period, the liquidation price for the bitcoin used in the loan, and the interest rate at which they wish to lend,\u201d he added.<\/p>\n \u201cWe provide the software and assist in its operation and automation.\u201d<\/p>\n Additionally, Galoy does not<\/em> take custody of the bitcoin utilized as collateral for the loans issued. Each bank partnered with the company is responsible for selecting its own custodian.<\/p>\n \u201cYou may choose BitGo, Fireblocks, or each loan can implement its own multisig arrangement,\u201d stated Burtey. \u201cWe remain neutral regarding custody.\u201d<\/p>\n That said, Lana aids banks in overseeing the bitcoin held in custody, which allows them to keep track of whether collateral is approaching liquidation thresholds.<\/p>\n \u201cAn essential component of this product is risk management,\u201d Burtey emphasized.<\/p>\n \u201cBitcoin\u2019s volatility necessitates that banks have a tool to demonstrate they are taking calculated risks. We will provide banks with a dashboard to monitor this risk,\u201d he added.<\/p>\n Galoy aims this new solution at community banks and smaller financial institutions primarily because they believe these smaller entities will gain the most advantages from it \u2014 and because larger banks are unlikely to require such a product.<\/p>\n \u201cWe don’t think JP Morgan would want to collaborate with us,\u201d Burtey advised. \u201cThey are likely developing something similar in-house, whereas a smaller bank, credit union, or a petite institution probably isn\u2019t.\u201d<\/p>\n Burtey also recognizes that implementing Lana instead of creating a similar solution in-house can ultimately save smaller lenders considerable time and resources.<\/p>\n \u201cOur aim is to illustrate, \u2018Look, you could develop this on your own, which could take six months, a year, or longer depending on your knowledge of Bitcoin,\u2019\u201d stated Burtey. \u201c\u2018Alternatively, we have a lending product available as a service that you can roll out more swiftly.\u2019\u201d<\/p>\n As Burtey and his team onboard the initial set of smaller banks, they will not only be pioneering the acceptance of bitcoin as collateral for loans but potentially reshaping the banking landscape by introducing open-source software.<\/p>\n Burtey envisions a future for Galoy that extends beyond simply assisting banks in issuing bitcoin-collateralized loans. He aims to incorporate open-source software into banking as more institutions embrace Bitcoin.<\/p>\n Nonetheless, it is crucial to point out that Lana is not yet open-source. It is fair-source<\/a> software, meaning the code will become open-source after a two-year period.<\/p>\n \u201cIt operates on a delayed open-source model, but all codes are accessible on GitHub,\u201d Burtey noted. \u201cYou can explore, test it, and experiment with it independently.<\/p>\n According to the fair-source license, no entity other than Galoy can sell the product to a bank at this time, allowing Galoy to profit while simultaneously building with verifiable code.<\/p>\n \u201cWe oversee the deployment and assist banks in connecting to their custodians,\u201d explained Burtey. \u201cWe\u2019re innovating transparently \u2014 while also aiming to generate income.\u201d<\/p>\n Beyond aiding banks in implementing Lana, Burtey seeks to create open-source \u201ccore banking software,\u201d as he aims to challenge the oligopoly in \u201ccore ledger\u201d systems.<\/p>\n \u201cThe core ledger is where institutions maintain account details, customer data, and transactional records,\u201d Burtey explained. \u201cIt serves as the definitive source for banks.\u201d<\/p>\n Currently, only three firms \u2014 FIS, Fiserv, and Jack Henry \u2014 dominate the core ledger market.<\/p>\n \u201cThese firms are primarily hundred-billion-dollar companies that you may not be familiar with as they primarily concentrate on selling software to banks,\u201d Burtey remarked.<\/p>\n \u201cOur long-term ambition is to disrupt this sector through developing something open-source,\u201d Burtey asserted. \u201cPresently, no company is providing core banking with an emphasis on open-source, and we\u2019re striving towards this.\u201d<\/p>\n Burtey imagines a scenario where open-source software simplifies the establishment of a Bitcoin bank. (For those concerned with the terms \u201cBitcoin\u201d and \u201cbank\u201d appearing in conjunction, it’s worth recalling that the legendary Hal Finney himself stated<\/a> that bitcoin-backed banks would act as a scalable solution.)<\/p>\n \u201cInitiating a bank in today’s landscape is both costly and complex,\u201d remarked Burtey. \u201cYou would need to allocate over $100,000 just to obtain core ledger technology.\u201d<\/p>\n Burtey then reflected on his experience in founding Blink wallet, effectively a bitcoin banking operation utilizing open-source code, before continuing.<\/p>\n \u201cI simply traveled to El Salvador and initiated what was nearly my own bank because I was motivated,\u201d Burtey shared.<\/p>\n \u201cWe must reinvent how core banking software is designed within the Bitcoin ecosystem, and I believe this is where open-source plays a crucial role,\u201d he added.<\/p>\n \u201cThis is fundamentally why I believe the intersection of banking and Bitcoin will look significantly different from traditional banking with fiat, and I am confident we are among the companies leading this evolution.\u201d<\/p>\nGaloy’s Background: From Blink Wallet to Lana<\/h2>\n
Functionality of Lana<\/h2>\n
Target Audience for Lana<\/h2>\n
Open-Source Bitcoin Banking Vision<\/h2>\n