UDSKRIFT 🔗
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Hey, hey, welcome back to the Bitcoin Matrix where critical thinkers meet. I'm your host,
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Cedric Youngelman. Real quick before we dive in, every episode of this show hits found a full day
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early and completely ad free for $5 a month. And honestly, thank you for being here. If the show's
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been worth something to you, that's the best way to keep it going. Today's guest is Martin Matika,
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the co-founder and CEO of Firefish.
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If you've ever wanted to borrow against your Bitcoin
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but didn't trust a single one of the lenders that came before,
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this is the conversation.
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We get into how Firefish lets you take a loan
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without ever handing over your keys
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while you're protected even if everything goes wrong
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and the one question Martin says you should ask yourself
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before you borrow at all.
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The architecture is genuinely different
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from anything that's blown up before.
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Stick around.
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And now, let's enter the Bitcoin matrix.
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What is real? How do you define real? You can't jump into cash. Cash is trash. What do you do to get out?
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Martin Matejka is the co-founder and CEO of Firefish, a Bitcoin-native non-custodial lending
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platform built in Prague that's facilitated over $160 million in loans, secured by 5,000-plus
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Bitcoin in multi-sig escrow. Before Firefish, Martin ran power trading at CEZ, one of Central
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Europe's largest energy utilities and founded Stratosphere, a trading strategy startup.
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Martin, welcome to the Bitcoin Matrix, where critical thinkers meet. How are you?
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Hey, Cedric. Thank you for having me.
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Yeah, I'm so excited to get into this. Thank you. I want to thank you right off the top for your
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support of the Bitcoin Matrix. And I'm excited to sort of get into this because what you guys
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building is really exciting. So maybe take me back to the origin. What was the moment Firefish
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actually became a thing? The thing actually started well before that. It was actually like
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in many cases, the story starts with some personal needs. It was my personal need. Like I was in a
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situation that there was an investment opportunity that I wanted to for. And at the same time,
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I didn't have any free cash and was exploring Bitcoin back lending opportunities over there.
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concept of using assets as collateral was very native to my occupation in institutional finance.
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We've been collateralizing a lot of different assets from equity, cash to gas in a storage,
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emission certificates, all kinds of crazy stuff. So I was thinking like Bitcoin is much better for
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this use case. And I was exploring the opportunities for this personal case of mine. And to my surprise,
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I realized that there are not so many good options out there. Actually, there was none. And it was
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well ago. You might remember projects like Celsius or Block 5, rest in peace, that eventually
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the rest is history. But I was like, I'm not going to send my Bitcoin to these dudes.
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You know, they have a nice Bitcoin logo painted on the company, but that's it. Like they operate as
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There's an old school institution where you are exposed to counterparty risk.
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And this is what financial professionals always care about.
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Your risk when you engage in a transaction, there might be some risk embedded into the transaction.
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And counterparty risk is a form of the risk when your counterparty doesn't deliver what they promised to deliver.
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And I didn't feel comfortable with that and realized we might do much better as a community.
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We deserve much better as Bitcoiners.
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We have programmable money in front of us and we are not using its properties to the full extent.
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So we started to think about how to do it right, how to do Bitcoin back lending right.
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Then after some time, teamed up with a couple of talented professionals, cryptographers, engineers,
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and designed a protocol that we believe is the answer to the problem that we've seen
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that is a lot of embedded risk into the lending transactions.
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And we created a protocol that secures or locks Bitcoin directly on the Bitcoin blockchain and allows for the secure transaction in between borrower and lender.
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So we happened to make it real and the production ready like two years ago, more or less.
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And since then, Farfish is operating mostly in Europe, but recently we launched also outside of Europe.
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We're
Load full transcript
going to break all that down. But you'd mentioned being sort of a trader, energy and gas and different things. What's that world actually like? And what did it teach you about risk that ended up shaping how you built Firefish?
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This place is pretty cool. I mean, like institutional trading is a great environment full of people that understand nonlinear outcomes of your decisions.
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Well, we've been trading energy assets across the Europe, across the globe, mostly across the Europe.
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The market is pretty effective. Like you can move around electricity across the Europe and it's fun.
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When it comes to risk, you realize that it really matters how the settlement, for example, works.
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Like you would never do a large transaction with random people on the Internet unless you or somewhere, unless there is a mechanism that allows this transaction to be secure.
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For example, exchange.
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right so we've been thinking bitcoin back landing might be you know in a position where a lot of
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people interact in between each other they don't have a mutual trust they don't want to trust each
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other so how to create an infrastructure that allows for them to transact without embedded risk
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so there are a lot of parallels between institutional or energy trading and bitcoin finance
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So kind of thinking about maybe your background in markets and physical commodity, margin,
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collateralized price daily, that world has so much discipline.
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When did Bitcoin actually pull you in personally?
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How'd you fall down the rabbit hole?
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Actually, first time I heard about Bitcoin, it was very early on.
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It was like 2011.
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I'm lucky enough that one of my friends have been really early in Bitcoin scene.
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And actually, the time I didn't pay so much of the attention.
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I was checking out a few articles.
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I've seen that it's some kind of magic internet money.
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It sounds catchy.
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And I didn't pay so much attention.
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I started to pay attention much, much later.
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It was actually a course era.
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Like there is this platform for online teaching where I enrolled for a course.
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it was called like Bitcoin and the cryptocurrencies from, I believe, from Berkeley or some US
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university at the time. I spent a couple of hours listening to that, to the series. I really had this
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aha moment when I realized this thing is going to be big. I mean, the time I was quite interested
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in Austrian economics and, you know, like being a gold bug and free banking and all these. When I
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When I discovered Bitcoin, it just fit in.
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It was like a piece of puzzle that was missing.
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Now we have a piece of technology that we can use to be protected from the monetary inflation that we all knew is a huge problem pretty much everywhere in the world
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So it was a big thing for me to finally understand Bitcoin.
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And for me, it really mattered that I understood the technical foundations.
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So I started with a basic cryptography that was pretty much a Chinese to me at that time.
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But once I understood how the thing works, I kind of early realized that this is going to change the world.
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And I still believe that.
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Yeah, I agree.
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Maybe for someone who's never really thought about this, what is a Bitcoin-backed loan?
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And what does it actually look like from the borrower's seat?
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I'm thinking what's the best way to put it.
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And for me personally, the Bitcoin back loan is a way how you can access the value that is accumulated in the best asset you have on your own balance sheet.
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You might own a couple of assets.
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I believe the best asset I personally own is Bitcoin.
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I don't want to take part with that asset.
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I don't want to sell it out when the time comes where I need to go for investment or pay my kids education or whatnot.
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I think there is a better way and is borrow and use the asset as a collateral.
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This is what institutions do on the daily basis.
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They don't sell their equity, for example, to go for to scale up their production or something.
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They borrow against it.
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I think now this technique is available to pretty much everybody that holds Bitcoin.
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There's a frame that I love that I think describes what Bitcoiners are actually doing when they take one of these loans.
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They're like shorting fiat and going long like digital property.
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They're not borrowing money to
spend.
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They're using fiat as a tool to keep more of the asset that's appreciating.
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Is that sort of how you see it?
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I love it.
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This is exactly, I think, how it works.
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And it's also highlighting one of the key properties of loan.
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And it got this component of shorting the fiat currency.
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Honestly, there are two big investment theses I hold in my life at this moment.
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One is Bitcoin will win.
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And second is fiat is going to decompose.
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And expression of the first is actually owning some Bitcoin.
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I think that's a good strategy for pretty much everybody.
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Another one is shorting the fiat, having a loan against the fiat currency.
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Because if you borrow $100 now, it's not $100 in 10 years.
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Like I might ask, what do you think is the probability that $100 will buy you the same amount of goods now as in 10 years?
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I think that I would bet my gut that it's minimal.
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Like it's pretty much close to zero.
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So taking a loan might be actually a good financial decision.
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You end up paying much less expressed by purchasing power than you get.
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So holding a Bitcoin and taking a loan against it,
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I think it's expressing both of these investment theses at the same time.
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Yeah, it's a really interesting way to see it.
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A lot of Bitcoiners will ask when they're considering a loan for the first time,
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why are interest rates on Bitcoin-backed loans what they are?
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sort of higher than maybe what a 30-year mortgage would go for in the United States
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and like lower than a credit card.
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How does sort of the math work and what has Firefish's sort of rates been historically
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or maybe now?
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I think the rates are just too high and they're unreasonably high at this moment.
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Taking into account the underlying asset, it's a collateralized loan backed by value
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that is at all times bigger than the loan itself.
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So I think the fair value should be much lower.
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Saying that at the same time, the rates are dropping quite significantly.
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Like if you just check our marketplace, because Firefish is an open marketplace.
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We are not a typical lender that sets the loan terms and sells the product.
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Instead, we just connect borrowers with the lenders.
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As simple as it sounds, it's also simple in a production.
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Over the last year, we have seen a significant drop in interest rates.
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It means that borrowers, I mean, lenders, investors to the loans
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are kind of waking up to this opportunity that I see as a pretty much
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window of opportunity that is closing down over time.
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Sooner or later, and we see that coming, institutions are waking up to the same thing.
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they see the asset class, Bitcoin back loans, with interest rates much higher than similar assets,
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for example, loans backed by real estate, such as mortgages. So my personal prediction is that
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this is like temporary inefficiency that we see at the market. I think at this moment,
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the rates are starting to be like they're single digit, they are starting to be much
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more reasonable than like a year or two ago. And I would bet that the rates would trend to go down
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over time. That's good to see. And it makes sense. What happens if Bitcoin price drops while I have
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a loan that's active? Yeah, I think this is one of the key things to understand. There is liquidation
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risk embedded in a Bitcoin back loan. That means that if the collateral value doesn't cover the
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loan notional, the collateral is going to be liquidated. That means that you might lose your
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Bitcoin at some point. That's why we think one should really understand that this tool is very
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powerful. But if you don't use it in the right way, it might be also something that might hurt you.
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So I think the Bitcoin banks loans are really strong tool for your personal freedom. And I think
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it should be in a toolkit of pretty much everybody.
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At the same time, you should understand the downsides.
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And that's why we actually force 50% LTV.
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That means that whenever you take a $100 loan,
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you need to deposit twice as much collateral at inception.
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So it's lowering the probability that you would get liquidated.
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At the same time, you might top up the collateral anytime.
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That means that whenever the price is going the direction that it's close to your liquidation level, you get a warning and you might just simply top up your collateral.
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I will personally not use all my Bitcoin savings for a loan.
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It's rather be on the safe side.
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But I think for a reasonable part of it, it's very useful too.
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Yeah, no, I appreciate that.
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Can Bitcoin on the Firefish platform be re-hypothecated?
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There is no way.
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Unless somebody hacks very basic Bitcoin primitives,
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like the enforcement, the fact that Bitcoin stays at the address
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is enforced by the Bitcoin network.
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We use the primitives that the Bitcoin network already understands,
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such as multisig, partially signed Bitcoin transactions, and time locks.
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These are the components that build our escrow system that doesn't allow us or anybody else to move collateral outside of the predefined spending parts.
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And those are predefined in a very simple way.
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And that means that Bitcoin can, from this particular address, it might end up only being written to you, to your predefined address, back to the borrower or to the liquidation address.
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And our role as a platform is pretty much only to choose one of those two directions.
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All right.
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Then what happens on chain when the loan is created?
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Like what moves, what doesn't, what side and who holds which key?
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I think this is quite interesting but a little bit technical What we actually do what our users do and most probably many of them do not have any idea but what they do they run our open source Bitcoin library inside of their browser
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that creates all the Bitcoin logic behind.
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So borrowers are creating this escrow address themselves.
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Like it's not being pushed by us.
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We think it's much more safe if users can verify the code that they are running.
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At the same time, this is not recognizable even for the average users, if you are not too technical.
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And the process is as simple as sending Bitcoin to a specific address that is generated inside of your browser within the Firefish app.
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The address represents three of three multisig address and a bunch of partially signed Bitcoin transactions are attached to that.
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One of the key is borrower's ephemeral key that is used only during this escrow creation ceremony.
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That kind of assures that only spending parts that are approved by the borrower are valid.
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And borrower pretty much approves spending conditions that correspond with the states in which the loan can happen to be.
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Be it full repayment, that means that if you repay the loan, partially send Bitcoin transactions, transaction like routes the Bitcoin back to your own address.
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If your loan happened to be defaulted, then the Bitcoin is rooted to the liquidation address.
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And there is one more cool thing.
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One of these transactions is actually signed by everybody.
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So all the signatures and it's valid.
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It just have a time lock on it.
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That means that even if Firefish doesn't operate in the future,
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if we go belly up or whatever,
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you still have a valid Bitcoin transaction that you can verify up front
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that allows you to spend the Bitcoin back to your own address,
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your hardware wallet or whatnot after the time lock is passed.
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Wow.
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Wow. This definitely seems like the architecture or real Bitcoin would want to use to get a Bitcoin-backed loan.
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Has there been any sort of major events on the platform that has sort of tested users?
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Maybe in February when price was dropping rapidly?
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What was sort of maybe any events like that like?
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That was the only day, actually, in our lifetime that we experienced liquidation events.
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that means that some part of our users haven't been able to top up the collateral to the extent
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that would cover the loan emotional and they have been liquidated. It actually due to our like
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conservative loan origination policies such as 50% LTV, it affected very small fraction of our
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user base. It affected like 2% of the active loans and everything went smoothly. I mean like
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The protocol works in a way that the logic is enforced by the protocol itself to the most possible extent.
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So pretty much it doesn't rely so much on other
aspects, such a legal enforcement.
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So all the originations happened as it was designed.
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Only 1.7%, I think, loans even triggered margin calls, which is a really small number.
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Yeah, I mean, it just must have been interesting to kind of go through that event,
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really stress test the system and see that come out so smoothly from all of that.
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And I kind of wanted to talk about what you guys created with the LSEG workspace integration.
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And kind of what is that?
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Who's using it?
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And how does that sort of affect the marketplace?
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The workspace, when I started my trading carry,
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you pretty much had two options to use like the financial infrastructure,
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like financial information infrastructure.
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That time it was Bloomberg or the Reuters.
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Now like Reuters rebranded to London Stock Exchange Terminal
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and this is pretty much the thing.
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So now the data from our marketplace,
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from the Bitcoin back lending live data
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are available to all the financial professionals around the world
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that actually use the platform.
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So we see ourselves as a place where demand and the supply meets for the Bitcoin-backed loans.
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And we publish live data for financial professionals to take their decisions.
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Yeah.
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So that gets going to spread, I think, the service quite rapidly, I would think.
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And then so why Prague?
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Is the Bitcoin Prague culture real?
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I mean, Bitcoin Prague coming up.
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And what made the city the right place to build this?
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Hell yeah.
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I mean, like Cedric, Prague seems to be like currently the Bitcoin capital of Europe.
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It's a home of a very strong Bitcoin community.
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It's also home of some well-known Bitcoin companies such as Trezor,
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like inventor of the first ever hardware wallet.
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Also Brains, Brains Pool, that time Slush Pool was like the first ever Bitcoin mining pool
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and pretty much the inventors of the concept of mining pool.
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So Prague is kind of a place where a lot of Bitcoin history was written and we decided to build here.
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There are a lot of talented people around that really care for Bitcoin.
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Until very recently, you could pretty much pay in Bitcoin in every restaurant or like 90% of them until very recently.
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recently after recently some regulation change and it's not so easy anymore.
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But you would be able to pay all your drinks and meals in Lightning.
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The Prague Bitcoin culture is real.
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And actually, if you have a chance, there is a nice event coming up in July and it's BTC Prague.
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I think it's the biggest Bitcoin conference in Europe.
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So if you happen to be in Europe at that time,
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And I think it's a great opportunity to explore.
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Yeah, I hope to make it one year.
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It sounds like the best conference in the world.
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You mentioned brains and it made me think of sort of,
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I'd like to know maybe what you can speculate about who the lenders are.
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I had a conversation with Meanwhile,
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and it was sort of very insightful on why miners in particular
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would want to lend their Bitcoin and get fresh Bitcoin in return
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or even cash because they have probably low cost basis Bitcoin they don't necessarily want to sell.
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What are the lenders like on the platform, at least from what you can see or speculate about?
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Yeah, on Firefish, the lenders lend or invest into the loans. So they invest
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fiat currency or stablecoins. Bitcoin, where's as collateral? That's just security that doesn't move.
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Like on Firefish, you don't lend your Bitcoin out.
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You use Bitcoin as a collateral and borrow or lend the fiat currency or stablecoins.
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When it comes to the lenders on Firefish, it's like we are really trying to make it
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open for all sorts of people from retail investors to big institutions and creating
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different products for them to be able to participate on the marketplace.
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And we are seeing like lenders or investors from all of these groups.
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Like we, what is cool for many people, for many other users, like investing on Firefish was actually their first experience when they kind of interacted with Bitcoin.
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So as an investor, you don't need to hold Bitcoin.
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You don't need to understand how the wallets work.
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pretty much you just send your money via the platform to somebody else to make their life
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better through a loan and earn interest. So it's actually my parents that are kind of
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our investors as well And you know they don operate Bitcoin They don have any Bitcoin wallet Bitcoin holdings And even they realized that Bitcoin is helpful for them in some way even without touching it
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So this is maybe kind of nice to see that Bitcoin can be useful for people, even without them interacting with the Bitcoin network in any way directly.
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Yeah.
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Oh, you mentioned stable coins.
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How do they fit into the platform and do you support them globally?
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For us, stablecoins are just different payment rail.
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We treat them in the very same fashion as bank transfers.
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So if it is more convenient or your jurisdiction doesn't allow you to be connected to the conventional banking system,
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then you might opt for those stablecoins.
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They bring some particular benefits for unbanked people.
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So we decided to add them to the currency offering.
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Yeah, it makes sense.
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I think they're a very useful tool for the unbanked for sure.
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And it seems like just the next phase of infrastructure.
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Do you think lending is the natural next phase for Bitcoin adoption?
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I think the lending will not force the adoption per se,
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but it will kind of make Bitcoin more useful. At this moment, I think Bitcoin can be useful to you
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in a few different ways. For me, Bitcoin is useful as a store of value asset. It's shielding me from
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monetary inflation. This is what I expected from the Bitcoin. It's working pretty well. You could
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use Bitcoin as a transaction tool as well. And I'm happy to see a lot of people and teams are
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iterating about this idea and creating like Bitcoin native payment rails as well. We think
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that accessing the value that is kind of embedded in your store of value asset is just the natural
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extension of the store of value proposition. It just makes the store of value even more appealing.
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Imagine the world where you can save into the, in my eyes, best asset in the world and at the same
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time be able to access that value anytime you want. I think this is pretty much a powerful
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proposition and the Bitcoin will be even more appealing to all sorts of people that would
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also benefit from its properties. You've built something real. Are you enjoying it?
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Oh yeah. I mean, for me, it was a very personal thing. Pretty much all my career was
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00:27:32,388 --> 00:27:42,348
was like corporate kind of in a corporate setting. And at some point, I really got deep
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into the Bitcoin and I really started to care. I thought, let's build something that makes
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Bitcoin more useful. And well, it's honestly, it's very nice feeling when you meet your
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clients at the conference, for example, and you hear the stories how they benefited from
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the product you built.
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I think this is something that is really powerful and it's recharging my batteries every now
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and then.
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I love that.
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Maybe for the listeners sitting on a meaningful stack who needs liquidity, I know in the United
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States, we just went through tax season.
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I've been there.
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But isn't selling?
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What's the first question they should ask themselves before they use Firefish?
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Most probably, what is the reason I require liquidity?
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You are in front of the two options.
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Either you are selling your Bitcoin or we are bringing the second option,
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like keep your Bitcoin untouched and access liquidity via non-custodial protocol.
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So this is maybe the first question.
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Do I want to sell?
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I would maybe argue I would never sell.
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This will be my answer, but it's free to everybody to decide on that.
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Once you decide to borrow, then perhaps you should think about,
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00:28:59,408 --> 00:29:02,788
like, what are the embedded risks I'm taking when I'm engaging
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00:29:02,788 --> 00:29:04,948
with a protocol platform or a lender?
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And there are some, especially when you are engaging
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with a centralized lender, they might disappear at some point.
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And we have a long history of events
like that for those who remember like Celsius and BlockFi and many others.
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So am I okay with such risk?
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If not, maybe I would choose something that doesn't rely on the trust so much.
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And one of the options out there actually is Firefish.
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Yeah.
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Well, where can people find you, Firefish, and the research papers you guys have been putting out?
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Yeah, it's a lot of information is available on firefish.io. There is a nice doc section
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00:29:48,668 --> 00:29:53,688
where you can see like technical write up about the protocol. I didn't want to go too
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deep into that. But for whoever we technical, I think they would enjoy the read. It's quite
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00:29:59,568 --> 00:30:07,128
digestible, I would say. Also, maybe check out our blog section where we talk about technical
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00:30:07,128 --> 00:30:09,328
but also non-technical stuff.
352
00:30:09,548 --> 00:30:11,248
Also, maybe follow us on X,
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00:30:11,668 --> 00:30:12,788
firefish underscore IO.
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What I found most interesting,
355
00:30:14,408 --> 00:30:15,048
I think like sort of,
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there's like 93% return rate
357
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of multiple loans on the platform.
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So usually maybe someone comes over
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00:30:22,808 --> 00:30:24,988
and takes a moderate size loan
360
00:30:24,988 --> 00:30:25,908
to test it out.
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And then they,
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93% seem to be returning.
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00:30:28,568 --> 00:30:30,568
And I'm going through my first loan now
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and I could see why you'd want to maybe,
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you know, you get comfortable with it
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and you want more liquidity
367
00:30:36,048 --> 00:30:37,788
and you don't want to sell your Bitcoin.
368
00:30:38,068 --> 00:30:39,888
So I love what you guys are building.
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Thank you.
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It's music for my ears.
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00:30:43,828 --> 00:30:46,568
I appreciate what you are saying.
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00:30:46,888 --> 00:30:51,528
As you mentioned, a lot of people are returning to the platform,
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pretty much like most of them.
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00:30:54,288 --> 00:30:59,688
It seems that once you realize how useful the tool can be to you,
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to your personal finance,
376
00:31:01,408 --> 00:31:04,308
you tend to incorporate it to your financial strategy.
377
00:31:04,308 --> 00:31:09,028
So this is how we explain the high return rates on the platform.
378
00:31:09,488 --> 00:31:10,208
Sounds good.
379
00:31:10,308 --> 00:31:13,708
Well, I hope to meet you in person one day, maybe next year in Bitcoin Prague.
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00:31:13,788 --> 00:31:14,928
I don't think I'll make it this year.
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But it's been such a pleasure.
382
00:31:17,328 --> 00:31:18,388
Looking forward to it.
383
00:31:18,668 --> 00:31:18,948
Likewise.
384
00:31:19,408 --> 00:31:19,928
Talk soon.
385
00:31:20,268 --> 00:31:23,548
Hey, hey, and that's a wrap on this one.
386
00:31:24,088 --> 00:31:28,808
If this conversation added value, share it with one person who needs to hear it.
387
00:31:29,148 --> 00:31:32,928
That is how the Bitcoin matrix, where critical thinkers meet, grows.
388
00:31:32,928 --> 00:31:40,588
huge thanks to our sponsors stamp seed firefish club orange and camp nakamoto these are companies
389
00:31:40,588 --> 00:31:45,728
and products i personally use and believe in please support them so they can keep supporting
390
00:31:45,728 --> 00:31:52,548
the show links and codes for all of them are in the show notes not on fountain yet five dollars a
391
00:31:52,548 --> 00:31:58,988
month gets you every episode a full day early completely ad free or one dollar per episode
392
00:31:58,988 --> 00:32:05,848
after early access. Follow me on X. I'm at Sed Youngelman. The show is at underscore Bitcoin
393
00:32:05,848 --> 00:32:13,108
Matrix. We're in the conversation every single day. The Matrix is real. Keep on stacking. Keep
394
00:32:13,108 --> 00:32:19,928
your head on a swivel. Spend your time well. And thank you for listening. Hey, hey, and that's a
395
00:32:19,928 --> 00:32:26,188
wrap on this one. If this conversation added value, share it with one person who needs to hear it.
396
00:32:26,188 --> 00:32:30,468
That is how the Bitcoin matrix, where critical thinkers meet, grows.
397
00:32:31,268 --> 00:32:36,428
Huge thanks to our sponsors, Stamp Seed, Firefish, Club Orange, and Camp Nakamoto.
398
00:32:37,108 --> 00:32:40,088
These are companies and products I personally use and believe in.
399
00:32:40,588 --> 00:32:43,588
Please support them so they can keep supporting the show.
400
00:32:44,228 --> 00:32:46,768
Links and codes for all of them are in the show notes.
401
00:32:47,388 --> 00:32:48,468
Not on Fountain yet?
402
00:32:48,908 --> 00:32:54,408
$5 a month gets you every episode a full day early, completely ad-free.
403
00:32:54,408 --> 00:32:57,668
or $1 per episode after early access.
404
00:32:58,348 --> 00:32:59,388
Follow me on X.
405
00:32:59,628 --> 00:33:00,808
I'm at Sed Youngelman.
406
00:33:01,268 --> 00:33:03,648
The show is at underscore Bitcoin Matrix.
407
00:33:04,168 --> 00:33:06,828
We're in the conversation every single day.
408
00:33:07,408 --> 00:33:08,548
The Matrix is real.
409
00:33:09,008 --> 00:33:09,888
Keep on stacking.
410
00:33:10,288 --> 00:33:11,388
Keep your head on a swivel.
411
00:33:11,808 --> 00:33:12,828
Spend your time well.
412
00:33:13,108 --> 00:33:14,668
And thank you for listening.