Monero Monitor

Episode 5: Blockchain-Backed Loans with SALT Lending

22 May 20170 Comments

Have you ever wanted cash for a project or purchase but weren't ready or willing to liquidate your Bitcoin, Monero, or other coin holdings? Would you be interested in a way to leverage your cryptocurrency through a collateralized loan to increase your spending power?

In this week's episode, I traveled to the headquarters of startup SALT Lending in Denver, CO to talk with Shawn Owen (CEO) and Caleb Slade (Creative & Community Director) about their new blockchain-backed loans platform, launching soon. Find out why they say SALT will provide a secure, private way to borrow against your cryptocurrency holdings, and how you might become either a borrower or lender with their service.

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Podcast Transcript:

~~ { Introductory Music } ~~

Mike: Hey, everybody. This is Mike, and you’re listening to a very special episode of the Monero Monitor podcast. Today I’m doing something a bit different than my past shows. I’ve travelled from Boulder, Colorado to the downtown Denver offices of a brand new crypto-startup, called SALT Lending. I’m joined today by SALT CEO, Shawn Owen and SALT Creative and Community Director, Caleb Slade, who have agreed to tell us about their company. Shawn and Caleb, why don’t you guys introduce yourselves? 

Shawn: Yeah, hello. Thanks for coming over.

Caleb: Hi, guys.

Shawn: My name is Shawn Owen, as stated and CEO of SALT Lending. We also go by just SALT which stands for Secured Automated Lending Technology. We’re excited to kind of tell you what we do.

Caleb: Hi, I’m Caleb Slade. I’m the Creative and Community Director. And yeah, we’re getting some momentum, we’re excited to tell everybody where we’re headed and where we are and yeah, getting into it. 

Mike: All right, cool. So, people who have listened to the podcast in the past might be thinking for a second, “Now, this is a little bit different.” Obviously, everything up until now I’ve tried to focus on companies who are in the Monero space because this is the Monero Monitor. But, this podcast, today’s episode just kind of happens to be something that I stumbled into.

I was down at the Denver Bitcoin Meetup a few months back and ran into Caleb and we got talking about his company, they were actually sponsoring the event at the time, for that month. And we got talking about the company and I offered to have him on the show so that he can tell everybody about this. So, I believe this is the first time that I’ve seen you guys in any type of media. I tried looking for interviews or anything, but I haven’t found…

Shawn: You might be the first.

QS 01:48 Mike: All right. Well, that’s pretty cool, I’m glad to kind of break this story. By the time people are actually listening to this, you guys will be presenting at Consensus in New York?

Shawn: Yeah. If you are putting this out after next week, we’re going to be in New York all week, next week for Consensus 2017 and then also Token Summit. 

Caleb: From May 22nd through the 24th. 

Mike: Okay, well, this is coming out May 22nd, so depending on when people download and listen, they may have heard from you there or this might be their first taste.

Caleb: If anyone is at Consensus, we’ll be having a booth, so come check us out at Consensus, would love to talk to you.

Mike: Cool. Yeah, so, any listeners who have been in for a while, pardon me as I go a little bit beyond the Monero space, this is just a cool opportunity I saw. And then, any new listeners who are coming in from maybe Bitcoin, welcome to the show and feel free to go back and look at some of the other episodes we’ve had.

QS 02:46 Mike: But anyway, why don’t we start, Shawn, with just telling everybody the basic idea of SALT Lending?

Shawn: Sure. So, there’s a lot to what we want to tackle. It’s a pretty ambitious plan and there’s a lot we could get excited about and share with you. But I wanted to just kind of break down the simplest version of the idea and where it started and then kind of elaborate to where we’re at right now and where want to take it. The concept is, when you first hear it almost kind of obvious, and then when it sinks in, it’s like, “Oh, I get it.” Which would be, if I own something like Bitcoin, it would be great if you could put that up for a collateral, like property and take a loan against it. The same way that you’d have equity in a home, or in a portfolio or a property, a car, you can borrow against any other type of property. Yet, you can’t borrow against Bitcoin, it’s new. 

And this is also before there was lots of other blockchains, so we’ve expanded into being able to lend against blockchain, or blockchain-backed loans and this is very analogous to securities-backed lending where lots of large institutions would have large portfolios of assets, whether it would be IBM or Apple and they want to swap back and forth or use those as value to hold a position. So, the concept was kind of simple and didn’t exist and we spent quite a bit of time looking at that and said, “This is an amazing kind of piece to the economy that needs to be here, let’s do it, let’s make it happen.” 

From then, we’ve kind of gone even much further into really focusing on the technology that would connect a borrower or a lender, or anybody that would have something that would want to hold his value as a digital asset, specifically distributive ledger technology, so this could be Monero, say. And not want to sell that, but maybe want to spend something else like cash if they need to pay bills. And instead of liquidating their asset or having to sell it out and turn it into cash and then go pay their bill, they’d simply borrow against it, so they can still continue to hold onto what they value, see the appreciation, avoid having to worry about accounting for stuff like taxes or other elements that might not be favorable depending on timing. 

And then from there, we’ve just been going down the road of anything that has to do with lending technology and smart contracts and how could we make this an efficient product that allows for gained ability. I don’t like to use the term peer-to-peer, but in a lot of ways there’s a version of this that is peer-to-peer. And you can take that into the future where maybe it’s one asset that’s on a blockchain, held against another asset on the blockchain, one is just where somebody wants to spend more than the other, and the other person wants a return on investment in the type of currency they’d be lending, right? 

So, that in kind of a quick summary is Secured Automated Lending Technology, in SALT we’re looking to do and from there, it kind of might be peeled apart and see which parts of it you want to talk about? 

QS 05:39 Mike: Yeah, yeah. I think I’m curious about the kind of implementation of it and then some of the other things. I think Caleb, you and I talked about how you guys were going to have a sort of membership model, but let’s first start off with just… Let’s talk about what it takes in order to get some type of Bitcoin lending going. You obviously need people who want to borrow against their Bitcoin and then you need people who want to provide the money that people can borrow, so the lenders. And how are you approaching that problem? Are you being the lenders or are you bringing in outside people, how does that work?

Shawn: Yeah. There’s a lot that goes into it. You’ve touched on kind of the two big pieces of creating the market. It really requires the demand to be there, which we know is there. There is lots of people waiting to use the service from the borrower side. And on the other side of that, people that want to get into this in an indirect way, maybe that are familiar with investing their cash or that’s the business they’re in, in lending, that have the ability to underwrite the loans or the securities depending on which version you’re talking about. And they just don’t have a way to connect, there is no mechanism, there is a gap in-between these two.

It just doesn’t exist, so we’re filling that and there’s a lot that goes into that, from making the market, the marketing, to the product, the technology leads, everything is tech-driven, so you’ve got to be really at the cutting-edge of using the technology. The regulation, understanding what is it requires to be able to properly let somebody with dollars come and lend. When you’re dealing with the legacy system as it is, there’s an entire framework that’s already been put in place, whether you’re a bank, credit union, broker dealer, hedge fund, private equity fund.

So, there’s lots of rules that they have to kind of follow in the way that they see it and the way they understand how they’d be investing on the cash side, and then other side you’ve got kind of the other side of the world, which is people understand blockchain, security, multi-signature addresses, privacy, holding on to your assets, being able to trade in and out of positions, work through wallets. These are terms that maybe lenders don’t have any clue about, but borrowers totally get. We really kind of do a lot, it’s all tech-driven, but there’s a lot of relationship-building in process and workflow in order to make that all come together. 

Caleb: From a lender’s perspective, it’s really, if you understand what a blockchain asset is, you understand that it is the perfect form of collateral because how easy and efficient and cheap it is to transfer and store and liquidate if you need to protect your loan. So, lenders looking at lending against this model, they’re used to lending against assets that aren’t that easy to transfer, aren’t that easy to divide, aren’t that easy to use to protect the loan that maybe defaults and because of that, lenders have to spend a tremendous amount of energy and cost evaluation the borrower’s credit-worthiness and deciding how likely that person is to have paid back regardless of the value of the asset underlying the loan. 

So, what we’re proving with this model is that, if the asset that’s protecting the loan is ideal, then you don’t even have to worry about the credit-worthiness of the borrower, which is exactly what our lending platform does. We only focus on the value of the asset underlying the loan and your credit doesn’t really come into play. For a lender, if they are used to let’s say, lending against mortgages or you know, real estate, if a borrower becomes insolvent for a month or something like that, they have to default on the whole loan, they have to foreclose on the whole property.

The parallel in Bitcoin is like if you could go in to a house, a mortgage that goes upside down and you could shave off the living room and then the loan would be fine because if they could  perfect possession of just that living room to make the loan right-side up again. And that’s what cryptocurrencies and blockchain assets do, is because they are so infinitely divisible, and they are so cheap and easy to store securely and then sell on the market if they need to, it really makes each loan more efficient and we can offer better rates to the borrowers and better rates to the lenders.

QS 10:00 Mike: Yeah, that seems to make sense. I’m guessing you’re using some type of multi-signature where you’re maybe the third party involved, I’m guessing there’s a lender, a borrower and then you as that third party decider? How does that work? 

Shawn: Yeah, I won’t be able to give you all of the information because I don’t want to get myself into too much of what we’re doing specifically, but you’ve got the concept right. So, if you take for example, three or four signatures, that’s already pretty secure. For anybody to have to log in or use three different devices in order to move a transaction, that’s a pretty sophisticated model for security, but then you can add secondary passwords on top of that, and then you can distribute those on to hardware that’s in separate locations or has protocol in place. It could be different companies.

So, we use third-party providers to help us separate the fact that nobody can come and say, “Well, SALT can just run off with your money.” And in fact, that’s really important for us to allow for a borrower specifically, to really feel like they still have control. If I do everything I’m supposed to, this is not something I’ve put up on an exchange or given over to somebody else, it’s not just a digit that represents my ownership in a screen, it’s actually my key and I’ve got the key on my hardware, right? 

There’s a way to override that and the contract, if needed, based on the lender versus the borrower back and forth, but it’s all very much focused on how to distribute the risk, how to make it very provably safe and to never have a situation happen where there is any type of loss and to give everybody the control without having to have a custodian so to speak. So, we act as a connection and we help play a role in that, but we’re not the custodian.

QS 11:40 Mike: Okay. So, you have a third-party bank or a lender, who plays that role, is it an autonomous thing?

Shawn: We play one role through software. Lender plays another role through a third-party. You can think of it for example, if you’re familiar with some of the service provided like, BitGo or Coinbase or Xapo. There’s lots of people getting into that space where they just basically will hold one key or two keys, depending on what you need. And then you have business logic based on rules that say, “We’ll only do this if this happens.”

Did that kind of help paint the picture of how you take four signatures for an example, and the three of us all have one, but there’s also somebody else, there is really no opportunity for collusion and you also have obfuscation. We don’t publicize who’s on the other end of it, you’re getting cash, but you don’t know who the lender is and the lender doesn’t know who the borrower is. There’s really no way to go figure out where are the keys. 

Caleb: I think our goal is as much as possible, is to remove as much trust as possible from the situation. So, the borrower knows that if they pay back the loan, their collateral is returned to them, there is no pediment to that. The lender knows on the other side, if the borrower doesn’t pay back the loan, then I’m made whole through this collateral. There is no need to trust anyone really that that’s gonna happen. It’s a relatively trustless situation, as much as you can when you’re interfacing a very trustless network like blockchain assets and a system that relies heavily on trust like traditional financial institutions and networks. We’re trying to bridge that gap and remove as much trust as possible from that agreement.

QS 13:24 Mike: Okay, cool. Let’s kind of expand on this a little bit and let’s kind of create a scenario. Say I have 10 Bitcoin that I want to borrow against. I would approach you and go through all of whatever it is to set it up. And then, what can I expect as far as how much I can borrow, what types of terms I would need on how I have to pay interest and things like that? How long can I keep this as collateral, can we work through how that would work?

Shawn: Yeah, I’m gonna give you a really generic, basic example. And then from there, we have plans to create a lot more flexibility and more of what we would call products, different types of products. For example, one product would be interest only versus principal and interest. Those are two different types of structures that somebody might have the preference for. But then when you get into the loan markets, there’s lots of different ways you can structure loans. We are starting with a very basic principal, I’ll give you the basic example, and from there, you can kind of imagine any type of loan you’ve ever experienced, those are options that we’ll bring in if there’s a market for it.

But a basic understanding of this would be, you have 10 Bitcoin. You know that SALT will help you in a loan. You don’t want to sell your Bitcoin, you’ve seen the appreciation, but you need to spend some cash on something and you need to make a payment of some type. You go to SALT, and we have you sign up, you become a member. Our membership is denominated in SALT, it’s a SALT membership. It’s on a blockchain, it’s on the Ethereum blockchain for the time being, probably will stay there. And that’s a transferable token, so either you say, “I’m gonna use this with SALT because I want to get a loan.” Or, “I’ve changed my mind” and you could go sell it or hold onto it for later. 

That’s applicable as an option to use on any one of our products, whether it’s buying a custom hardware wallet to go along with your platform, your login. So, you have the security, or if you just want to pay down some interest. But now you’ve come to the loan function and you’ve gone through the process and you’ve finished your profile, and you say, “I’d like a loan.” And we’re gonna ask you how much and it’s gonna have a calculator that will tell you, “For that amount, we’ll give you a loan for, say, $8,000.” Because we have to overprotect it in case of volatility for the lender. 

Caleb: $10,000 worth of Bitcoin would be $8,000, but 10 Bitcoin would obviously be…

Shawn: Oh, yeah, he said 10 Bitcoin, whatever the math is on that. We’ll do an 80% loan to value. 

Mike: Sure.

Shawn: So, then, a contract is created, we go through the process and an address is created for the collateral, you send the funds that basically memorializes or officializes that this is good. Collateral is good, we know the collateral, so you’ve already got a linked account where you want the funds to go; now we send you the money. Then, we send you notifications to make it easy for setting up auto-payment and things to make your life easier, but ultimately, then now you have to make a monthly payment and pay down either interest or principal and interest depending on the structure of the loan. You pay that down and suddenly now you have extra collateral that has always been yours, it’s still yours, and you decide, “I want to take out another loan, like a credit or I want to take my Bitcoin off the system again.” Then that becomes a preference for you. 

QS 16:31 Mike: Okay. So, then, is the amount that you decide to borrow, off of that 10 Bitcoin, does that at all determine your interest rate then? Or, what determines the interest rate?

Shawn: The interest rate is determined by the marketplace of what lenders need and what borrowers will pay. So, in the beginning, we’ve kind of standardized that. Ultimately, what happens is a market dynamic. Most anything in markets that’s related to interest is something above whatever prime is in the markets, what they can get. Typically, if somebody has the option to refinance, or get a better rate, they will. So, as soon as you open the flexibility of letting people prepay or sell out of whatever position they’re in, then now the market decides. But in the early days, it will just be a standard, easy to understand. This is the going rate, you’ll know what it is ahead of time and it’s either take it or leave it.

QS 17:25 Mike: You said that you’ve seen some demand for this already, what kind of volume, for lack of a better word, would you have to see in this on a monthly basis for your company to be able to sustain itself. This seems like something that maybe you can get people who are interested in it, but if you don’t have enough people, how do you pay for the overhead and everything else?

Shawn: Yeah, so there’s a couple dynamics to think about to answer that. One, when we started this, we were looking at the market cap of Bitcoin that was probably 7 billion, 8 billion, around that. And we did all of our math based off of what would happen if we were only doing a niche market of Bitcoin which is a very small market, mind you, in the big picture. And we crunched the numbers and did the math and if you could get leveraged out or loaned under management, assets and management would be a way to think about it, a billion dollars, you still have a decent company to make. However, things have gotten much more favorable on the fact that the market cap of all crypto is now more like 60 billion and climbing very quickly.

And we’ve seen this kind of rush which we’ve all been anticipating, but now that it’s here, I don’t believe that that goes away, our bet is that more and more types of value, whether they’re native internet new types of value, like Bitcoin, Monero, Storj, you name it, interesting projects… Or, if it’s more traditional types of value like assets, stock portfolios, bonds, gold, there is lots of work towards putting all of those on the blockchain and thus now you’re market kind of exponentially gets larger. 

We think that it will not only be just Bitcoin being leveraged, we think it’s gonna be portfolios of blockchain assets that are borrowed against and we think it’s a very big market. So, in order for what we need to survive, we would be just fine if we were a little niche company, but we’re planning something much bigger. 

Caleb: If you look at the active projects right now that are big-name companies like IBM, Samsung, Goldman Sachs, Merrill Lynch, some of the biggest companies in the world that have active projects that tokenize the world’s existing assets. The Royal Mint of Scotland, the Royal Mint of Canada, they both have individual projects to tokenize gold in vaults, so they’ll have a digital token that corresponds to an ounce of gold in their vault and they guarantee that. Diamonds, jewelry, art, even small niche industries like appliance servicing which is a headache of an industry that has a lot of problems that can be solved with blockchain technology. They’re starting to look at service contracts on appliances as an asset and that’s being traded, and it’s a fungible asset now on the blockchain, on blockchains.

And that’s really interesting to us because we’re building the technology that makes leveraging those assets, the value of assets, we enable that. And we do it in a way that’s very efficient, very affordable, very automated and with a large reduction in trust in those agreements. We think that our up-side is so much bigger than just Bitcoin or any singular crypto-asset that exists today. We really want to be agnostic to the usefulness of this technology, we don’t want to say it’s only good for this, or it’s only good for that because we see the power of distributed ledgers doesn’t just apply to money. And Bitcoin, Bitcoin is kind of what email is to the internet, it’s one powerful application for a really powerful technology, and currency is one really powerful application of a very powerful technology, distributed ledgers and blockchains.

We’re excited to see the future of value and assets and where that’s going, we think it’s a tidal wave that’s coming. Whether or not you think it’s coming, it’s gonna come for you, so we’re positioning ourselves to be the catalyst for the leverage of that value.

QS 21:28 Mike: Interesting. Okay, so now I imagine you’re gonna start with, Bitcoin is gonna be the only collateral that you can put up and then cash is what you can borrow, but how will you evaluate, or what’s your plan, I imagine for something like Ethereum with its market cap is gonna be a quick thing to follow, what about other coins? What is needed for that and then also, is this something that’s gonna be strictly for the US, so strictly borrowing US dollars or will this be open to a worldwide market?

Shawn: Great question. There is a roadmap, version one - easy to understand, biggest crypto market cap of blockchain is Bitcoin. Biggest cash, most used cash in the world is dollar. Those are kind of the obvious pair to start with, but then from there, Ethereum is right on the roadmap, there is actually already a lot of demand for people wanting to borrow against their Ethereum and now you’ve seen the explosion of a lot of the other caps, right?

By the time we can even get to there, I think there will be even more. However, What we’re gonna look at is liquidity, how much of a market is there, what would it look like if we had to sell, how many people need this, what other currencies are the biggest, is it the Euro, is it the Yuan? Where do we go next and a lot of that is just letting the market inform us. We don’t know for sure where the market goes, what’s the third or fourth asset, what’s the third or fourth currency, what we know is there is always going to be assets that people want to hold on blockchains and there is always going to be currencies that people want to spend, that they need to borrow. That’s kind of our roadmap… Let’s come up something very simple and useful, let people use it and see it and then let the market tell us what is next. 

Caleb: And people talk a lot about… I think what’s really exciting when we start leveraging crypto for crypto to spend. People talk a lot about Bitcoin in 10 years, most consumers might not even touch Bitcoin, they might not even know they’re using Bitcoin because Bitcoin is kind of a first-layer store of value. I could definitely see someone leveraging their Bitcoin assets, or somebody leveraging Bitcoin assets for something that’s a more instant transaction like Dash or Monero even for those transactions and that’s really the agnostic benefit of something like this because there are things that you want to hold that have value. There are things that are better to spend even from the pragmatic structure of what that technology is, or that asset is, or just because you see it as a depreciating asset versus something you think is gonna be more valuable tomorrow.

~~ { Intermediate Music } ~~

Mike: Hey, everyone, Mike here. I just wanted to take a quick break to thank everyone for your support of the show so far. In just four episodes, we’ve seen nearly 3,200 downloads with over 1,400 just this month. If you’re enjoying the shows, please help continue to build our base by subscribing on your favorite podcast site and following me on Twitter, @MoneroMonitor. Leave a comment on iTunes, Google Play, or on our website and give us your feedback. Lastly, I just want to thank the generous donors to the show, your support has helped with hosting costs and allows me to invest in new equipment to bring you in-person shows like today and maybe even videos or interviews at conferences in the future. Now, let’s get back to it.

~~ { Intermediate Music } ~~

QS 24:49 Mike: So, we talked a little bit about somebody who wanted to borrow. But on your website, it talks also about how you can become a lender, so it says that you have to meet a requirement to being an accredited investor. And can you walk us through, first of all, what that means for people who might be listening that don’t know and then, second, how you go about assessing somebody’s status as an accredited investor?

Shawn: Sure. So, the term accredited investor is a benchmark, it’s a way for the SEC to say, you need to do disclosure and due diligence to make sure that you’re not out there selling something to Grandma Kettle that she shouldn’t be buying, so you can make a profit. It’s a kind of a rule that’s been around for a very long time. I think it probably could be done different in the future, better, but for whatever its worth, it’s a standard that says, if I wanted to go sell investment in the company SALT, I would need to come up with an offering, I would have to fully disclose that you can lose your money, and I’d have to make you put a minimum up and I’d have to vet that you have a certain net worth to qualify for being an accredited investor. 

And then, if you have  a certain net worth and you fully signed off on saying “I understand all this,” now I can sell you equity. It’s a bit of a barrier for most people. And it’s not necessarily our long-term vision to make it that way. It’s just simply one type of offering. If you’re issuing a security in that manner, that’s required under those rules. That’s very different than if a bank wants to underwrite notes or loans and it’s very different if a hedge fund wants to go out and do specific types of structured notes, et cetera.

The way we disclose that and the way it works, is if somebody wants to use our platform, as we have people that want to, from the lending side of it, there’s a couple of different ways that they can do that. And it’s different in every jurisdiction. This would be a different conversation if we are in the Eurozone or in Hong Kong. But, there’s rules typically set by governments because you’re dealing in a national currency that’s issued by the government, so you have to play by those rules when dealing with that currency.

So, if you want to be an investor, which is another term for a lender, then we’re gonna have to go through suitability and make sure that you are understanding what it is you’re doing and or you’re set up for that. And then we make it as easy as possible, whether you want a licensing agreement or kind of an easy, here, just write a check and we put it into a fund and now it’s been invested. Or, if we allow people to be the underwriter or participant on the platform in a peer-to-peer fashion which is more analogous to say, like a lending club. So, there’s a lot of different ways in such a big market when you talk about just being a lender.

That can mean a lot of different things depending on how you structure it. We want to be as versatile as we can and we also want to make this available to as many different types of lenders as possible and then again let the market decide really which direction to go. Does that help?

QS 27:54 Mike: Yeah, I think so. As part of that accreditation process, if you’re a US lender for instance, can you self accredit or do you have to submit certain documents to your company, to SALT, and then go from there?

Shawn: You can self accredit. There’s a due diligence period that is on us to make sure that we’re following the law, and again, this isn’t us being the primary. Right, so we don’t want to become a lender. We want to help people connect that are already lenders. So, if you’re already a lender, this is something that you’re very familiar with because you already understand, am I issuing securities, am I buying securities, what part of the process am I in… What we want to be able to do is eventually extend that down to everybody. 

Right, so everybody can go sign up and pretty much as easily as you would if you opened up a TD Ameritrade or some type of trading account, have access to be able to put a smaller amount of money in. There is just a lot required to get there, so it’s a little further down on the roadmap. It’s not our V1, it’s not what we’re going after Day 1. It’s easier for us to go bring on people who are in the business of lending, and say, “Sure, I can go do X amount of dollars Day 1.” And kind of open up that ability to use the SALT technology without directly interacting, but then we have plans to get that to where anybody could go on and use it.

QS 29:09 Mike: Okay. So, then, Caleb, we were talking about a few months back, that a part of this whole thing and actually, Shawn I think you alluded to it too, is that you have to buy a membership in order to I assume be a borrower or also be a lender, how does that work? Can we talk more about the membership?

Shawn: Yeah. So, we think the membership is really cool. It’s another application of using blockchain technology in an actual, real-world environment. I think most people listening and I could be wrong, but they probably have a good sense of crypto if they’re listening to this, or if you’re new they understand the value out of being able to denominate things on token or in smart contracts. And there’s a lot of really cool projects that are doing things where it’s kind of, if you have this token, you can use this platform. Right, Ethereum is probably the most well-known, first one.

But there’s a lot of ways in which you can do that and the way we’re doing it is, if you have a membership which is very normal for a platform… if you were going to be doing a loan say for example, you’re going to end up paying a lot of interest. That’s a part of the cost to borrow money and we’re taking that and saying, rather than us creating origination fees and on-going fees and maybe pipework fees and all the other things that would normally go into a loan, because we can streamline this, we’re gonna make it a little simpler and we’re gonna do something that fits into using crypto. We’re denominating a membership as a base unit, say it’s worth $10 and you can apply that towards your loan or you can apply that towards upgrading to have larger credit limits, or you can apply that towards hardware wallet that will help you provide and secure your side of the coins or the assets.

Then, you have kind of all the additional benefits of something being transferable, being auditable, being built on a smart contract where you can add additional code into the future. A lot of what we want to be able to do is be able to eventually issue these loans onto the blockchain, so they’re not just paperwork and they’re not just something in code, but they actually exist on the blockchain. That’s a pretty big goal and that kind of goes down the road of what we think everything will do, which is being able to transfer value effortlessly on the internet of anything that’s of value. Well these notes are gonna be of value, the membership is of value, a gift card is of value, there’s a lot of different ways you can denominate value.

We’ve created an application basically that says, there’s a cost to doing this, there’s a cost for us to run this. There is all of the cost that goes into the technology, the compliance, the software development, the on-going burden of creating relationships and servicing this, the notification, paying for the software, all of that is a cost and for us to make money, we have to make money or we can’t provide this.

If you’re going to charge, there’s a lot of different ways you can charge. You can accept all types of payment, which we intend to do. But you can also accept your own internal payment, like most places do. They have coupons, they have credits, they have gift cards, etc. This is one of many things we want to do that’s directly supporting building on the blockchain or blockchains and we’re pretty excited about it. 

QS 32:15 Mike: So, I take it it’s a token then on Ethereum. 

Caleb: It’s an ERC20.

Shawn: Standard smart contract.

Mike: What’s gained by having that? I mean, if the token is only good as a membership for being part of SALT, then why does that need to be on the blockchain?

Shawn: You don’t need to put anything on the blockchain. Right, that’s just the reality; you don’t need to put gold on the blockchain. There’s additional benefit.

Mike: So then, what’s the efficiency then that’s gained here? 

Shawn: Mostly transferability and accounting. You have something immutable, if you’re using an immutable blockchain, there’s a lot of value in that automatically. People underrate I think and highly underestimate how much money goes into proving documents exist whether it’s a dollar bill and you have all the fancy material embedded into it or if it’s a notarized document that you have to go put in a safe in your home, or stocks certificate. Blockchain solves a lot of that in a very efficient way, right? So, just simply that alone I think is worth people building more and putting more value onto blockchains in general, the immutable nature.

But then there’s this efficiency gained in transferability and that’s a really big deal. Being able to transfer value is a part of our big value proposition. We believe that in the future there’s much more value that’s transferable, so why wouldn’t you apply that to something like a membership or a token?

Mike: It just seems to me that you have, with a company like this, you’re gonna have certain KYC/AML requirements. So, let’s say, I imagine you’re doing some type of ICO or something with this token, but let’s say, or maybe you’re just continuously selling these tokens, indefinitely into the future, let’s say a buy a bunch of them and then transfer them to a whole bunch of other people. While you did your KYC on me, but what about all these other people who now have a token and ostensibly have a membership to be able to lend that…

Shawn: Membership doesn’t give you the right to borrow or lend. There’s a big distinguishment between our eco-sphere that has to do with data, access, information, security. That’s one element that all of the regulatory burden and KYC comes in if you’re gonna do financial transactions like borrowing. So, just because you’ve signed up for a membership and then you give it to your buddy, that doesn’t mean we’re gonna give your buddy a loan.

QS 34:37 Mike: So, what does the membership do then?

Shawn: It does everything I just described, but I’ll see if I can do it in a better way. It accounts for who’s a member, it gives us a denominated dollar amount that we can then stack up and process that we’re already gonna be doing. We already have to account for everything. There’s a model that we used, are you familiar with Bloomberg? 

Mike: Yeah.

Shawn: The Bloomberg Terminal.

Mike: Sure.

Shawn: Okay, so Bloomberg Terminal was access to what now effectively now would be called an application, but it was an actual terminal and it comes with a lot of data. It comes with the ability to understand that market. It comes with basically a membership. You have to pay an annual subscription to that. And you could effectively argue that that’s the exact same model we chose. We looked at a lot at what’s been done in securities-backed lending; it’s almost always a tiered approach to how much access you want. It’s not a free service. These are not free products, this isn’t something you can just give away. It’s an expensive financial tool.   And that model is something we found very attractive and the fact that you can do a lot with denominating and representing ownership of value on a blockchain, we think it makes perfect sense and we want to build on top of that.

Mike: Okay.

Caleb: And it’s not just access to the platform that the token gets you, like you were saying, we’re gonna have SALT branded hardware wallets that you can purchase with the access token, with the membership credit. We’re also gonna lower your cost of money if you pay for that level of membership. The interest rates that you’re paying on your loans can be reduced through spending these tokens. It’s not just access.

Mike: Okay, so do the tokens have then a fixed value against the dollar? 

Shawn: On our side, yeah. What you would want to go sell it to your friend for, that’s out of my hands.

Mike: But you’re essentially pledging that for your company, this is always gonna be worth $5 or whatever it is.

Shawn: 10 bucks, yeah.

Mike: $10, yeah.

Shawn: Yeah, so we’re gonna collect 10 bucks from you anyway, right? We need to create revenue and we found that because we have lots of different products and because there’s a lot that goes to meet those products, we wanted to quantify them down into buckets. For example, if you have a basic access level and what that comes with and what would cost us to service that, versus a mid-level or an enterprise-level where you have, we’re working for you to integrate this into your system or licensing your API in it. Then, there’s a lot more that goes into that. It’s a different application, if you will, it’s a different product suite.

We wanted to bucket them first, and then we started realizing you can denominate everything into categories. This is 5, this is 10, this is 15, I’m making examples up so to try and make it simple. And I also understand that there’s always skepticism in this. I was originally like a Bitcoin maximalist. I thought that everything was a scam, whether it was Monero or anything else. But I don’t hold that view anymore, at all. I think there’s lots of ways that you can create projects and tokens if you will, to use a simple term - that have merit. We want to prove that out.

Mike: So, essentially, the token then is almost as much an IOU or like a Starbucks Gold Star or whatever, some type of thing that you were saying, or gift card, you’re saying will always have this value and if people on the side want to trade it, whatever, feel free, you don’t care. But you’re kind of saying this is what it’s worth to us.

Shawn: Yeah. So, say you had become a member, right? To get comfortable with that term, and now you have access to this product that we’ve given you, it’s a bunch of different products packaged and you’ve purchased extra membership and you decide that you don’t need to do your loan anymore, you don’t need to pay down interest and you don’t need the services, the beauty of it is that there’s a market for you to kind of get out and sell that off to somebody else that might want it.

You could sell it at discount, you could sell it for whatever you want, we don’t really care because we know that we’ve already made the promise that if you have a ticket to the show, we’re gonna let you come in and watch the show, right? So, there’s a lot of different ways that you can denominate something that’s a subscription or access, whether it’s ticket to the show analogy, whether it’s access to data like streaming movies, whether it’s credits that gives you the option to listen to audio books, whether it’s something that you flash so that you can get into the gym. These are all basically different models that allow for somebody to come into a country club, a gym, a gun range, whatever fits your profile, there’s a lot of different analogies that we could use in a normal business environment that I think all have the potential to kind of follow the road a lot of people have already done.

Which is, saying, instead of us having a serial number or a barcode or any other mechanism, we’re doing the exact same thing, but using a token, or a blockchain smart contract. So, that’s our opinion. We are very excited about it. We love supporting and building onto public blockchains. We think we’ll probably service a lot of other applications as well whether they be private or public, if there’s value and they have liquidity and they want to trade, we’re probably gonna end up interfacing with that some way or another if people want to borrow against it. But then, there’s a lot of additional cool things we think can be built into the technology.

If you’re a technology company that’s focused on building Secured Automated Lending Technology and you understand what smart contracts are and blockchain tokens, we want to leverage every ounce of that and build as much as cool stuff as we can.

QS 40:22 Mike: Okay, so in a sense, you’re kind of just handing off a little bit of the accounting there to Ethereum.

Shawn: Sure, yeah, yeah. That little bit of accounting which is really interesting, right? So, we can track how many have been redeemed, how many have not been redeemed, where they are transferring, what are people doing with them. You know, hopefully, our goal, if we live up to it is to continue to add more value to our site and to make this something where you would clearly want to pay for a subscription. If you’re gonna pay for the money anyway, it’s just an easier way to denominate it. Then our goal becomes how much value can we add to our platform.

Caleb: Given the community we’re trying to serve, it’s like, I would much rather have an app token or a store credit, stored on the ledger that isn’t privately and centrally held by that company. What if they decide they don’t want to value that credit that I own and they can just turn that off like with the Starbucks card, not that Starbucks ever would probably, but…

Mike: Well, but on the same token if you guys decide to honor the value of it, it doesn’t matter to me that it’s on a blockchain at that point. At that point, your token just becomes any one of the other dead scam coins on the market. Not saying that you are a scam coin. 

Caleb: Yeah, it’s possible that a company could…

Shawn: We are by the way.

Caleb: Yeah, totally, we’re just waiting for the money to come in. But there’s no reason we would stop accepting just one token if we were to stop accepting all the tokens. If we go out of business or something perhaps, yeah, but I mean, if you have something that is stored on the blockchain, that is separate from that company’s internal ledger or centralized ledger, then there’s a secondary market. Then, the secondary market doesn’t ask for permission, doesn’t ask for SALT’s permission to value that. We’re giving up a lot of control of this internal token, but we think it’s more efficient, it’s more mutable, it’s requiring less trust of our customers and the market in general.

Shawn: I mean, quite bluntly, there’s a lot of other benefits for us as well in marketing, in brand acquisition. Our goal is, let’s get as many people as possible to know about SALT, to sign up, give it opt them for literally free in the beginning, almost as free as you can get, and then let’s learn from the community. Let’s interact, let’s participate in a truly agile way, let’s really kind of listen to the feedback and work with people and build that community and stake our claim. Say, we’re the ones doing this. So, there’s a lot of benefit to being able to have something that’s transferable, where everybody can help you market.

Mike: Okay. 

Caleb: But this whole project becomes really very interestingly meta when our platform starts leveraging SALT tokens. So, if you have a bunch of SALT tokens, that’s an asset with value, you can leverage that for dollars to spend. 

Shawn: Yeah, if we get to that point where we’re able to use it as collateral, I’ll be very happy.

Caleb: Yeah, that’s our goal for like any blockchain asset. 

QS 43:20 Mike: Okay, so do you have a date for when this is gonna become available or when your company is gonna launch?

Shawn: No dates, we’re kind of more taking it in… the roadmap. Give you kind of high-level where we want to go and not promise anybody any dates because dates can become arbitrary benchmarks, but in the very near future, we’re focused on brand-awareness, building the idea and getting people comfortable with what we’re doing. There’s lots of good questions that come out of pushing back, why are you doing this, etc. Especially in this space, so I’d rather get out there and let everybody kind of fire away and understand this is credible and we’re going to do this, and there is going to be value, and let it sink in to where you start thinking, “Maybe I want a loan.” Right, “Maybe I could use this platform.” 

Then, we want to launch access to the beta if you will which is the base level of membership. You can come sign up now, get on the wait list for a loan, we need to queue that up, we’re not gonna be able to handle everybody, so you need to get in first. So, if you’re interested in taking a loan out, which we already have a large list of people that want to take a loan out, the way to do that would be participate in buying some membership, locking a spot. We give you a profile; we get it all secure, now you understand us, we know that you are ready, put your name on the queue and let us work towards getting you that loan you want.

Once we get through that phase, then it’s very much business development - focusing on the campaign to really kind of go over to the lenders, right? We don’t want to try to do everything at once, we want to really go after the value proposition of the borrower first, build the community, build the access, get people on the list so they understand, yes, this is in fact going to happen and I’m going to be able to get a loan based off my Ethereum or Bitcoin or at that point, whatever else we have that we’re ready for.

And then go to the lenders and say, look, here’s an entire class ready to go, are you ready for your income, your fixed asset investment, how do you want to do this? Let’s structure it and we’ll be able to really focus in on that roadmap which gets us probably near the end of this year without making any promises of dates, and when we can really kind of just allow it to get put into the wild where it starts interacting with people and financial transactions are done. From there, we want to start figuring what’s the next market, are we going to Ireland, are we going to Hong Kong, where’s the best new currency to kind of pair, right? 

Mike: You guys heard it here first, launching at December 2017, across the universe.

Caleb: Every jurisdiction, every cryptocurrency!

QS 45:45 Mike: Let’s talk just one kind of final question then about the token sale. You sort of said that you’re gonna sell the tokens for a lot cheaper that what they’re gonna ultimately be worth. Is the sale going to be something that is a one-time thing or will you always be issuing tokens to anybody who wants to get a new membership? Let’s say five years from now, somebody is just discovering this and wants to become a member, are they gonna have to go that marketplace now or will they still be able to buy directly from you a membership token?

Shawn: Yeah, great question. So, we’re being very particular not to fall into a crowd just because we’re doing stuff with blockchain and ICOs. Not that there’s anything wrong with that for people out there that are in love with ICOs, it’s just simply, it’s not an accurate statement when you look at the words very closely. It’s not initial, and I’ll explain that; it’s not a coin, I’ll explain that; and it’s not an offering, right?

However, I totally get the fact that anytime anybody is doing a thing with blockchain now, the first word that comes out is, “Oh, is it an ICO?” So, bearing that in mind, I’ll kind of walk you through. The way we structured it, and I’ll give you as much details as I can, there is some stuff that we don’t want to release yet.

Mike: Yeah, that’s fine.

Shawn: It’s kind of like the date; we don’t want to make promises yet until we can. So, we have a fixed amount, we think having a fixed amount of units is better for accounting, even if it doesn’t matter, people still psychologically don’t like to think about something that’s just unlimited. It doesn’t go well with holding value, right? There’s a huge part of Bitcoin specifically that came to fruition because the people saw the limited scope of saying, “There will only be this many.” And you can apply that to a lot of different aspects, right?

There is always something valuable in something that’s scarce. However, that’s not our primary driver. But we did decide to make it a capped amount of membership units that we would then use as either an instant purchase or a credit. The next piece is, don’t want to talk about pricing yet, although, we know, in order to attract the type of user base we need to really give us the data and build the base that we want, it’s got to be very attractive, it’s got to be… I don’t want to say free, because when you give something away for free, it doesn’t really have the value it should.

We don’t want people to think that this is something that’s cheap. It’s very expensive to build and to service this type of product because you’re interfacing directly with the financial institutions of the world. It will be at a discount, though, as much of a discount as we can give away without too much liability. So, there is a benefit right then and there. If you think this idea is something you’d use for being an early adopter, we want to give the benefit to you knowing that we want to interact with you, want your feedback, we want to get your on-board and not be pissed that you spent too much money, so it will be very small.

The next thing is, because it’s a consumable, consumptive use of a token, it’s not an asset, it doesn’t give you ownership in the company, there is no promise associated with it other than you can consume it for our products. Because of that nature, ultimately we had to make a decision on whether or not it would be transferable into a burn address where it’s gone forever and it doesn’t exist anymore, or if we’d keep re-issuing them. Or, if we’re just transact where it just moves ownership? You spend your first one with us for membership, it goes back into our accounting, now you have a membership that you’re gonna use and now we’re gonna resell that same unit to somebody else who also wants a unit.

So, it’s another way of being able to have this business model perpetuate for the next, however, hopefully 50 years plus whatever it is into the future. And there’s a lot we could talk about there, I know we would probably run out of time, because we’re getting into the nuts and bolts of it, right, but that’s kind of some of the basics of how we’re structuring it.

QS 49:41 Mike: You guys are going to be at Consensus, some people might have already seen you at Consensus. At this point, I imagine you’re still just getting the word out and it sounds to me like you’re not trying to use this token sale as some type of fund-raising opportunity. So, I guess, if all of that is the case, then, what’s paying the bills now, are you VC-backed or whatever else? What’s the goal of your trip to Consensus? What do you hope to get out of it? And let’s start to tie up some loose ends here of some various things.

Shawn: Yeah, those are great questions. So, let me just run through them real quick. We self-funded. We put our money at stake, we went to our friends and family and we raised this with people we know. Nothing against VCs, because we will be probably working with you, but we ended up wanting to take this approach rather than go down the road of taking a deck out to Silicon Valley and pitching it to everybody. We wanted to prove that we were gonna build the technology, period. Whether or not you give us money or not, so we self-funded. We will most likely do a subsequent round which will either be kind of an extended seed round or just a Series A. 

We’ll also be doing some debt offering for people who want to help us grow. And, although it’s not our primary objective because really the marketing and market penetration is our primary objective of how we structured our kind of launch, it is a revenue event that does have a lot of the same elements of ultimately of what people are thinking of in an ICO world, right? We want people to help us build this, we want people to say, “This is a freaking cool idea, I could scratch my itch with that, this is something I want to use, I could use a loan, I’d get this.” Which is guys like me, I totally want to use this, this is part of the value. We want those people to help us. 

Whether or not that’s the opportunity because we’re talking to you at Consensus or if we already did or in the future about raising money and you want to take a look at what it would look like to be involved with the company, there’s a lot of different ways you could play and add value. Whether or not you’re just a borrower, you’re just a lender, you want to invest in the company, you want to help us crowd-raise, you want to be an affiliate, you want to help us be in the community. There’s a lot of different ways, so we want to attract as many people as possible and we’ll continue to fund self-funded if we have to, although we’re getting to the point where we want to probably look at a larger amount of growth. And ultimately get to where we’re revenue positive as soon as possible and we think we’ll be there pretty quick.

Caleb: Even without this, without selling our memberships before a launch, we’re on course to launch, we’re gonna launch either way. So even if some ruling comes down from the powers that be, we’re still gonna be launching a product without doing our membership sale, but I think what the membership sale can do is it puts us in a position where if we do take on more funding from a VC, say, it’s for a strategic benefit, not just because we need the money. It puts us in a much better position.

Shawn: One other fact I think that I personally would like if I were listening to this, because we’re big believers in blockchain and been around since the beginning of Bitcoin, we are not of the opinion that we should take in participants that send us cryptocurrencies or payments and then convert them and sell them out so we can live off of that. Rather, we want to prove our own business model. Any type of assets we acquire, say you want to pay for your first membership in Bitcoin, we’re gonna hold on to that and we’re gonna take a loan against it. We’re big believers that the meal we’re serving up, we’re gonna be eating, don’t trust the cook who doesn’t eat his own cooking. 

And we’re gonna prove this model and the fact that there’s a big value add, I think, in the community when you realize that the company is following the exact same model that it’s selling. And if that means us bringing in 20 million dollars of Bitcoin and holding on to it, to me, that sounds awesome. So, I just wanted to mention that. 

Caleb: Yeah, we’re gonna practice what we preach for sure. We’re not gonna take all your Ethereum and Bitcoin and then convert it into US dollars into a bank account somewhere, sitting there, off the market. 

QS 53:51 Mike: I’ll trust you’ve done your homework on that one. Okay, so, Consensus then, you’re looking to raise awareness and make sure people know about your company. Do you have a talk or any type of official thing?

Shawn: No, I mean, officially we have a booth. We have a spot carved out. We’re really there to talk to people one-on-one. Our goal out of Consensus specifically is for us to go and meet as many people as possible. Change from where we were when we were purposefully being stealth and keeping ourselves off the radar, to saying, “Hey, here we are, let’s talk.” And we are already a big part of the community; everybody involved has been in this community for a long time. We just want to expand that and meet a ton more people.

Caleb: This is our cotillion… our introduction to society, as it were. “We’re here!” 

QS 54:41 Mike: That’s great. You said you’ve been part of the community for a while. I know you had something to do with Southern Hospitality here in Denver, is that right? 

Shawn: That’s right.

Mike: And for people who are listening, they are one of the restaurants in Denver that accept Bitcoin, but how else have you kind of been involved or been around? Where might people know you from?

Caleb: I can actually speak this for a second. This is how I met Shawn. Shawn was formerly the COO of a restaurant group called Southern Hospitality.

Shawn: Southern Concepts.

Caleb: Southern Concepts, excuse me. And as a part of that restaurant group and the operations there, he spearheaded Southern Hospitality, being as far as we know, the first brick-and-mortar business in Colorado to accept Bitcoin for all their goods and services. They integrated it into their point of sale, trained all of their staff, it was something that was a bold move and he put his own name on the line to prove the model and I think that for myself, he proved that he cared about the community and cared about Bitcoin as a whole, cryptocurrency as a whole. Not in the theoretical way, but in a very practical, putting himself on the line for it, and I have tons of respect for that.

When we started this project, it was really through that connection that we had, that’s how we met and there was a…

Shawn: (To Mike:) We might have met that way, somewhere along the way.

Caleb: Shawn has been into Bitcoin a lot longer than I have and into cryptocurrencies longer than I have and he’s been a very respectable advocate for both. I think that’s something that he probably wouldn’t say appropriately enough, so I’ll say it for him. I’ve never met somebody who cares more about this space and what it can do for humanity and the future of money and value. That’s a little background about how I met Shawn.

Shawn: I think, a really quick version… thank you, Caleb. In a real quick version, I heard about Bitcoin in 2011, was fascinated by it from the economical standpoint. Was very much into sound money and the idea of kind of free money, if you will and that just became an obsession. So, in 2012, when I kind of had the opportunity to see if we could take it as payment in a restaurant, there wasn’t really many people doing that, there wasn’t any Ethereum, there was no anything else, it was just Bitcoin, right? There was no blockchain, it was just Bitcoin.

And it was very successful, I met tons of people that were very supportive and came and spent money for beer and for barbeque and that helped me meet a lot of people and pursue ideas which is where Caleb and I met, and first started writing ideas down on whiteboards. But I’ve just been involved in a lot of different ways, anyway way I possibly can. I’ve used every service, I’m out there, always kind of looking to support anybody that’s in the community and I think that this has been the best idea we’ve come up with yet out of all the ones that could happen. And I truly believe that this will be of great value to not only finance, but really to the Bitcoin and blockchain space as it is today and into the future.

Mike: Yeah, I think it’s certainly a cool idea and hopefully this podcast will start to help make people aware of it. This has been fun, guys. 

Caleb: Thank you so much for coming down to talk with us. If you have any further questions, don’t hesitate to reach out, we’re online at We’re on Facebook at SALT Lending, we’re on Twitter, @SALTLending as well. Very soon we’re gonna be launching our public Slack channel, so we would love to talk to you in any medium that you’d like to talk to us and we’d love to be available to answer any questions. We’re a hungry, young company and we’re interested in speaking to you no matter what your questions or concerns are. We want to build a relationship now and there is no lock on the door as far as speaking to us or getting access to us. From a company-wide perspective, we’re an open book and we really want to talk to you. So, reach out, don’t be a stranger.

Mike: Very cool. Yeah, I think you guys even have a subreddit. I don’t know if it’s totally ready yet or not, but it looked like r/SALTLending was at least being setup for you. 

Shawn: Yeah, it’s there. We need to go in there and get some conversation going, but there’s a lot of channels and like Caleb said, in any way we can possibly talk, we will. I’m looking forward to listening to your podcast; I haven’t heard it yet, so it will give me a good reason to come check out everybody out there as well.

Mike: Yeah. Thank you for having me. For people who are listening, what you fail to appreciate is that we’re sitting in a room overlooking downtown Denver, watching the beautiful May snowstorm that’s coming down. 

Caleb: Good ol’ classic Colorado May snow storms. 

Mike: But yeah, thank you for having me. Anybody who’s listening, you can find out more about this podcast on You can follow me on Twitter, @MoneroMonitor, or if you’re on reddit, look for bigreddmachine, that’s me. And thank you for listening in. 

Caleb: Thanks, everybody.

Shawn: Yeah, thanks!