Since its inception, people have wondered how Bitcoin would change the global banking system. Would it eliminate the need for banks completely, or would it evolve the way they operated? The answers to this question only existed theoretically until now, with one company creating a decentralized banking program.
LakeBTC, a well-established Bitcoin exchange, recently started the LakeBanker program. Any LakeBTC user can become a LakeBanker, which involves facilitating bitcoin purchases from people all over the world.
According to Dr. Andrew McCarthy, LakeBanker’s chief strategy officer, the project is eliminating the Bitcoin industry’s need for traditional banks entirely by creating a “Crowd-Banking” system. He said:
“We don’t beg banks to work with us, we replace them.”
With their model of decentralized access to bitcoin, LakeBanker believes it can facilitate cryptocurrency industry growth in developing countries that lack traditional banking infrastructure.
To fund the continued development of this project into a global financial network, the team has organized a token sale. A fixed-price sale is active now with a small cap, and runs until September 20th. After that, the rest of the tokens will be sold in a Dutch auction.
Bitsonline interviewed Dr. McCarthy about this new project. Read on to get an in-depth explanation of how LakeBanker will work, how it is secured, and how the team expects it to grow in the future.
EF: What inspired the LakeBanker program?
AMc: The financial industry needs to change: Banking is too expensive. Wires can cost 50 dollars or more; VISA and others charge merchants up to 3 percent to accept payments. World Bank data indicates that remittances cost an average of over 7 percent of the amount sent.
All that’s moving in these transactions is information. It shouldn’t cost more to send money than it does to send a text message or an email. (Imagine your favorite messaging app charging you $50 to let your friend know you’ll be late for dinner!). Banks rely on outdated technology (paper checks, ATMs) and an outdated business model (brick-and-mortar branches, tens of thousands of salaried employees). This is why they remain so expensive and they fail to reach much of the world’s population.
We learned this from our experience at LakeBTC: Many users without much money want access to crypto-assets like bitcoin but are prohibited from doing so by the expense, inefficiency, and inaccessibility of the traditional banking sector. To address this we developed our “Crowd-Banking” model.
You don’t need to send an international bank wire to deposit $10 into our system. If a someone nearby wants to withdraw that much, our system can do intelligent matching between users themselves to facilitate these transactions. It’s similar to how Uber matches someone that wants to take a cab ride with someone that has an empty seat in their car.
Some fintech projects are working with traditional banks — they want to create things like bitcoin ATMs. We’re different: we’re not a small patch to the existing financial world. We don’t beg banks to work with us, we replace them. Crowd-Banking can change the whole financial industry for the good of everyone.
EF: What do you hope to accomplish through LakeBanker?
AMc: Our Crowd-Banking model delivers massively reduced operational overheads and exceptional risk management when compared with traditional banks.
With this, we accomplish two key things. First, in the LakeBanker system, all domestic and international will be free, for everyone, forever. This includes user-to-user and user-to-merchant payments. Second, our model allows us to easily reach un/underbanked populations. To extend supply in a given region, we don’t need to build branches or hire salaried employees. Instead, networks of LakeBankers can be created wherever people have access to smartphones, and smartphone saturation is growing at a phenomenal rate in emerging markets.
Our free services and exceptional reach will attract many millions of users. To them, we can offer value-added financial services such as credit lines, p2p lending, and insurance, all at great rates because of our strong risk management. We will also offer these users access to crypto-assets. We are Blockchain enthusiasts and a big part of our plan is to bring cryptocurrencies to the world.
EF: How is the LakeBanker platform secured?
AMc: LakeBanker spins off from veteran cryptocurrency exchange LakeBTC.com. Its operations began in 2013 and now services 10 million user accounts from 162 countries. LakeBTC is perhaps the only major platform without stolen coins, security scandals or flash crashes. We know how to handle people’s money.
In terms of specific security protocols that we use, and will continue to use, here’s a rundown:
- SSL/TLS encryption for all data transfers to and from users
- TRUE cold storage for cryptocurrencies—never, ever online. (Some other platforms claimed to use cold storage but were nonetheless compromised.) Fiat balances are secured by automatic auditing and, in the future, insurance where necessary
- Multi-signature wallets
- Two-factor authentication with a 48-hour lock period after any change
- SMS confirmations, encrypted backups, and a disaster recovery plan
- Our internal network is not accessible from the Internet
- Strict authorization levels: employees have differential data access depending on their role. Some cannot access usernames, others cannot access balances. No employee can access everything. Nobody can override our security rules.
- Automatic internal auditing and human auditing
- User accounts are checked automatically
- We employ two-level independent manual reviews
- Accounts are monitored for suspicious activity, including logins, trades and transfers
- Departments are separated by physical firewalls
- No USBs, cellphones or cameras allowed in restricted office areas
- Market surveillance program
- 24-hr surveillance and a security guard for restricted areas.
EF: How do LakeBankers receive fiat payments?
AMc: Dozens of payment methods are supported in our beta version. We will add many more as the system grows.
EF: What are LakeBanker’s plans for the future?
AMc: I guess we set out our vision to revolutionize the financial world in the first question. As to more specifics: The LakeBanker system currently operates in beta within LakeBTC. We already have a global network of over 2,000 LakeBankers. Demand has been very strong, even without public announcements or media reports. During the beta we have improved our workflow and streamlined the overall process. Now the system is ready for the world.
Most importantly, we want to increase the number of LakeBankers to leverage network effects that will encourage exponential growth. To this end, we are spinning off the LakeBanker project and launching a token sale. Phase one of the sale is currently underway. We’re offering a small number of tokens at a significant discount to encourage community participation. The phase one price is 1 ETH = 1300 BAC.
Most of our tokens will be sold in a Dutch auction format in mid-October. The starting price will be 1 ETH = 100 BAC. If that auction closes early, phase one participants will make 1300 percent profit.
Unlike many other ICO-type projects, we are offering participants near-immediate liquidity for our token: BAC trading will be enabled on LakeBTC.com soon after the close of the token sale and before 1st November 2017.
After that, we plan for LakeBanker to support many more currencies, including other cryptocurrencies and altcoins. We will further develop the LakeBanker mobile app, train and support more LakeBankers, and perhaps expand into emerging markets by offering users free smartphones with basic functionality and our app pre-installed.
What do you think of the “Crowd-Banking” concept? Let’s hear your thoughts.
Images via LakeBanker, Pixabay
Bitsonline senior editors Scott Fargo and Jon Southurst are LakeBanker advisors.