Lend at Hodl Hodl: what happens to your funds if the platform goes down?
Looking for a non-custodial lending solution may have brought you to Lend at Hodl Hodl. This is how we are different from the competition: we do not hold users’ funds, allowing them to control their funds in multisig escrow and stay anonymous while using our lending solution.
And even if you feel secure knowing that you hold the keys, we want to make you even more confident, thus covering any possible cases you may have thought about in the back of your mind.
What happens to your funds if Lend at Hodl Hodl goes down?
Absolutely nothing, your funds will remain locked in the multisig escrow address, which has never been directly connected with the platform itself. Meaning that, even if the platform is shut down or no longer exists, you will still be able to control and access your funds and successfully finish the deal without Hodl Hodl’s involvement.
During the deal, the collateral is stored in the multisig escrow address, which has 3 keys in total and requires 2 of them to sign the transaction. Keys are distributed as follows: 1 belongs to the Lender, 1 belongs to the Borrower, 1 to Hodl Hodl.
User’s private keys are generated on the client’s side, both using a random number generator and a unique user-created payment password that is not known to Hodl Hodl. Users use their keys to generate the escrow address and to release bitcoins from escrow; Hodl Hodl only uses its key in the case of a dispute.
In case, for some reason, you are forced to finish the deal without Hodl Hodl’s involvement, you are able to do it in cooperation with your counterparty since both parties together hold 2 out of the 3 keys to escrow.
In order to do so, one has to be technically apt and have some basic programming skills. Here is a rough description of what needs to be done:
- After the contract has been created, the user needs to generate a unique payment password for that contract. You must click on the “Create payment password”, and afterward, a pop-up window will appear where you should enter all the required data. Before going ahead, open the browser console by hitting F12 on your keyboard, then select the “Network” tab. There you will see the data being sent to the server.
2. After clicking on the “Create” button, a “update_encrypted_seed” input will appear in the list. An encrypted version of the private key is being sent to the server.
3. You need to click on it, after which, if you are on Firefox browser, a “Request” (“Payload” for Chrome browser) tab will open, where you can copy and save the encrypted_seed.
4. With that encrypted key, and using the same algorithm which Hodl Hodl uses, decrypt the key using your payment password.
5. As both keys (borrower’s and lender’s) are necessary to release funds from escrow, it is also essential to establish a way of communication between counterparties when creating a contract in case the platform’s chat was not available.
6. You would then need to write some code that would construct a release transaction and use that key to sign it and then broadcast the signed transaction.
IMPORTANT: The procedure to save the encrypted key can only be done once. Precisely at the moment when the Payment Password is created, given that a random number chosen at that moment on the client’s side is involved in the creation of the encrypted key.
We acknowledge that this process is still quite complicated for an average user, and that’s why we are working on simplifying this workflow. But for now, you can sleep well, knowing that your funds are safe at the multisig escrow.
The purpose of this post is to make you more confident by knowing where you are putting your money and that in case of an extreme emergency, you know that the means to recover your funds without our intervention exists.
One of our fundamental values is transparency, and we encourage you not to put your money anywhere you are unsure about.
Reach us
- Hodl Hodl trading platform: hodlhodl.com
- Lend at Hodl Hodl: lend.hodlhodl.com
- E-mail: support@hodlhodl.com
- Blog: hodlhodl.medium.com
- Twitter: twitter.com/hodlhodl
- Telegram: t.me/HodlHodl
- Reddit: hodlhodl.reddit.com
- Facebook: facebook.com/HHodl
- Youtube: youtube.com/c/HodlHodl
Hodl!
