This company hopes to pave the way for a crypto-centric future

The very first time Zhu Juntao heard about Bitcoin was in 2011, when a university classmate brought it up while the two were studying for their final exams.

“He told me that he bought this magic internet currency for S$20,” recalls Zhu, his words echoing the skepticism many had at the time. “I remember telling him to focus on studying, rather than this magic internet money.”

Zhu’s interest was eventually piqued a couple of years later, when the value of Bitcoin rose 50x -the cost for just one unit of the currency matched the price of that year’s latest iPhone model.

Today, Zhu is the co-founder and CEO of Hodlnaut, a startup that helps retail investors maximize their cryptocurrency holdings and ultimately envisions Bitcoin to become the world’s reserve asset in the future.

Internal and external resistance

Zhu sees two main reasons why the world has been slow to adopt the idea of cryptocurrencies.

The first is a widespread resistance to change, backed by what Zhu views as a misconception that Bitcoin has no intrinsic value.

“In Game of Thrones, there is the saying that ‘power resides where men believe it resides,’” says Zhu. “[Those resisting Bitcoin] fail to recognize that there is intrinsic value in consensus. Something is valuable because we all agree that it’s valuable.”

He is optimistic that this issue will fade in five to 10 years, as younger generations who are more receptive to these newer concepts grow in number.

Zhu Juntao, CEO and co-founder of Hodlnaut / Photo credit: Hodlnaut

The second obstacle that Zhu points out is the tedious process to get into cryptocurrency exchanges in the first place. This often includes laborious know-your-customer (KYC) verifications, which can discourage many people from even considering the idea. This was especially true in the earlier days of cryptocurrency, when people weren’t sure about trusting unfamiliar websites with sensitive personal information.

While these issues persist for now, Hodlnaut aims to make it worthwhile for users who put in the effort to adopt cryptocurrencies.

Keeping it simple

Derivative instruments for cryptocurrencies have become more popular of late, despite most retail investors lacking the adequate understanding of how they function. What this highlights is a market of cryptocurrency investors who wish to gain yield out of the coins they hold, without having to trade them.

That, in essence, is what Hodlnaut does: It offers yields on supported cryptocurrencies deposited on the platform with no lock-up periods. Users are also provided the option to purchase custody cover, a kind of insurance for users. Zhu says that using the platform is much like investing in stocks that are rising in value year on year, only that the investor also gains additional quantities of those stocks as interest.

Hodlnaut offers a 10.5% annual percentage yield (APY) on its USD Coin (USDC), USD-Tether (USDT), and Dai (DAI) offerings. USDC is a stablecoin audited by the US’ Federal Deposit Insurance Corporation (FDIC) and pegged to the value of the US dollar.

Photo credit: Hodlnaut

The company also offers a 6.2% APY on Bitcoin, which currently has close to zero annualized returns. The firm achieves this by collateralizing deposited Bitcoin to borrow stablecoins like USDC, USDT, and Dai at very low rates, capitalizing on the high returns of these coins.

Rather than locking up investments for one year or more in exchange for low interest rates, Hodlnaut is able to offer a larger payout, while allowing customers to keep their investments fully liquid via a fuss-free process.

Signing up on the platform, the firm says, takes only a couple of minutes – this is followed by KYC verification that takes between one to two days. Upon verification, each user is automatically assigned crypto wallet addresses, and their funds are then managed by Hodlnaut. Once the process is complete, users only need to think about depositing investments or withdrawing them for a small fee.

Earning trust amid uncertainty

By the looks of it, customers are buying into Zhu’s ideas. Hodlnaut ended 2019 holding US$3 million in assets under management (AUM) and by August 2020, this figure passed the US$12 million mark.

To date, Zhu shares that he remains one of the top five users of Hodlnaut in terms of amount deposited. Putting his own investments on the line has allowed the CEO to earn the trust and confidence of high net worth individuals and family offices, which in turn attracts more users.

Zhu estimates that he has seen more customers join the platform since its AUM exceeded US$12 million, adding that the expansion of the team in the past year – from just two co-founders to 23 members – has helped the firm’s growth efforts.

Hodlnaut’s success is particularly remarkable: When it launched in 2019, Bitcoin was valued under US$10,000, and the cryptocurrency market was in a slump.

Against the backdrop of rivals with far more resources, getting its name out there was a challenge.

While the company has mostly been profitable since its inception, Zhu recalls that earnings at the start were barely enough to cover business expenses. It was also unable to raise much funds in the bear market environment, only netting US$100,000 from an accelerator program it participated in.

At the outset, Hodlnaut was often compared to larger Western competitors like BlockFi and Celsius too. Against the backdrop of rivals with far more resources, getting its name out there was a challenge.

In order to compete with these established platforms, Hodlnaut believes in building a trustworthy brand, being transparent, and providing good user experience and customer service. Zhu adds that the firm can become one of several major players offering cryptocurrency yield programs, an area which currently has plenty of room for growth.

Waiting for spring

Ultimately, Zhu’s vision is to live in a world where Bitcoin is recognized as a strong form of currency. He believes that for this to happen, companies like Hodlnaut must exist to make using cryptocurrency easier. For the CEO, the ubiquity of Apple Pay today would be an ideal state for the Bitcoin economy in the future.

To achieve this, Hodlnaut aims to become a cryptocurrency bank, where coins can not only be stored and grow in value, but also transferred between platforms and services interoperably.

In the short term, the team has its work cut out for them. The rest of 2021 will be dedicated to bringing the company’s iOS app live, adding more supported assets, paying out interest in different tokens, and by the end of the year, aiming to achieve US$1 billion in AUM and 10,000 users.

That said, Zhu shares that progress today is hindered not by a lack of capital or technology, but mostly by regulatory confinements. Though Hodlnaut remains exempted by the Monetary Authority of Singapore from needing a license to provide digital payment token services – as its license is still under review – it is unable to engage in expansion activities such as soliciting for merchants to join its platform without the appropriate licenses.

While Zhu says the Singapore government is not resistant to cryptocurrency per se, he hopes to receive clearer directions from the authorities regarding regulations. Without being able to test any prospective services in the market to gauge interest and traction, companies will not be able to efficiently build and grow their service offerings.

Nevertheless, he credits the government for being quick to adopt battle-tested regulations that have seen success in other geographies, expressing hope that the same will happen for the crypto industry soon.

In the meantime, Hodlnaut’s team of 23 is channeling its collective energy to show why it strongly believes cryptocurrencies are the future, producing guides and tips to educate the public on the space and doing its part to help build the ecosystem.

Hodlnaut helps individual investors make the most out of their cryptocurrency holdings, partnering with institutions like Fireblocks, Jumio, and Nexus Mutual to realize its mission. Learn how it works on its website.

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.