How My Crypto Story Led Me to Lantern Finance

Hey there, my name is Jung, and I’m one of the co-founders of Lantern Finance. I wanted to share my personal crypto journey and what led me to build our platform.

Introduction to ETH

My crypto journey started in 2016 when I interned at a venture capital fund in Korea. There, I was tasked with researching use cases of Ethereum (ETH). Back then, Ethereum was still quite new and not many people knew about it. Imagine Googling "Ethereum" and finding only a few articles to read. But I quickly became fascinated with the technology and soaked up everything I could get my hands on.

While I fell deep into the rabbit hole, crypto remained simply a hobby. I continued my college studies after that internship and followed many of my classmates into a traditional job in banking.

Crypto Banks

Even though my career had nothing to do with crypto, I continued to keep up with developments in the space. There was a flurry of activity with the ICO boom and early DeFi projects, however, I was afraid of putting my crypto at risk. So I did nothing. That is until I found crypto banking platforms like BlockFi, Celsius, and Voyager.

In 2019, I became a client at BlockFi, one of the pioneers of the crypto earning & lending platforms. BlockFi offered interest on any BTC and ETH deposited and allowed clients to take out loans in a few clicks by using their crypto as collateral - all in a familiar web2 experience with customer phone support. I was a huge fan.

What really made me (and perhaps many others) comfortable with platforms like BlockFi, was that all loans made were presumably over-collateralized by at least 200%. This meant that if someone wanted to borrow $1, they would need at least $2 worth of crypto collateral. With that much cushion, these platforms seemed safer than traditional banks.

The unfortunate reality was that most of their loans were not over-collateralized. The over-collateralization requirement only applied to retail clients. Institutional clients like hedge funds got better terms because of their volume and scale. The fact that 80%+ of institutional loans were under-collateralized, or even unsecured (no collateral), was never disclosed.

Meltdown

Fast forwarding to summer of 2022, the sudden collapse of the TerraUSD stablecoin brought down Three Arrows Capital (3AC), a prominent crypto hedge fund. The downfall of 3AC, one of the largest borrowers in crypto, impacted all major crypto lenders and led to the downfall of Celsius, Voyager, and Gemini Earn, among others.

BlockFi managed to get a lifeline from FTX with a $250MM line of credit. As part of the lifeline deal, BlockFi moved a decent chunk of client assets to FTX. As we now know, FTX turned out to be a fraudulent operation. BlockFi filed for bankruptcy in November, and I joined the millions of others in losing hard earned funds.

Lantern from the Ashes

After the companies filed for bankruptcy, I realized that the problem lay in having a flawed business model. These crypto banks relied on irresponsible lending practices which were unsustainable. For instance, Voyager made a $650MM loan to just one borrower (3AC) without any collateral.

We at Lantern are reimagining what crypto banking services might look like if done properly. Instead of a foundation built on irresponsible and unsustainable practices, we are building atop security of funds and sound risk management, first and foremost.

With us, you can access liquidity against their crypto without having to sell and trigger capital gains taxes, with peace of mind. Your collateral sits in cold storage with BitGo Trust, our qualified custodian, with up to $250MM in insurance. And if you ever have any questions, you can always reach out to us and expect a real human to help you, over phone or over email.

We’ve come some way since the crypto implosion of 2022, and it’s time for a change. With the worst of the industry behind us, we at Lantern are looking to guide a brighter path forward for our industry.

Join us on our mission to illuminate the world’s crypto journey.

Got questions? Just call/text us at 415-365-0100 or email us at [email protected], and we'll be there to help.