When Owen Kemeys opened his bitcoin lending app Lava on September 22, he found an alert: “Upgrade Your Lava Vaults.”

“In order to take advantage of Lava’s newest features, you’ll need to migrate funds from your existing Lava Vaults to the latest versions,” the message read.

Thinking nothing of it – and having no choice but to update to access his bitcoin-collateralized loan on the app – Kemeys obliged. 

Kemeys, an early user of Lava and head of physical design at Bitcoin wallet Foundation, was drawn in by the app's use of discreet log contracts (DLCs), a form of Bitcoin-based smart contracts. In this case, DLCs allow users to take out non-custodial loans on their bitcoin. At first, he liked what he saw. The update seemed like a significant buff to the app’s user experience.

And at first, he relished the update, noting significant improvements to UX and functionality.

Then he learned why the application worked so much more smoothly: Lava had moved its entire design away from DLCs and into a custodial solution.

Kemeys and other users were nonplussed not so much by the decision, but because the messaging for the update did not make it clear it was a fundamental overhaul of Lava’s custodial design.

"You cannot, CAN NOT, alter the trust model without the user's fully informed consent,” Kemeys told Bloskapce.

User frustrations and the ostensible lack of transparency from Lava would be less notable maybe if not for the company’s $200 million raise announced last week, which prompts questions regarding the timing of the change and whether it was a requisite for Lava’s latest round.

In sum, the entire episode is a puzzling about-face from a company that originally marketed itself as a non-custodial option for bitcoin-backed lending. 

Headlines by Blockspace

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