How we protect your money and collateral
We’re slowly adding new technologies and custodial partners to our system to reduce the need for trust and give you peace of mind. However, MyConstant is not a completely trustless platform yet. Sometimes we need to handle assets on your behalf.
If you’re new to MyConstant, or simply want some reassurance, please read on to find out how we protect your money and collateral while doing business on our platform.
How we protect your money online
You choose how we handle your deposits. You can either invest them in instant-access investment; our secured lending pool, or escrow them with Prime Trust, an accredited US custodian.
Instant access pays you 4% APY for pooling your deposits in a lending pool. Liquid collateral from borrowers protects your money, and you get unlimited free withdrawals.
Prime Trust, on the other hand, is a financial institution specializing in escrow services. Escrowed funds don’t earn interest, but they’re protected by a $130 million dollar insurance policy.
Most of the time, you’ll send your funds directly to Prime Trust. In some cases, such as Zelle transfers, we first take custody of your money for a short period, usually less than 24 hours, before transferring it to our instant access account or Prime Trust.
Although not ideal, this small window of trust allows us to match you quickly – much faster than if your money were to move in and out of instant access or Prime Trust directly. We’re working to remove this intermediary step, however, and ask for your patience in the meantime.
Once you match with a borrower, your money goes straight to their MyConstant account. Your investment is then backed by the collateral they put up to secure the loan. If they default, or their collateral falls too much in value, we sell the collateral to repay you.
Since your investment is backed by collateral, we perform due diligence on every cryptocurrency before adding it to our platform. Volatility is a feature of the digital currency market so we must mitigate that as well as ensure the collateral is liquid enough to sell when necessary.
We do this in several ways:
- We only accept cryptocurrencies that have passed liquidity, trading volume, and technological assessments. This ensures only promising projects get through the door.
- We cap our cryptocurrency exposure to 10% of daily trading volume. This prevents us from triggering a mass sell-off which may affect our ability to sell the collateral.
- Borrowers must stake up to 150% of the loan amount in cryptocurrency. If the value falls to 110% of your principal and earned profit, it’s sold to repay you.
- We’ve introduced auto top-up allowing borrowers to preload their accounts with extra collateral. If the price drops, their loan is topped up, avoiding a sale and loss of interest.
- We regularly review cryptocurrency projects to identify risk factors. If a cryptocurrency falls below our standards, we can remove it or adjust the LTV ratio accordingly.
Like all investing, there is always an element of risk. The primary one for you as an investor is whether we can sell collateral if the price crashes or borrowers default. With these measures, we believe we can confidently sell collateral in all but the most extreme circumstances.
How we protect your collateral
As mentioned above, we currently use Prime Trust to escrow your funds when Instant Access is disabled. But when it comes to the collateral you send when placing a borrow order, things are a little different.
When you borrow on MyConstant, 30% of your crypto collateral is stored in a third party wallet — ready to be liquidated in case your collateral falls below the 110% threshold or if you recall excess collateral.
The remaining 70% of your crypto is stored in MyConstant hot wallets hosted on a dedicated server that’s insured up to $10 million dollars. Only qualified senior staff members have access to these wallets. Occasionally we’ll move collateral to cold storage, but it depends on the loan term and other operational factors.
The key thing is balancing security with fast access to your collateral. We don’t want you waiting to get your collateral after repaying. In the same vein, if you default or your collateral falls too much in value, we need fast access to initiate a sale so we can repay your investor.
It’s said that the proof of the pudding is in the eating. So far, the measures we’ve taken have prevented any losses for investors or borrowers. That’s not to say the measures are bulletproof, but that the risk of loss is small.
We’ve built up a great reputation among our customers for being timely and helpful, which reflects in our testimonials and reviews. What you care about, we care about. We’ve used traditional banking services – still do for some things – so we know how bad they can be.
At the same time, we’re aware the conventional banking system is familiar. Leaving it, especially for the first time, is hard. We try to make that transition simple for you through the protections outlined above and in explaining how our system works.
Transparency creates trust but it also educates. And when you know how something works, it’s easier to become a part of it. You’ll find us very talkative. Drop us a line and we’ll help you get the best out of our platform. Or, browse our growing content library to learn on your own time.
However you choose to use MyConstant, rest assured we do everything in our power to give you a secure environment in which to do business. The rewards, we believe, are worth it.
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