Frequently Asked Questions
General
Firefish is a Bitcoin-backed lending platform where members can participate as Borrowers or Investors.
- Borrowers receive cash loans and use Bitcoin to secure them.
- Investors earn interest on their investment by providing funds for such loans.
At Firefish, the members are in control. Different to centralised lenders, many of whom have recently collapsed, Firefish does not have access to Bitcoin collateral - it is never touched, traded or exchanged. Instead, it is securely locked in a smart contract built on top of the Bitcoin network.
You don't have to worry about Firefish's solvency or reputation either - we only provide the technology for secure interaction between borrower and investor, and we never have access to members' funds.
Firefish is a peer-to-peer (P2P) platform where loans are provided on bilateral basis between our members - Borrowers, holders of Bitcoin and Investors, holders of banking money.
Firefish offers technology for secure interaction, escrow and settlement.
In general, the ratio between your Bitcoin collateral and the amount due (amount + interest) of your loan is 2x.
For example, if you wish to borrow EUR 1000, for 1 year at 6% (amount due ⇒ 1000 + 6% = EUR 1060), you would need to lock Bitcoin collateral worth EUR 2120.
On top of that, you should consider the current blockchain fees and Firefish service fee o 0.75% that will be deducted when transferring Bitcoin.
The process can be summarized as follows:
- Borrowers submit their loan requests, including details such as the loan amount and currency, their preferred interest rate, and loan tenor. Once the Borrower submit their request it is either immediately matched with an Investor, or listed in the Loan Marketplace.
- For Investors, there are two methods of interacting with the platform:
- Loan Marketplace - displays all available deals that haven’t been matched with a particular Investor. Investors can select any of the available deals and accept the opportunity.
- Watchdog - An email notification service that enables Investors to customize their preferences for currencies, minimum and maximum loan amounts, interest rates, and loan periods.
- Investor accepts the deal opportunity and loan agreement and the respective Borrower receives a notification to start their part of the process.
- Borrower accepts the loan agreement and proceed to the Bitcoin collateral setup process.
- Investor receives a notification about the collateral being successfully locked and moves to the funds transfer part of the process. Once the money is sent to the Borrower’s bank account (for example from a banking application), the Investor confirms the transfer.
- Borrower finally confirms once the funds arrive in their bank account, and the deal is live.
- At maturity, the Borrower receives a notification to repay their loan via a bank transfer and confirm the repayment on the platform.
- Investor receives funds to their bank account and confirm the repayment. The deal is closed.
When a Watchdog is created and a Borrower submits a loan request that matches an Investor’s preferences, an email notification is sent to the Investor, who can then accept the deal.
There they confirm their platform password, specify their Bitcoin return address, to which the collateral is sent after a successful repayment of the loan, and proceed to the Bitcoin transaction. Once Bitcoin is sent and confirmed on the network, the Borrower finalizes the process with a final confirmation.
In case of Borrower’s default or significant decline in the value of the Bitcoin collateral, a liquidation process starts. (Please see further for more details).
There are two ways for matching Borrowers with Investors:
- Watchdog - Firefish aggregates all borrow requests and investment Watchdogs and matches Borrowers and Investors based on their selected currency, amount and tenor.
- If there is more than one Investor who can be matched with a Borrower, Firefish choses the Investor who submitted their interest first
- If there are no available investment offers for a deal, Firefish lists the deal in Loan Marketplace.
- Marketplace - if there are no opportunities for an instant match, a loan request is listed in the Loan Marketplace for 14 days. Investors can proactively select any of the listed deals.
Our platform is currently in an Open Beta mode, primarily available for our members from EU, Switzerland and UK. We invite all fellow bitcoiners and self sovereign investors to take part.
Firefish has global ambitions as we believe bitcoiners from around the world could benefit from its many features.
We are exploring opportunities for launch in many other markets. We will keep on updating the global Bitcoin community as we progress with the new releases and additional markets.
Firefish is a Bitcoin-native platform. We have no plans to expand our coverage and are focused solely on providing the best service to bitcoiners.
In order to provide a complete borrowing and investing experience involving banking money, Firefish is required to comply with standard KYC/AML regulations.
On top of that, Firefish aims to ensure security and prevention of fraudulent activities for both Borrowers and Investors in the P2P relationship, while safeguarding the integrity of the platform's transactions and operations.
The identity verification through a KYC process is required to ensure regulatory compliance and secure financial transactions. Our verification partner is Idenfy.
Borrowing & locking Bitcoin
Firefish Borrow enables borrowers to receive cash loans and use their Bitcoin as collateral to secure them.
Long-term Bitcoin holders may encounter situations where they need funds for investment opportunities or significant life events. Similarly, professionals with Bitcoin on their balance sheets might seek additional leverage, exposure, or a means to cover operational costs.
With a Firefish loan, individuals and organizations can retain ownership of their Bitcoin assets while unlocking the liquidity they require. By leveraging their Bitcoin holdings as collateral, they can secure a cash loan without having to sell their digital assets. This approach not only preserves their long-term investment strategy but also positions them to potentially benefit from future capital appreciation in the value of Bitcoin.
Furthermore, by retaining their Bitcoin, they can avoid capital gains tax implications.
An origination fee of 1.5% of the loan amount is applied to Borrowers.
The fee is automatically deducted from the Bitcoin collateral during the collateral locking process phase.
Currently the limits are set to EUR 15.000 or CZK 360.000 per transaction and EUR 30.000 in total, per user, for all active loans.
We are working on introducing additional tiers with higher limits, as well as a tier for stablecoin deals.
Currently CZK 12.000 and EUR 500.
In general, the ratio between your Bitcoin collateral and the amount due (amount + interest) of your loan is 2x.
For example, if you wish to borrow EUR 1000, for 1 year at 6% (amount due ⇒ 1000 + 6% = EUR 1060), you would need to lock Bitcoin collateral worth EUR 2120.
On top of that, you should consider the current blockchain network fees and Firefish origination fee o 1.50% that will be deducted when transferring Bitcoin.
Currently Czech koruna (CZK) and Euro (EUR).
Please, reach out if you are interested in other currencies.
We do plan to introduce stablecoins in the near future.
Interest rates on Firefish are driven by supply and demand from the platform members.
No problem! We would cancel your deal.
Firefish always tries to find the best deal for all loan interest, however, at times there might be not enough liquidity (Investors) for a combination of currency, amount and tenor. In such case, Firefish lists your loan requests on the platform (Marketplace) or, occasionally, contacts particular investors to consider your request.
Meanwhile, are been working hard on bringing additional sources of liquidity to the platform.
To secure a Firefish loan, Bitcoin collateral is locked using a 3-of-3 multi-signature contract, providing a high level of security and preventing unauthorized access. The collateral is designed to only move under specific predefined conditions, such as loan repayment.
The escrow address, where the collateral is stored, is generated through a code executed within the Borrower's web browser. Firefish subsequently verifies the accuracy of this code-generated address.
Your Bitcoin remains secure in a multi-signature escrow address, with no party having access to it.
It will only be released back to you (the Borrower) upon loan repayment or to the Liquidator in the event of non-repayment or if your loan-to-value ratio exceeds 95%.
An escrow is a Bitcoin address, where your collateral is securely locked for the duration of the loan.
Your collateral can only move from the escrow address to your return address upon loan repayment, or to the liquidation address in the event of default or price liquidation.
The duration of the process can vary, typically taking a few hours. This timeline depends on how promptly you provide your details, send your Bitcoin, and how quickly your transactions are confirmed (mined) on the blockchain.
Your Bitcoin is initially sent to a 'pre-fund' address, specifically used to consolidate UTXOs (Unspent Transaction Outputs) into a single address. Subsequently, it is transferred to the 'escrow' address, where it remains securely locked for the entire loan duration.
An additional address receives a minimum amount of Bitcoin. This address serves a vital role for Firefish: in instances when blockchain confirmation fees become prohibitively high, potentially causing delays in the confirmation of the escrow transaction, Firefish employs a 'child-pays-for-parent' (CPFP) transaction. This approach boosts the blockchain fees, expediting the confirmation process when necessary.
No, please do not use RBF to expedite the process. If there is a sudden increase in blockchain fees, Firefish will use a 'child-pays-for-parent' (CPFP) transaction to increase the fees and accelerate the process.
It is technically possible to send both more or less Bitcoin than the platform proposes, with the following potential outcomes:
- Sending more Bitcoin - by providing additional Bitcoin as collateral, your loan becomes more secure. This results in a lower loan-to-value (LTV) ratio and liquidation price. Essentially, it enhances safety and reduces the risk of liquidation due to a decline in Bitcoin's price.
- Sending less Bitcoin - you will receive a warning message (Underfunded), and we will contact you with further instructions on how to resolve the issue.
There are two scenarios:
- You never send your Bitcoin - in this scenario, we would cancel the transaction, removing it from the platform. We strongly advise against sending any further Bitcoin to the escrow address. Doing so could result in the loss of your Bitcoin.
- You send your Bitcoin but never finish the process - in this situation, your Bitcoin remains at the 'pre-fund' address. If you discontinue the process and fail to complete it, your Bitcoin will be returned to you two weeks after the first confirmation of the pre-fund transaction on the blockchain.
In a highly unlikely scenario of a complete meltdown of Firefish infrastructure you have at your disposal a text file with a ‘Recovery transaction’ which gives you (the Borrower) the ability retrieve your Bitcoin from the escrow. In such a scenario, you can use the 'Broadcast transaction' feature on a standard blockchain explorer like Mempool.space, one month after the loan matures, to unlock and send your Bitcoin back to your return address. You can download this transaction during the escrow setup process, or directly from the loan card on the platform.
The Borrower.
Your Bitcoin will be sent to your return address within 72 hours after the investor confirms they have received their investment (Amount Due) back.
Please, contact us.
After finalizing the setup process, the return address cannot be changed. If you have used an incorrect address, please contact us for assistance.
Please, contact us.
You can monitor the status and health of your collateral for all your loans on the platform using the 'Collateral Health Indicator' (CHI).
LTV, or Loan-to-Value ratio, is a financial term that represents the ratio of a loan to the value of the collateral. The initial LTV (e.g., 50%) is used to determine how much Bitcoin needs to be locked in the escrow contract to secure a specific loan amount.
For instance, to achieve an LTV of 50% for a $10,000 loan, you would need to deposit $20,000 worth of Bitcoin. If Bitcoin's price is $25,000, you'd deposit 0.8 Bitcoin (0.8 BTC * $25,000 = $20,000), resulting in an LTV of 50%.
If the LTV reaches 95% during the loan term, the collateral is automatically liquidated to repay the loan and return the proceeds to the Investor.
CHI, or Collateral Health Indicator, is a metric used on the Firefish platform to assess the sufficiency of collateral securing a loan. The higher the CHI value, the healthier the collateral position.
A CHI of 100% signifies a fully healthy status, indicating that you have sufficient collateral as recommended by Firefish. However, as the CHI approaches 0, it's advisable to consider adding more collateral to avoid potential liquidation. When the CHI reaches 0, the collateral is subject to liquidation.
Liquidation is a process that occurs when the value of Borrower's collateral does not sufficiently cover the value of the loan due to a decline in the price of Bitcoin, or in case the Borrower doesn’t repay their loan at maturity.
In this case, the collateral is sent for liquidation and the proceeds are then used to pay off the loan.
Liquidation can occur if the price of Bitcoin reaches a liquidation level (price liquidation) or if you fail to repay your loan at maturity (default).
For price liquidation, the actual level for each loan is displayed at your loan card as ‘Bitcoin liquidation price’.
There are two scenarios for liquidation:
- Borrower doesn’t repay their loan at maturity - the collateral is transferred to the liquidator (either Investor or Firefish), who then sells a portion of the collateral to settle the outstanding loan amount. The remaining Bitcoin is returned to the Borrower, with the liquidator retaining a 5% liquidation fee.
- Bitcoin price reaches liquidation price - in the event of a significant decline in the Bitcoin price that reaches the liquidation threshold, and if the Borrower neither adds more collateral nor repays the loan, their collateral is transferred to the liquidator. In this scenario, the liquidator retains the entire collateral amount.
There are two modes for the liquidation:
- Self-liquidation - Investors receive Bitcoin collateral to their designated liquidation address, which they set during the deal setup process.
- Firefish liquidation - Firefish manages the collateral liquidation process, and investors receive their investment back in bank currency. Firefish receives the collateral only once the investor is fully repaid.
If the price of Bitcoin falls to a predetermined liquidation level, it triggers a liquidation event, and the collateral is liquidated.
Liquidation price equals loan-to-value (LTV) of 95% and collateral health indicator (CHI) of 0%. The liquidation price available in the loan details on the platform.
If the Bitcoin price hits the liquidation price, even for only a couple of seconds, it is considered as a liquidation event.
Firefish utilizes a weighted Bitcoin price index sourced from 9 Bitcoin exchanges. This helps to avoid a flash crash or a technical glitch situations at any single exchange impacting the Bitcoin price considered for a price liquidation event.
The platform refreshes prices once every 5 minutes and the prices displayed are for information purpose only.
For non-USD deals, the liquidation and price levels are calculated using the USD/BTC price and the respective currency cross (e.g. EUR/USD).
The value of your collateral should always remain above an LTV of 95%. It is essential to maintain an adequate amount of collateral.
If the price of Bitcoin experiences a significant decline, we advise you to consider either topping up (i.e., sending more Bitcoin) using the platform's designated process or repaying your loan.
No. Partial loan repayment currently doesn’t impact your loan-to-value (LTV) ratio.
We are considering to introduce support for partial repayments in the future.
A margin call is an event which is triggered when your LTV hits a pre-defined level.
There are 3 margin calls levels: at LTV 80%, 85% and 90%.
If your LTV reaches any of these levels, you receive an email notification.
In an ideal scenario, you would choose top-up your collateral though the platform or repay your loan.
Please bear in mind, that the loan repayment process might take longer, and if the Bitcoin price continues to decline rapidly, there's still a risk of a liquidation.
Currently we do not support excess collateral withdrawal.
We are considering to introduce this process in the future.
Currently not, but we are considering to introduce this feature in the future.
The time it takes for you to receive your funds depends on when the investor made the bank transfer and the speed of transaction processing. Typically, you should receive your funds no later than the loan's start date.
For EUR SEPA and local CZK payments, the transfers usually take from intraday to 1-2 days.
SWIFT payments might take a bit longer, possibly a few more days.
Firefish would start a resolution procedure as defined in the Escrow rules. If the resolution process ultimately confirms that you never received the funds, your Bitcoin will be unlocked and returned to you.
We would cancel the deal and try to match you with a different investor as soon as possible, or list your request in the Marketplace.
The loan amount and interest (Amount due) should be repaid at the end of the loan period, no later than the maturity date.
Due to certain complexities, we currently do not recommend partial repayments of the loan.
Your loan should be repaid to the investor no later than the maturity date. It's advisable to initiate the transfer a few days before the maturity date to ensure timely repayment.
For your convenience, you can download a calendar event from the ‘Loan actions’ menu.
You will also receive an automated email notification 14, 7 and 2 days before the maturity, and on the day of the loan maturity.
You should return the ‘Amount due’.
Amount due = Loan amount + Interest for the whole loan period.
Firefish would start a resolution procedure as defined in the Escrow rules. Part of your collateral might get liquidated to cover the full amount.
Firefish would start a resolution procedure as defined in the Escrow rules. If the outcome of the procedure is deemed a ‘default’, your collateral will be liquidated to cover the outstanding amount.
Firefish would start a resolution procedure as defined in the Escrow rules. If the outcome of the procedure is deemed a ‘default’, your collateral will be liquidated to cover the outstanding amount.
Yes, you can repay any loan earlier.
To do so, please select the ‘Early repayment’ option in the ‘Loan Actions’ menu.
We will then seek confirmation from the investor that they are ready to confirm the repayment of your loan. Once they agree, you will get notified and the platform will guide you through the repayment process.
When repaying your loan earlier, you will need to repay the entire amount due for the entire period of the loan.
Firefish would start a resolution procedure as defined in the Escrow rules. If the resolution procedure results in us receiving only the confirmation of repayment from you (the borrower), we would consider the loan closed, and your collateral would be returned.
Please, contact us if you need to change the bank details.
Investing in Bitcoin-backed loans
Firefish Invest enables Investors with free cash to earn interest on their investment by providing funds for Bitcoin-backed loans. These funds are sent directly to Borrowers who return them upon maturity of their loans, along with accrued interest.
Firefish investments are backed by Bitcoin collateral that is always higher than the amount of the loan, therefore the credit risk for Investors is completely minimised.
Along with borrowing, Firefish allows its members to invest money in secured Firefish loans in a very direct and easy way. No trading, cryptography or blockchain skills are required.
For Investors, there are two methods of interacting with the platform:
- Loan Marketplace - displays all available deals that haven’t been matched with a particular investor. Investors can select any of the available deals and accept the opportunity.
- Watchdog - an email notification service that enables Investors to receive investment opportunities directly to their inbox. Watchdog allows Investors to customize their preferences for currencies, minimum and maximum loan amounts, interest rates, and loan periods.
Once the opportunity is accepted, the investor confirms the details, and the deal is then passed to the borrower for them to lock their Bitcoin collateral.
Once the collateral securing your investment is locked, you will be asked to transfer the funds directly to the Borrower's bank account. You will receive your investment and accrued interest on the maturity date.
The return of your investment is guaranteed.
Because the value of the locked Bitcoin is always higher than the loan itself, the possibility of a default and you losing your investment is completely removed.
If the Borrower doesn’t pay back their loan, Bitcoin collateral is liquidated either via a ‘Self-Liquidation’ or ‘Firefish Liquidation’ process (please, see below for further details about the liquidation processes).
Your investment is protected by Bitcoin collateral. Its value is always higher than your investment. By default, Borrowers lock 2x the amount of your investment.
E.g. for a EUR 1000 loan with EUR 60 as the interest, a Borrower would lock EUR 2120 worth of Bitcoin collateral.
If the value of collateral significantly declines, because of of the decline in the price of Bitcoin, the Borrower would be asked to top up additional collateral. Alternatively they can opt to repay the loan.
In case they fail to do so and the price reaches a liquidation level, the Bitcoin collateral would get liquidated and your investment covered with the proceeds. The same applies to a situation, when the Borrower fails to repay their loan at maturity.
No. Investing with Firefish is easy, you do not need to interact with Bitcoin or blockchain.
Your only role is to send funds (banking money) to the Borrower before the start of the deal and confirm the repayment of the investment at maturity.
Your investment and interest will be returned to your bank account on the maturity date of the loan.
Alternatively, the Borrower can request an early repayment of the whole amount and interest.
In the event of a Borrower’s default a liquidation process is triggered. The collateral gets liquidated either via a ‘Self-Liquidation’ or ‘Firefish Liquidation’ process.
Liquidation of collateral can occur in the following two scenarios:
- Default - Borrower doesn’t repay their loan at maturity: the collateral is transferred to the liquidator (either Investor or Firefish), who then sells a portion of the collateral to settle the outstanding loan amount. The remaining Bitcoin is returned to the Borrower, with the liquidator retaining a 5% liquidation fee.
- Price Liquidation - Bitcoin price reaches liquidation price: in the event of a significant decline in the Bitcoin price that reaches the liquidation threshold, and if the Borrower neither adds more collateral nor repays the loan, their collateral is transferred to the liquidator. In this scenario, the liquidator retains the entire collateral amount.
For price liquidation, the actual level for each loan is displayed at your loan card as ‘Bitcoin liquidation price’.
There are two modes for the liquidation:
- Self-liquidation - Investors receive Bitcoin collateral to their designated liquidation address, which they set during the deal setup process. After deducting an amount to settle the outstanding loan amount, the remaining Bitcoin is returned to the Borrower, with the Investor retaining a 5% liquidation fee.
- Firefish liquidation - Firefish manages the collateral liquidation process, and Investors receive their investment back in bank currency. Firefish receives the collateral only once the Investor is fully repaid. This mode allows Investors not to worry about handling cryptographic material, such as private keys or about interacting with exchanges.
If the price of Bitcoin falls to a predetermined liquidation level, it triggers a liquidation event, and the collateral is liquidated.
Liquidation price equals loan-to-value (LTV) of 95% and collateral health indicator (CHI) of 0%. The liquidation price available in the loan details on the platform.
Firefish liquidation is set as the default option. If you prefer self-liquidation for each deal instead, please navigate to ‘My Account / Settings’ and enable the ‘Self-liquidation’ option. When confirming your investment you will be prompted to provide your Bitcoin liquidation address. Alternatively, you can switch back to Firefish liquidation when confirming the deal.
It is possible to have different methods applied for individual deals. To select your preferred option, please toggle the ‘Self-Liquidation’ radio button in ‘Settings’.
Please bear in mind, that it is not possible to change the liquidation method for live deals and deals that are in or past the Bitcoin collateral locking process stage.
If the Bitcoin price hits the liquidation price, even for only a couple of seconds, it is considered as a liquidation event.
Interest rates on Firefish are driven by supply and demand from our members, however in general the rates are higher than standard money market instruments.
Check our Platform or contact us for the latest rates.
Currently the limits are set to EUR 15.000 or CZK 360.000 per transaction and EUR 30.000 in total, per user, for all active loans.
We are working on introducing additional tiers with higher limits, as well as a tier for stablecoin deals.
Currently CZK 12.000 and EUR 500.
A service fee is applied to Borrowers.
Firefish Protocol
Firefish protocol is a set of rules designed to facilitate a loan contract between Borrower and Investor, and use Bitcoin collateral to secure it. The Bitcoin network is used to enforce such rules.
Check out more details about the Firefish protocol and its security model in the Firefish Protocol section of our Document Hub.
Unlike centralised custodial lenders we do not rely on trust when it comes to security. Firefish protocol is secure by design.
We invite you to learn more about the protocol, its assumptions and potential risks in the Firefish Protocol section of our Document Hub.
To secure a Firefish loan, Bitcoin collateral is locked through a 3-of-3 multi-signature contract which ensures safety and prevents anyone from accessing it.
The collateral only moves when a set of predefined criteria, such as repayment of a loan, are met.
The escrow address on which the collateral is stored is generated by the Borrower themselves.
In general, Oracles are systems that connect data from the outside world (off-chain) with the blockchain world (on-chain).
Firefish protocol requires two kinds of off-chain data: the current Bitcoin price (Price Oracle); and confirmation of bank money payment (Payment Oracle).
Oracle services are in the current release provided by Firefish.
There are two modes for the liquidation:
- Self-Liquidation - Investors act as their own liquidators and receive Bitcoin collateral to their designated liquidation address.
- Firefish Liquidation - Firefish manages the collateral liquidation process, and investors receive their investment back in bank currency. Firefish receives the collateral only once the investor is fully repaid. This mode allows Investors not to worry about handling cryptographic material, such as private keys or about interacting with exchanges.