Liquid launched in 2014. In 2017, they raised over $100 million in an ICO for their utility token, QASH. In the past year, they’ve done nearly $100 billion in real volume.
This interview is part of a series with exchange operators. We’ve interviewed Binance CEO Changpeng Zhao (CZ), Binance CFO Wei Zhou, Ivan Poon from Switcheo, Alex Wearn from IDEX, Sam Bankman-Fried from FTX, and John Jansen from Deribit.
If you run a top-50 crypto exchange by volume, I want to speak with you as part of this series. Please reach out to set that up.
My conversation with Mario Lozada is split into 5 chapters:
- Chapter 1: Liquid’s state of affairs in late 2019
- Chapter 2: Revenue sources
- Chapter 3: Liquid’s product roadmap
- Chapter 4: Mario’s take on branding and growth hacking
- Chapter 5: The future for Liquid and the crypto space
Topics Discussed In This Episode
- Mario’s background
- Liquid’s willingness to be regulated
- Working with Japanese regulatory agencies
- Why leaders of crypto exchanges are rarely seen in public
- Why Liquid chose Japan
- Liquid’s IEO platform
- The value of customer feedback
- Why spot markets outnumber derivatives platforms
- The likelihood of consolidation in the crypto exchange space
- New, consumer-focused products on the horizon
- How Liquid approaches marketing
- Cryptocurrency’s impact in Southeast Asia
Links Relevant To This Episode
- Popular Crypto Weekly Newsletter
- Clay Collins
- Mario Lozada
- Liquid on LinkedIn
- Liquid on Twitter
Quotes"Quick Exchange allows you to trade any crypto to any other crypto… You can go from Litecoin to Stellar, for example. We don't have that pair in our exchange, but our Quick Exchange will." ~ Mario Lozada, co-founder @Liquid_Global Click To Tweet "The product is our marketing. Build a new product, make it great, listen to the feedback from existing customers, and repeat. And keep iterating over and over." ~ Mario Lozada, co-founder @Liquid_Global Click To Tweet "Vietnam itself has about 100 million people… A lot of them are unbanked… It would be great for these people to leapfrog the existing banking system and go directly into a crypto-based system." ~ Mario Lozada, @Liquid_Global Click To Tweet
Clay: Welcome to Flippening, the first and original podcast for full time, professional, and institutional crypto investors. I’m your host, Clay Collins. Each week, we discuss the cryptocurrency economy, new investment strategies for maximizing returns, and stories from the frontlines of financial disruption. Go to flippening.com to join our newsletter for cryptocurrency investors and find out just why this podcast is called Flippening.
Clay Collins is the CEO of Nomics. All opinions expressed by Clay and podcast guests are solely their own opinion and do [00:00:30] not reflect the opinion of Nomics or any other company. This podcast is for informational and entertainment purposes only and should not be relied upon as the basis for investment decisions.
Welcome to this conversation with Mario Lozada, co-founder, President, and Chief Technology Officer at the cryptocurrency exchange Liquid, one of the top crypto exchanges on nomics.com.
This conversation is part of a larger series we’re doing on crypto exchanges. As part of [00:01:00] this series, we’ve already interviewed Binance CEO Changpeng Zhao (CZ), Binance CFO Wei Zhou, Ivan Poon from Switcheo, Alex Wearn from IDEX, Sam Bankman-Fried from FTX, and John Jansen from Deribit. As a side note, if you run a top 50 exchange by volume, I want to speak with you as part of this series. Please reach out to set that up.
Now for a bit of background on Liquid. Liquid is a cryptocurrency exchange that launched in 2014 and is regulated by Japan’s Financial Services Agency. In 2017, [00:01:30] Liquid conducted an ICO and raised over $100 million by selling QASH tokens. In the past 12 months, Liquid has done just under $100 billion in real volume.
The conversation you’re about the hear with Mario is broken up into 5 chapters. In Chapter 1, we discuss the current state of Liquid, where it’s at and how it’s doing. In Chapter 2, we explore Liquid’s revenue sources. In Chapter 3, we dive into the product roadmap. In Chapter 4, we discuss [00:02:00] brand differentiation and growth hacking for the exchange. Finally, in Chapter 5, we close our conversation by exploring the future.
We’ll get right to this episode in just a second, but before we get started, I’d like to pause for a moment to tell you that this episode is brought to you by the good folks at Nexo. Here’s a word from them.
Nexo is the only lender offering instant crypto credit lines, which let you use digital assets as collateral to get cash in 45 fiat currencies and stablecoins. Nexo has a big announcement related to credit lines. Annual interest rates [00:02:30] for credit lines are now starting at just 5.9%, which may very well be the lowest borrowing rate in the whole industry. Nexo is also a strategic partner of exchanges, OTC desks, and crypto funds through its portfolio of structured financial products. Institutional counterparties can earn up to 8% annually on their idle stablecoins, enter into asset swap agreements, or directly borrow crypto assets. Individuals also park their cash and stablecoins at Nexo’s interest-earning account to get an annual return of 8%. [00:03:00] What’s more, interest is paid out daily and you can add or withdraw funds at any time. So if you are looking to borrow, lend, or swap digital assets, Nexo is your go-to partner. Definitely explore nexo.io or reach out to them on email@example.com
This episode is also brought to you by the Nomics API and CSV Data Export Service. If you need an Enterprise-Grade Crypto Market Data API For Your Fund, Smart Contract, or App, or if you need historical CSV dumps of trading data or crypto [00:03:30] market cap data from top exchanges or even obscure ones, then consider trying out the Nomics API or our historical data export service. Our cryptocurrency API enables programmatic access to clean, normalized, and gapless primary source trade data across a number of cryptocurrency exchanges. Instead of having to integrate with multiple exchange APIs of varying quality, you can get everything through one screaming fast fire hose. And if you’d like to order historical cryptocurrency market data as CSV exports from top exchanges, email us [00:04:00] at firstname.lastname@example.org.
Okay, back to our regularly scheduled program. Here’s my conversation with Mario Lozada from Liquid. Enjoy.
What was your background prior to co-founding Liquid?
Mario: Most of my life, I’ve been in investment banking, [00:04:30] on the institutional side. I started back in the mid-1990s, in Tokyo actually. I was based in Tokyo at the time with Merrill Lynch in their fixed income business group. And up until the year when I started Liquid, at the time it was called Quoine.
Clay: Hey, this is Clay cutting in from the editor’s booth to give some more information about Liquid’s timeline. The company was established in 2014 as Quoine [00:05:00] and launched a fiat to crypto exchange called Quoinex in that same year. In 2017, they launched Qryptos, which was a crypto-to-crypto exchange. In September of 2018, Quoinex and Qryptos were merged together to create a new exchange called, Liquid, which is the exchange we know and love today.
Okay, back to the show.
Mario: I’ve been in banking. So I was with Merrill Lynch first, and then I was with [00:05:30] Credit Suisse, I was their CTO for the fixed income business the whole time I was there for a very long time. I was doing that for a long time, so I was thinking what else I could do with my life, because I really didn’t want to do that for the rest of my life.
An acquaintance of mine introduced me to Bitcoin at the time, and I started reading about it, doing research. That was back in 2013, I believe, and I became quite fascinated with what it was and what it is right now. Given my [00:06:00] background, I thought, “Wow, this is the future of finance,” and that’s when I started thinking about launching an exchange, which became Quoine. We launched in 2014, and that was basically the beginning of where we’re at right now.
Clay: I didn’t even know that that was how it was pronounced. So it’s Quoine. Is that still the corporate entity that owns Liquid?
Mario: Yeah, and the corporate entity’s name was Quoine before we changed it to Liquid Group. [00:06:30] It’s headquartered in Tokyo. The way we’re organized is we have the parent company, which is Liquid Group, and we have a number of branches. There’s a Liquid group in Japan, there’s another one in Japan called Quoine Corporation. There’s one in Singapore and there’s one here in Vietnam, where I’m based. But the main one is Liquid Group.
Clay: I went to quoine.com and it forwards to Liquid. I guess Liquid is definitely the focus of everyone in your organization. Is that correct?
Mario: That’s right. [00:07:00] That’s our core platform, our core business right now. As I said, we started back in 2014 with an exchange. We’ve been building it up since then until now. We have a lot of different products that I could talk about later, but that’s our core platform, our core product.
Clay: At Merrill Lynch, Credit Suisse, basically your entire background has been, at least from what I can see, being the technical leader in building products in the financial space, [00:07:30] but always in heavily regulated areas, it seems like.
Mario: That’s right. It’s pretty interesting because as I said, I come from a very heavily-regulated organizations like these big banks where I was a CTO, or fixed income currencies and commodities of both companies. A lot of the work we do, probably more than half of the work that we do has to do with regulations over there, [00:08:00] which is something that I wasn’t really enjoying towards the end. We’re regulated in Japan, by the way. We have a license in Japan. We’re regulated under the FSA in Japan, but at the same time, it’s a new industry that we need to grow.
Clay: The first time that I saw that you guys really came on the scene for me or what kind of flagged the work that you were doing is [00:08:30] I had read the Bitwise report to the SEC. They called out a number of exchanges that they believed were engaging in toxic trading activity or suspicious behavior and they outlined ten exchanges, some people are calling the “true ten.” I remember that Liquid was not called out explicitly as being in this [00:09:00] group of ten exchanges.
There was this response on Twitter. Basically everyone was saying, “What about Liquid? What about Liquid? Liquid is absolutely part of the group. Liquid belongs there with Bitfinex, and Kraken, and Coinbase, and Bitstamp, and Binance, and Gemini, and Itbit, and Bittrex, and Poloniex.” There was just so much support for your exchange, for the reputation you built, and for your willingness to be regulated.
For whatever reason, you weren’t identified in the report, but the [00:09:30] community absolutely came out in favor of you guys. Even though to date or at the time I hadn’t heard you mentioned in that group very often. It’s really cool that this has happened, and since then, any ranking of legitimate exchange activity absolutely puts you guys in the top ten, at least of the spot exchanges.
Mario: Yeah, if you looked at Cointelligence, and there’s a couple of other ones that have us in the top two, top one, top two consistently [00:10:00] in their reports. In terms of clean volume, reputation, trust, and a lot of important factors.
Clay: We have you guys at number three on our ranking. One of the things I really appreciate about what you guys do is just the transparency of your API. It’s very rare to find exchanges that don’t just report the 24 hour ticker that will actually give you full [00:10:30] trade history on all the trading pairs. There’s something about being willing to provide highly auditable data. I think it speaks to the quality of your business in general.
Mario: That basically has to do with the people that are working here, with their backgrounds. A lot of the people that are working with me right now, our Head of Business and Sales, for example, came from Goldman Sachs. He was at Goldman Sachs for more than ten years. He was at [00:11:00] Merrill Lynch with me. I’ve known him for, God knows, 20 years maybe. His name is Seth Melamed.
A lot of us came to this new industry with this background that makes us want to do the right thing and follow the rules. We’re regulated, as I mentioned before, we’ve got a license. Japanese regulators are not the easiest in the world. Actually, they’re quite difficult to deal with. So we have to follow all the processes and the policies. Whatever policies and processes were put in place [00:11:30] for Japan, we adopt for our entities outside Japan as well.
With AML, a lot of different things, I know a lot of users in the community probably don’t like KYC that much, but it’s something that we need to do in order to be compliant. We need to work with what we have in terms of countries and so on.
Clay: What is the name of the Japanese that is a four-letter acronym [00:12:00] for the…
Mario: The JVCA?
Clay: Yes. Exactly.
Mario: There’s two entities in Japan. There’s the FSA which is the main regulator. That’s the Financial Services Agency. Those are the main ones. Those are the ones that give you licenses. Then there’s the JVCA, which is a self regulated group, which is comprised of different exchanges in Japan, that measures exchanges in Japan over there as well. They work very closely with us and work very closely with [00:12:30] the FSA on on-going new policies that we need to follow to be compliant.
Clay: It strikes me that cutting corners or not being regulated. It’s a slippery slope. In other words, it needs to be part of the DNA of the exchange from day one, or it’s easy to just slowly erode that, reap the benefits of perhaps moving quickly when you otherwise wouldn’t or being able to sell something that might be a security or engage in all kinds of activities that can be very [00:13:00] lucrative and rewarding. Once you’ve crack open that can, it’s hard to put the stuff back. It’s hard to undo that and now that’s part of the baseline of your growth, you want to beat the next quarter, and you just can’t un-cook those eggs.
Mario: Yeah, it’s in our DNA as you can see from our backgrounds. You mentioned it’s a trade-off whether we’re here for the long term. For us, it more of a marathon, more than a sprint. We want to continue to grow and [00:13:30] provide the services to more and more people. At the same time, you need to be compliant with the local regulations. You can’t just try and bypass them. Otherwise, you will not be able to make it.
It’s a working relationship that you need to build with the local regulators in every country where you operate. Same in the US, same in Japan, same in Singapore, and so on.
Clay: I appreciate you doing this interview. I think that for much of the history of [00:14:00] cryptocurrency exchanges starting with Bitcoin market, then Mt. Gox, and on, and on, and on, for the most part, the market has not been able to hear much from the founders of these exchanges, the leaders of these exchanges.
There are some notable exceptions. I think, you know CZ from Binance has done a really good job of making himself available on Twitter. Brian Armstrong from Coinbase [00:14:30] doesn’t do interviews, but he does occasionally go on panels at conferences and things like that. Arthur Hayes from Bitmex has been around. But it seems like for the most part, the founders of these exchanges are not tweeting much, they’re not doing a lot of podcast interviews. I appreciate the fact that the market can hear from you. Why do you think that is? That for the most part, there isn’t a lot of Twitter presence? I couldn’t find you on Twitter. Maybe [00:15:00] I didn’t do a very good job of trying to find you.
Mario: Yeah, I’m not on Twitter. I should be. I do look at it. I think it’s because, at least in my case, and I can tell you that I’ve been quite focused on building the platform, the products. I do believe that the product eventually speaks for itself. However, having said that, I do agree that maybe I should get out more often and speak more on Twitter. In fact, I’m being advised by our marketing people that I should do that. [00:15:30] And I will do it.
I wanted to initially focus on the product. I do listen to what our customers are saying. There’s a lot of feedback that we get from our users, from our customers. I read it, we discuss it, we improve the platform, and we continue to move like that. But I believe now that we’re at the point where we can do that. From our perspective, Liquid itself being regulated really have nothing to hide.
I don’t have to hide my name, people know who I am. [00:16:00] It may not be the case for other exchanges that are not really regulated. I don’t know. But in our case, there’s no issues with us getting out there and making ourselves known to the public who we are and taking in direct feedback. It’s something that I will do, definitely.
Clay: I think that’s a good point that even though someone might not be super active on Twitter, just the act of being regulated often results in a great deal of transparency. There’s docs [00:16:30] that are posted online or various disclosures and filings. It might not be incredibly accessible to consumers, but in a very real way, that’s definitely a transparency, and in a lot of cases, it has more rigor than just someone chatting it up on social media. That’s a good point. And I appreciate the heads down perspective, that it can be all-consuming when you’re building these things, especially with the kinds of scalability and regulatory demands that you have. [00:17:00]
Let’s kick off chapter 1, which is about the current state of Liquid.
What can you share about your home base, if you have one, metrics on employees, revenue, any kind of user metrics? Valuation? Things like that. Where are you at right now in October of 2019?
Mario: Our headquarters are in Japan. That’s where Liquid Group is based. We have an office there in Japan. It’s about, less than 100 people there. What we do there is mainly legal compliance [00:17:30] for regulators. There’s some engineering going on over there, as well as customer service.
We also have an office in Vietnam. In fact when we started, was started here in Saigon by myself, where I’m based. But our main market has always been the Japanese market. Our main product, our main currency pair has been the BTC/JPY product because we believed at that point in time that there’s a lot of potential in Japan. The Forex market in Japan [00:18:00] is quite big as a new trader, and I think we were right in that sense.
In Saigon, in terms of employees, we also have less than 100 people. We have a few people in Singapore, we have a customer service center in Manila with about 50 people over there. Total, I would say there’s about 250, something like that, people in the company. Most of the engineering product [00:18:30] that we have is done out of Saigon, with some engineering in Tokyo, as I said. There’s some engineering in Singapore as well that we do.
Because of the nature of what we do and because of our backgrounds—a lot of us came from the institutional trading side—a lot of our users are actually institutions. A lot of our biggest users are institutions, corporates that trade with us by API. [00:19:00] In total, we have close to a million users now, so it can’t really compare with other exchanges because we make it a little bit not straightforward because of KYC and AML.
I guess a lot of users, given the choice of no KYC in other exchanges and KYC in our exchange, they go to other exchanges. But if you’re an institution, if you’re corporate, you come to us because you’re actually probably required to do that by your [00:19:30] internal corporate laws. We have a license which gives us a lot more trust in the eyes of institutions. We have a Japanese license, as I said before, so institutions feel a lot more comfortable trading with us than trading with another little exchange. That reflects on the makeup of of our users.
Right now the market is quite bad, actually. [00:20:00] The volume has dropped quite significantly over the past few months, but like this year, the highest, the good days we’re doing between $300 million and half a billion dollars in trading daily. Most of it, again, is institutional, some retail in there as well. We’re doing quite well.
Our revenue is quite healthy. We do charge fees, so much of our revenue comes from trading fees, [00:20:30] financing fees for margin trading, and CFDs. We also have listing fees that we charge for listing new coins. We’re actually quite selective about it. There’s a whole very involved process to get your coin listed in our exchange. Again, because we’re regulated, we have to follow certain rules through that.
Valuation-wise, we were valued at $1 billion a few months ago. Actually more than a few months ago, maybe 7–8 months ago that was the valuation that we got. [00:21:00] We’ll see what happens in the future. In a nutshell, that’s where we are in terms of metrics and stuff.
Clay: Your user metrics are absolutely impressive especially if a large percentage of those users are institutions. It simply can’t be compared in terms of volume to consumers. It’s the opposite of the long tail sometimes that’s just really fat beginning to the thing, to the distribution curve. How many employees did you say you had again? I missed that. [00:21:30]
Mario: About 250 employees across four different locations. Tokyo, Vietnam, Singapore, and the Philippines.
Clay: I imagine being a distributed global team. You could have built an exchange that targeted really any market. Was it a strategic decision, taking everything into consideration, to go after Japan? Or was it primarily because that’s where the founding team had the most [00:22:00] experience when it comes to regulation and compliance, knowing the various governmental entities and your way around those processes?
Mario: It was mainly a strategic decision. If you look at Forex at that time—this is about four or five years ago—Bitcoin trading was considered very close to Forex trading, foreign exchange trading. My background is actually with fixed income. I was also overseeing foreign exchange trading technologies and I did some [00:22:30] personal trading using Forex.
One of the things that you learn when you’re doing that is that a lot of the volume, a lot of the trading on Forex comes from Japan. It’s a little trading, I think it’s one third of the global retail volume of Forex trading is Japanese traders.
Knowing that, we decided to focus our efforts in the Japan market at the time because we believed and I think we were right that a lot of the [00:23:00] traders over there would easily understand the product and trade Bitcoin as well as just like Forex, but it was more strategic than anything else.
Clay: It seems like there’s a really interesting ratio of population size and land mass size to trading activity. It seems like it was off the charts in terms of the impact of Japan relative to a lot of the other metrics for that country. [00:23:30] It seems pretty impressive. And then, the fact that you were coming from a background where you had worked in Japan, in Asia, at Credit Suisse, you had built a product for Japan. It seems like a happy coincidence that it all worked out.
Mario: Yeah, that’s right.
Clay: Are you are the largest, fiat on ramp? If you look at Bitcoin to Japanese fiat volumes, are you guys the largest in terms of that trading pair?
Mario: We are. [00:24:00] JPY/BTC we’re the largest in terms of fiat spot and bitcoin, JPY bitcoin fiat. We’re the largest right now. We’ve been the largest for a long time.
Clay: What geographic areas are blacklisted from participating on your platform?
Mario: There’s a long list of countries that we don’t allow because of AML (anti-money laundering), and so on. We need to follow these rules. There’s a list of 10 different countries that we’re not allowing to trade [00:24:30] on the platform. I can’t really remember off the top of my head, but they aren’t on the exchange. I think when you sign up, if you’re one of those countries, you won’t be allowed to sign up.
Clay: Can you name just a few of the larger markets that are excluded?
Mario: The US is one of them. Because of regulations, we can’t really allow them to trade. We are in the process of getting licenses in the US so we can allow people to trade spot. Other than the US, any other [00:25:00] large market can trade on our exchange. Japan, obviously is our biggest market.
Clay: I know a lot of US-based institutions, because of where they’re domiciled and because of how they’ve set up their corporate structure, are just fine legally trading on platforms like Liquid. We have some institutional customers that have asked for your data and have said that, because of how they’ve set up their structure in the Cayman Islands. with a Delaware LLC feeder, [00:25:30] et cetera, it’s perfectly fine.
Let’s transition to chapter 2, which is about revenue sources.
What are you able to share about the cost for listing a token on Liquid?
Mario: It really depends on the token itself. The person I mentioned before, Seth Melamed, would probably be better positioned to answer that question, but it does depend on the partners, it depends on a lot of different factors that we take into account. What they bring to the table, [00:26:00] the number of users they’re opening to us. It’s a lot of different factors going into it.
Clay: Obviously, if you’ve got some non-standard blockchains, there’s a real cost to you guys to integrate a token.
Mario: The non-standard ones, for example, is not really straightforward to integrate. It does take some development work and effort to do that.
Clay: You’ve got to trade on the blockchain, you’ve got to custody it, cold storage solutions, all that stuff.
Mario: All that stuff, yeah.
Clay: You’re a business, so you do aim to be [00:26:30] profitable in any transaction, but hopefully it’s mutually beneficial. Are you able to share a ballpark, a range, can that be seven figures? Six figures?
Mario: It really varies.
Clay: I’m sure there’s tokens where it’s probably strategically non-ideal to not have that platform and maybe the development team is sufficiently decentralized, so you just have to add it and you don’t charge anything. There’s no one to talk to about adding it anyway.
Mario: That’s right. [00:27:00]
Clay: You’ve got listing fees, you’ve got trading fees for the margin product, there’s interest. What about when it comes to leverage products? Is there money to be made there above and beyond providing a product that people want? Or are there ways to capture additional value because you are providing leverage as a business?
Mario: There’s what we call funding fees, which is similar to interest fees. We have two products here. We have [00:27:30] CFDs and we have what we call margin, the traditional margin trading, where you would borrow, if you want to go short. If you want to short bitcoin, for example, you borrow bitcoin from somebody and then you sell it on the market. That’s what we call the margin product.
When you trade on margin on our platform, you as a trader, are borrowing from somebody within our platform at an interest rate that they’re dictating at that point in time. [00:28:00] As long as you keep the position open, you’re paying them interest on a daily basis. From that, we take a fee as well.
The other product we have is CFD, which there’s no really borrowing going on underneath, but there’s a funding fee that you need to pay us as a company. It’s similar to interest payments, but the difference is that interest payments can be variable, depending on the market, [00:28:30] depending on the lenders, depending on the market conditions, so they can be variable. With CFD, it’s fixed most of the time. They don’t really change that much. In Japan, for example, we could only offer CFDs because of regulations. We can’t really offer the margin product with loans underneath them.
There’s a product that we call Infinity, which is a CFD product underneath, but there’s a few features that we’ve added that allows to give the users the option to do 100X leverage. [00:29:00] There’s a few things like insurance bonds. There’s a few other fees that we charge when closing positions, for example, that compensate us for the risk that we take on providing 100X leverage, because the company takes a risk as well in the market. If the market moves very fast, or too much, then we might be at risk of losing money ourselves. So it’s these three products. We’re introducing a new one, but maybe I can talk about that one later. Those are the main products.
There’s the lending platform, which I think you have mentioned lending on your document. [00:29:30] The lending is when you come in you have Bitcoin, or Ethereum, or ETH, or XRP and you don’t want to sell it, you’re holding it, but you want to put it out there to earn interest. That lending platform allow you to do that, and the borrowers there are the margin traders. This connects the margin trader platform. The borrower is selling this one, so that’s what we have on lending.
Clay: When someone provides their [00:30:00] assets for loan on the platform, do you guys guarantee that? You are taking a fee. I imagine you could aggregate risk across the platform and feel pretty confident in that and so can your users. Is that the case?
Mario: Yeah, we guarantee. First of all, when you lend a coin on the platform, that coin is not going to leave the platform, so it’s kept inside. In all cases, you’re lending it to a margin trader, [00:30:30] the system guarantees that if a margin trader is about to run out of money, it would do a margin call. So that he or she is able to pay back the loan.
The system has been designed that way to protect the lenders in that case. That’s why we are able to guarantee. It’s quite sophisticated in what it does. It was designed and built many years ago and it’s been improved over the past number of years. We are comfortable guaranteeing [00:31:00] that you don’t lose your coins that you’re putting out for lending there.
Clay: Even now they are, “being lent out,” they’re never leaving your custody, so their funds are safe at all times. That makes sense. So we’ve got listing fees, trading fees, we’ve got CFD (contract for difference). I think we’ve covered everything. Anything else we’re missing on, in terms of fees or revenue?
Mario: We do some OTCs sometimes, ad hoc basis. It’s not really our core [00:31:30] business, but we do do that sometimes.
Clay: With your OTC operation, are you taking one side of the trade or you simply facilitating a trade between two users of your platform?
Mario: In most cases we’re facilitating the trade between two common parties.
Clay: You guys also have a token.
Mario: We do, yeah. We launched it a couple of years ago during the height of the market, 2017, I believe. It’s a utility token. [00:32:00] If you’re a trader on our platform, you get a 50% discount if you use it to pay fees. People might not believe it, but as we build more features and there’s a lot more features coming up in the future, we’re actually looking at adding more utility for the token into all these new features that we’re building. There’s a lot of really interesting features that we’re going to be rolling out over the next number of months and beginning of next year.
Clay: Yes, it launched [00:32:30] during the ICO craze, but still seems like saving 50% is a big deal.
Mario: It’s a big deal if you’re a high volume trader and most of our traders are that. If you get a 50% discount, if you pay using our coin, most people take it. Unfortunately, that’s also tied to volatility. The more volatility, the more value there is. The more value there is, the more demand for our coin. Then the price tends to fluctuate. [00:33:00] It’s interesting because if you look up volatility, time, that generates more volume which tends to push the price of the coin up. It makes sense, it’s all connected.
Clay: I saw on your website you mentioned that you were running a private sale. Is that, for all intents and purposes, an IEO?
Mario: That’s an IEO all right. Those are IEOs that we work on with partners. If you’re a company, you’re looking to raise funds, you can work [00:33:30] with us.
Clay: Hey! I wanted to pause for a second to let you know that this episode of the Flippening podcast is brought to you by nexo.io. As someone who personally uses Nexo, I wanted to point out a few things that I especially like about their crypto-backed loans.
The first thing that I appreciate about Nexo is that when the price of your collateral grows, so does your credit line. Let’s say you borrow against your Bitcoin when each is worth $5000, but over the course of your loan, the price of each individual Bitcoin [00:34:00] that you deposited grows to $10,000. This means that the size of your credit line just doubled as well. You don’t have to take out a new loan to appreciate the growth in your credit availability. I personally haven’t seen anyone else doing this or any of their competitors providing this kind of approach.
The second thing I really like about Nexo is that you only pay interest on the amount that you borrow from them. I’ve seen Nexo competitors require you to take out loans and force you [00:34:30] to borrow the entire amount of that loan at the time of origination. With Nexo, you get a credit line and can only borrow the funds you need, as you need them, and pay them back whenever you want, with interest assessed daily. Again, this isn’t something that I’ve seen other providers do.
The final aspect of Nexo that I want to highlight right now is that they give you the ability to borrow against a basket of crypto assets. For example, if you post [00:35:00] Bitcoin, Ethereum, and BNB as collateral to your Nexo account, the Nexo oracle calculates the real-time market value of those assets and adjusts your credit line accordingly. To my knowledge, other providers in this space only allow you to borrow against one asset per loan, not against a basket that you can grow or diminish over time.
That’s what I like about Nexo. I’m a happy user and I encourage you to check them out at nexo.io. [00:35:30] Be sure to support the show and let them know that I sent you their way. Okay, back to the conversation with Mario Lozada from Liquid.
Mario: We have an IEO platform and we can help you launch the sale on our platform. You bring your partners, you do your marketing, and we’ll help you with KYC with the platform and so on.
Clay: It’s an interesting model in the US here, that used to be [00:36:00] the realm of Goldman Sachs, investment bankers would take you public, and now exchanges are offering that. In some cases, they’ll invest in your business. They’ll onboard you, there’s various arrangements. Some involving a percent of total supply of tokens, in some cases equity in the business. It seems like that there can be a lot of things rolled into one. Advisory services, some financing [00:36:30] when it makes sense, initial exposure to the market, et cetera.
What are your thoughts on the evolution of “going public,” whether it’s an IPO, an IEO? Do you think that this is something that’s going to become consolidated in exchanges over time? Like it’s interesting because this whole space on some level, when we talk a lot about decentralization, but an IEO is actually a consolidation of a lot of various services. [00:37:00]
I can see how there’s an advantage in terms of cost savings, potentially, in getting a lot of these things from one provider. On the other hand, that’s also a lot of concentration of risk as well and hopefully the incentive alignment is just as productive when it is centralized. What are your thoughts on this and how it’s playing out?
Mario: If you look back in time, it’s cyclical. There was the high [00:37:30] of the ICOs, how long ago was that? About a year, two years ago, maybe?
Clay: Two years ago, yeah.
Mario: Years ago. And then it went away. Actually, we had our platform at that time and we were doing a lot of ICOs at that time with some partners. Then it went away for some time, and it came back again this year as IEOs. Again we’re using our platform to facilitate, to help our partners do IEOs, but it seems to be winding down again. [00:38:00]
My opinion is it really depends on regulations. What we see in the future, I do believe they are here to stay. They’re not going away. The regulators are more aware of what’s happening and how it’s happening. I know Japanese regulators are actively talking about coming up with regulations for IEOs in Japan.
By the way, the IEOs that we do are not really offered in Japan because we can’t do it. Their local regulations, we’re not allowed to do it. [00:38:30] But we’re working actively with regulator in Japan on the new framework that would allow us as one of the exchangers that work with them, to offer IEOs to Japanese customers.
Same thing is happening if you look at Singapore. They’re working on regulations not just for IEOs but for crypto exchanges as well. Same in the US. The US may be a little bit more difficult, I think, to look at this, but Japan and Singapore seem to be more open to [00:39:00] embracing our way of raising capital and regulating it.
I do think they’re going to stick around for some time. They’re not gone. I don’t think they’re going to go away. I think there will be an evolution into more regulated areas. They’re going to become regulated, which means protection for the customers. The customers would be protected. Unfortunately, there’s been a lot of people taking advantage of this and scamming users here and there. [00:39:30] But regulators, even though some people may not like them, they do bring some security to the industry and some order. So we’ll see more IEOs in the future.
Clay: I imagine there’s some overlap in terms of process, between the listing fee business and the IEO business. But also, they’re a little bit distinct because IEOs are earlier in the process. Does Liquid approach that with VC hats, where you’re looking at what’s the team? What’s the business model? [00:40:00] What are the funding sources? Is this something we want to put our reputation behind? Is that basically the model?
Mario: That’s exactly the model. We have a team in Tokyo. They’re based in Tokyo, actually. They do the due diligence, they look at the project, they take a VC kind of a view of it as if we were going to invest in it because, as you said, of reputation. We didn’t want to put our reputation on the line. Reputation is something that takes a long time to build and it’s easy to destroy.
[00:40:30] We have a whole full process internally. By viewing IEOs, they go through due diligence that our team does. Our legal compliance team look at it, our risk team looks at it. It’s a whole process that you need to go through, and we reject most of the IEOs that come to us. We don’t take 100% of the IEOs that come to us. We are very strict. We have a reputation to maintain [00:41:00] and we need to be careful.
Clay: There’s a few exchanges offering IEOs, and I’m sure for the projects that are most interesting to take on, there can be some competition. I imagine that for the project itself, it’s all about the best fit, where do you access to customers, is the IEO something that’s more potentially interesting to institutional [00:41:30] customers versus consumers, and on, and on, and on. There’s a lot of things to consider. What would you say are the characteristics of a project that is a good fit for Liquid in terms of region, type of users, who could buy it, et cetera?
Mario: The IEOs that come to us usually want to work with a licensed, regulated exchange even though we don’t offer it in Japan, work through our non-Japan entities. They still want to work with us because of the trust [00:42:00] that we have being a regulated exchange platform in Japan. That’s one of the main reasons they come to us for. They usually bring their own users, they bring their own communities that they’ve built. They don’t really come to us because of our number of users. They come to us because of our reputation more than anything else.
Our processes and KYC, the fact that we follow all these things, is a big loss for the, I guess thinking about the future [00:42:30] of their business as well. What might, for example, another regulator in a different country say to them? Looking at them, they can always say, “Look, we’re going through this process with an exchange that follows regulated processes.” That’s why they come to us. In fact, most of the IEOs that come to us, come to us because of that. Not because of the number of users. They usually bring their own communities. They just us as a platform to offer it. [00:43:00]
We have a high level of security. We’ve never been hacked, for example, like most other exchanges. We use really highly sophisticated wallet technology beyond what anybody else is using. We have really high security standards and so on, so they really appreciate that. That’s why they come to us.
Clay: It sounds to me like the big benefit is regulation, security, reputation. You’re a good fit for someone who does want to bring [00:43:30] their own community. One of the services you probably don’t go hard on would be marketing for the IEO. That’s taken care of by the project itself for the most part?
Mario: That’s right. We do help a little bit here and there, depending on the deal that we make with them. But in most cases, we want them to do their own marketing and we will help them. If they want to put up a page on our exchange or banners, we put banners on our landing pages as well, promoting them, [00:44:00] but they’re the ones driving it. They’re the ones bringing the communities, they’re the ones driving their telegram groups, for example. Or their Facebook groups, whatever they’re on. Twitter, is one. So yeah, they need to do all of that.
Clay: Let’s kick off chapter 3, which is about your product roadmap.
A good place to start with a discussion about product and product road map is to dive into some of the more difficult trade-offs you’ve had to make when it comes to product. [00:44:30] Obviously, people love product and you want to build everything. You want to give everything, everything they want. You want to give people staking and you want to give people lending, TC, and you do all the things. But I think focused product organizations tend to really embrace trade-offs and be very focused on how they go about making decisions. And I’m sure as a technologist, you see the cost that every incremental feature brings and what you’re going to have to pay in terms of [00:45:00] maintaining all these things.
What are some of the more difficult product decisions or types of trade offs you’ve had to make when building up the product and the product road map?
Mario: It’s not really difficult. It’s more about making decisions based on the customer feedback. And as I said to you before, most of our customers are institutions that paid by API. Most of our volume, I think maybe 80% of our volume comes from APIs, [00:45:30] probably more. A lot of the focus that we had in the recent past has been around, how do we improve the latency of our APIs, how do we make it faster for them. There’s a lot of features that they ask for. They want to do the bulk orders. They want to do this and that. So, a lot of features that we’ve been adding recently have been more on the API side, like bulk orders, bulk cancellations by API. Some of them want to do withdrawals by API, for example. [00:46:00] They want to request withdrawals by API for crypto or fiat, which we didn’t have before. So we’ve been adding all of that.
At the same time, we do realize that it’s an ecosystem that we’re building, so we need to pay attention also to the retail traders, the people that are using our web front ends, our mobile front ends. Like the big guys, the API traders bring in a lot of volume and liquidity. These guys bring in smaller, but it works out, with each other. They need [00:46:30] people. A lot of them are just putting in bids and all sorts like market making. They need people that will cross the spread, the people that do market orders, for example.
So, retail brings in this kind of different kind of flow. We’ve been doing a lot of work on our user interfaces. Mobile and web as well. It’s been a huge amount of work over the past one year, I would say, on our user interfaces to improve them for retail. Our focus [00:47:00] in terms of product has been the exchange, making sure the exchange is stable.
That’s the other thing I was going to say. From an API, big trader perspective, you want a fast, stable platform. With a lot of liquidity, of course, but our focus has been making sure the platform doesn’t go down when we don’t really have those issues, but we wanted to make sure that it doesn’t happen. When there’s high volatility, high volume, we never had the issues of orders getting rejected, for example, [00:47:30] as some other exchanges might have.
We’ve continued to provide the same quality of service, no latency, and stability on the platform. That’s the things that they care most about. That has been our focus. It was pretty obvious to us what they wanted. No latency, stability for API traders, they wanted a few more API features. Retail guys wanted better usability, ease of use for the user [00:48:00] interfaces and they got it. Now, we’ve got everything there.
The products are pretty much the same. When they trade, they trade spot, margin, with 100X leverage if they want to. We’re working on improving the Infinity offering, which is the 100X Infinity and we’re bringing in new products as well. Very soon, I hope.
Clay: You could, you could make or lose an infinite amount of money trading.
Mario: Yeah, that’s right.
Clay: [00:48:30] One of the most interesting things that you’ve mentioned is that over 80% of the volume comes from API trading. Most people don’t think of an API as user interface, but it absolutely is when your numbers look like yours. I imagine that for, maybe most of the trading products you provide or order types, that it’s unthinkable that these order types would be available via the interface, but not [00:49:00] available by the API. So perhaps, is it the case that some of these things are offered first via the API and then make their way into the user interface later?
Mario: That’s right. There are a few cases like that. I believe there was one case recently where you had access to the feature via the API but there was no user interface access to it. That’s no longer the case, but you’re right.
Clay: I imagine market makers must like that quite a bit.
Mario: Yeah, that’s right. They’re not really [00:49:30] market makers per se, but they do both. They do market making, they take as well whenever there’s a chance to make a profit. They’re all API users. As I said, we do speak with them constantly. Almost every week we have people speaking with them on the phone to understand their needs, what else they want, what other features they would like to see on the API, and so on.
Clay: I’ve interviewed a few market makers, both informally and formally on the show. [00:50:00] One of their biggest comments is that it’s really hard to get in touch with exchanges. There’ll be exchanges where sometimes they’re doing 10%, or 15%, or 20% of the volume on that exchange and they literally can’t get someone on the phone.
Mario: We’re more than happy to speak with them. As I said, we have a team mostly based in Tokyo, by the way, and their whole purpose is to be on the phone weekly with a lot of our [00:50:30] API users, including market makers, just getting feedback and telling them what’s next, talking about the product, understanding their needs.
Clay: let’s talk a little bit about your your, your Qash token. It’s interesting to see exchange tokens evolve a little bit as utility tokens and something that I didn’t expect to see is the range of exchanges that would support exchange tokens. [00:51:00]
Hey, this is Clay cutting myself off to shed some light on what exchange tokens are. Exchange tokens are usually utility tokens issued by exchanges. They started to emerge in the cryptosphere in the middle of 2017. Exchange tokens give benefits, like lower trading fees on an exchange to the token holder. Okay, back to the show.
There are clearly exchanges that are competitive with Liquid that offer Qash trading pairs. Is that the norm? I mean it does seem like this is what’s developing [00:51:30] is that if there’s demand for a token, exchanges are going to fill it, even if that benefits, in the long run, a competitive exchange. Do you guys carry any exchange tokens on your platform for other exchanges?
Mario: We don’t, actually. If the community comes to us and they really want it, and we see opportunity there, why not? That’s what’s happening at other exchanges. Their communities are probably asking for these tokens to be listed. But we really haven’t really [00:52:00] seen that from our community, at least.
Clay: You mentioned that there was a product that you’re coming out with soon that you be open to talk about?
Mario: That’s right. If you look at Infinity right now, Infinity’s our 100X leverage product, it’s basically tied to our spot market. So it’s like a CFD, closely tied to the spot market. It’s basically the same on the books, with financing fees, which are probably not competitive right now.
What we’re looking at doing very soon, [00:52:30] within the next two months, is to decouple Infinity from the spot markets into its own market and make it more like a perpetual product, where the financing fee would be a lot more competitive in line with what’s offered in other exchanges. If it’s too high, it becomes unattractive, not attractive for traders so [00:53:00] they’ll probably go somewhere else, regardless of whether the leverage is high. By making it competitive and by splitting it from the spot markets, we are hoping to attract more traders to this product.
On top of that, we’re working on futures, more like dated futures product on a weekly or monthly, which we plan on launching shortly after perpetuals. Perpetuals is basically an iteration of our Infinity product. Then, looking at [00:53:30] doing options trading sometime next year, that’s more far in the future.
Clay: It seems like 2016–2018 was the year of the development of a lot of spot exchanges, especially crypto-to-crypto spot exchanges, and that derivatives products are really coming on strong right now. Often, if you look at a ranking of exchanges, the largest [00:54:00] exchanges by volume on any given day that aren’t faking volume are derivatives exchanges offering leveraged products. For some reason, there’s been an explosion of spot markets, but not as many derivatives platforms. Is that because it’s harder to provide liquidity for derivatives platforms?
Mario: Building the product is not easy. It’s not straightforward. There’s a lot of things that go into it, on the risk management components and so on. You need to have the right kind of experience in-house [00:54:30] to build it properly, especially when you get into dated futures and options. It’s far more complex than than a spot exchange.
That’s probably the reason why. Maybe nowadays, there’s a lot more people from banking like where I came from, that are moving to crypto, and this is why we are seeing more, probably. If you look at the traditional financial markets, what you’ll see is that derivatives [00:55:00] markets usually trade multiples of the spot markets. That’s normal. I think as the market matures, once the industry matures, the need to have derivatives instruments becomes more pronounced, and we’ll see it more and more next year and so on.
Clay: When I interviewed the CEO of Deribit, John Jansen, he spoke about their most popular product was the perpetual markets, [00:55:30] followed by the dated markets, followed by the options product. Just because it’s not something that many people understand, at least in the crypto space, is the options. It sounds like your road map roughly reflects that, which is probably just driven by customer demand is that they want these perpetuals, then they want the dated, and then they want the options.
Mario: Yeah. As you can see, we’re more on the professional [00:56:00] side of things, more than consumer. I guess it’s because of our backgrounds, it’s just where we ended up, and where we see we can make the biggest impact right now, given our combined experience from our previous jobs.
Clay: Watching this space, because exchanges have the potential to do so much, they can custody funds, you guys I see have a credit card. They can issue tokens, you can do staking, [00:56:30] you can do both. Someone can lend and simultaneously borrow when they can do that in an institutional trader context, or more of a consumer banking context, whichever direction the exchange tries to go down.
You can offer security tokens at some point, if you wanted to. It does seem like there is this consolidation of features, over time. How do you see this playing out? Do you see there being security token [00:57:00] exchanges, derivatives exchanges, and spot exchanges? Or do you think eventually all of these things just become merged and provided by a few leading players that do most of this?
Mario: I think there’s going to be consolidation in the future, definitely. Actually, I have no doubt. There’s dozens and dozens of exchanges nowadays. There’s no way that we don’t succeed. Eventually, there’s going to be a handful of exchanges that [00:57:30] will survive.
In terms of product, it’s interesting. It’s something I’ve been thinking about a lot. What will happen with regulations, for example. There’s a lot of people, specifically in Southeast Asia where I am, that are not banked, and they’re basically in a position to where, if we can offer products for them to bank themselves, they can leapfrog the banking system and basically have a bank [00:58:00] in their hands using cryptocurrencies.
So there’s opportunities there, but then again, the question is regulations. What will these countries do? There are actually countries like Vietnam or Indonesia that can be highly regulated as well. We will see. It’s exciting to think about it. It’s exciting to think what might happen in the future.
I don’t know if there’s going to be a consolidation between the crypto world and the finance world, which is more centralized. It’s far [00:58:30] more regulated than we are. Maybe there’s going to be two branches, the crypto and the traditional finance. Who knows? We’ll see what happens, but I’m in the middle of everything right now and it’s exciting to be here.
Clay: There’s no limit on what you can build. In fact, you specifically have built trading systems in the traditional financial world, so you can absolutely do that. [00:59:00] I wonder what limits people just focus like in the traditional banking system. There are banks and exchanges that go after a range of customers and then there’s banks like Goldman Sachs which is institutional in focus. It’s not that they can’t build consumer products or partner with Apple on a credit card, but for the most part, their DNA is what it is. Are there any other products that you are working on that are [00:59:30] specifically targeted to consumers?
Mario: Even though I talk a lot about professional products like derivatives, options, futures, and so on, we have an internal project to look at consumer. What can we do with consumers, for example. We’ve launched a couple of products for consumers. One of them is called Quick Exchange. Our Quick Exchange allows you to trade any crypto to any other crypto as long as we support it within [01:00:00] our exchange. The pair doesn’t have to exist. You can go from Litecoin to Stellar, for example. We don’t have that pair in our exchange, but our Quick Exchange will. There’s an algorithm underneath that will go and find the path across different order books within our exchange to fulfill your order.
We just launched that a few months ago. We’re enhancing it right now. There’s a lot of interest, specifically from [01:00:30] corporate partners. They want to white label it. They want to use it. They want to put it on their wallets. There’s a huge amount of interest on that, and we’ve been working with them. The product is live. It’s being used by consumers. It has been growing quite a bit over the past few months. But as I said, there’s a lot of interest from our corporate partners to use that for themselves.
Quick Exchange is one of our consumer plays that we [01:01:00] just launched. There’s a few other things that we’re looking at on the consumer space. There’s something that we have internally called Liquid Vision which is a social take on trading. You can have leaderboards, you can follow people, you can do company trading. All those things going on internally but consumer-oriented. Quite different from the professional trading side.
Clay: The Quick Exchange thing sounds fascinating. there’s, there’s so many aspects to it. [01:01:30] All consumers for the most part, if I talk to friends who aren’t traders, they have asset A and they want to trade it for asset B, they don’t know what a base currency is or a quote currency is. They just want to make the trade. They’re not going to use a limit order, they just want a market order, they want it to go through, they don’t want to analyze steps of the books, they don’t want to analyze if their trade is going to move the market, and on, and on, and on.
It seems like that is a pretty cool consumer application. A lot of trades [01:02:00] do seem like they’re a bit constrained by the availability of trading pairs. To have these synthetic trading pairs is really innovative. I think it’s the way that that this stuff should be done. Congrats on that. That’s a really cool thing. I haven’t seen it anywhere else surprisingly.
Mario: […] our first step into consumer consumer space.
Clay: Sometimes if you want to trade some of these assets, because they’re trading on the literal pair, the order books are just so thin, that in [01:02:30] some cases, even if you’re a sophisticated trader and you don’t want to have to deal with a bunch of custody whatnot, moving things around and trading this for Bitcoin, and then you’re losing money on fees the entire way. It seems like, in some cases you might actually be able to save in fees.
Mario: With ours, you got a guaranteed price for a given volume, for example. So, if you want to do one Bitcoin to XRP, for example, it will tell you get this rate locked in [01:03:00] for 20 seconds, for example, and this volume, and you get a guarantee, so there’s no slippage, there’s nothing like that. You get your true rate on like that with Quick Exchange.
Clay: You guys are probably placing the orders in the background, following the actual path you’d have to take to execute that order.
Mario: That’s right. There’s a few orders you’re going to have to traverse, different order books, and sometimes take a little bit of risk in order to guarantee the price, but it is pretty cool. I think it’s becoming quite popular with our [01:03:30] consumer base and also with our B2B partners.
Clay: That would be the thing to white label. So just, for our listeners who might not know exactly what we’re talking about, let’s say someone wants to trade 0x to Monero. That isn’t a trading pair that I know of that exists anywhere where you can trade directly from 0x to Monero. So, the path might be 0x to Ethereum, Ethereum to Bitcoin, and Bitcoin to Monero. If that’s maybe the highest volume path of this or the cheapest path to [01:04:00] get from one to another, and their system would execute that in the background, and allow people to make the exact trade that they want.
Let’s transition to chapter 4 which is about growing an exchange and growth hacking, marketing, things like that.
I know you’re mostly on the technology side. You probably get harassed by marketing and sales a lot to do X, Y, and Z for various reasons. I don’t know that there is [01:04:30] a standard growth playbook for exchanges. I know during the ICO craze, a lot of the growth came from just listing all the tokens, listing them first, and integrating new blockchains before anyone else. That was a strategy for some period of time, and now it seems like there’s a lot of delistings happening. People have tried affiliate programs, referral programs, SEO, branding, and on, and on, and on.
Of what you can share, [01:05:00] what seems to have worked for you guys, above product market fit and developing a good product? Have there been any growth tactics that have been especially useful?
Mario: No. For us, fortunately, our marketing focus has been quite limited. It’s not the case anymore. We have spent a lot of time on the product, which has attracted liquidity. For us, up until some time ago, it was more like the product is our marketing. [01:05:30] Build a new product, make it great, listen to the feedback from existing customers, and repeat. And keep iterating over and over.
Having said that, I do believe marketing is important. We have a team right now, it’s the person that you spoke with, Emily, who’s been with us for a few months, building out our marketing strategy. New features that we have, like the social features that I mentioned to you before that we’re bringing in, should be able to help us attract more [01:06:00] consumer kind of users. We do ICOs, some branding, and content as well. Twitter, social, Facebook, we do a lot of that as well.
Clay: One of the areas where I haven’t seen a lot of differentiation in the exchange space is on branding. It doesn’t seem like that’s been really a huge focus. I have to say, I think you guys have done a pretty remarkable job on branding. I feel like I do know what you guys stand for, like there is a [01:06:30] distinctive look and feel, like someone is paying attention to typography and consistent visual experiences, which is not 100% of branding, but it does seem like you guys have done a great job there. Do you guys have a referral program?
Mario: As a matter of fact, we’re just testing something right now. We’ve had it for a while. It was there before. It was like trading fees shared revenue. Something like that, where if you refer [01:07:00] somebody, you get to keep part of the trading fees that they generate for us. We have something like that in production, but for whatever reason it was, it was turned off. So, we’re just about to turn it on with some pilot users will refer to in this case, that will bring in how it works. When you introduce somebody and the fees generated from this person, you get some of that. We’re about to do that. We’re talking about it today, actually.
Clay: Sometimes, people try [01:07:30] and game them, so they’ll sign themselves up on a different IP address and make trades and try to capture some of that. But that’s tedious and, I don’t know if that’s sustainable for making money. Engage in wash trading on your own, on your own referral, who’s really you. I don’t know. Stuff like that happens, but I’m sure you guys can catch it.
Let’s transition to chapter 5, which is about the future.
What do you see happening into the future, in terms of the evolution of the space or [01:08:00] your exchange in particular? And what does the world look like five years from now?
Mario: We’ve been looking at, what we call the ecosystem. Coming from finance myself, having spent most of my life with finance, it’s a whole ecosystem out there that needs to be built for crypto. Or at least built on top of crypto. More decentralized services and so on. So, as part of [01:08:30] this QASH token that we launched two years ago, we’re building we call Liquid Chain, which is a blockchain, more oriented to our financial services, on top of which we can build more sophisticated services that are more decentralized. We hope to launch it next year. We’ll see how it evolves over the next number of years.
It’s a very versatile, very sophisticated platform. You can use C++ [01:09:00] or Java or anything to build the programs with a smart contract over there. We have some interesting ideas. For example, to launch basic consumer trading apps, like binary options, for example, on top of this platform, whereas there’s no centralized entity. We have ideas to do noncustodial wallets, where there’s a new way to do this nowadays. It’s called multi-party computing technology. I don’t know if you ever [01:09:30] heard about it. It’s quite interesting technology that we use for our wallets. As a user, it allows you to keep your private keys on your device in a very safe manner, without the complexities of remembering any seeds or anything. And easy to recover.
We’re testing multi-party computing for consumer applications right now. We use it for our big apps, our wallets, but we never use it for consumers. So we’re using that [01:10:00] for consumer applications right now. There’s a lot of things that we could do in the future, in the next five years. As I said, building an entire ecosystem on top of blockchain would be interesting to see that. How we can decentralized everything that we can possibly do. Deregulates trading, and so on. It’s an interesting time coming up, I think.
Clay: And the final question, this is a question that I ask of all my guests. If you could wave a magic wand and altruistically [01:10:30] make something happen for the crypto sphere, what would it be?
Mario: One of the things that I said is that I’m based in Southeast Asia. These are amazing markets. There’s a lot of people here. Vietnam itself has about 100 million people, population here. A lot of them are unbanked, with limited access to banking. Same thing in neighboring countries. It would be great for these people to leapfrog the existing banking system and go directly into a [01:11:00] crypto-based system where there’s no intermediate banks. They can be their own bank. They have access to the internet, have access to a phone, and you can be your own bank without having an external third party telling you how to do your financing. Having all these services easily accessible to people here, would be great.
Clay: [01:11:30] Well, that concludes my conversation with Mario Lozada from Liquid. I hope you enjoyed it. Before you go, I want to mention that since we’ve started producing episodes at a much higher rate, we now have room for a few more sponsors. If you like the work we do and would like to support this show, then a sponsorship might be a good fit for you.
I can say from our own experience that Flippening sponsorships work. In fact, we would do these shows even if nobody else sponsored because of the business it brings to us. And over 80% of paying [01:12:00] customers mention that they heard of us through our podcast. If you’re interested in sponsoring the show, please hit us up at email@example.com.
Alright, that wraps up things for this week. Stay tuned for next week’s episode. Until then, take care. Goodbye.
That’s it for this week. To sign-up for our free crypto investing newsletter, listen to other episodes, or get the show notes from this episode, please visit flippening.com. I also invite you to check out the startup that funds this podcast, Nomics [01:12:30] at nomics.com. Finally, if you got value from the show, the biggest thing you can do to help us out is to leave a five-star review with some comments and feedback on iTunes, Stitcher, or wherever you listen to podcasts. Thanks for listening and see you next week.