Solana's Crypto Native Next-Gen CEX | Armani Ferrante

This episode is brought to you by Sei. Sei's V2 upgrade introduces the first high-performance parallelized EVM already live on public devnet. Mainnet comes later in Q2. You can follow along with the Sei journey on X @SeiNetwork. Sei is spelled S-E-I. Go follow Sei on X, @SeiNetwork. Scary stat for you. The odds of falling victim to online crimes are 1 in 4. Aura provides digital security protection to keep your personal information, passwords, online activity, activity and technology safe from online threats. For Empire listeners, Aura is offering 14 days free plus up to 55% off an Aura subscription when you visit Aura, aura.com/blockworks. Terms and conditions apply, see site for details. You'll hear more about Aura later in the show. This episode is brought to you by Avalanche. Avalanche is a leading network of blockchains giving some of the world's largest financial institutions new use cases and business models while leveraging completely customizable infrastructure. Check them out, it's core.app/discover, you can explore Avalanche's subnet ecosystem at core.app/discover. I was playing around earlier today. Really cool. This episode is brought to you by Mantle. Mantle LSP is a permissioned and non-custodial ETH liquid staking protocol deployed on the ETH L1 and governed by Mantle. Mantle staked Ether, which is mETH, serves as the value accumulating receipt token of Mantle's LSP with multiple rewards and yield opportunities. Today it is the 4th largest liquid staking protocol with almost $1.5 billion in the protocol. Mantle is your opportunity for yields and rewards completely on-chain. Big thanks to Mantle. All right everyone, welcome back to Empire. We've got Armani from Mad Lads and from Backpack. Armani, welcome to the show, man.

Hey guys, how's it going? Thanks for having me.

Yeah, good man, good, good to have you here. So Armanath, I want to start off. So Santiago is an investor, so maybe he can help take us a lot deeper than I can go. But I actually am kind of an outsider to like, you know, I own some Mad Lads and stuff, but like an outsider to really what you guys are building at Backpack. From an outsider's point of view, like thinking about Armani, the builder, you launched Anchor, the framework, you launched Mad Lads, the community, you launched Backpack, the wallet, and then you launched the exchange. So I'd love to get your like high-level view of what, like, what is Armani building here?

Yeah, great question. So I think there's multiple parts, I think, of the stack. You know, Anchor naturally is a smart contract framework. That's really, you know, the customers, you know, it's a developer toolkit. MadLads is an NFT profile pic. It's an NFT community, community, and a super genuine sense of the word. Backpack is really the consumer product. That's really the force that we're putting behind, the company behind. And what it really is, is it's an entry point into crypto. You know, a lot of people like to talk about super apps. They like to talk about these one-stop shops. Backpack truly is, in the most meaningful sense of the word, your entry point into crypto, namely through the kind of substrate of custody. It's like you want to own crypto. No matter how you want to own crypto, it's the best place to do it. And the ultimate goal is to be able to own crypto on any chain, whether it's self-custody, whether it's a ledger, whether it's a 24-word seed phrase, or whether it's a centralized exchange and you want to use an account. And that's kind of, I think, at a very high level, what we're trying to do with Backpack. And the way that's operationalized You know, we can go down a bunch of different rabbit holes, but today that's kind of where we're at. And, you know, there's a bunch of stuff that we're building in terms of like the next kind of year of Backpack. But, you know, that's more or less where we are today.

Nice. Let's talk about the exchange. So every cycle there's kind of a new— so exchanges have been the best business model historically in crypto the last decade. There's like no better business model than an exchange. And every cycle, there's kind of a new exchange that rises to the top. You could say, what, 2013, 2015, you've got, you've got Coinbase. 2017, kind of Binance came along, unseated Coinbase. 2021, I mean, you could say FTX, like, came into that seat. Obviously, it was fraudulent, but, you know, it did kind of become the top exchange. And I think when I talk to people, and I think the thesis for a lot of the investors was, look, Backpack is going to be that exchange this cycle. How do you think about building a crypto exchange and like go as deep as possible here? Like, how is it going to be different? Like, what is the strategy? Customer acquisition? Like, would love to just like get all your— the brain dump of your thoughts on building an exchange.

Yeah, yeah, no, it's a great question. So there's a bunch of different ways to tackle this question, but I think, you know, at a high level, maybe just to give you some moral context on how I think about exchanges, You know, I think the exchange is one really important piece into the app, but it's really like an auxiliary component in the same way that like a wallet is an auxiliary component to an L1, where, you know, an exchange and a wallet, you know, these things aren't very useful unless the underlying L1 is flourishing and has a, you know, a vibrant, successful ecosystem. And that's kind of like our view of the world. I think, you know, we are pretty different in the exchange world in the sense that we are coming from the on-chain world and then going and building out this really important tool to grow L1 ecosystems and to kind of encourage self-custody and to kind of make innovative crypto products, which is maybe a bit of a different perspective than starting with the exchange and then going on-chain. But, you know, if you rewind, let's say like a year ago, which I think is when we decided to go down this path, and you look at the exchange opportunity. On the one hand, you know, if you aren't really kind of super familiar with the exchange business model, you might look at the landscape and think to yourself, oh wow, it's quite competitive. You kind of have to be crazy to go build an exchange. But if you dig a bit deeper, there's some quite interesting insights that I think where I think I think, I mean, the exchange opportunity was pretty, pretty obvious, but actually how to execute on the exchange opportunity is actually quite subtle and is this really weird mix of skills you need to have, like, you know, really good engineering. Obviously, you need to be able to, you know, figure out how to actually solve these really important problems. You know, exchanges are notorious for being hacked. FTX was, you know, we all know what happened there. I don't need to relitigate that. And there's this enormous kind of like trust minimization problem that no exchange really has solved in a meaningful way. And but it's not just like one part of the problem, right? You also, I think, in the wake of FTX, need to have that kind of compliance piece really figured out in a really mature way. And this is really the thing that scared the hell out of me out of building an exchange. You know, I'm an engineer, I'm a product person. I know I love marketing and community and being loud on crypto Twitter. I'm not a lawyer. I'm not a compliance expert. There is, you know, a rich kind of history of, I think, people building crypto exchanges, some successful, some not, that have basically ignored this piece altogether. We obviously all saw what happened with Binance and how CZ had to step out. And I think, you know, the day— it's my view that the days of like a founder who's maybe a good programmer or a good product engineer or whatever, um, starting, uh, one of these, like, you know, crypto exchanges without the compliance piece figured out, I think those days are mostly over, uh, and it's basically precipitated by FTX. I think, um, every kind of regulator, for good reason, um, is really kind of on the edge of their seats, like, really paying attention to the world. Um, and, you know, on the one hand, I think it's that, you know, it's kind of unfortunate in the sense that it's really hard to build one of these startups now. But on the other hand, it's, it's obviously quite great in the sense that, like, you know, the world kind of has to level up and we have to mature as an industry. And so these types of things that were, you know, once kind of just shrugged off, are now kind of important. And it's kind of my view that as a result, the kind of crypto world or startups in crypto are going to run into like two different kind of are going to fall into two different buckets. They'll either be totally centralized, uh, uh, like us, uh, where you're fully regulated, you're, you know, uh, you, your, your license, you're a money transmitter maybe, uh, you know, whatever it might be, um, you're, you're, you're, you're a licensed VASP in whatever jurisdiction you're operating, or you're going to be fully decentralized, you know, you're going to be, uh, you know, operated on a super decentralized network with a bunch of independent nodes, you know, maybe you're an immutable smart contract, you're you know, something that really, uh, uh, represents like the best of the space, things like, you know, Uniswap and, uh, you know, you know, uh, other kind of like really kind of, uh, pioneering OG, uh, DeFi protocols like that. Um, and, and anybody that's caught in the middle is going to be in this weird spot, um, in my view, uh, where, you know, they're not trust minimized, um, uh, they, they, they, they, they don't follow any of the rules And it's my view that it's only a matter of time between, you know, they either get, you know, you know, squeezed out of existence for one way, shape, or form. Either they're fragile in the sense that they explode, or they don't comply with the rules and they get regulated out of existence. And so I think that middle spot is a really bad place to be. And so for me, you know, if we were going to build a centralized exchange, this piece had to really get get it, get checked off. It's like, how do we do it and do it right? And do it kind of with the sophistication of like building a, you know, like a Wall Street financial institution. And it's like really easy to like say that in like a negative light, like Wall Street or whatever. What I really mean by that is like, you know, being able to comply with like the legal framework that, you know, kind of financial institutions have to operate in, in, you know, different parts of the world. And the reason for this is really simple. The reason why centralized exchanges are so valuable and have such like enormous distribution is because they are like the very first touchpoint that bridge people from one economy into the crypto economy, from TradFi into DeFi. And they are uniquely positioned unlike any other product really to be able to bring all of that value back and forth between those two economies. And obviously, if you want to be able to kind of interact with that value in the traditional economy, if you want to be able to, you know, have great fiat rails, have client money accounts with banks, be able to, you know, trade not only kind of crypto assets, but, you know, also stocks and bonds and, you know, real estate or whatever it might be, right? You need to be able to operate inside of that that, that, that compliance framework. Um, and to me, that's really important. It's like, you know, uh, foundationally, I view the space, uh, you know, I, I, I, as I, I view, I view crypto as like, you know, eating Wall Street in the same way that like software ate the world, right? We, you know, ultimately, if crypto is really going to succeed, you know, every piece of financial plumbing, every piece of financial infrastructure, um, has to be built on, on crypto rails. And so it's kind of this, you know, really kind of important part of the product landscape to not only focus on decentralization and not only focus on this parallel crypto economy, but to also bring all that stuff into kind of the traditional economy as well. And so I think this is kind of like a foundational kind of view with like, you know, after the exchange space. And so I think like that is like maybe the beginning of the conversation of like, you know, those things become really important. And then obviously, um, uh, you know, when FTX collapsed, a lot of people kind of saw that as, you know, um, a huge void, um, that was ready to be filled. Um, and actually executing on that, um, on that is actually very difficult. And that's like, you know, maybe the next part of the conversation, but I guess I'll stop there.

Yeah, why don't we just go there?

Sure.

Yeah.

Yeah. So I mean, I think, you know, firstly, you know, if you want to execute on the, on the exchange opportunity, obviously you need to have, you know, the engineering chops. And I think, you know, you need to be able to build, you know, a really kind of reliable, robust, like Web2 system that's up kind of up 24/7 and never goes down, but has to be really fast. Right. And like, you know, with the requirements of a modern financial institution. But I think that the thing that's, I think, unique is like, well, you also now have to start layering on all this like cryptography and stuff like that. And all this stuff's kind of interesting and unique. And then there's a compliance piece that's like interesting and unique. Most people have like one or two of those. But then the third piece, which I think is pretty challenging, is like the distribution piece. Right? And that's really having all 3 of these things together is really unique. Most people have 2 or 3. Most people honestly have 1. Very few people have all 3 of them. And the distribution piece and the go-to-market, I think, is something that is unlocked in a couple of key ways. So I think there's, you know, obviously unique product. I think that's the most traditional way that people kind of go to market. I think What's really, I think, unfortunate, but just like the reality is that the barrier to entry to building a centralized exchange is so high that that unfortunately is like a source of edge and is like a very real way to kind of differentiate yourself. Like a small example of this is just like what we're doing in Japan. Like, you know, we moved here very kind of intentionally because it's really hard to get licensed here. It's really, really hard. And the bar is really high. And, you know, it's not that common for, you know, an American to come and move to Tokyo and set up office here and hire a Japanese team. And not only a Japanese team, but a team that actually knows kind of the process and how to actually build out the centralized exchange here. And so I think that's an unfortunate reality. And then I think, you know, another piece is just like the international nature of crypto exchanges. And this is maybe the part that is super, um, uh, just, it's like invisible to most people. Um, so like, I'll make like an assertion that like, I don't mean to like be like, you know, mean or insulting or anything, but like, you know, I'm an American. I, I, I'm, I mean, I, I love the US. I will probably live in the US. That's again, at some point in my life. But if you're building an international crypto exchange, you have to live where next to your customers. You just have to. If you're not living next to your customers, you're not doing it right. You're just leaving value on the table. Like little things like tweeting when your customers are awake are really important, let alone being able to speak the language and whether it's Japanese or Chinese or Cantonese or whatever. And so I think that's another element that's really unique to our team in the sense that we have a bunch of people that are super international, that are part from different parts of the world. Um, and so we're able to like go to these local markets in ways that I think a lot of teams have trouble with.

Armani, on that point, I want to double-click on Japan. It's a very unique market and very crypto-native. Uh, I think a lot of the spot Bitcoin, like the penetration of crypto in Japan is high, similar to Korea, but they're very particular. Uh, Bitcoin's very strong. Some of the other assets are not so much. Like, what was the rationale for going first to Japan, being a market that is so hard to crack into? And very unique and localized.

Well, before you do that, Armani, what are the two— what, there's Coincheck and Bitflyer? Are those the two exchanges in Japan?

Yeah, those are the two, the two, the two real quite large, quite successful exchanges.

So they're still okay. And Binance, I think, took forever.

I don't know if they are actually even licensed at this point, but they were working on it two years ago, I believe.

That's right. That's right. Yeah. I mean, I think firstly, Tokyo is just— this is where I am right now. Tokyo is just like one of the best cities in the world. It's incredible. It's people like, I have this conversation, people are like, oh, why'd you do that? Or whatever. And I'm like, well, just come here for a weekend and you'll see why. It's just like, it's beautiful, it's safe, it's clean. There's so many smart people. It's like, it's just amazing. As you said, it's super crypto native. I think it has a very progressive crypto culture. And so it's really exciting on that front. I think we've very unexpectedly have been able to hire a lot of really really smart people here, which is, I think, was probably the— I thought it would be hard just because, you know, it's like, you know, as a, as a, as a foreigner or whatever. And so that's been like super pleasantly surprising. I think what's really unique about Japan is a couple of things other than obviously all the stuff that you mentioned, quite a unique culture as well. Listing tokens is very unique here in the sense that you only get a couple shots on gold, like heavily throttled. Um, and so they have this like, uh, uh, uh, uh, whitelist of sorts where if you want to list a token in Japan, you have to basically get it approved. Um, and it's not till, uh, about 2 or 3 exchanges have, uh, the same token approved that the 3rd or 4th one can come along and list it without approval. And so the number of tokens that are on exchanges here in Japan, it's actually way less than in other parts of the world. I think the other thing in Japan is like a really strong admiration and respect for kind of, you know, its institutions. I mean, I say this as a foreigner, so like, you know, what do I know? But I think what's unique and what's pretty consistent just based on the people I've spoken to is that like the licensing piece is really important here. And so, like, unlicensed offshore exchanges tend to not do really well here. And so if you're going to go to market in Japan, you have to do it like you have to, like, you know, button up and do everything kind of, you know, bespoke and by the rules here. And so I think that was kind of, you know, we basically thought, okay, well, if we're going to do it, then we have to— this is kind of how we do it. And I think, you know, the other thing is just like It's just a big market. It's like, you know, one of the largest countries in the world by GDP. And, you know, that obviously makes it exciting. I mean, there's the two kind of competitors. But I think generally in the exchange landscape, you know, there's just not a lot of competition. I think in a sense, like, there's not a lot of people competing at a very high level. There's like a lot of exchanges, obviously. but not a lot that are kind of, you know, really going toe to toe with, you know, the largest kind of exchanges in the space.

Maybe this is good, a good, a good of a pause to just get your thought process into the decision of building an exchange, centralized exchange at a moment where, yes, we all felt that there was a gap because FTX was a good product.

Yeah. Yeah.

I mean, people used it. It was a good product. Putting aside all the other stuff. One component is, I mean, it has all this level of effort's really high for centralized exchange, right? You're talking about licenses. You have to— building distribution is really hard. It's not clear in many places. The other alternative is kind of go do build a competitor to Uniswap and then build some on-ramps, you know, by integrating with a bunch of partners and maybe kind of stitching it together like that. The point that you made around owning the customer relationship, I mean, Coinbase is synonymous with crypto in the US. It has built such a powerful powerful brand and people still use it even though, you know, fees are higher than other places. Um, why go— like, did that compute when you were thinking about— was that even an option, building a decentralized exchange? Do you think a decentralized exchange with some on and off-ramp could ever approximate what a centralized exchange has from a customer relationship standpoint?

So I think it really depends on, on, on what you are what role you're trying to play. I think decentralized exchanges are super important. I think, um, I, I think they're certainly kind of, you know, the future in many ways. Um, I think we, you know, obviously our, our product, you know, the wallet in particular, um, it's a self-custodial wallet. It's in the same app as a centralized exchange. Um, you know, you can interact with DeFi and DEXs in that way. I think the main— I think there's a couple things that are really important. So I think firstly, there's a lot of decentralized exchanges now. I think there's tons of competition. I think that part of the world is really being taken care of really effectively by teams like, you know, Uniswap on Ethereum, Jupiter and others on Solana. Yeah, just generally a lot of really impressive people that are doing really great work. I think in the centralized exchange landscape, I think there's also a lot of really impressive people doing a lot of great work. I think there's less in terms of number of products that are, that are, I think, solving all the problems that in my view need to be solved. And I think for a lot of us, you know, the centralized exchange is the first touchpoint. Into the industry. I don't know about you guys, but I bought my first ETH, my first Bitcoin, it was on Coinbase. Um, I, I never, I didn't onboard with a self-custodial wallet and I didn't know what a Ledger was. I didn't know what a mnemonic was. Um, it wasn't until I got on Coinbase and used the app and, you know, uh, you know, got my first crypto that I eventually, you know, started learning about kind of all self-custody. Um, and that was that progressive kind of onboarding journey. And I think that is one of the most important things that a lot of exchanges are trying to do, but they're not doing it as integrated as they could be. And like, they're just best positioned to teach the world about self-custody. There's no place better. Like, Coinbase made a really interesting decision. Like, tons of respect for them. Brian Armstrong's incredible. Like, no, no, like, no, no shade at them. They're like the pioneers in the space. But like the fact that they have their apps separated is something that I, I, I, I think is a really good example of like one of the differences between us and them. It's like for us, like we want self-custody to be inside of the same app and like, yeah, you, you can use the centralized exchange, you could use your exchange account. That's going to be like a backbone of this, of the product. Uh, but self-custody is, is just as important and it needs to be kind of right there front and center alongside the exchange. And so I think that's one big component. I think the second big component, other than, you know, coming to the exchange space with this on-chain ethos, is wanting to actually go toe-to-toe with like the largest financial institutions in the world. Like, okay, we're not there yet. We're certainly not there yet. We have a long freaking way to go. But it's my view that particularly kind of in certain parts of the world, um, you don't go and look at, you know, just literally go look at a financial app, go look at your, your banking app, uh, go, go to, you know, your favorite, you know, a banker or, or trading product, and you'll, and compare that to like Instagram or compare it to like TikTok or whatever. It's like night and day in terms of like the engineering quality and the design and the product experience. Um, and the reason for that is really simple. It's just that there's just an enormous barrier to entry to to building these things. It's quite literally impossible. You need millions of dollars, you need decades of experience, you need relationships with all the right people to get into the right rooms, to have the right meetings, to get the right trust, to get the respect and time from, from, from the right people that will allow you to do these things. That it's so hard to build these companies. And there's been a couple of them that have come in over the past, like, you know, decade or whatever. You know, it's like Robinhood and whatever, but they are kind of like the exception. You know, I think from, from my point of view, this is the other piece that nobody is really tackling other than Coinbase. Coinbase is the only one that's really trying to go for that market and really trying to like eat the traditional financial world. They're the only ones that have been able to go public. That's like, that should be like indicative of any of anything, right? Like there's so many people that like, you know, tried and could have, but they just for whatever reason couldn't get to that. Like, they couldn't, like, you know, get their, you know, financial department, you know, uh, department to, like, you know, have the right auditing stuff in place. Um, uh, and so I think to get to that next level, uh, is, is really important for the industry to, like, you know, for crypto to really take over. Um, and I think that's one of the big places where everybody is just falling, falling short. Um, and it's not necessarily that they're falling short for, like, you know, any, like, bad reason or whatever. I think a lot of people just haven't tried it or don't realize how important it is. Um, and so we've kind of set up the exchange from day one with this goal in mind. Um, and so we're doing like a lot of really hard things that require a lot of, you know, experience, like hiring like, you know, really established and experienced auditors from like, you know, big accounting firms and financial institutions, and not only exchanges in crypto but also, you know, people that have kind of, you know, done this stuff before. And so, uh, yeah, I think that's like the other big missing piece that I think is really important for the industry to get to the next level.

When I first, uh, used it and then heard the pitch from Christian, um, I felt and agreed with a lot of your point of view. There has been a lot of innovation in the exchange space. Uh, if you have the license, you can get away with a kind of crappy product, and that's the nature of the world. But it felt to me that you guys having started with MadLads and like really understand— it was a sort of a very interesting— these guys really understand crypto. You're building it at a time where we have just more visibility in what the user really likes, meaning NFTs. Felt like you have a deeper appreciation for that. But of course, as you say, you know, the— you have to do the— you have in crypto, building in crypto in the centralized world, regulated world, you have to sort of build for perfection. It's not like, you know, um, and the, and the capital requirements and the level of effort is higher than maybe like spinning up a competitor to Robinhood, right? Um, you know, when we were in the early days of ParaFi, Ben and I were of the mind that we had to build and use every single service provider, like not the second tier or the third tier. We had to use the best auditor, the best accountant, because because otherwise people discount you, right? And I can— and so the question for you is, um, when you think about like expanding and really servicing the next 100 million users, um, how much of that is we just need to raise a ton of money and replicate what we've done in Japan and go elsewhere and convince regulators that we are legit and we have the best team to execute and make them feel safe?

Yeah, I think so. So maybe for, for some context, um, exchanges can use money unlike any other business. And it's not just like buying stadiums and hiring celebrities, right? And like, you know, we've seen plenty of that, obviously. Um, and I guess there's like a time and place for that type of thing, although we're certainly not at that place or time. Uh, uh, what you need the, the money for is for, you know, things like parking money in like banks so that you can get like licenses and like hiring teams all around the world, offices, local compliance people, local customer support, people that speak the language, people that are not just like random people off of the street, but people that have like done this type of thing before can actually build a real team that's like familiar with the local country and the local laws and the local like compliance regime or whatever. And so every time you expand into a place, you have to like set up all of this infrastructure and it's like, okay, it's like a couple million here, a couple million there. It's just absurd. It's like, it's like, it's so absurd that just nobody does it right. And the way that it was done in the past with like, you know, Coinbase and Binance and FTX and all these others, right, is that they were just so early that they were lucky. They were, they were just lucky that they, like, they got a jump on it, right? Uh, but the world is, as in my view, has changed now. Um, and so you can't kind of run that same playbook again. Um, it's like, you know, building a bank in the, you know, 1920s or whatever, uh, it was a lot easier than, uh, in the, in the 1930s, or obviously like up until today, right? Um, uh, and it's like the same story in crypto. And so yeah, I think this, the barrier to entry is enormous. The ability to just spend capital is absurd. And so raising a lot of money is obviously really important, especially if you want to get to that next level, because you need to do things that not only build the product, but you also need to have all of these, like, kind of, you know, you know, all these people with financial expertise and auditing expertise and security expertise. And, you know, you like an SRE, a security team, an accounting team, a financial team, a compliance team, not just in one country, but in Japan and the UAE and the US, uh, and literally, uh, you know, every country you can imagine. Um, and so it's this like enormous beast, uh, that is unlike really building a normal Silicon Valley startup or a normal kind of DeFi startup, uh, which is just like, um, super, I think, unappreciated until you've actually gone through it.

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It is felt that most recently regulation is maybe at an inflection point, particularly in the US with this election cycle. As you think about expanding one, has it gotten easier to talk to regulators to get approved? Um, do you— have you changed your mind maybe on when you're, you know, your strategy for the US in general?

Yeah, so I would say it's, um, like, I, I wouldn't say we've really changed our mind. I think our approach to the US is basically, you know, it's a huge market. It's, you know, where I grew up. We want to go into the US. It just takes an enormous amount of time and an enormous amount of money, and you can't really short circuit it. And furthermore, I think the US product is like, you know, quite strong. I think Coinbase is quite good, and I don't see any good reason for us to, you know, immediately go toe to toe with them. The market internationally is just as big or bigger. And so that's where we're starting, where we can kind of get a head start and start building a real business, get users, get a real product off of the ground, start growing and start snowballing, both, you know, letting our product grow, letting our user base grow, letting our resources, capital, and team grow so that when we're ready to go into the US, we're kind of ready to go guns blazing and ready to really compete at a high level. And I think this snowball, uh, uh, uh, like mechanism, uh, for lack of a better word, is actually really important when thinking about building an exchange. Um, like, yeah, like you really need to figure out how to prioritize because it's an enormous amount of resources and, and you can't like go after the biggest market like on day one, right? You have to figure out like what's the path for you to get from zero to like climb, climb, climb until you can eventually get to like really high level. Um, and so that's kind of, you know, the game that we've been playing.

Yeah. I want to get an understanding of why you think you've won to date and how do you think about winning in this game? Uh, you talk about, you mentioned earlier, you're, you're solving unique problems. Uh, Coinbase has expanded their product offering quite interestingly most recently with like Base, for instance. They've been very opinionated on becoming that place where you you, you, it's first interaction with crypto, and then we want to guide you in an app store kind of equivalent of entering Web3. You guys have taken a different approach, uh, but I want to hear for, for the benefit of our listeners how you think about like the steps you've taken and how your product's different, why you're winning.

Yeah, great question. So firstly, I, I wouldn't say we're— we've won by any means. I mean, we've, we've One, a couple. We are, we are, yeah, we're trending in the right direction. I mean, certainly doesn't feel like we've won. We have a very long way to go. The way I think about it, I mean, it's, I guess, like pretty trite advice, right? What we are doing and continue to do is to just focus on where we can be unique. And there's a bunch of different kind of elements of this. So the first element is just like starting with like our core, right? It's like Mad Lab community and Solana. Right? This is where I think we have very unique distribution, unique background, unique storytelling, uh, just, you know, you know, moral friends and family that are in the ecosystem, right? And, and so this is like a great place to start building a company and start building a product where you have, you know, a 10,000-pick profile, a profile pic collection of people all around the world that MadLads is unique in that it's really like genuine. It's like, it's not like, uh, it's, it's like It's like an actual community. It sounds like kind of silly and dumb, but, but it really is. And so that's been like a really great starting point, just like, okay, just build a product for these people. You know, there's two products that every NFT holder has, right? They have a wallet and they have an exchange. And so that's been really just, I think, a really symbiotic relationship. And I think that was a unique starting point. And then you start there and then, you know, you keep expanding, right? We did it with the Solana ecosystem and kind of rode that wave. I think Solana obviously was like at $8 or whatever when, you know, post-FTX collapse, and now it's at like $170 or whatever. It peaked at like $209 or whatever it was this year. And so a bunch of tokens got launched. That was a bunch of listings. That was a bunch of launch pools for us. That was a bunch of awesome product engagement where, you know, we had, you know, the mad lads helping the product and the product helping the mad lads and Backpack. and, and that, you know, allowed us to, you know, start growing in other kind of unique parts of the world. Um, and I think that's kind of been our approach to community. It's like the exchange and the wallet is really unique in that our goal is ultimately just to promote and to help, uh, grow other projects. And, and we can do that in a really positive way. Um, and so we're kind of like this cheerleader for, you know, the pro— the, the projects that, that we work with. Because, you know, it's a very symbiotic relationship. So yeah.

Armani, will you tell me about the future of the exchange and how you think about like adding more products to it? So you start with Solana assets, then I saw you guys listed Shuffle, I think it was, which is, which is an ETH token. So maybe you're now pushing on to ETH. Then do you start to like, will you ever add NFTs? Will you ever think about adding traditional equities? Like, tell me about the vision for the product side of the exchange.

Yeah, so the way I think about it is there's like a couple different user segments that are pretty interesting to go after. I mean, firstly, we obviously went after where we had unique distribution, which is just, okay, let's get every Solana backpack wallet user basically to use the exchange. And, you know, as we're doing that, you know, on the B and marketing side and getting listings, we start working on the next phase. And really kind of that next phase is expanding to the broader, I would say like prosumer, more typical kind of centralized exchange user, which is, you know, people that care a bunch about trading, people that care a bunch about having a diverse set of token products, people that care about, you know, futures and borrow lending and spot margin and all these things. And really recreating, in my view, like what made the FTX spot product really special. And, you know, you see like this of Binance and OKX and Bybit where they all kind of had their own, you know, go at recreating that product. But I think, I think that continues to be a pretty important, I guess, just a product that hasn't been properly reproduced. and, and so I think that's kind of like, you know, a small way to expand the, the, the, the, the customer segment where it's, you know, no longer just about, you know, Solana maxis or whatever, but now starting to think about the larger kind of, you know, people that care about, uh, trading crypto more broadly. Um, and when you start thinking about trading product, uh, it's all about one thing, right? It's all about capital efficiency. It's all about cost of capital. It's all about where's the optimal place for me to have my funds. An optimal place for you to have your funds is the place where it's, you know, A, most secure, and B, can be used for the maximum amount of things possible, right? And so if those are your two design constraints, then, you know, that starts guiding a lot of the decisions and a lot of the way you start building, right? So, I mean, on the second point, you know, the table stakes is just, you know, the the large L1s, right? Solana, ETH, Bitcoin. You've got to have those three chains. You've got to have all the awesome projects that are part of it. I think for us, you know, the wallet is like a really integral part of the product, like on the mobile apps, literally one app on the web. We have it like natively integrated with the extension and the website. And so we kind of go after expanding the product offering with those kind of two products. In tandem. But, you know, the more tokens that you have, right, the better the trading product. And that's kind of like, you know, a basic informative direction. But then you start, you know, venturing into, you know, other products, right? You know, perpetual futures, cross-collateral system, margin systems, borrow lending, spot margin, etc. But then once you've kind of gotten to that point, I think then the question is what's next? And I think, you know, in my view, You know, one of the most important innovations in the space has just been stablecoins. I mean, this isn't like, you know, particularly insightful. I think a lot of people agree with this. And when you look at companies like Circle, what are they really? Circle is basically a centralized exchange that has one product. They don't have a trading product. They just tokenize dollars and put it on different blockchains and create and redeem through their, you know, centralized exchange. They don't call it a centralized exchange, but it's a centralized exchange. It does everything a centralized exchange does. Jason Yanowitz. Um, uh, and that by itself has probably been one of the most important innovations for crypto at large, right? You know, whether it's USDC or USDT or, or, um, any of these other kind of stablecoins, uh, that are tokenizing kind of these, you know, real-world assets, uh, or whatever you want to call it. Uh, and I think this is really the unique thing that regulated centralized exchanges can do in a way that no other products can do, basically. Um, and so I think given our kind of setup, um, given our kind of, I think, skill set on the team and orientation and just way— like, the problems we've chosen to solve, we're kind of heading in that direction where I think we will be able to, or we'll at least give it a go, uh, to, you know, try to tokenize a lot of really important assets and bring them on-chain to create, uh, you know, uh, you know, people like to call talk about exchanges as liquidity hubs, but I think, you know, creating these, you know, very capital-efficient environments where it's just way more just practical and also just productive and safe and just more convenient to have your money on and backpack, right? Whether it's through the wallet or through the centralized exchange, like that's ultimately the goal, right? Yeah. And, um, I think once you've done that, right, um, I think for a lot of, you know, uh, you know, maybe Millennials or Gen Zs or whatever, um, or Gen Alphas or whatever the, the, the letter is these days, um, you know, the, the centralized exchange starts becoming a financial hub in the same way that, like, you know, our parents thought about, you know, their, you know, banks or whatever. Um, and I think that's ultimately kind of, you know, the direction that a lot of you know, I think that, that we're going, um, and there's gonna be like a lot of work involved, a lot of challenges that we face, but I think ultimately nothing beats crypto in terms of like the place to have your, you know, all of your finances. Um, and so that's definitely the direction we want to go.

The way you describe the frustration with the financial system, which is like it's not up to par with the best-in-class, um, internet services, um, and my thesis for exchanges, particularly yours, Coinbase, is that they will become the premier financial institutions, especially for younger generations, which are harder to capture. Like, but once you have them, like, there's enormous amount of LTV there. How do you think about, like, the users that are— you initially acquired, a lot of them were MadLads holders, deeply passionate community. In crypto, I think you have this phenomenon where, like, the early adopters are easier to acquire and retain. But as you go and try to expand into other circles, it just becomes harder and harder. Maybe you're bumping into a user that is using Huobi or Binance or OKX and you don't have perps and they do. And but you have launchpad and really unique distribution, especially in Solana. How do you think about like expanding? And I'm curious, any insights you can share into what you're observing at the customer level, the interactions, what they're doing, the behavior? Are there any particular like insights there that you found interesting over the last year?

Authentic.

I think there's maybe a couple ways to look at this in terms of like, user acquisition and kind of getting to that next level. I think firstly, building crypto products is really, it's not like, like, it's not like necessarily like hard, it's not rocket science, you know, if you're a good Web2 engineer, good Web2 product person, you know, you can, you can work in crypto and build stuff. But I think a lot of the, you know, the skills and expertise and just, you know, foot guns and like how to build secure, reliable crypto systems at scale is like pretty— there's not a lot of people in the world that can do that. And so if you think about, you know, maybe the first part of your question that what you were getting at, you know, I think, as the industry grows, which I think we all continue to think it will be— it'll grow, um, you know, as, you know, the products in the underlying ecosystems, whether it's Solana or Ethereum or Base or whatever, become more and more important, um, you know, the, the, the, you know, it's like rising tides raises all boats, right? Um, and so the institutions that are there, um, to kind of facilitate, uh, uh, uh, that economy grow alongside it. And there's very much, I think, network effects there in terms of like not only capital and people and brand distribution, but also just in terms of like actually just becoming part of the fabric of that economy. And whether it's, you know, running, you know, validators and actually operating the networks to, you know, contributing to protocols to, you know, you know, a small example of this is like, you know, our— it's just like Anchor, right? It's just like every, you know, a lot of, you know, I would say, I would say that the majority of smart contracts on Solana literally have, you know, you know, our company name in it or whatever. And that's like a really small example that's like maybe not super meaningful. But it, you know, it's illustrative of the point of that, I think, you know, as the industry kind of grows and takes over and really starts to, in my view, you know, it'll eventually dominate kind of traditional financial services. The, the institutions that, you know, were part of that will capture market share in the same way that internet companies did with all the incumbents. And so I think that's like definitely a big part of it in terms of like going after like the main entrenched, you know, I don't know, archaic financial services businesses.

Yeah. Is having a stablecoin necessary to really get mainstream users?

Um, I would say— I wouldn't say creating a stablecoin is necessary. I would say having good stablecoin products absolutely is. Um, would you ever think—

yeah, would you ever think of creating your own?

Um, I think there'd have to be a really compelling reason to. Um, I think getting distribution on them is really hard. It's like close to impossible. I do think exchanges are the best places to get distribution. Like, if you're— the first BD problem that you're probably going to solve when you're creating a stablecoin is like go find an exchange partner.

Um, just like Circle, the reason Athena, Athena's gotten traction is because they're a great customer to exchanges, so they're going to get listed, they're going to have the distribution, right? So if there's anyone out there that's going to create a competitor to USDC, maybe a different denomination, yen or, you know, otherwise euro, it's probably going to be an exchange like you guys.

Yeah, no, that's, that's totally right. I mean, I think, uh, I totally agree it's not on the roadmap, but yeah, wholeheartedly agree with the sentiment. Yeah.

Um, can you just make a comment or just talk about the Launchpad? There's been really interesting projects, um, that have like launched in Backpack. How important has that been to really entrench your position in the Solana ecosystem, and how do you see that going forward to get an edge over other exchanges perhaps?

Yeah, I think it's super important. I think ultimately exchanges are in this really unique position where they, you know, own that customer relationship. They have that distribution to, you know, just a huge broad audience in a way that very few projects do. And, you know, I think it's really important to, you know, take that responsibility and to use it in a really productive, positive some way. And so I think, you know, we have just, you know, tried our best to create as much value and to extract this minimal amount of value from projects in the sense that, like, you know, our success is their success, or their success is our success, I should say. And so that's kind of the view that we take to launchpads. And I think people have been really appreciative of that. And it's been like really successful. And we kind of were able to capture lightning in a bottle with it in the sense that we got a bunch of people really excited about them. You know, people in the larger kind of APAC region in particular, but all over the world, honestly. And so I think it's a really important moment, not unlike NFT mints, where it's just one of the best opportunities for a project to tell their story and tell, you know, educate the world what they're building, why it's important, and to have this like huge microphone. To, uh, and, and an audience, uh, in a way that's, that's really important and really special. And, and so, yeah, I think it's a really important moment for our projects and, and really important for our business as a result.

Yeah, I mean, I think Binance executed this phenomenally well in the last cycle, their launchpad. I mean, projects that launched there had a ton of distribution and attention out of the gate. Um, it just felt like that is like IEOs have been like not as popular, I guess, or for a variety of reasons. Um, I'm curious, uh, when you think about— there's— it felt historically that there's been some tension between the strategy of listing tokens. Some exchanges are really just kind of fast and prioritize that their users want it. Uh, others have, you know, like Coinbase, have taken their time, but then they've also listed random tokens that it just felt like the strategy has been confusing, at least from my standpoint. How do you think about your strategy, and is that something that you guys feel like you have a better understanding because you're closer to these teams, at least in Solana, and you've, you know, you're really entrenched in the community?

Yeah, no, I think that's more or less how we feel. I mean, I think we're very much like in the trenches, on the front lines. Like, uh, I think we were really lucky in the sense that a lot of the teams that came into the Solana ecosystem, like we just like met them on day one, like when they first came in. Like I think, you know, whether, you know, a lot of the Wormhole team, you know, a lot of the Pyth team, you know, a lot of the Drift team, the Zeta team, and all these projects on Solana that are listing tokens and building really cool stuff. you know, that, you know, I wouldn't like, you know, they would like help me like build the anchor framework or whatever, you know, just like, like things that just didn't happen. So we were really lucky in the sense that we just knew a lot of folks. And so that really, I think, informed our listing process in the sense that, oh, we knew the really high quality builders that were building really like substantive products and not just like, you know, just, you know, randomly, you know, trying to exit or whatever. Um, and I think that's, that's super important. Um, just not to say the obvious. Um, uh, I think, you know, on the one hand, you want to be really fast for sure. That's like, you know, unique product. You have to have your finger on the pulse. You have to know what people want. You have to know what your customers want ultimately, right? And the tokens that are exciting for them. And that's ultimately the thing that guides your decision. Um, but yeah, I mean, I think, like I said earlier, it's just We just want to be productive team players in the various ecosystems and be a reliable exchange partner.

I know you obviously are not just tied to Solana. You've mentioned other ecosystems like Ethereum.

They're very important.

Bitcoin, others. I want to hear your take on Solana. Why build or why focus there, especially at a moment where it was, as you pointed out, kind of abandoned post-FTX? What did you see there? What do you see there today that you find most interesting?

Yeah, I think, I mean, the thesis for Solana is very simple. And if you're a programmer, it's very easy to come to this conclusion. If you're not a programmer, Solana is like maybe pretty hard to understand. But it's very simple. It's like, you know, to put it in Just normal, you know, layman's terms. Like, do you want to use one tab on your Chrome browser or do you want to use multiple tabs on your Chrome browser? Uh, do you want to use like one app at a time, just Chrome, or do you want to use like Chrome and Spotify and your calendar app and your, uh, settings app and your, you know, clock app and whatever at the same time, right? Um, it's like parallelism is like the most blatantly obvious thing, um, to build. And it's really the only L1 that has done it, I think, at the scale that it has been able to do it. There's been a lot of really, you know, really admirable attempts at it, I think, but I think they're really the first one to really go to market in prod with lots of users. And so I think, you know, if you You know, during when FTX crashed, you know, you'd see all this just crazy stuff, right? Like, you know, it was like SBF chain or whatever. And it's like, it's like, no, SBF couldn't like program a blockchain if his life depended on it, right? He's a trader, not an engineer. And so I think the thought process was really simple. You know, if you believe that crypto is going to survive, okay, do you believe that smart contract platforms are important? And then do you believe that parallel processing is important for such a smart contract platform? And if you believe any of those things, then really the only game in town is Solana. Ergo, you should keep building on Solana. And I think that was kind of— there's some other stuff that I think is super important, like the community distribution. And that whole problem is pretty challenging because there are other especially today, parallel kind of execution environments like, you know, SWE and Aptos, etc. Um, and super excited about that as well. Uh, but, you know, at the time Solana was really the only one that had a functioning crypto economy. Um, and so it was like pretty— I think on the one hand it was non-consensus, but it was like, it was just so obvious in my view that I was just like, duh, it's like, keep going.

Yeah, on that point For me at least, I was investing in Solana projects before the FTX collapse, like, you know, um, Solana Jet. Like, there's a few projects that I looked at, was playing with. Orca— like, I look at Radiant, like, I was playing with them, uh, and then post-FTX, I felt like the quality of projects— there was a point in time where I felt like, this is a very different project. And the DeFi ecosystem really took a different meaning for the better. Like, the quality of apps improved dramatically to the point where, like, I was sending most people that were interested in crypto to Solana-based apps. Like, we always— Phantom existed for a while, their product's gotten incrementally better, but you had, like, I was sending people to try— out of the 3 apps that I would— 4 apps that I would send people would be Backpack, Jupiter, um, you know, Tensor, um, and maybe Drip if they wanted to get something free on their hands. And I was like, wow, for me that was a big aha moment. And I don't know, I'm, I'm still trying to pinpoint, like, was it bonk? Was it like, what was it that happened behind the scenes? Because I, I'm— again, if you're not a developer in these ecosystems, I think you miss a lot of what happens under the hood. And you might say Well, this was happening for the last 3 years. You just saw the tip of the iceberg. But I did feel that, like, you know, when, when especially like post-FTX, there were some projects that really started to break and they weren't perfect. Maybe my observation is wrong, but I'm curious to get your perspective. Like, did you feel that there was a big inflection point, the quality of builders coming into Solana? Did the foundation do something? Was it Bonk? What was it?

I think, yeah, I don't really think that. Okay, maybe I think there's a couple things that are simultaneously true. So I think foundationally, Solana is unique in the sense that it's a very product-first ecosystem. It's like, it's like probably the closest thing to Silicon Valley in terms of blockchains, like as the in my view, like the most amount of people that just are super pragmatic and just care about their users. They're like a lot less idealistic, I think, than other chains. And I think on the one hand, that's a really good thing in the sense that, you know, they care about the people that use their product and that's who you should care about. And then it may be a bad thing in the sense that, you know, they maybe, I don't know, that would be a bad thing actually now that I think about it. But some people think it's a bad thing. But I think it's super, um, uh, uh, just, just practical is like the wrong word because it's almost like demeaning, uh, but, but it's very product focused. And I think that's kind of foundationally like at its core, um, it's like, you know, if you want to build a good product, you have to have a fast blockchain. Well, and if, and if you want a fast blockchain, like, you Solana. And so it just attracted all the people that wanted fast blockchains, uh, if that makes sense. Um, and then the people that, you know, cared about running a validator on their phone or whatever, there's like, you They don't like Solana, and that's like totally fine, right? But so I think that's foundationally one ingredient. I think the second ingredient was that, well, it had a couple of years. I think I came to Solana in 2020, had a couple of years of just like baking, of cooking, right? Like these projects that I mentioned, like Pyth, Wormhole, Drift, Zeta, Jupiter, all of these teams were cooking for years. Like these were not teams that just like randomly like saw, oh, you know, I'm going to rip a token like randomly all weekend. Like these are folks that have been doing startups for a very long time and doing these particular startups for at least, you know, since like, you know, 2020, 2021 or whatever, however long they've been. It's like on the order of like years. And like, I remember I was at NFT NYC like a year or two before the FTX collapse, and I was talking with some of the guys from Jupiter and they're like, yeah, we're going to do this, we're going to do a Jupiter token or whatever. And they just launched it like a couple of months ago or whatever. They put so much time and energy and thought into everything. It's like really incredible. And so I think, you know, a lot of— there was a lot of that as well. That's like a second ingredient, just like people are just cooking in the kitchen for so long. And we're really built like building real, I think, substantive kind of products and companies and protocols. Um, and then I think the third ingredient was just like, you know, um, maybe signal and noise. You know, FTX goes down, all the, the people that, you know, don't really have the chops or they're just here for, you know, the bull run or whatever, or, you know, they're just here for, you know, I don't know why the people come to crypto other than, I guess, just, you know, come for the bull run or whatever. But if you're not like here to like build cool stuff, you're going to bounce immediately when something like that happens. And so I think there, you know, you look around and it's like, oh, who's left? It's like, okay, the people that are left are the real ones. And I think that was a really important ingredient. And, you know, everybody says it, it's like so trite, but it's also just so true. It's like you just like focus and build like no other in a bear market. And I think that was certainly true for us. But yeah, I think that's my take, if you will, on what happened. I don't know.

Yeah. Maybe I'd like to, as a builder in the space and for folks that are listening and are maybe building or thinking about building, like one, if you had to do it again, would you do it in the same manner? Would you be doing it? Would you be doing something else? And what have been like the key learnings for you? What would you do differently?

That's a great question. I'm almost like afraid to give an answer to this question.

Um, you haven't been afraid of it, so we have to get you on one.

Yeah, I feel like— I don't know how I feel about this. I would strongly consider being anonymous, I think. Yeah, I think— I feel like not— I feel like there's this really like counterintuitive thing that's like the more, like, I tweeted this the other day, and it's like, not always true, right? But it's like, the more you share with people, the more like, the more opportunities they have that like, they have to like, you know, call you out for something. Like, let me give you a small example. Like, we decided to like, oh, to, we have like our codebase, right, for the wallet. And we're like, oh, there's no open source wallet on Solana. It'd be cool to do an open source wallet. And so we decide to checkpoint our codebase, which has a bunch of private stuff in it. It's like ops and as like the exchange on the mobile app and all this stuff. So we just like rip out a bunch, all the stuff that we wanted to open source, like a fully functioning Chrome extension, put it on a public repo and make it a GPL. License. They were like, cool, awesome. This is— we have like a real kind of consumer-grade kind of open-source wallet on Solana now. This is awesome. And it's like, here, world, like, you know, like, please go, you know, check out the code, like audit it, like, you know, test it out, you know, stop complaining about no open-source wallet that you have right now. And then what happens, right? It's just like people just start just like, just like shitting on you for like, for doing that. And it's like, It's like, oh, you're not doing it the right way. It's like, you know, you're not actually open source or like you actually suck. You're like, you're actually a bad person because you're trying to like, I don't know, like free ride off of like the goodwill that like open source people give you or whatever. And I'm just like, okay, like I've probably done like more open source work on Solana than like anybody other than like the Solana core devs. But okay, like you can, I'm a bad person. And so just like stuff like that, it's just like, it just, I think in crypto, just so heightened that I think, you know, I think, you know, that FTX thing, obviously, it was just like an enormous, just like when you guys announced, when you guys announced the round, it keeps coming out.

Every Bloomberg piece was like, you know, former FTX employees launch another exchange. And it was like, I'm sure it was attention grabbing.

They're calling me an executive. They like Alameda executives. I'm like, what?

Like, To be fair, the beanbag, you know, the guys, you guys, that picture that has been now used in pretty much, I mean, you guys should get royalties. Yeah, it was like, yeah, so emblematic. But yeah, yeah.

Anyway, I digress. But I feel like there's not a ton of upside of, of, of being, of having your identity revealed in crypto. So I would, I would strongly I used to like hate being anonymous too. I was just like, I'm not being anonymous. I have nothing to hide. And like, I still have nothing to hide. It's like, I'm like an honest, like, good person. I'm just going to naively believe that everybody's like, you know, equally as— as—

as—

but to be fair, other—

other than Satoshi, you've never— like, the most successful teams in crypto, it feels like a necessary evil and burden that a founder has to just embrace.

Yeah.

As you said, it's not easy to build. I sympathize with founders in crypto. You, when the token goes up and the project's doing well, it's like, yeah, obviously that's your responsibility. As soon as there's some deviation of that, you're the scapegoat. Like, you're on the cross.

Yeah, the analogy I, I talk with the team about this a lot because they'll like pay attention, they'll see something on Twitter and then I'll be like, oh, you need to like not pay attention to Twitter. Um, and, and what I like to say is like, you know, to, to like, you know, imagine you're like walking down the street and you and somebody like screams at you. I don't know if it's like, you know, maybe they're on drugs, maybe it's a criminal, uh, maybe it's somebody who just had a bad day, uh, I don't know. But like, you know, these things happen, right? I live in San Francisco, it's like this thing's like part of life. I don't know if either of you've been at stuff recently. Um, I love San Francisco, but, but it is really insane some, some of the things that happen over there. Uh, but you never stop and think to yourself, oh, oh, you know, that person just screamed at me. Me, uh, when I was walking to work or whatever, I'm going to stop and spend the rest of my day thinking, why did that person scream at me? Uh, uh, when it was just like, I don't know, some, some crazy person or whatever. If you're walking in SF or whatever, uh, uh, uh, and I don't mean to be like insulting people in SF, but that, that has happened to me just so many times. It's just like a really great analogy. Um, but that's basically crypto Twitter. Uh, it's like, you know, all these people that would just like call you like the worst possible things you can imagine. And it's these just like, it's almost like it's really hard to not get distracted by it. And I think it slows, I think it really turns off a lot of really good builders. I think it's actually one of the biggest problems probably. It's just like a lot of really good people just don't want to go into crypto for like this reason. It's like, it's, you just get thrown into the mix of all these, like, you know, whether it's like criminals, like, you know, or like in the case of FTX or whatever. Or just, you know, just people that are anonymous calling you a criminal. It's like, it's tough. So anyway, not super interesting, but maybe that's the one thing I would reconsider.

I think the best thing about— the best thing about the industry is also sometimes the worst thing. And you can't, you can't have it one way and not have the other, right? So you can't have the like, I mean, the, the, the like speed at which you guys were able to do customer acquisition could never happen if you didn't have the madness of crypto Twitter.

Yeah, totally.

You're just—

you're right. You're totally right. Yeah.

Um, Armani, are there any good things like post-FTX everyone always talks about? Like, ah, like lessons learned, compliance, whatever, um, don't be a fraud, etc., etc. Like, are there any good lessons that you learned from FTX? Like, yeah, I mean, they were fraud— like So the context for this question is I was with an investor who was one of the biggest investors on FTX, and he's like, look, like, say what you will about FTX and the fraud and Sam and all that kind of stuff. Like, it was an amazing platform.

Yeah, yeah.

With a pretty small team. So like, are there any product lessons that you took away? Like trying to ignore all of the fraudulent stuff, any product lessons you took away?

Yeah, no, that's a great question. I mean, it's probably like a deeply uncomfortable question for most people because like the narrative is so like one-sided. And as usual, I mean, the truth is somewhere in the middle, right? There's certainly a ton of negative stuff, uh, but it's also easy to forget it was like literally the biggest startup of the last cycle. It attracted the best people, the most amount of talent. Um, uh, and, and that whoever you're referencing, I mean, I would directionally agree. Um, it was a great product, um, uh, with you know, the small team. Um, what are like the positive lessons? I mean, I think, um, I think the main thing is probably just like growth in crypto. I mean, you saw it, it wasn't just FTX, it was also Binance is the same thing, right? Um, like you can grow 10 times faster than you think, um, and 10, and 10 times bigger than you think. I think, right? The growth at Binance and the growth at FTX, those were like, those are, I mean, they're two examples of two kind of crypto exchanges in two different cycles. And it's easy to maybe look back on FTX and write it all off. But I mean, I think we've seen a lot of it ourselves where, you know, a lot of that growth was real. These are like real, like amazing businesses. And so I think that's certainly is a, a big one. Um, I think I, I would say this is a negative lesson that is positive from FTX, but I think like, um, another one, other, is like just to focus on the things that matter. Um, I think like in my view, like FTX started doing all this like weird stuff at the end, like sponsoring like athletes and celebrities, all this kind of crazy stuff, and instead of just like focusing on, I guess, uh, trading product or whatever. Um, and I think that's like maybe, uh, another kind of important lesson. It's just like really focus on the things that your customers care about.

Um, you saw Coinbase make the same mistake in that, in the cycle too, like launching the NFT platform when they like—

and I think in the bear market, yeah, they acquired it and then they brought a product. I paid them a ton of money and it amounted to nothing.

Yeah, so That's great. That's good though. Armani, how's the organization set up? Like, you guys have, you have like Anchor that I don't know how much time you guys spend time on, but like you've got the xNFT protocol, you've got like Backpack, the wallet, the exchange, you've got MadLads, the community. Like, do you have different pods essentially, or is everyone working on everything? Or how— yeah, and like how big is the organization?

Can you—

how do you manage all this?

Yeah, yeah, great question. So like the group is broken up into like you know, different teams, obviously different functions, um, that are kind of working on different things. So like, you know, like the wallet is like, you know, a very clear team. Uh, the like, you know, exchange compliance team is a very clear team.

Um, so like on the wallet team, will there be like a marketer and a product person and engineers on the wallet?

Yeah.

Or do you have like an engine? Okay. Okay. Yeah.

I mean, I'm, I'm kind of unique in the sense that like, I'm like really the only PM. And so I like think about all of these things. Like I think about marketing, I think about like, you know, engineering, I think about product. And so I kind of like glue everything together in a sense. But yeah, it's, you know, mostly kind of, I like kind of thinking in terms of like products and like mini startups in a company.

How do you think that you build company, like the companies differently than other founders build?

I mean, I wouldn't say I was like, I'm like particularly unique. I would imagine that our company is kind of, would be similar to other companies that are started by people with similar backgrounds. I'm a programmer, so I like to think about like building like good engineering teams and giving them like as much like responsibility and as possible. So like just a bunch of really kind of like, just like senior kind of like engineers that basically have a bunch of trust and responsibility to make a bunch of really good decisions. And so they're kind of empowered to do large parts of the product. We don't have a lot of, we don't have any PMs. I'm literally the only PM. We probably won't have any PM anytime soon. Similarly with design, although product design is super important. We have one really awesome one. So I think that's at its core. And then obviously there's all the functions around it that are equally as important. that are kind of just there to kind of like amplify the, the core engine, if you will. Right. Um, but, um, I don't know, I kind of view myself as just like a, uh, like I, I'm just like a substitute, I guess. Like I just, I find like whatever's like not working and then just go and like work on that. Right. Whether engineering or marketing or, or whatever. Yeah.

I want to end with one question, uh, inspired by something I read recently. But before we do that, I'm curious if there's anything that you can offer in terms of what's next on the platform, any particular product, uh, and, you know, upgrades or launches that you might be willing to share, or, or just anything in general you want to talk about that we haven't covered during this segment.

I generally don't like to, um, like anticipate future releases for whatever reason, um, mainly because I think Louise's, like the impact, like, that's a horrible answer to your question. So, but I would say there's like nothing in particular. We are, there will be a big kind of summer for us. We have a product that we're rolling out. But yeah, well, yeah, we'll see when it comes out, but we have a couple of kind of enormous announcements. Let's put it that way. Probably, uh, one of our announcements in my view will be like equally as large as the exchange itself.

Um, oh wow, okay, well that's something to look forward to. Um, I was reading over the weekend this, um, like this, the idea of hard work, and there are like 5 different— they kind of broke it down into 5 different types of hard work. And I'm curious, as you think about the success that you've had And what has in your mind been most like your style? Uh, one of them is outthinking, which is you have a better strategy, there's a shortcut. The other one is pure effort. You're just working longer, you're— the intensity of it is high. The third one is being like opportunistic. You know, you position yourself to take advantage of, of a change, of an opportunity, maybe a void in the market. The fourth is consistency. You're just doing average things for longer than most. Yes. And the fifth is focus. And a lot of that is just saying no to a lot of distractions.

Right. Yeah.

They're all different types of hard work. I am curious when you think about the success that you've had.

Yeah.

Which ones do you gravitate to or you think have been most important in your journey?

Yeah. For me it's very definitively 2, 4, and 5. Um, it's like no, no questions. I think they're all kind of the same to me. Um, uh, basically I think just working really hard, undistracted for a long period of time. It's just my formula. It's kind of as simple as that. And if you keep doing that long enough, like hopefully you get lucky and an opportunity comes along.

Um, uh, so yeah, that's pure, pure for, for listeners, pure effort, consistency, and focus.

I, I would argue that most founders are gonna tell you that he's like, to me it's so 2, 4, 2, 4, and 5. In, in a heartbeat. Like, I, I would argue most founders will say 2, 4, and 5, and most investors will say 1 and 3.

I'd say yes, although investors that end up blowing up would say 1, because I never want to assume that I'm smarter than the market.

Oh, interesting.

But you hear Three Arrow guys be like, I'm really smart, or, you know, Long-Term Capital Management blew up spectacularly. These are Nobel laureates. It just felt that they had an algo And I think you never— I never want to assume that you're being— I think one is the most dangerous because you never want to assume you're smarter than anyone else. But I do think a lot in crypto has been opportunistic. And if I hear the conversation that we just recorded, I do sense that there's been a lot of insight that you've had because you've been in the industry, you were at FTX, that collapsed, and you saw the opportunity like at a moment where everyone probably said, you know, this is the last thing you want to be building. Like an exchange again. And I think that's, that's positioning yourself to take advantage of— we know exchanges are highly profitable, we know that value can be, you know, created there, and you went for it. And sure, you've been at it for a while, you were very strategic and going to Japan and all this stuff, but to me it feels like it was, it was actually surprising hearing your answer that you didn't mention opportunistic. Because I think a lot in crypto is that— not in the bad sense of the word.

Yeah, no, I totally agree. I mean, I think it's like, um, what's the saying? It's like you create your own luck or whatever. Um, and I think, I think 2, 4, and 5 gives you, gives you 3. It gives you opportunity.

Yeah.

Um, so I think that's, it's like you have your cake and eat it too, I guess. Um, and it also gets you other smart people that want to be around you. And so out of like, if you do 2, 4, 5, you kind of get the rest. But I just want to like maybe say one thing on this topic that was just so insightful to me that a friend of mine, he's another, I think he's a DeFi founder in the space. He, it really blew my mind when he said this. I just wanted to share it. It was just so, so incredibly insightful. So I'm sitting there at lunch with him here in Tokyo and he's like, Romani, Hey, who do you think my role model is as a founder? And he tells me, he's like, my role model is a redwood. And I'm like, what do you mean it's a redwood? And he's like, yeah, it's like a redwood tree. And I'm like, well, what are you talking about? What do you mean it's a redwood tree? Like that makes no sense. And he's like, no, no, no, no, no. Think about a redwood tree. Um, you know, fires come and go. Um, uh, people come and, and, and, and, and, and destroy kind of everything around, uh, the land. Um, but it doesn't matter what happens. Uh, uh, the redwoods stay. Uh, the redwoods don't go anywhere. They're always there standing. Um, and kind of the history of the region and the Bay Area can be kind of encapsulated in these redwood trees. And he looks at me and he says, he says, Armani, I'm a redwood. I'm a redwood tree. And he says, I don't want to win in a cycle. He says, you know, I want to win in 3 cycles or 5 cycles. And, you know, if you look at all these guys, you know, whether it's, you know, Terra and Luna or FTX or Three Arrows Capital or whatever, You know, these are all folks that had to win in a single cycle that just, and just there was a, there was a tipping point where they just lost it and then they threw it all away because of whatever reason, right? Whether they took too speculative bets or sold customer assets or, or, or whatever it was. And, and, and he's like, well, if you just change your mindset from winning in one cycle to winning in, you know, three cycles or whatever, it changes all your decisions. Decisions. Um, and that was a really, uh, uh, that was just like a, such an awesome thing to hear from somebody in the space. Um, that type of like long-term thinking. So anyway, it was just, you know, shout out to the guy, and it was awesome.

Yeah, it's amazing. I, I, I've started to use that analogy, um, in the sense that if you invert and you say how many more years ahead of you do you have in investing You've discovered crypto today. Do you want to perfectly time the cycle, or do you want to position yourself to invest for the next 40 years and compound? And if you do that, then I think you start making decisions that never compromise your ability to play the game. You never use leverage. You, you, so, so you protect capital, and you, you know, you want to be in a position where you want to fund projects where no one wants to fund them. We're not in that environment right now, but it's still very exciting. So inverting is sort of what has been helpful for me to just play the long game, I guess, as a redwood. Well, that's awesome, Armani. I, uh, it's been a fascinating discussion. Really, uh, loved having you on. I know we've been trying to make this happen for a while, but, uh, you know, you're a busy man, so really appreciate you coming on the pod. And perhaps we'd love to have you on again, uh, when you do this major announcement, and, uh, maybe we can do a recap of what you're doing then and there.

Sounds great. Thanks so much for having me on, guys.

Armani, appreciate it, man.

Really appreciate it.

All right, you heard about Sei a couple times. Just want to give them one last shout out. Big thanks to Sei for sponsoring this episode of Empire. There are a ton of reasons to build on Sei. If you want to get in touch with them, you can reach out to me. I'll put you in touch directly with the team. You can also get in touch with them on Twitter @SeiNetwork. You can follow the journey @SeiNetwork. They are currently live. They've got Sei V2 on public DevNet today. Mainnet goes live later in Q2. Really excited to have Sei sponsoring and partnering with us on this episode of Empire.