[Wyre Talks #7] Fixing the Lehman Problem with Crypto

Guest: John Piotrowski, Founder and CEO of The Ocean

In this Wyre Talks, our guest is John Piotrowski, founder and CEO of The Ocean. John has a past life in political campaigning and traditional finance, but made the pivot to cryptocurrency and founded the Ocean in 2017. The Ocean provides wallet-to-wallet trading on a high performance, institution-grade, decentralized platform that provides more liquidity with less risk. They also strive to create an intuitive trading experience, while maintaining a safe exchange with KYC/AML performed on their users.

Topics discussed in the episode

• How is the New York finance scene different from the SF crypto scene?
• With a team in Krakow, Poland, what are the challenges in not just building, but managing a distributed team? How do you address these challenges?
• Transitioning from a career in political campaigning to being a VP at Goldman Sachs
• How is the Ocean more than just a 0x relayer?
• What led to the decision to build the infrastructure layer using the 0x protocol?
• Why create an onboarding flow instead of just sticking with Metamask
• Why is verification and KYC so important to what the Ocean does?
• Why does the Ocean choose to focus on the U.S. market when you could move to a country that supports your business?
• What are the critical ingredients needed for institutional entry into the crypto space?
• What’s the purpose of the OCEAN token?

0x Protocol Overview

0x is a protocol for decentralized exchange. They hope to define some of the settlement and order broadcasting logic but leave the rest open ended. They enable an ecosystem of relayers to recognize orders from makers and display them in their own orderbook for takers to fill.

Relayers are different from exchanges. Where an exchange must build and operate proprietary infrastructure, execute trades and handle user funds, Relayers merely facilitate signalling between market participants by hosting and propagating an order book that consists of generic messages.

Related Links

• The Ocean website: https://theocean.trade/
• The Ocean blog: https://medium.com/the-ocean-trade

Questions or comments?

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Episode Transcript

Thomas: Hey everyone. Welcome to Wyre Talks, the Wyre podcast where we discuss all things crypto, so whether you’re a veteran or a crypto noob, we’re all here learning together. This is your host Thomas Scaria, I work here at Wyre. Today we have an extra special podcast episode firstly, because we’re joined by my wonderful co-host Louis, head of research and fund manager at Wyre Cap.

Louis: Pleasure to be here.

Thomas: Thanks Louis. Thanks Louis. But more importantly I am joined by John Piotrowski, founder of and CEO of The Ocean. John Welcome.

John: Thank you. Anytime I get introduced as extra special, that’s a good day for me.

Thomas: And you flew out pretty far to join us here. Where are you coming out from John?

John: So, I live in New York. I’ve been in New York for 5 years and some of the work we’re doing now is based in that general area, but I been here all week talking to people, investors, did a few conferences and presentations, and wanted to make sure I made a stop here.

Thomas: Yeah just before I dive into this, how’s the New York scene different from the SF crypto scene?

John: It’s interesting. New York anything involving money, New York tends to think it rules the roost. And I think there’s an excitement in that city and this space in particular because maybe this is one time in the general tech space we’re playing on level playing field. At least that’s the feeling of people in New York. So there’s a certain buzz and excitement about this technology and innovation that I haven’t seen in others as much as a result.

Louis: And is your team, are they based there? Are they distributed?

John: We’re distributed team so most of our team is actually in Krakow Poland. So we, sort of a modern team, modern philosophy, truly global. Our good friends that we met in Krakow a few months ago, actually closer to a year ago, as we were building out technology stack and hey can only do so much work in any single day, met the rest of our team and now work. We’re 23 total people spread about the US and in Krakow and excited about growing that in the near term.

Louis: Just not to get sidetracked too early, but what’s it like building a distributed team? How do you go about acquiring talent?

John: Yeah that’s a good question. So I used to manage, kind of highlights, going to get into my background a little bit, I used to manage a big distributed team at Goldman and PriorLIFE, and the thing I learned is if you’re in that situation and you’re trying to manage as best as you can, steer the ship, you need to spend a lot more time on the phone and in person than you think you do. So, I got to Poland now quite frequently and we want to start to slowly start to collocate and bring people more and more together. A lot of it is just on the phone everyday, talking through things, getting to know people from slightly different cultures and perspectives, and it keeps it interesting than just scream at people on a New York trading floor.

Thomas: Yeah. And now is a good time as ever to talk a little bit about your background and how you got into crypto, right up until the point as founding The Ocean.

John: Yeah, so my background is, in general, banking capital markets so , when I graduated undergrad, I was at IMF at two years, McKinsey for two years based in Europe. I did local campaigns for a gap year which is a very interesting experience and then I, when I came off the political stuff, went to Goldman. I originally started trading some stuff and doing some risk management strategy stuff for the firm and so by the time I left late lat year, well actually beginning of this year, just after five years at one place and that place is changing, like much of the finance industry. I’d rather be part of the change and be a change agent and get into this space a little bit and I started trading crypto probably two and a half years ago but really thinking about it from the perspective of financial institutions, the technology around the same time. It’s part of my mandate at the firm. So I come at it from a very much, financial services use case perspective and that’s part of the reason we’re making certain design decisions that we’re making at The Ocean. Our view is if you want to build the maximally valuable and transformative company in this space, you’re going to have to interface in the traditional financial world in some way, shape or form. We want to be someone who sets this up from day one to be able to do that.

Louis: And did you find, kind of, the back end of your time at Goldman, did that feel like an industry or type of business that was structurally challenges, or what was the kind of vibe in there when…

John: I think its…So I remember interviewing for jobs, the day before, the day of, and the day after Lehman Brothers collapsed, which is a very interesting time. I was looking, the economist had a headline, I think it was last week, of ten years after Lehman what’s changed. I think the answer besides more regulatory over site and more insurance that banks effectively have to buy, from a structural perspective, I would argue not a lot has changed.

John: The industry is more regulated but you haven’t fixed fundamental technical challenges that led to that event and continue to lead to lots of regulations, one way to control it. And so, there’s, I think, what was interesting in me always working ten years is a lot of banks, bank customers, regulators know that something is amiss and not quite working and not quite right. So when I left Goldman, the last year or two I was there, was focused on how do we rethink, restructure, what businesses grow and shrink in this new world order. There’s no answer yet right? And what institutions will have people in general struggling with what’s the role of financial services in general. And that idea of the service piece of that description is something that maybe, in the past was the focus. And so how do you think of financial services less of an end all be all but more of a growth engine in general, is something that a lot of people are struggling with and it’s something that gets me excited about block chaining crypto.

Thomas: And you firmly went down that crypto rabbit hole when you left Goldman?

John: Oh yeah. Totally.

Thomas: Yeah. I had a similar experience when I was at Citi and once I was deep in that rabbit hole it was easy to just look around and be like, “Okay. This place is very not tech forward. There’s lots of busy work going around. Things that could be automated. Tons of, everyone here is basically middle men that…

John: Yeah, no definitely. When you start thinking about what am I doing as a cog in the machine, you get very depressed.

Thomas: Yeah, although it’s going to take a very long time for banks to get down on their knees like that but I just couldn’t be part of a place that was not a growth sector anymore.

John: Yeah, and banks have a hard problem in the sense of, at the end of the day they are the central cogs in the machine and all the customer assets, and so on. They want that to be kind of regulated and risk verse, otherwise you get Lehman Brothers. So there is some need for it to be slow but there is, not slow but, let’s call it, lots of due diligence and thinking and more carefully in new technologies but the issue sometimes is they’re run by human beings. Incentive for people in general is how do I make sure I get mine as part of the process you know?

Thomas: Mm-hmm (affirmative)

John: And so as a result there’s also a structural incentive in the businesses themselves and not necessarily be for thinking…

Louis: Indeed.

John: Adoptive.

Louis: On that note, I’m not sure if it’s something that you’ve thought about much, although I think it will probably be an emerging theme in this industry as basically, algorithmic capital markets be credit or equity, I do know that there’s certain people in the traditional venture capital that are now thinking along those lines. Is that something that you’ve thought about and is that something that you have, you kind of, your own view on how that might develop in the crypto space?

John: A little bit of why we’re building a dex and how we think about this exact point of, and I remember being at Goldman and part of my job was to think about which clients to fire and because they were prohibitively expensive and the pushback, because they’re moving lots of assets and going through Goldman pipes and regulators want you to put in certain protections. And then the client pushback would always be, “Why is it still so expensive a digital bit that represents value from point A to point B?” And then you would quickly shut the door and leave the room or hang up the phone. Fake an illness or whatever it would take because there’s not a good answer to that question.

John: It’s just 40 years of financial technology, so that makes me excited about this space and why I left Goldman to build what we’re building is exactly this point of… A lot of financial services is just moving things around and there’s capital raised component and there’s a movement component and this a distribution of value component. We want to tackle that piece of movement because I think you have to think about genesis of BitCoin and why we’re all in this space in general. It really comes down to a lot of that problem. I’m just trying to move a piece of value from here to there and make sure it doesn’t blow up in the process and I get as much of it as quickly as possible.

Thomas: Yeah and we’re definitely, we’re going to dive into your project in specific that you founded after your experience at Goldman but I’ll just kind of wind you up for that. So, John you’re running a ZeroX Relayer and for our audience that doesn’t really know what that means, we actually had the ZeroX guys come through last week, so I’ll just give a high level overview if you missed that episode as well, but the ZeroX protocol is just a protocol for a decentralized exchange. They hope to define some of the settlement logic and order of broadcasting logic but leaves the rest of it open-ended and enable this ecosystem of relayers to recognize those same orders from, what they call Makers, which are basically people that stand on either side of the market, just the Market makers right? And display them on their own order book for takers so people who are taking that same Equity to fill it. So relayers very different from exchanges where as, exchanges really encompass that infrastructure layer that ZeroX has built out and also handle execution of trades and handle user funds as well. Relayers merely facilitate the signaling between market participants by hosting an order book, right? Would you add anything to that definition of ZeroX relayer there?

John: Yeah I mean, what I think is brilliant about ZeroX and the power of a block chain to something, its sort of puzzling a little bit, if you think about centralized exchanges. Because I have this technology, this thing, that says, “Hey, every transaction I can settle on a chain and you know I have rules that let me remove the ability or the need for someone to sit in between, of passing the baton from one party to the other, at the same time the role banks play.” And then every crypto exchange goes and does exactly that same infrastructure in the old way that everybody agreed was messed up, right?

Thomas: Mm-hmm (affirmative)

John: So, the concept of how do you remove as much of that need of the middle man that’s holding things, this kind of game that nobody wants to give up except at the same time, how do you enforce that cryptographically as oppose to another entity that is really powerful. And then it becomes a question of how do you do what you’re talking about is matching people in that world. And something that we’re, if you look at the different projects building on ZeroX, they’re market focus is different. We have a certain customer and thesis that we’re pursuing and I think RADAR and Pardex have their own.

John: And something we’re super focused on is how do we replicate as much of the experience that people, those individual traders, or institutions, or whomever, get from the old trade experience so that the adoption is not fundamentally different, and then given a space that’s still so early, how do we be as interoperable as humanly possibly. And I think a lot of people think of Dexes and this concept of no custody terms, which means kind of gives the connotation of chaos and who knows what’s going on, but I view it as interoperable where if you build the right way, and I argue that we have, I can just plug into any wall or custody solution, I can list any asset, I can work with any customer, and I can start doing things a little more creatively with less friction and cost, and risk, and some other centralized methods.

Louis: So I just want to touch on something that you mentioned there, how do you think you target customer profile differs from other ZeroX relays?

John: So, We’re all creatures of our background of a finance person, maybe that’s a good thing or bad thing. But that’s who I am and my own perspective on the concept of interoperable, separate execution for custody be maximally flexible in matching people to trade things of value is really most powerful, a concept to the old financial world. Not necessarily, this transformative to this new financial world or just crypto assets, but the question is, “Can you also do something to build it, that it touches and interfaces well, and helps solve some of those old problems?” And so we think a lot about, lots of people talk about the crypto market today as just being largely retail focus, individual traders and funds that have popped up. We think about we want to serve some of that customer base too but can we also do it in such a way that I can get a Goldman plug into it? I can get traditional products in that same infrastructure because its that idea of not repeating Lehman Brothers 2.0 is pretty attractive the entities like Lehman, regulators is much if not more attractive to retail traders.

John: I’m kind of the philosophy too that some Dex projects go to market and go, “Hey, we’re a Dex. We don’t take custody. We’re safer. Use us individual trader.” I’m of the view and the belief that if you’re of the average individual trader, I view the fact that I manage my own private keys, this platform is decentralized as this last priority, not the first. The things that I want, if I’m trading anything as an individual, tend to be Is there cool new stuff that I want to buy? If there Equity, easy on boarding, soon, so on so forth. The fact that it’s decentralized is in… I have to check all the boxes on those other things and then I worry about making that decision and that’s part of the reason you haven’t seen dexs take off. We kind of flip it on it’s head and say, “Dex concept is most valuable to the old world. We want to get, improve ourselves in this new world, but we have to do lots of things besides just being a dex to win customers and have a good experience for them.”

Louis: And when do you think we might see, obviously in traditional asset markets the vast majority of volume is executed by institutions, that’s probably not the case in crypto today, when do you expect to see the flickering and volume share?

John: It’s probably a function of infrastructure, regulation, and products. What I mean by that is, lots of people talk about custody is a big issue for institutions who are executing on behalf of people that are not themselves right? So you need that third party protection. If you look at a lot of the announcements from The Mora, Citi, Morgan Stanley, my former institution, the thing that they’re focused on seemingly right now, and certainly I’m talking to a lot of these folks, is custody right? It hasn’t been built yet but it’s in the works. That’s sort of step one. Building that is going to take a little time.

John: The second is, if I’m a big financial institution, there’s no way I’m touching finance. Not to pick on finance, just an example everybody knows. I can’t do business with an unregulated platform that no one knows where it’s located or whatever it is.

Louis: Yeah.

John: So that’s a piece of it. And the third piece which is a little more nuanced is, crypto assets have captured lots of people’s imagination but from the institutional perspective, I’m managing money on behalf of pension funds, insurance companies, work with big family offices, and then they’ll come to the institution and say, “I’ve heard about this thing called BitCoin, how do I price it, hedge it, rick management it, how do I build a portfolio around it? What’s the value of it? What do I spend it on if shit hits the fan?” And the answer, “I don’t know.” I don’t think anybody know the answer to those questions right?

Louis: No.

John: A lot of the focus, personally, needs to be less on how do I construct a BitCoin ETF because that doesn’t resolve any of those problems. It’s how do I make sure that we’re building tools, applications, technology solutions. That I would argue, we’re building that you guys are building to make this stuff more accessible to the average person to do something with. And I think that’s the piece on the institutional game.

Louis: Yeah. Yeah. So I guess kind of related to that point, Do you think that there is any pent up demand pending some infrastructure being built or do you think the infrastructure is going to be built and then, a lot of the companies building custody solutions and things like that are going to realize that actually isn’t really there yet?

John: Yeah, it’s part of the calculus, and I know this well because I used to think about this stuff at Goldman, I think part of the calculus is, and want to be… Crypto means lots of things to lots of different people right?

Louis: Mm-hmm (affirmative)

John: A lot of the institutional focus is on block chain as a technology and we apply it to old assets. I know the first thing I need to experiment is build a solution to store it, so I build this custody thing. And then it gets to your point of, “Okay now I’ve built a way to store it, what asset do I put in this bucket, this locker.” There’s going to be some customers and clients that want BitCoin or other tokens because they view them, and I talk a lot of family offices through the prism of stocks, maybe there is a Yahoo or Amazon circa 1993, so lets do it. Lets see what happens. But then there’s a big push on some of the projects we’re working with closely, Harbor, TrustToken, this idea of can I put traditional assets in a cryptographic wrapper or token form is really interesting. That’s a different business. That’s a different use case for the technology than BitCoin at least. I think institutions in general, that space in general, wants to be able to do both, just like I want to be able to do both but really the emphasis and the demand, 95% of the demand in general, is on that old stuff in new format, is the way I always say it. Not necessarily the new stuff that has yet to prove itself in their field.

Louis: And so, overall, you’d say the thematic or the narrative will probably get more attraction with institutional investors will be this kind of tokenizing traditional assets.

John: That’s my view and if you do that you say, “We’ve tokenize this traditional assets.” I think of it as stacks, right? It’s hard to get human beings in general, it’s hard to get me to adopt anything if it’s completely foreign to what I know, so think of BitCoin as the most extreme different thing you could conceive of, something like a tokenize asset is somewhere in the middles. Right? It’s going to be easier to get them to adopt that than BitCoin.

Louis: Mm-hmm (affirmative)

John: And I think of that in the same prism of just other, going back to our business, Dexes where we build a off chain order book, looks, taste, feels, like traditional exchange order book. You have other projects that are making more peer to peer marketplace chat roomish type of platforms, which I think makes sense for the individual person but then they go pitch an institution and the institution says, “Where’s the order book? I want an order book. I know how to play with an order book. All my…

Thomas: I want an order book. I know how to play with an order book. All my systems are set up for order book. And then they’re surprised when the institutions don’t adopt, right? So I think we need to be a little bit … Maybe we get to a world, 20 or 25 years where that’s the model, is this kind of peer, peer-to-peer chatroom. Because there are certainly problems with order book systems. But I don’t think you’re gonna get there by building that dream world today, you need to kind of step into it. You know, I think that’s the way we think about it, is that right cadence and rhythm to that development cycle.

Thomas: Yeah. And you were touching on this earlier, John, about KYC in the e-mail and why that’s important for you, and I think one of the distinguishing factors from The Ocean versus other relayers is that you … I think I noticed you used Onfido to do your KYC verification, and you have a verification process at all.

Thomas: Which is pretty rare for even a 0x relayer. What’s been the push back from your users when, you know … You probably released that product with that verification. You know, with the news coming out about Shapeshift and how that was just a whole shit show on Twitter.

John: Yeah. I mean, I would say it’s been interesting. There’s been less push back than I would’ve thought, to be honest. And I think it’s partly a function of Shapeshift and kind of where the tea leaves are growing in the state of the marketplace, and so I think in general, you know, all of us through end of last year, beginning of this year, when just chaos of people. You know, everybody getting into the space, and that’s certainly cooled off since then. People have become more sober. As a result, I think people are thinking what’s the long-term value? How do we bring order to chaos? Maybe this dance with regulators of finding the right balance between innovation, regulation, isn’t such a bad thing after all. Especially if it gives me access to things that maybe I wouldn’t have accessed before, right?

John: And so I think, just like the Swiss bank accounts today, there’s always gonna be a demand for anonymous trading or unregulated marketplaces. And some products kind of lend themselves to that. We’ve always been in the view. A regulation, financial services in general always goes one direction, and it’s very rarely more liberal or more free, and then you know, if you want to solve a lot of the dEX problems around liquidity, users, interesting things to buy and sell that people agree on the value of, you’re gonna need regulation to do a lot of that. You know, so that customer identification piece is the first step on what you have to do to do that.

Thomas: Do you think there’s a trend towards companies in the space being more pragmatic with respect to those kind of issues?

John: Pragmatic in what sense?

Thomas: As in a greater willingness to comply.

John: Oh yeah, I think so. I think people think of New York Attorney General’s Report. I think it was last week?

John: You know, and then we met with regulators immediately on the heels of that, and you know, imagine being unnamed in that report. Whether it’s a true or un-true statement of what regulators said or you self-report or whatever it is. Now imagine your name is in that report and you’re trying to pitch Goldman Sachs on you’re this ripe bridge company to work with. Or someone who else isn’t in the space is the right person to work with, that gives you tremendous disadvantage. And now you need to play catch-up, right?

John: And so I think people are starting to get that maybe, particularly from an adoption perspective of the space, it’s really important start thinking and finding the right balance. And the right way to do that, as somebody who’s worked with regulators for a long time, is not to necessarily do the Kraken approach. Though I can certainly see the frustration at times, I think it’s work with regulators, work policy makers. Figure out the right balance. Am I somebody who wants to adopt every financial service regulation? No. There’s certain things I don’t agree with. And there’s certain things I think specific to dEXs you can do without. So I think its’ a good thing to know who’s trading things of value on platform. Yeah. So then, somewhere in between we gotta find the right balance.

Thomas: Mm-hmm (affirmative). I think globally, regulations are less of a focus than … At least in the U.S. it’s almost like the tail wagging the dog if you will, for U.S. based dEXs, regulations is definitely center plate. But if you ask CZ from Binance, he would argue that why even focus on U.S. users, there’s a bigger market internationally.

Thomas: You can of course move your exchange to Malta or whatever liberal nation will have you that is gonna foster your growth and be supportive to your mission, right? So why do you focus on the U.S. user base and regulatory environment here, rather than pulling a Binance?

John: Yeah I mean I think for a couple different reasons. First think I’d say is we’re not U.S. focused, right? We may be under U.S. jurisdiction the way we’ve structured the company, but we want to be a truly global player. Most of our customers, you know we have 3,000. We’ve been online for a month, we have 3,000 confirmed folks on the platform. Most of those folks are in Asia which makes sense given that it’s Asia.

John: So number one if we want to think of ourselves as fully global and certainly support that. The second is, for the types of customers we want to serve, the type of business we want to get into. That kind of bridge concept between these two worlds. You’re gonna need to be regulated in some way, shape, or form. Right? If you want to list the securities token, if I want to do a derivatives build, which we’re doing, in a way that’s gonna be exciting, safe for retail customers, but then also have a way to bridge and grow into that institutional world, we’ll have to do it a certain way under certain rules.

John: And I think that countries are different on how they treat financial services regulations. Some are more liberal than others. U.S. tends to be a little bit more conservative but not in every case. Korea has tight capital controls. China has its own framework. I mean all these places. But you’re gonna have to do something, right? And putting the bastion in the ground of … We’re trying to do the right thing, we’re a U.S. based company and we’re doing the right thing under U.S. law. All of a sudden once we get to a certain scale in other countries, and we want to do this in other countries, they’re like okay, these guys are trying to do the right thing. So let’s find the right balance to do it.

John: And then the third piece, I think if … I mean obviously I’m a little bias because I come from that New York-based finance world. So, all people in New York, they think the world revolves around New York. I do thin there is a certain, if you want to be again this kind of bridge new financial world order company, you’re gonna have to interface a lot of the old financial world order. Just based in New York. Not everybody, but a lot of players.

John: So I think for those three reasons, we think … Yeah, you know this early regulatory adoption gives a lot of benefits, and then also to individual retail traders on dEXs, right? What you all are doing for Fiat to Crypto. I can only do that if we identify who’s what, right? Liquidity. Reason we have professional market makers on the platform, our platform, and most dEXs do not, is because we identify customers. Because they have their own compliance regime. And they can trade with anybody else that isn’t identified. So we’ll have a bunch of new and interesting products that came to us to be listed in our platform because we’re regulated. They want the implicit stamp of approval that helps them stand out in an environment that’s a little crazy at times. And so I think there’s trade-offs but there are a lot of benefits, too, to all this stuff.

Thomas: And is The Ocean regulated?

John: So we’re registered with FinCEN as a money transmitter.

John: And even though we’re … You know, I don’t want to reveal all of our legal machinations, we don’t really think that description’s quite accurate, and we’re working with FinCEN to figure out the right framework for it.

John: You know, we’re also working with New York Department of Financial Services, the SEC, CFTC, we’ll have a number of high-profile and exciting announcements in the coming weeks on that front.

John: You know, and I think in general my philosophy and what I learned at Goldman, having worked with a lot of these regulators for years, was I can have that head in the sand approach, move off shore, or I can get in there and control the conversation and work actively to net better outcome for the industry and for users. I think that latter is much better, long-term strategy.

Louis: Yeah. I’m not sure how much you’re gonna want to get into the details on this but, for instance, you know working with the SEC and perhaps becoming licensed under one of their various regimes, does that restrict what you can do as well as open up what you can do?

John: It restricts what types of activities we can or cannot facilitate, in terms of, as an example. You might see a lot of activity on certain dEXs that you would say it looks a lot like somebody trading back and forth to pump volume numbers, right? I’m not gonna be able to do that. You know, I think. But in general, if you structure, and the way we’re structuring business is in a little bit of attritional financial services perspective, where we have unregulated activity in one bucket. Securities in one bucket. Derivatives with their own controls and protections around them.

John: I think there’s a little bit of a misnomer in the space that says, hey, nobody knows what the right rule is for certain products, or what bucket to put certain products in. So therefore, I’m not gonna adopt anything. But you know things are gonna be put in one of three buckets. So why don’t you set up the framework to do any of the three buckets, then I can do whatever I want with whoever I want. And again I think that’s, you know, if you’re trying to build a successful transformative company, why wouldn’t you do something that it’s painful, you need a little … Part of the reason, to be honest, we’re getting good regulatory attraction, is my own experience, right? I have good relationships with regulators who have done the dance before, and I know what their concerns are.

John: And a dEX actually is a really attractive as most, I would argue, most exciting to regulators of all people, because it solves this Lehman problem. So why not use that to your advantage?

Thomas: That’s interesting, the way you describe that sort of covering our bases, so to speak. I can actually only really think of one other company in the entire space that’s really taking that approach. And they’re not a major player.

John: Yup.

Thomas: So yeah, I think that’s a really interesting kind of point of differentiation for you guys.

John: Yeah. I mean, yeah. Part of the game here is standing out.

John: Crypto’s loud. You know? But I think there’s a lot of benefits, and if there’s any company that’s gonna have a good shot at kind of bridging these two worlds and growing from 200 billion market cap to trillions that everybody’s excited about, obviously I’m a little bit bias but I would be a betting man on The Ocean, at least it’s one of those companies. Because of all these angles that we’re playing a little bit.

Louis: So on that point of standing out, how do you think … Say, if we just look at the perspective of dEXs or even 0x relayers, what are the points of differentiation that they’re gonna be able to compete on long-term?

John: I mean, I think … You know, and I kinda echo Will Warren here a little bit, who … The 0x philosophy… I don’t want to speak fully for him, but when I hear that team speak it tends to be a vision of different players specializing in different pieces of the market. Maybe it’s retail people who want to gamble in the U.S. versus Latin America, and an ancillary benefit to Coinbase, it’s the Paradex model. Lots of different models, and then having some interactivity around them.

John: I would say, the space is still so immature that it’s hard to say what each player’s strategy exactly is in that game. I think a lot of it is people, and as an example, I talked to Alan at Radar Relay maybe a couple weeks ago, who I really like and I think their team’s doing great interesting stuff. They made certain design decisions to make it, I think, a little more kind of retail-focused. We’ve made certain design decisions to support, I think, not just retail but certain types of customers. And game’s still early, we’ll have to see it evolve, I think you have to in this space. I think lots of people are just trying to capture Binance magic in a bottle.

John: How do we get that special sauce to go up to a billion dollars in volume. But at some point, then everybody looks exactly the same. But I think there is still a sense of grabbing a little bit for what’s the right model that’ll make us stand out.

Louis: And if you get kind of institutional marker makers, and more institutional players early, do you see The Ocean as becoming a kind of wholesale provider of liquidity to other relayers?

John: I do. You know, as an example, we have an interesting initiative the next couple weeks around a certain use case for dEXs that I think is really interesting. Particularly for an algorithmic market maker, the fact that you’re not taking custody lets you do certain things faster and better. I think that’s something that again it’ll be a good differentiating factor, an interesting example of a DEX specific use case, not just another way to trade things.

John: And so I think we’re super focused on being creative in how we leverage our infrastructure, the things dEXs can do, and as a result then … You know, our business model is the more stuff that flows through our pipes, the better we’ll be. So I want to flow through as much of the pipes, if I built good pipes, I can handle it from day one and I think we have.

Louis: And I guess a related issue to that, and I think, Thomas you wanted to touch on this which is … You know, obviously 0x was built with this vision of sharing liquidity. What’s your view on the protocol, it’s current state, it’s ability to enable that. You know, if it’s not the role of the protocol, how should that be organized and what’s your kind of view on doing that specifically with The Ocean?

John: Yeah. I mean I think the protocol is fantastic, right? It envisions this world of really doing the thing that blockchains are sort of designed to do, is how do I do this swap without a middle man? It does leave the specific implementation in the actual business model up to the individual people implementing it. The teams doing it. So I think the idea of sharing liquidity presupposes that there’s liquidity to share, number one. You know? And so first, you gotta get that liquidity, and I think that sort of regulated concept is one of the big pieces that people have missed.

John: And then the second is, I think depending on what regulatory framework you want to go down, there’s gonna be certain things that I can share where certain players and certain things I won’t be able to, right. And I think that’s something that we’ll have to see how folks, the speed and the cadence, and what the priority is. But as an example, when we become securities law licensed, we’ll have to restrict that market to whatever conditions are appropriate.

John: And players, so … I kind of view regulation as well, another way to look at it is I want to sell as many different types of assets to as many different types of people, and so people want tokenized gold, tokenized real estate, tokenized share of their dog. You know, I don’t think that’s a wise one, the last one, but I’m a little bit of a free markets person, so I want to build the optimal marketplace one-stop shop type of idea.

Louis: Yeah. And do you think that there should be any kind of protocol level system for sharing liquidity, to share the economics of trading activity or something to do perhaps with the token?

John: I don’t know. I mean I’m a little bit a person who is … I want to use the right tool for the job, so long as it’s the right tool. Right? And so a lot of people ask us you’re making a bet on Ethereum, right? And I say yes and no. We are in the short-term, in the sense of everybody’s building on Ethereum. So if you want anything to trade, it’s gonna have to be Ethereum based. And you see most of the tokenized asset projects doing that, building on that ERC-20 spec.

John: Suppose tokenized assets really takes off and Ethereum never scales. Maybe we have to jump to another chain, or maybe we need to based on the needs of our customers, create x, y, z, little thing and 0x or our settlement layer to do something. We’re gonna do it. I think really my view is, as somebody who wants to build a great transformative company, the vision has to be what does the customer want? First, who is your customer? What does the customer want? So I think, because there will be different customers using 0x and there will be different needs, we’ll have to see how that plays out.

Louis: And do you think, for instance, a decision to perhaps integrate EOS, would that be a customer-led decision?

John: I think a customer and industry-led decision. The great thing and the hard thing about running a trading platform is you’re only as good as the things you list, which means you’re … You know, it’s nicer scalable, I can list lots of different things, I have to worry about building things in that sense. But I also can’t jump to EOS if there’s nothing worthwhile of trading, right? And so there’s a little bit of you have to find the right balance and work with projects. That’s part of the reason we spend a lot of time with talking to new projects, what are the things we want to list, especially in the tokenized asset game, obviously that world is a world I come from. We want to work closely with those folks because it’s in our best interest to make sure that we’re a good place to find interesting projects.

Thomas: What are some other push backs on the 0x relayer standard? Some pain points particularly for The Ocean, and some general pain points for the relayer ecosystem?

John: Yeah, I mean I think the number one pain point in dEXs and daily active users for any dApp, is just how the hell do I use this thing with Meta Mask or Ledger, this little thing that I click, it’s not the most intuitive user experience ever. And if you look at the … I keep always coming back to this point of, you look at daily active users today of any dApp, it’s exchanges all at the top, and then it drops real quick after the fact. And I think a large part of the problem is just the usability isn’t there. So I think the number one issue is, and we’ve talked a lot about this, maybe we’ll need to engineer the right wallet solution for folks to use in general to interface with things. We talk a lot about that. That’s one.

John: The second piece is this concept of, specific to 0x, and something we’re thinking a lot about, and … 0x V2 gets you part of the way there but not all the way there. This concept of wrapping ether … Everybody knows that there’s a big pain point just getting people to think through that. It’s difficult. So as an example, just one small example, on our platform today we updated WETH to just ETH. It’s the same thing, right? You still need to do the wrapping with somebody to facilitate for you. But we had a lot of feedback from customers, well what the hell is WETH? I don’t know this thing, and you explain it to them. Okay, I get it, so why don’t you just call it ETH? So again, let the customer decide.

John: And so I think something … This is my first start-up. But I did run political campaigns before. Political campaigns are very similar. The thing you learn in political campaigns is listen to the voters. Listen to the customers. I do think, and again this kind of goes back to the idea of dEXs selling themselves on decentralized or holding on private keys. Seemly no one wants to do that yet, so you gotta find out a right solution to do that, a right customer base that’s willing to do that.

Louis: That’s interesting that, you know, the DEX that’s … I mean, if you want to call it a DEX, I think it’s fair enough to call it a DEX, that’s received the most traction to date is IDEX. And it’s arguably a less pure solution from a decentralization standpoint. Do you think that that proves your point, or do you think there’s another reason why they’ve had more traction to date?

John: I think that’s partly to that point of IDEX is sort of nice, it really looks, feels, tastes like a traditional exchange. I deposit, quote unquote, but I do it in a smart contract that I don’t have to worry about some of these other abstractions. A part of their business model seems to be, as well, listing as many types of assets as quickly as possible, which is a business model that’s obviously proven successful. It’s not gonna be our business model. You know, and so I think that that issue of … You know, and a lot of people ask about the regulatory, that you’re gonna give up some things maybe in the short-term to get some things in the long-term, is a little bit our philosophy. IDEX is an interesting business, for sure.

Louis: Yeah. Yeah. And kind of, on the business side of things, how do you think about your revenue model, the revenue models of relayers in general, what’s gonna be sustainable in the long serve. I mean arguably, it’s a space ripe for commoditization in the purer sense of the world. Is anybody gonna be able to run a sustainable business on this kind of technology, because it almost seems antithetical.

John: Yeah. No, exactly, and I think part of that is why we think of our ourselves a little less, and we are a 0x relayer, but more that we are a financial services company looking to de-risk and improve the efficiency of the overall systems. What does that mean? You know, so we’re working on certain specs for wallets, certain specs for margin and derivative solutions, in a non-custodial fashion, how do we do cross chain? You know, I think our philosophy is not let’s use 0x, let’s wait for people to build things that we can list, and let’s wait for daily active users to come. We’re gonna make our own luck. You know, and so I think our mandate, at least the way I think of our mandate, is de-risk, improve financial flow period. Starting crypto assets, moving that tokenized asset world. It’s gonna take a lot more than just building a 0x relayer. So we want to do that stuff.

Louis: And so it sounds like you’re thinking of bringing your own derivative products to market?

John: Potentially.

John: Yeah. I mean, I think at least building a platform that’s compliant, that sets the stage for … Maybe we build our own products, maybe we partner with an institution that’s interested in building and issuing those products. They have, to be honest, tremendous amount of advantages in that game, and at some point I really just want to be someone who’s constantly iterating on the venue of how do we connect a more in inner-operable with more. But I am very conscious that we’re gonna have to make our own luck.

John: It’d be pretty aggressive and creative on moving the space forward. And I think there’s a big … You know, that’s a philosophical difference between us and a lot of projects in space. And a lot of it goes back to that regulatory piece, too, where a lot of the things that people want to do or talk about wanting to do is gonna need regulatory coverage. Right? That’s something that, you know, The Ocean … Lots of fish, lots of products, lots of liquidity. Come on home, jump in, water’s warm, you know, and that type of thing where I think we’ll be a good partner for lots of projects that wanna tackle hard, fintech let’s call it, problems. But maybe don’t have the expertise and legal compliance working with those types of players that we do. And so I think that’s one advantage we have.

Thomas: And going back to the business model, do you collect fees currently in ZRX?

John: We allow users … You know, again, kinda listening to the customers, what they want. You can either pay fees in 0x or Native. And right now our fee model is five basis points for takers, two and a half for makers.

John: And then the Ocean token, which is a tool just to reward early adopters, you hold it, you get discounts on that fee model. As we expand and offer some of these other services, like our margin lending or some of our other business lines let’s call it, we might have a different fee model as a result. So I don’t actually see, to be honest, that kind of spot market as our core bread and butter model, it’s gonna be these other things we build around to support the ecosystem that I think will be interesting.

Louis: Do you think maker taker fees in the DEX space go to zero?

John: Good question. I think I would put it … I wouldn’t say it’s necessarily just a dEX issue, I think it’s a exchange, financial flow issue, period. If there’s a lot of push back on maker rebate model and traditional financial world, does that create pernicious incentives, and … So your point, it should be in the steady state, in some sense of if things are maximally efficient and are inoperable, yes it should be over time eaten down to zero or near zero. And I think it is gonna be important on what’s the other value you bring to the table.

John: You know, I think that’s a question, or a debate I had with a few VCs not too long ago, of what makes more sense to invest in? Custody or exchange? And I’m of the view, you know, custody solutions, at least from an institutional perspective, you see a lot of investment and excitement in that now. At steady state though, you’ll do everything that Goldman and more are talking about, which is bring the custody in house. Why am I gonna pay coin-based custody?

John: When could I build something that’s infinitely scalable one time?

Louis: It’s not a cheap service, either.

John: Yeah, exactly, right? And that kind of goes back to what’s an advantage of a DEX. Well if everybody’s gonna build their own custody solution, you need a place to plug into.

Louis: Between 0x and yourself, or maybe some abstractions on top of your app to introduce some new products. Do you imagine a world where that becomes more and more relevant, and 0x becomes less and less relevant, and you know, relayers combine forces to fork away from 0x or something like that?

John: I don’t know, too early to tell. You know, I think something that I find challenging about this space in general, is the fire hose information new technologies. I certainly can’t keep up, right? Right now, we’re focused on this interoperability problem, and we don’t have to focus on this execution settlement problem that 0x has sort of taken care of us, which is great. You know, as we evolve and see what happens, and what our customers need, maybe … You know, I always want to be … I think there’s a tension in this space of these kind of …

John: At the end of the day, I want to build a great business for our customers. Right? I’m gonna leverage whatever technology I need to, and I’m gonna do what I think is right for our customers. If that means working well with others in the space, great. I want to do that, because I want to do that stuff as quickly as possible. If people have another vision that’s not compatible with that, then I’m not gonna be holding to that. And that’s not to say that’s an issue with us, with 0x right now, I love that team. I think they’re doing great work. But I do view these blockchains, cryptocurrencies, this ecosystem as tools, not dogmatic.

John: Not … You know, something I find really interesting about the bitcoin space, just as an example, is the way people talk about it in religious tones. You know? There’s a certain amount of, you know, you choose your tribe, and there’s the Catholics versus the Lutherans, and you know, there’s Martin Luther, and you know, breaking off, and DCs is all that type of stuff. But I don’t care about any of that stuff, personally.

John: I care about we’re choosing this problem to solve that we think is important, not just for adoption of this space, but making financial flow more easy, better for the average person. 0x is a tool, we want to continue to develop that tool, and we’ll evaluate that tool amongst other tools as they come online.

Louis: Do you think … I mean, you know, obviously it’s easiest to spot that with the bitcoin community, and I think when you see the Ethereum community kind of juxtaposed to projects like EOS, arguably there’s a similar kind of nature of the debate. Obviously, if you go too far along the, arguably you could characterize it as the cost in the first strategy. You might end up undoing some of the fundamental benefits of the technology. How do you kind of balance that, and do you think that that could be an ultimate sort of threat to something like Ethereum, is if they can’t properly serve what people actually want?

John: It’s a good question. So I did, Tuesday night, Venrock was kind enough to host an influencer series that I was invited to speak at and pontificate and give my two cents. And you were supposed to take a contentious point, you know, and I love controversy. So I took the position, and maybe I agree with this, maybe I don’t, that there’s actually relatively few use cases that make sense for the pure blockchain technology in its quote unquote purest form. Right? And that financial services, I think it’s pretty clear to most people. Makes sense there. Other things? I don’t know, people don’t know. But I think you’re highlighting this point of … As people are starting to build more and more applications outside of financial services, some other specific use cases, you start to get to this push of now to go back to …

John: You know, EOS can argue as a pretty centralized model. And you know, maybe that’s a good thing, maybe that’s a bad thing, but it depends on the use case. I think there is a bit of truth always to this claim of blockchain as a solution looking for a problem. I think financial services is pretty clear. Others still yet to be determined, I’m excited for the potential of some of these projects, but I’m also a little tempered by that daily active user number, let’s see what we can collectively do to make sure we find the right … And I think this goes back to that, what’s the right tool for the job?

John: There was an event. I always like to share little anecdotes. There was an event in New York a few weeks, few months ago I went to, and somebody in the middle of this event stood up and said hey, we’re here to put higher-ed on the blockchain, or … You know, God, fish food on the blockchain, or whatever it is. I mean, cool, if you’re passionate about it go for it, but to your point, I think we need to start first what is the problem? Let’s think of blockchain as a tool and a set of tools to solve problems. And I think looking at that lens, not just try to put everything on a chain.

Thomas: Great. Final kind of question I had is, I noticed on your … You’re very active with your blog, right?

John: Yeah. That’s all Monica, it’s not me at all.

Thomas: Yeah, and I think that’s fantastic. Just wanted to promote that for a second, it’s a excellent blog. I also saw that you have an API. Not all relayers have an API. What kind of impact are you trying to create with that API?

John: I think it goes back to adoption.

John: Right? So if you want to build a great business, have maximum flow through your pipes, I gotta build easy ways for people to connect to it that’s scalable, leverageable. Right? And so something we did, you know in our CTO, Ari and our team in Poland have put a tremendous amount of work into this. Let’s build that API look feel taste, just like any exchange, if not better on planet Earth. Right? So as an example we’re the only dEX, not just 0x relayer but dEX period, that’s in the CCXT algorithmic trading library that’s very popular. Run by a fantastic team out in Russia and in Hawaii. Why is that? It’s because we built that API to be interoperable with kind of any trading system, or any sense or tool you could use to move blockchain base assets. And if you look at that site, I think it’s CCXT.trade, the stamping of approval that the most performant APIs are finance, Bittrex, bitfinex, I believe Kraken, the 5th is The Ocean. Right, and that’s something we take a lot of pride in, and I think it goes back to …

John: I’m not trying to reinvent the financial system in some sense yet, I want to move the ball forward one step. And then I think that’s why you need to build the right tools, API framework, look feel taste, like any other trading system on planet Earth. Let me innovate on top of it, and move and move and move, and so I think that’s something we take a lot of pride in and I view it through that lens of adoption.

Thomas: Absolutely. I think it’s so important to have that proper piping and those libraries that you mentioned, just to get the traditional Quants to get into the DEXs

John: Yeah, exactly. Right? For me, I was a Quant trader. I still am for a long time, and built my own libraries. I want to cut paste strategies, I don’t want to reinvent the wheel every time I want to do something.

John: Or if I want to … Some of the initiatives we’re talking about with some of our partners on just using our infrastructure to not trade necessarily, but move financial flow in big chunks through our pipes. All this interconnectivity is really important. And yeah, I hear your point, it’s not something I think a lot of dEXs have done a particularly good job with.

Louis: I did have a question on stable coins. We’ve got a whole bunch of fiat-backed stable coins now. That market looks like it’ll probably get more fragmented before it gets consolidated. Over time, you know probably there will be a few big winners, and you’ve also got a whole bunch of decentralized stable clients, all with different mechanisms. Some broken, some not. How do you think about managing, trading pairs with all these different stable clients? Do you think that you have to make a value judgment on the company providing the stable client, or if it’s a decentralized one, the stability mechanism.

Louis: You know, that could be one that becomes really popular, that arguably can break catastrophically. What do you think about all of that?

John: Yeah, it’s a good question. I start through the lens of, maybe you could argue this as a little bit of a punt, but let’s let the market decide a little bit, right? I’m kind of of the view … You know, why are a lot of these projects being issued? One part is a rethinking of how money works, right, and that’s some of the algorithmic tokens are trying to do that too an extent. Others look at it as I need a better on-ramp to my system, whether that’s Circle, Gemini, whomever. So I’m gonna issue my specific on-ramp for me. And there’s value to potentially having all of them. Right now, if you’re trying to … For me, as an algorithmic trader, right, maybe I want to have access through The Ocean to all of these different things. Because I can go there, I can move from risky to riskless positions, I can go out to any of these other venues much faster.

John: You know, so there’s a use case there right now. I mean, I do think eventually there needs to be consolidation, and I do get a little concerned a little bit in the adoption of this space by traditional players or people outside the market today, because imagine … And I just use the example that I know, right, imagine I’m Goldman Sachs, I’m trying to sell to a customer of we want to execute for you on behalf of these tokens, and you can have your U.S. dollar in one of 17 flavors. And they would look at you like you have horns growing out of your head, because it’s just the dollar, right? Well, you know, how are you gonna explain that to people? Right?

John: So I think there’s … I get why there’s a proliferation on these projects. I get why certain people favor one model over our other, we’ll see where it shakes out but I do get a little concerned if we as a industry can’t agree on a single dollar standard, again, why are people super surprised the space hasn’t been adopted by more people? Right? So that’s a little bit of my perspective on it.

Thomas: Yeah, fantastic. Thanks so much for joining us, John. Where can people get in touch with you, or learn more about your work?

John: So, you know, we’ve done a live trading for a month. Probably maybe close to six weeks now. And go to theocean.trade and you can log in for an account, and trade on our platform. We have I think 13 pairs available for trading, we’re gonna do a lot in the stable coin space. A lot of unique and exclusive listings. A number of high-profile regulatory and partner announcements in the coming weeks and months. The thing I’d like to think that separates us from other, not just dEXs, projects in the space is we want to be a trusted company, both in the way we do business, the way our architecture and technology works, to give you what you want. If that’s a retail trader I want to give you liquidity on the products you want, and a way to plug in your preferred wallet and custody solution. If that’s an institution, I want to do the same thing. You know? And we’ll do whatever we need to to do that. So theocean.trade. Visit our blog on Medium, you can access it from that website, that’s Monica’s handiwork. You know, she cleans up my mess. Certainly on that front, and we get a lot of compliments. Big shout out to her, she’s fantastic and she’s really the face of the company so a lot of kudos to her. And we think that stuff’s important, right? I think we’ve talked a lot about in this segment, adoption, right?

John: And education? And I think we feel that very strongly. And part of the reason we do the regulatory stuff to be a trusted partner, it goes to all that stuff. That’s very much our ethos.

Thomas: Yeah, and for any of you trading nerds that are listening, there’s a fantastic arbitrage bot.

John: That’s right. That’s right.

Thomas: That’s listed on your blog, I was reading through it the other day.

John: And we have an intern, Shalesh, you know, who’s written a lot of that stuff and will continue to pump out more of that. Yeah, we’re trying to have fun with it too, a little bit, right?

Thomas: Yeah. It’s very cool.

John: I like The Ocean, just playing with fish in presentations and stuff like that, putting out those series. I think all this stuff is important, I do like the push of crypto and blockchain. Let people own their financial future more. Let’s let Goldman Sachs take a little bit less taste of moving everybody’s money. Nobody knows that better than me, so that’s the push.

Thomas: Thanks for joining us today. To learn more about The Ocean, check out the show notes included in your podcast. And remember to subscribe to get the latest episodes. If you have any questions or comments, reach out to us on Twitter, Facebook, LinkedIn, or The Wyre Blog. Whatever works for you. If you liked this episode, share it with your friends and colleagues. Thanks again for listening.