Backpack Fireside Chat: Bridging two economies - TOKEN2049 Singapore 2024

hello hello uh thank you for everybody for coming excited to be here in Asia um really looking forward to this chat with Armani I think Armani has been one of the true uh 10x Engineers that has really helped build uh many things within the ecosystem has really been forged within the fire so excited to chat with Armani today about bridging two different economies but maybe to start it off Rani I would love to get your point of view on why build backpack uh what what is the Grand Vision of what you're building today a lot of Founders might hear something like this and they might tell you a story about you know we're going to rebuild Finance disrupt the financial system uh uh and that's true uh uh uh certainly with backpack but but it's it's it's a bit vague it's like okay what does that mean right so you might you know start by defining some objectives you know I might want to like maximize the number of transactions flowing through some verifiable Computing machine it's like okay very engineering Centric uh a point of view um maybe you come from traditional finance and and you think okay well I want to minimize the compliance costs that's like an enormous tax on the world right that's a that's a good thing to do um you might talk about something a little more philosophical right you might think about reducing the error rate of this like Collective database that we all use you know called money or whatever it's like okay like what what does all this stuff actually mean it's all like super vague very high level like what's the actual uh Vision um and you hear this type of thing a lot and uh you know you might ask yourself well why why do people have this kind of orientation and I think part of the problem that I'm certainly guilty of is thinking about crypto and thinking about the crypto economy as this like separate parallel thing right it's this thing that's like this special like a thing that's separate from the actual Financial system and you have this kind of uh uh a demarcation or bifurcation uh uh between like real world assets and crypto assets uh and you see this start to kind of leak into into the discourse where you have folks you know on crypto Twitter recently uh lamenting about defi right it's like uh you know people uh really just asserting that it's kind of valueless uh and that might sound a bit harsh uh but you know you have these tokens generating yield that are generating more tokens and it's this like circular like snake eating its own tail type thing it's like where's the actual value and all of this stuff it's like really cool Tech sure um but fundamentally Finance and Accounting and all this stuff di it's not actually useful unless you're rooted in in the real world right unless you're rooted in physical goods and services that are making everybody's lives better right um um and this is kind of the the the fundamental I think uh uh orientation for how kind of I look at the uh kind of backpack and the problems uh uh that we should be solving uh which is to say that you know the crypto economy isn't the separate thing the crypto economy like is the economy and in the same way that software ate the world crypto should really be leting all of Finance so it's like okay this is starting to make more sense let's just go do this uh but then you might you know ask the question okay that sounds great but how do you actually operationalize this like what what are the actual steps um and I think like the backpack uh approach is more or less to break things up into a couple different market segments that kind of have defined our kind of approach and go to market and strategy up until now where you know to start we really started with the crypto native Market Market segment like this is the heart and soul of the company it's all about the wallet it's all about self- custody um everything from the madlads to the wallet to our kind of uh Genesis in the Sal ecosystem and let's go out into the world and just put self- custody into the hands of as many people as possible but I think it's all kind of fair to say that that Market's more or less saturated um and and we need to find ways to kind of grow grow grow that market so then you move on to like a second Market segment which I'd really defined as like the centralized Exchange Market segment so these are folks that trade a bunch people that maybe don't care about self custody but people that really care about crypto assets what's really interesting about this Market segment is that it's just so jaw-droppingly large um uh uh like in backpack's a really good example of this so for context over the past year during salon's like rise from like $8 to like $200 or whatever we did as much volume as Robin Hood did uh during the 2021 bull cycle it's like in it's hard to wrap your head around how big this like opportunity is in the second Market segment uh uh uh and that's really kind of what we've been focused on with the exchange and with the trading product uh and this Segways into a bunch of stuff but the problem with these two market segments is that you still have this fundamental snake eating its own tail problem uh uh it's like where where like this is all fine and dandy it's awesome Tech it's cool speculative Behavior you have some really incredible kind of uh uh uh innovations that have come to the world uh in crypto native assets uh uh but we still need to bridge into the real world right we still need to do things like you uh uh U you know people like to talk about tokenizing assets or or whatever uh but there's this third Market segment that is just honestly really hard to break into and it's probably why Nobody Does it which I would it's this kind of broad bucket that I would describe as this uh uh Mass Market mainstream Consumer Finance right these is everything from like brokerages uh you know E Trade Robin Hood you know Banks uh uh you know Chase whatever uh but it's all about kind of taking that next step and bringing everything that we love and care about in crypto into traditional Finance um um and then you could start really competing at this third Market segment where now you could start talking about U not just crypto native assets and then speculative assets but actually using the tech to eat Finance right token stocks tokenizing bonds uh treasuries uh uh you know payments Fiat all around the world uh uh and really kind of you know people like to talk about hot swapping uh the backend of the financial system uh and and this is really kind of the key right and there's really only been a couple companies that have even tried this let alone have been successful about this maybe the most notable of this is like coinbase I think they've they done a really impressive job I I like the hot swap analogy because it is true if software is eating the world software will also eat finance and blockchain is going to be a component that helps facilitate that but you also need exchanges Fiat on ramps and off ramps and I think it kind of goes back to the title of the talk which is bridging each of these economies and really backpack has been really at the Forefront to my mind especially within Asia and continuing to expand globally into these new markets I would love to kind of maybe shift the question around product uh generally if you're building a consumer product or talking with VCS they're always like how do you build a 10x better product or money uh and I would love for you to Deep dive from the product perspective how you really thinking about melding these two different worlds so that blockchain can actually help replace the backend system of the financial institution so whenever you use a product you never think about what the back end's doing right everybody kind of says this right you think about oh I'm going to dinner I'm GNA pay you know uh Logan uh with my money from I live I live in Tokyo Japan I'm going to pay uh uh Logan some money from Tokyo uh but he lives in Miami but then we also have some a friend from Singapore and nobody's like okay I'm going to like bridge this money into this chain or or or or do a Fiat offramp and pay you with an a transfer or whatever it's like no I'm just going to pay my friend right just like just make the thing happen right and so when we think about products there's you know having this onchain offchain distinction is is kind of going in the wrong direction it's like what does that actually mean it's like okay like on chain you have some verifiable like immutable Ledger uh on chain it's like this opaque thing that can maybe be uh uh uh uh reversed and and and forged and and and maybe not something that we want to trust uh uh but it's all about just the value proposition uh and what is like the thing that I can do and I think from the backpack perspective uh I really think a lot about opportunity cost of capital and and and answering this question from the perspective of the user like where is the optimal place to have my money what is the set of all the things that I can do with my dollars with My Soul with my eth with my Bitcoin with my retirement account uh with with all my stocks or whatever um and that's the thing to optimize uh if you want to talk about 10 Xing product just 10 Xing like how far your dollar can go a and ultimately we want to create like the most compelling place for people to store their money and whether that's onchain um inside of the self costolo wallet or whether that's offchain uh inside of an exchange or or something uh that looks like a bank but isn't quite a bank or something that looks like a brokerage but isn't quite a brokerage that's kind of an implementation detail uh and it's simply all about 10 Xing the things that I can do and and so you can imagine things like you know a lot of people like to talk about uh these very Capital efficient liquidity systems you know things like cross collateral where I can you know take uh uh my my soul and I can take my usdc and I can take my my eth and I can use it to like you know borrow some Bitcoin or whatever um but that's just crypto native assets why are we stopping there right um You can talk about Fiat tokenizing stocks tokenizing bonds uh retirement accounts all these things um and I so I think from you know the backpack point of view uh we not only want to kind of provide distribution to every dap and every ecosystem you know most notably obviously in salana which is kind of like a second home for us uh and provide kind of the benefits of of Defi and everything that you can do on chain but also provide all of the opportunities for or traditional finance and there is this kind of generational turnover that that you'll see um and that I think we'll continue to see in our lifetime where it just doesn't make sense to use any of the existing uh traditional Financial applications if you're kind of crypto native and if you're like part of this like newer generation of decentralized Finance where it's just way more convenient to have your money uh in coinbase or backpack or whatever uh uh it's like I can do everything that I can do uh in my kind of uh you know not to pick on any given Financial product but I can do everything I do there but I also have access to the entire crypto economy um and I think as time goes on as the industry continuers to grow uh bridging these two worlds to make backpack your primary financial services provider is ultimately uh where we want to end up in and I think that is the is the ultimate end game perhaps in the last couple minutes we can take a left turn and maybe do rapid fire questions uh to spice things up a little bit what is one of your more contrarian's opinion uh in the space that perhaps many other people do not believe but you strongly believe contrarian uh opinions H this might sound I I might sound like I'm contradicting myself uh uh uh but and and this view is not uncommon in traditional startups uh uh but it's very common in in crypto which is to say that everything matters except for product like like that's kind of the view that that I think a lot of the crypto world has has has has seen uh you know the rise of meme coins uh and things like that but I think in crypto specifically there is this view that value is this arbitrary thing uh it Valu is this Meme and memes are important nobody loves memes uh uh more than me uh uh uh uh but I think one of the it sounds so ridiculous to say it's like yeah value is not arbitrary if you like cure cancer obviously valuable for the world right uh uh but I think that is maybe uh the most obvious but but uh important things that I think the space uh has been sidetracked with over the past year uh and people might not like me saying that but yeah I i' would be remiss if we didn't talk about madlads madlads is one of the top nft communities uh within all of crypto uh is there any alpha or uh spicy things that you can tell to the madlad community yeah I I I don't know about any particular Alpha but I think the way that I think about Community um is that there's kind of three things that are are important when you want to build one of these things a lot of people try and a lot of people fail you can go to magic Eden or tensor or open see and see a graveyard of communities that are built uh that are built on on Vibes and and and and and and some random thing that that boils down to sitting in a Discord and and typing into a chat which I I love to do um but the ml's approach is basically three things right it's like the first thing that you need is just purpose you need a reason to exist and if you start asking yourself what is the purpose of Any Given nft Community you immediately start writing off the majority of them like like they have no purpose uh they have no goal they have no reason to wake up in the morning to actually go do something as a collective um I think the purpose of mad Lads is is manyfold we obviously have all the products we also obviously have just really supporting the Sal ecosystem I think it's positioned in a pretty unique way from that point of view um I I I I think the second thing that you really need or at least from the backpack point of view is just to like support others like it sounds really simple right but an exchange in a wallet is in a really kind of unique position where we can make an incredible business by just supporting other projects in other ecosystems and that's a very positive something and if you can do that you can build uh a really beautiful vibrant ecosystem uh uh around that uh and then I think like the third thing is like you just have to genuinely care it sounds so simple and so silly but if you take a look at like all the corporations whether it's Starbucks or whatever coming into nfts and and trying their hand at it they all fail on this Dimension where they're like this soulless corporation that is not actually invested into the community doesn't actually care about the industry and doesn't actually care about what they're doing and so you kind of have to be consistent uh on that Dimension as well so I don't know that's kind of a my my take on community building with mad LS everybody I'm Amani Fon uh CEO and founder of backpack thank you