Kraken cryptocurrency exchanges
I can tell you a story that is kind of a bit funny and a little bit embarrassing. I was at a conference in London, probably back in I'm talking to one of the top people of Mastercard in the coffee break before I go on stage. And honestly, I did not know what they meant. So I'm basically trying to Google it before I go on stage. I know what they're talking about. I'm from big data. I joined Kraken because I was probably one of the few people interested in the industry who had a real career, who had a background working at big organizations, building an operational framework, who understood how to work with governments because I'd done that in my research.
I've been contributing to the core protocol, and had built wallet systems that were way ahead of the industry. Did Jesse Powell invite you to join, and how did that conversation go? I met Jesse at the first crypto event I attended in New York in We were both early in the industry. We started talking and basically connected. We had the same views on the industry around a need for running things in a more professional manner.
We were looking at the Mt. Gox exchange [hack] and deeply concerned about that. We were discussing [the idea] that someone needs to do something better than that. We stayed in contact from there on. In , I realized that he wanted to build an exchange. I became part of that team and we started building Kraken. In , FinCEN issued its first guidance around cryptocurrencies. One of the things I keep reminding regulators today when they look back at the industry is everyone in the industry in , , — they were techies.
They knew nothing about finance. There was no idea of this being finance. This was cool. You could buy a pizza with it. Maybe you get rich. That changed in with the guidance from FinCEN. The banks would not let you use the platform because they were afraid of being part of a money-laundering scheme.
They couldn't understand what we were doing. I realized that with all of the anti-money laundering policies of different countries, everyone talks about transaction monitoring. You could not assess the origin of funds in an online exchange without adding a ton of paperwork and a ton of verification of that paperwork.
So I could see that there was a need for a scalable process to do origin of funds and transaction monitoring of crypto. That was the summer of when we really started to look into those things. I made presentations for our own banks around what could be done in crypto: It's way more transparent than you think. I had conversations with regulators around the transparency of crypto. I kept saying how transparent crypto is in principle. One of the things I keep reminding regulators today when they look back at the industry is everyone in the industry in , , , they were techies.
I basically realized that this is an opportunity. There's an opportunity to build a blockchain analytics company. There was no blockchain analytics. That was exactly the company that I wanted to build. I just didn't realize that before that point. I wanted to build something cool in crypto, and it turned out to be blockchain analytics. I had to leave Kraken. I discussed that with Jesse. He could see it was a good idea. There were a lot of people who didn't believe this was even a thing back then.
So it was impossible to get funding. There was a belief that crypto was meant to be anonymous, and I was going to break that and that was not right. So there was pushback initially from investors and others. I remember sitting in their office. By mid, I had sold to the FBI and to other government agencies. It was kind of clear that what we are building is useful.
But how many other FBIs are there? This is going to be niche. That's a good segue to my next question: How do you make money? One of the very, very early decisions was basically thinking the most valuable companies on the internet today are selling things online, B2B, and charging money for it. I wanted to build a company where you get recurring revenue, where people subscribe to a service, a good way to grow the revenue over time.
The most valuable companies are typically SaaS companies that can build recurring revenue. They have good multiples because there's a lot of stickiness in that revenue. So we did that initially. We are still doing that. The change that happened in was the realization that our data and software is actually so powerful, and we don't want it in the hands of the wrong people.
So we had to create a vetting process in the sales process where we don't want the FSB from Russia to buy it or others to get access to it. That would today be called enterprise SaaS. It typically moves the deal sizes from thousands of dollars to hundreds of thousands of dollars. So that's where we are today. We could have predicted that something was about to fall apart.
And we see huge growth in our customers because we talk to them a lot. In the early days, the main customer was government. It still is. So we have public-sector institutions in some 50 countries in the world, roughly, that are our customers. Sixty percent of our revenue today is from the public sector. They're not touching crypto in terms of buying and selling cryptocurrencies. But they want to be able to trace it. So if a hack happens, if they think it's being used for selling drugs or other things online, they want to trace the funds.
They want to build a court case. The product enables them to be smart about crypto and do these investigations. That we ended up becoming a very big business. Then we have the other side of the business, which is the private sector. In the private sector, the typical customer would be a crypto business. It could be a crypto exchange. It could be a gaming platform. It could be a DeFi platform. It could be others in the crypto space that need compliance and also want to have business intelligence information about their customers.
A lot has changed in the last decade in crypto and blockchain. What has been the most difficult change for the business? When we see times like the last couple of years, when the entire world was [into] crypto — and we saw that back in , as well — it's actually hard to run a business because, first of all, everyone thinks they're going to be rich tomorrow. Everyone gets weird.
You suddenly realize there's a few people in the company who might be key people that suddenly got rich on crypto and don't need to work anymore. I've seen that in Kraken back in the day. We have seen some extremely fast bull runs where the market just explodes, capital keeps flowing in, new protocols are being launched, new projects are being launched, and you basically are being pulled in all directions all the time. I can see the opportunities growing 10x a day, which is amazing.
But at the same time, I need to make decisions at a millisecond level in terms of where I should deploy resources. Where should we grow? What should we do? If I make the wrong choice, I might lose out on the biggest opportunity. What we saw last year was hard. Can you give an example of a decision that was hard, and maybe a mistake that you made? A good question. One is from the last bull run in We saw the ICOs.
Everyone in crypto did an ICO. They all launched funds that way. But I wanted to play it out to the team. So I remember an event where we were discussing it and I just pretended to the team that I wanted to do it just to see their reaction. And everyone got a little bit concerned because I was basically telling them we're going to launch an ICO.
We're going to raise money this way. We're selling to the SEC as one of our customers. They might not like that we are doing an ICO. They felt that this was selling unregulated securities and it was wrong. So I'm happy we didn't do it.
But it was also one of these things that had we done it right, it might have been an opportunity. It's hard to say. And I would say this today: I would say I feel that there [could] have been a core piece of regulatory innovation that I could have created to enable the ICOs to be a success. What do you mean? What happened in the crypto space in the early days was really interesting.
We saw that you couldn't trace cryptocurrencies. It was more and more dangerous and all of that. Because of what we innovated at Chainalysis, it was suddenly not a risk for society anymore. There was no need to go hard on it from a regulatory point of view. So I always think about every time we see challenges from a regulatory point of view, it's easy to create technology where you can move funds super fast and make investment schemes like we saw with Three Arrows and terra-luna.
That's the easy part. The hard part is to create the regulatory technology that enables these technologies to work with low risk or less risk. That's kind of the foundation of Chainalysis. If we make the right innovation now, we can change the industry. But I'm always thinking that there might have been a way where we could have enabled regulators to get the right oversight and feel they did the right thing for consumer protection and other things through technology.
That would have been an opportunity for the company. You mentioned Three Arrows and Celsius. What are some of the things that you think could have been done better with blockchain analytics given what happened? The challenge in the industry today is there's a cross section between traditional finance and crypto.
What happens today is that many of the crypto exchanges operate also like traditional finance. Someone is a well-known customer and they will operate on credit. You can hand in the money later. In the crypto space, we saw the same. We saw it with Three Arrows. We saw it with Celsius and others. Suddenly that's not something I can see on the blockchain. I don't know. I can't see that. So the challenge here becomes: how do we include that information?
There were deals happening in terra-luna that were not visible on-chain. If decentralized means that I'm my own bank, and everything is out of reach of governments, they're wrong. But I would still say — if I should point fingers at myself and blockchain analytics — I think that when our industry and what we're building at Chainalysis matures even more, there will be a situation where a lot of these schemes and all of these layered investments will actually be more clear.
You can build products that can showcase them. Both on Celsius and terra-luna, we were trying to assess: Could we have predicted this with our data? And the answer was, sadly, yes. We could actually have seen that stuff was going on. And now, we are, of course, focused on enabling that [kind of prediction]. If we can do these things, it means that that's a very valuable product. It derisks your investment. Suddenly, if you can get early warning that this is falling apart, you can leave in time, and that makes the investment less risky.
I think that that product could really help regulate the industry. So I think that there's stuff that can be done in blockchain analytics. But there will be parts where, as I said, if it happens on a phone call, I cannot know about it.
I'm assuming you're using AI to figure these out. We are. Then they said use the website which worked. Yes Payward, Inc. Your previous experience was not what we wanted for our clients when using the App and we're glad to see it's working better now. If you ever need anything or want to provide any suggestion, please note we're always available to help at mobile kraken.
It's great. Now just like every other exchange, at first if you don't know how to use it, you will commit error. It said it was a success but I lost it due to being under the limit. Just make sure you read the small print lol. But besides that it's a great way to make passive money.
As well as the websites Trading Tools are really cool.
Other centralized exchanges I have had issues with wires coming through.
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1 комментарии к “Kraken cryptocurrency exchanges”
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on24.09.2021 в 16:45 говорит:
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