AMA Recap — 12th July 2022
We hosted an AMA with Brian from the StarkNet Vietnam community and our Co-founder & COO@olistar on our focus on emerging markets, how we differ from our competitors, and ZKX's plans to scale in Vietnam.
1. Let’s have a chat about your project. How did you start the idea of ZKX?
Olitsar | While Eduard and I were at SOSV, a venture capital firm focused on Asia and the United States, we discovered the potential of emerging markets. One of our key investments was BitMEX, and around 2018–2019, when the market was coming out of a downturn, things blew up and accelerated the growth of the entire sector. Soon came the DeFi wave, and Eduard and I realized the potential of the markets and growth levers such as high adoption, internet penetration, and risk appetite.
We wanted to enter the market and were figuring out how when the GameStop saga happened. I’ve been a Wall Street bets member for quite a while, and I was fascinated by how the community came together to take on the heavyweight hedge funds. The growth was community-driven, and we wanted to be part of it.
But the reality proved to be a little more complicated. Even buying a share of GameStop was very complex, and it was difficult for us to purchase and participate in this yield opportunity. And that’s when we thought, what about the average user sitting in these markets if it’s complicated for us?
“ZKX was created out of the idea that everyone should have access to investment opportunities, creating an equal playing field for people from different countries and backgrounds.”
With our experience at SOSV and observing the emerging markets closely, we knew we needed something scalable and future-proof. We soon came to the consensus that we wanted to work on something long-lasting and needed the depth, size, and security of the Ethereum chain, so we started exploring solutions for emerging markets and landed on StarkWare. We decided to build on top of StarkNet because of their community of developers, the StarkWare ecosystem’s support, and their focus on fostering growth.
2. What are ZKX’s unique selling points compared to other projects in the market?
Olitsar | We get asked this question a lot, so I’ll start by explaining ZKX and our unique combination of solutions. We want to create the Uniswap of Perpetual Swaps — a listing platform for perps that is permissionless and community-governed. The process is very complex if you’re a new project and want to create your derivatives marketplace. This is a problem that we at ZKX are working to solve.
If you’re a project, you can apply via a community-governed permission listing process. You get voted in, are listed as a swap, and can create a derivatives market of your token. To make this vision, we had to solve two very fundamental problems.
First, the data and then liquidity. If you can solve these two core issues, you can solve most of them. When we started, we reached out to big data providers. But they told us that if the asset was not in their roadmap, they didn’t want to be part of it. Its next to impossible for a new project to receive data feeds through one of these centralized or decentralized oracles and create a swap. So to solve this, we developed our decentralized node network, which makes us relatively oracle-independent. The node network will have an inbuilt data layer that allows us to pull in data from anywhere to create our swap, and it eventually helps us bring data on-chain. This data can be pulled directly from centralized exchanges, decentralized exchanges, and even a fiat data feed from one of the core market exchanges.
Another aspect is the security threshold, and the node network allowed us to bring data on a chain for anything out there so we could create a perp, which was the first hurdle we crossed.
The second part of it was liquidity. We created a mechanism called Swap Liquidity Mining, where DAOs, protocols, and community stakeholders will be able to list new assets and offer incentives to trade these new perpetual swaps with any ERC-20 pair of their choice. By enabling a native liquidity bootstrapping mechanism, ZKX’s open-source derivatives protocol can grow with the community. By creating something as innovative as this, we solved our second fundamental problem: the depth of market and liquidity.
3. You have talked about web2 meets web3; when do you think that shift will happen?
Olitsar |I think the shift is already underway. You’re seeing regulation being pushed on one side, driving mass adoption forward. On the DeFi side, Web 2 aspects come into play because we are seeing projects that can scale in the long term.
The DeFi space, I’d say adoption-wise, is extremely massive. I’ll take an example of emerging markets over here, especially Vietnam. This is something everybody needs to understand. Why do we feel emerging markets are so important? I’ll take an example of Vietnam in the 80s. I believe Vietnam went through major reforms in the mid-80s and was one of the first countries to allow foreign investment, which increased investments, stimulated exports, and improved technology. Fast forward, the economy evolved into more of a production economy which brought players like Samsung, Adidas, and Nike, and they got massive production facilities in the last two or three decades. As a result, the country has a young population with disposable income, high internet penetration, and risk appetite. They have also heavily invested in human capital and have one of the region's largest ecosystems of developers and highly educated youth.
Hence, I believe that US, Vietnam, and Thailand are the fastest adopters of DeFi. We are witnessing a similar wave in Pakistan, India, and Turkey. One of the core benefits that Vietnam has over here on the adoption front is the support of the government support. It's the perfect mix and the reason why adoption will continue to grow in these regions.
4. It seems that your protocol is preparing for the bear market; how can you attract liquidity for the protocol in a bear market?
Olitsar | Looking at the current economic scenario, we saw a bit of an economic slowdown since February, and normally, you would see crypto and Fiat markets are inversely correlated. This is what happened in 2020, a black swan event, and the kind of growth we saw in the crypto market was unprecedented. Currently, recessionary pressure on the overall larger fiat economy combined with the macroeconomic factors, such as the Ukraine war and rise in inflation, is draining liquidity from the market. From a Web3 perspective, I believe the Luna collapse triggered a sense of massive distrust in the community. It scared people, and what is happening now is massive stress testing of the markets.
Bear markets and economic downturns are the perfect places to build a project of value. If you’ve planned it correctly and stuck to the right business principles, you will walk through any economic uncertainty, and that’s what we had.
We at ZKX have been lucky enough to have experienced and witnessed economic downturns in the last couple of years to understand and plan accordingly. But again, you know, not everything is gloomy. The right projects are still getting funded, and it's all about survival of the fittest.
Even venture capitalist funds have pressure to deploy capital, and they have three- to five-year funds to deploy. The only difference is that they’re a little more conservative right now.
5. What is ZKX’s vision for the next 5 years? Will you have a mobile app to ensure user experience?
Olitsar | At ZKX, our strategy has been to reach out and target the core DeFi users across emerging markets. We circled down on countries with the highest adoption agenda. Then we will move on to the web2 audience, where we want to provide a centralized exchange experience with the safety, security, and trust of a decentralized exchange. This is our plan, and account abstraction will play a huge role here. From our perspective, in the future, we’ll facilitate the user experience and enable users to log in with their Gmail account, Discord account, or Twitch account.
The next wave is where things get interesting, and you mentioned the mobile app angle. So if you looked at the growth of Robin Hood a couple of years ago, options trading or, in general, trading was extremely complicated before the advent of Robin Hood. I don’t think, in general, the average age for trading was relatively higher; why? Because it’s very simple, it’s extremely complicated to trade on a Bloomberg terminal. If anybody has tried it, compare that to the user experience you get on something like Robinhood. It’s a simple application that you can have in your pocket.
The core factors in Robinhood’s growth are user experience, ease of use, and accessibility. So there’s a community that is created behind simplicity and ease of access, and this is the same vision we feel we can use to corner the market. Eventually, we want to provide people with the opportunity to have a mobile app because they can have the same experience in their pocket and can trade. Yes, there will be some steps to that process. It’s not as easy for a decentralized protocol to build an app. But the way the ecosystem is evolving, along with policy changes and friendly regulations, will create more opportunities for ZKX in the future.
About ZKX
ZKX is a permissionless protocol for derivatives built on StarkNet, with a decentralized order book and a unique way to offer complex financial instruments as swaps. The protocol is powered by a DAO and will provide an elevated trading experience with gamified leaderboards and unique liquid governance. ZKX’s mission is to democratize access to global yields through its offerings to anyone, anywhere.
