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Backpack EU Launches with Daily Proof of Reserves
00:10:11
Unveiling the launch of Backpack EU with CEO Armani Ferrante.
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Transcript22 lines
- [00:00]
A
I think confidence and trust is something that ultimately it's built every day over. Over a lifetime.
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B
Right.
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A
There's not any one thing that you could ultimately attribute it to. I think from the beginning, we've tried to build BACKPACK in the way that we felt was the right way.
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C
Hello, you're watching CoinDesk. Joining us now is Armani Ferrante, the CEO of Backpack, to discuss the launch of Backpack EU, a new regulated crypto derivatives exchange. This launch follows the acquisition of FTX EU and positions the company as one of the first in Europe to offer perpetual futures under the MiFID 2 framework. Armani. Hello.
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A
Hey, Jen, how's it going?
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C
Not bad. How are you doing? I imagine you are riding high after the launch of this new exchange.
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A
Yeah, I mean, people tend to want to celebrate with these milestones, but we're just back in the office and back to work.
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C
Well, I mentioned in my intro that you are one of the only exchanges in Europe. I believe the quote in the story that was released on CoinDesk yesterday was it's just going to be you and Kraken offering regulated perpetual futures. Talk to me a little bit about the product and how you plan to differentiate yourself from Kraken and other entrants as they enter this market.
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A
Yeah, it's a great question. I mean, I think there's so much that goes into building a derivatives product. There's everything from the markets that you list, from the performance and stability of the exchange to all of the small little details that traders know and love. When it comes to just building a great product, you can't attribute it to any single thing. My favorite saying is brick by brick. That's because there's a million little bricks that we build over a long period of time that end up making a beautiful home, if you want to use that metaphor. And so I think ultimately it just comes down to building a great product over a long period of time and putting your head down and doing the work.
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B
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C
Talk to me a little bit about the MiFID 2 framework. What was that journey like getting to the launch of this?
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A
Yeah, I mean the challenging thing about buying a regulated company is that you don't just show up with a bag of cash and then get a company. There's plenty of people in the world with many more resources than us, to say the least. In fact, it was, you know, over a year long process, was over two years to actually go on this journey, but it was over a year long process just for diligence and all of the details that go into meeting the bar of a framework as renowned and rigorous as MiFID. And so, I mean, I'm happy that we're kind of, you know, the, the end of our journey now, turning the page to the beginning of our next journey. But it's certainly a long, arduous process that's not for the faint of heart.
- [03:23]
C
I know you've talked about this before the launches of course, built on the acquisition of ftx. EU talk to me a little bit about inheriting a piece of that FTX legacy and how that maybe impacts or doesn't impact your strategy and earning investor confidence.
- [03:38]
A
Yeah, I mean, I think confidence and trust is something that ultimately it's built every day over a lifetime. Right. There's not any one thing that you could ultimately attribute it to. I think from the beginning we've tried to build backpack in the way that we felt was the right way, which is a long winded way of saying that we wanted to not only be regulated and compliant, but also reimagine how to build this technology from first principles to solve a lot of the issues that FTX surfaced with. Not just centralized exchanges, but really just any type of opaque financial system that really has plagued the world for the past hundred years, not just in crypto. And so things like reimagining how we think about custody with modern techniques like multi party computation, or thinking about transparency and a new way. Right. One of the things that we recently introduced to the world was daily proof of reserves where every day we attest to a ledger and we provide a zero knowledge proof where anybody in the world can actually verify with cryptography that their assets are indeed held in the wallets on the exchange. You don't have to trust us, you just have to trust that the math works. And there's a lot of kind of great companies in finance and in crypto that do, you know, yearly, quarterly, even monthly attestations. But being able to do it every day and hopefully in the future in real time was a really important milestone for us. In terms of how do we actually solve all these problems and not only build a great product, but also bring to traditional finance what makes crypto so special. And that's security, that's risk minimization, and that's trust minimization in a way where you don't have to trust somebody that you can, you can verify. And that's kind of our philosophy and ultimately why we're in this industry.
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C
Talk to me a little bit about the daily attestations. Logistically, are there more resources required? Is there more capital required? Why aren't more folks doing this?
- [05:48]
A
It's a great question. I mean, I think I can only speculate, and so I won't, I will not speculate on why other people won't do it. I can tell you what went into ours. For us to achieve this, you have to consider the fact that there's so much complexity involved with these exchanges. It's not just one chain, it's every chain that exists, right? You need, you need not only Bitcoin, but Solana, Ethereum, Optimism, Arbitrum Base, you name it. You need to be connected to it. You need to not only have one fiat currency, but every fiat currency. It's not just spot, but also derivatives or spot margin or borrow, lending or one of the many different financial instruments that these exchanges might offer. And so in order to get to the place where you can automate this stuff, it requires a level of rigor in the engineering that you can just cannot cut corners. An example is that internally we have real time asset reconciliation across every, every user, every wallet and every asset on the exchange. So if at any moment we're missing a penny, alarms start ringing. We do that in real time all day, every day. And then at the end of the day, we take the ledger, we package it up into a proof, and we, you know, publish it to the world where anybody can check. And so a lot goes into it. It's one of these things that sounds really easy to do in practice. It's elegant in its simple, elegant simplicity. But there's a lot that goes into it behind the scenes. And I think being able to build one of these exchanges from scratch with over a decade of experience, and being able to learn from all the pioneers and predecessors that came before us, just gave us an opportunity to do it right. And so I think we are fortunate in that respect. But I mean, to answer your question, there's no fundamental reason why every exchange couldn't do this. It's just hard work.
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C
Hopefully it becomes industry standard one day it sounds like it could address many of the concerns that folks have when looking at this industry.
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A
Wholeheartedly. Agree.
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C
All right, I want to ask you about your plans for global expansion. We are talking about backpack eu. I know that you're looking at Japan for licensing next. Talk to me about where you go from here.
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A
Yeah, so, I mean, I'm from the US born and raised in California. When we started the exchange, the US obviously is like my home. Right. It's the most important market for me. And we have always had our sights on having a US team going after all 50 state mtls and going live in that market. The challenge is that if you are a new startup and you want to build a regulated crypto company, it turns out if you want to go live in the US you have to have a lot of money, you have to have a lot of resources, you have to have a lot of time and the wherewithal to actually do everything required to do it in a compliant fashion. And so what we did was we basically created a plan of the world, a map. We took a map of the world and created a plan for how we were going to go into every region. And so we looked at the US we looked at the Japan, and we looked at Europe, and we looked at a couple of these countries with extremely high bars and rigorous requirements for going live and basically created a plan of attack. And so we did this over two years ago, and we've just been chopping wood all day, every day just to get to the starting line to do things the right way. And so, you know, we opened up shop in Dubai, we got licensed with VARA out of the uae. I moved over here to Japan to work with, you know, building our office here, building our local team here, working with the local regulator to finally go live. After multiple years of effort, we will be probably the first exchange since before FTX that is looking to kind of complete that licensing process from scratch. So I don't want to count our eggs before they hatch. It's. It's certainly not done yet. There's still a lot of work ahead of us, but we have our eyes set on Japan. We have our eyes set on the US it's been multiple years in the making for both of these regions, and we're getting pretty close to the finish line for large parts of both of them. And so there's a lot of exciting things to come for Backpack over the next year.
- [10:01]
C
Armani, congratulations on the launch of Backpack EU and good luck with your future endeavors. It was a pleasure chatting with you today, and I'm sure that we'll chat again soon.
- [10:10]
A
Yeah, thanks so much, Jen.