WBD015 Audio Transcription
Building a Decentralised Exchange with Don Mosites from AirSwap
Interview date: Friday 4th May
Note: the following is a transcription of my interview with Don Mosites. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.
In this interview, I talk with Don Mosites, the engineering side of the co-founding team about the launch of the platform and the challenges they face with security, liquidity and market maker pricing.
“A central limit order book is something that does very well in a centralised context: very high performance, highly automatable, singular execution engine and if you attempt to decentralise that you encounter a variety of issues and that is why there is an attraction to remain centralised.”
— Don Mosites
Interview Transcription
Peter McCormack: Hi, Don, how are you doing?
Don Mosites: Doing very well, thanks.
Peter McCormack: So, AirSwap launched yesterday; how did that go?
Don Mosites: It was very exciting. We rolled it out basically over the course of the day. There are a few different components of that. One was having it go live on our site, and we introduced a totally new website, totally new brand, and had the marketplace go live there. We also have a new widget that can be deployed on any website, so we had a partner fire that up yesterday as well. So, it was really exciting.
Peter McCormack: Any last-minute hiccups, anything that happened that had you pulling your hair out?
Don Mosites: Actually, it was quite smooth. Intense overall, a lot of things had to come together. I mean, this is the integration of several different significant efforts that we have undertaken since our launch last October, and just pulling everything together, making it all work, smoothing it over was challenging, but a lot of fun. And actually, it went very well.
Peter McCormack: And, how much sleep have you had recently?
Don Mosites: Not a ton! I'm going to be trying to catch up on that soon.
Peter McCormack: Before we get into the details of AirSwap, do you want to just tell me a bit about your background and how you came to be involved in creating it?
Don Mosites: Sure, absolutely. So, I have a background in early-stage technology start-ups and actually spent most of my career in the Bay area, San Francisco, and I've just been involved with teams, small and large, in different spaces and social games and consumer web and some ad tech, some big data. So, I've had a pretty good variety. A lot of that, I've been able to apply just the lessons learned over the years, but for me I had, actually with my co-founder, Oved, he and I went to school together, so I've known him for a good decade or so.
But I had always looked at the space and really tried to imagine -- because I'm really a product guy at the end of the day and I need to envision how a technology can be applied. And so, I'd always had my eye on blockchain. And I think that really came to be when this phenomenon of tokenisation started to take form, around this time last year; I mean, a little bit further behind that. But that was when it really started to click for me, as the notion that assets, both virtual and real, can be represented online through the blockchain. The ownership and the authenticity of these assets can be just asserted on this global network; it's really, really exciting.
So, what emerged from that is the need for trade and what we saw early on, and even today, the majority of traders on these centralised venues, and that is just a source of systemic risk, and we really find that unacceptable in the longer term.
Peter McCormack: So, your first exposure to this was when, in terms of when did you first become aware of crypto, not aware, but as something that started to impact your life?
Don Mosites: To impact my life?
Peter McCormack: When it became significant to you.
Don Mosites: Got it. Well, I think it became significant when Oved and I really started to talk more deeply about this about a year and a half ago. I had always just admired and pretty consistently been working on ways to make blockchain technology figure out what kinds of applications are going to emerge, beyond cryptocurrency basically. From pretty early on, I did have my eye on it, even back in the day when everyone started to hear about this new thing called Bitcoin. It was all very exciting, but as an applications guy, I was just trying to make this work beyond currency.
Peter McCormack: Okay. So, a number of the centralised exchanges have obviously had quite significant hacks, everything from Mt. Gox through to the recent, I can't remember the name of the exchange, but had the NEM hack. Obviously, this creates a demand in the market for decentralised exchanges and publicity for what you're doing. Why was a decentralised exchange the thing you decided to go for?
Don Mosites: So, it does emerge from this phenomenon of tokenisation, there's a need for trade, a need for exchange. Our thesis is that exchange itself was decentralised with the advent of peer-to-peer trade, as Bitcoin on the blockchain, and the introduction of these models that you see that have emerged into Wall Street in these centralised venues. So, a central limit order book is basically something that does very well in a centralised context; very high performance, highly automatable, singular execution engine does very well in that context.
If you attempt to decentralise that, you encounter a variety of issues. So, that's why there's this attraction to remain centralised, and why the majority of trade, even in crypto, is centralised does seem kind of counterintuitive. So, my cofounder, Oved, he's a veteran trader and really knows these types of things inside and out.
So, he'll tell you the story someday, but he got involved in the space through some really great people at Consensus, maybe going on two years ago now, I think, and started to think about how to apply his background and knowledge onto the space and try to decentralise exchange. But he realised early on that several issues emerge once you start to try to shoehorn the centralised models into a decentralised context.
Peter McCormack: Such as?
Don Mosites: Well, it goes back to that idea that trade execution on an order book needs to really happen in a single place, because otherwise you are trying to reach some form of consensus as to the priority at which these trades are executed. And, you are either doing that as a central authority, or finding some way to reach consensus, which sounds a lot like a blockchain, which takes time.
Peter McCormack: So, this is why AirSwap doesn't have an order book?
Don Mosites: So, that is what brings us to AirSwap, exactly. And, it was at this point that he and I started talking about, "So, what are the solutions here? There must be a way forward", and really tried to think in simple terms. So, what does it mean to decentralise? We've seen what that means, because Bitcoin, through blockchain, decentralised as a system of value transfer.
So, if we can embrace that, if we can embrace the act of peer-to-peer trade and try to step back and determine what is going to make that work effectively as a means of trade, it brought us to this idea of what we call the Indexer, which is basically a search engine for traders to come online, announce that they are trading certain tokens, and make themselves available for counterparties to discover and connect to them.
So, it turns into this more freeform kind of network, where it creates a ton of flexibility actually in both the ability to come online, be available for trade, or to disconnect and be unavailable, as your conditions trade. If you want to make a trade, you come in, you make a trade, you leave again. But also, as new assets come online, we believe that this is the ultimately scalable solution for this type of thing, like the token economy itself; as more tokens come online, having a system that you are actively listing assets on is not scalable.
You see on these centralised venues, very time-consuming, takes a ton of energy by their team to assess each individual asset, and many times they're charging a ton of money to actually list anything.
Peter McCormack: Wallet maintenance?
Don Mosites: Sorry?
Peter McCormack: They have wallet maintenance issues as well?
Don Mosites: Well, I mean they have a lot of other things going on as well. The idea really is that it's a manual process to make additional assets available for trade; but on our system, it's just a matter of somebody coming online and announcing that they're trading a new asset, and that can be instantly discoverable by somebody else.
Peter McCormack: But that facility isn't there right now, right?
Don Mosites: Oh, it is.
Peter McCormack: I thought AirSwap launched with a number of limited tokens?
Don Mosites: So, we launched, we announced these 24 tokens. These 24 tokens are on the platform, because liquidity providers that are connected to the platform are trading them.
Peter McCormack: Right, essentially market makers, right?
Don Mosites: Exactly.
Peter McCormack: So, if a market maker wants to make available another token, they can just do that from their side?
Don Mosites: Yes.
Peter McCormack: The interface updates; the logo appears?
Don Mosites: Yes.
Peter McCormack: How does that -- just the basic infrastructure items such as that?
Don Mosites: So, the way that the metadata works is there are a few different components to that, and that's actually a very interesting topic as well. So, let's see where to start here.
So, at the very basic, the smart contract that represents that asset that they're trying to trade will contain some metadata; it will have a ticker symbol and a supply and things like that, which we can use to bootstrap how this thing is represented. And, our team can also fetch or determine or work with the given project to have the correct metadata, much like you have on any other app, like one of these wallets; they'll have the logo and the description --
Peter McCormack: But there is a process for it to be added; it isn't…?
Don Mosites: So, the token can be made available for trade, it's just a matter of the way that it's represented. So, it can be made available for trade with the metadata that's on the contract, and searchable as that, and that's fine. What we do on our side, on the search engine side, is make it a little bit more accessible for everyday people.
Peter McCormack: Okay. So, you've launched with three liquidity providers?
Don Mosites: Yes.
Peter McCormack: Are they all providing liquidity to the same assets, or are they providing different assets?
Don Mosites: It's a variety, and actually changes over time as well.
Peter McCormack: So, if three of them are providing liquidity for something like Basic Attention Token and I go onto AirSwap and say I want to buy 1,000 of the tokens, does it just give me the cheapest price available from those three?
Don Mosites: So, it will actually ask all three of them for a price and it will say, "This is the best price"; you can still see the other ones. So, say you like what you see and maybe you're getting a good price from the first one, maybe you want to take that, but you still want to check out the other two, whatever reason you have to do that. So, all three are there, but we say, "This is the best one".
Peter McCormack: Okay. And, it kind of sounds like an order book though?
Don Mosites: Well, no. So, AirSwap is providing the connectivity through search. So, you come in, you run a search, you determine where those three can be found. Your browser asks the three of them for orders.
Peter McCormack: Oh, right, I see.
Don Mosites: Then, they return the order to you and then you have that order in hand and have the option to fill it.
Peter McCormack: Right, so they create the offer at the time that you create the price?
Don Mosites: Exactly, it's for you.
Peter McCormack: So, it sounds more then like a marketplace?
Don Mosites: Yeah, that sounds about right.
Peter McCormack: I took a look at it. For me, I quite liked it. I said to you before we started recording that I don't buy with market orders, I buy from the order book. I quite like, as an experience, Coinbase, because it's quite simple. I want to buy 10 Bitcoin; here we go, here's a price. And I also kind of like ShapeShift, and it feels like it's a hybrid of the two to me.
Don Mosites: So, one of the earliest ways that we were describing this was that -- we were thinking that interaction model that you have with ShapeShift is nice. So, they have a deposit address and a receive address, but they're the only counterparty to your trade; things happen between when you send them something and they send you back something.
On our side, you can have many counterparties to your trade, so you have competitive pricing, and also the trade itself is atomic, so there's no risk in the trade itself executing, or having an issue with the execution once it's been issued.
Peter McCormack: And, ShapeShift seems to sometimes come up against liquidity issues as well.
Don Mosites: They may.
Peter McCormack: Yeah. Okay, so in some ways then, the place I see AirSwap -- I just wrote a course, a very basic introductory course, how to get involved in cryptocurrencies, to try to help people. Part of that process, I did a tutorial on Coinbase, which is easy. Anyone's going to be able to sign up, create an account and buy. Then I tried to explain how to sign up to Bittrex and to buy from there, and it felt very complicated and I know a lot of people will get lost.
I also find in crypto, UX, UI, user experiences, it's not always at the forefront. But looking at AirSwap, you seem to have made probably one of the easiest places to go and buy tokens. Have you got a more retail focus on this? Is that the market you're going for?
Don Mosites: So, with this release, I think that we determined -- and I could draw it out, you know; it's a visual thing! But we decided that the three components that we want to target to establish this network are to focus on liquidity of course, which means working with and ensuring that this is the right kind of system for market makers; the connectivity, which is what we provide between traders; and then, reach or distribution.
It's between the liquidity providers and the distribution of the integrators, or the front ends, that we provide connectivity. And it's that liquidity that is driven from these market makers through to consumers, retail traders basically. On our end, between focussing on liquidity, as provided by market makers, connectivity through our Indexer, our search engine, and then reach, through front ends, much like what you use today, and also the widget being able to be deployed on virtually any website, and also accessible from any Ethereum-enabled device, and with language support for now eight languages, we're really just trying to bring the front end to within whatever context that you're trying to trade.
Peter McCormack: But, who's your target consumer for this?
Don Mosites: So, on our front end, we have just the everyday crypto community, who wants to come in, pick an asset, find a seller, find a buyer, make a trade; certainly a ton of great people, many of whom are part of our community that are engaging in this kind of activity. But also, something that we discovered recently as more of the projects that launched tokens in the last year are scheduled to come online, I think they're encountering a situation where their users need tokens and their users want to become power users, or use whatever features within respective applications they need.
So, they need tokens and there's not a simple interface to get them, and there's not necessarily liquidity for them. So, what we fairly recently discovered was that the same kind of liquidity, connectivity, reach aspect that we realised was going to be powerful came into play where we can provide this front-end widget for one of these dapps to drop into their site. For example, with a company called adChain, they have the widget live right now and people are just trading into ADT, which is their token that they can vote to whitelist advertising, do amazing things like that.
To even really use the front end of adChain, you need to be able to acquire these tokens to use it and to vote. We can provide them the front end, which makes it, as you saw, very simple to do that, but can also work with market makers on the other side to ensure that liquidity's provided for them. So, this is a great use case, we think. So, we have this everyday trading activity that we talked about, but we also have more of these projects coming online that need this functionality.
Peter McCormack: And, does it just have to be a token provider that can do this, or if I wanted to have AirSwap on my website, could I have AirSwap on my website?
Don Mosites: Absolutely, yeah.
Peter McCormack: So, whilst that's a brilliant idea, does that present a phishing risk, that people will start creating clones of AirSwap?
Don Mosites: Yeah, we've thought about this. So, there's a few different things you can do. From an implementation standpoint, your website runs on your domain, our trading front end runs on our domain, and these are kind of sandboxed and everything is still peer-to-peer, so you're in control of the ultimate transaction that you're sending between you and a counterparty, so you can see what's going on before any assets are moved.
But the ability to just know and be confident that you're actually using AirSwap is something that's very important.
Peter McCormack: Yeah, of course.
Don Mosites: So, there are best practices in just, for example, on AirSwap, maybe setting something recognisable, whether it's a phrase or an image, or something like that, so that anytime you encounter that widget on a third-party website, you would be presented that. If you don't recognise it, you're in the wrong place.
Peter McCormack: Right, okay. So, that is a challenge you've got that you're aware of?
Don Mosites: It is, but we think there's definitely a solution and that really is about just coming out and saying, "This is how it works. Anytime you encounter AirSwap, this is what you should expect. This is how to stay safe". This does play into a broader effort that we're making into just educating people on how to take care of themselves on a decentralised web, which with the power of decentralisation of course comes a ton of risk and responsibility; it's just a matter of being sharp and aware, and it's a matter of these tools presenting people with the actual state of things.
I think, as it pertains to this actually, when you are using a wallet, right now I think most wallets will show you, for example, how much Ether you're sending with a transaction, which is very important. But more of these trades are going to be happening in smart contracts that represent assets, tokens, and so for these wallets to start to parse out the details of what these transactions are is going to be very important, I think. Because, right now, if you fire up Metamask, actually maybe even on your Ledger, it says, "This is the amount you're sending and there's data present". It doesn't tell you what the data is, but that data could represent a trade. So, as a user, you want to be able to see what's going on there in more detail, I think. But these are UX issues that will be solved.
Peter McCormack: Do you have a responsibility at all on price? So, in a centralised exchange with an order book, although arbitrage exists, you feel confident that you're getting a fair market price, because you can see the buyers and sellers, you can see the order book move. I guess one thing is, if I was buying on AirSwap and seeing the price, I would also just be very quickly wanting to check on Binance or Bittrex and see if it is a fair price. Do you guys have a responsibility for that, and is that something that you consider; or, is it all trust with the market makers who are providing the liquidity?
Don Mosites: Well, I think in any case, you need to be -- it's about information, right, and when you get a price and you're about to make that decision, you need as much information as you can get to be confident in that price. And so, like you said, maybe you check Binance, maybe you check another exchange, or something. But on our end, there's this challenge in this decision-to-trade scenario, where right now what we do do is give you a link to CoinMarketCap.
But what we also do is we have some built-in price bands, just to ensure that things are within a certain range on the front end, just to have that basic protection. Earlier in the conversation, we were talking about exchange being decentralised with peer-to-peer, so the active exchanges between peers, and that's why we don't consider ourselves an exchange. But what is required to make that work?
One of the things is discovery, through the Indexer and search engine we were talking about. But also, another is information about the relative price of assets. So, as more tokens come online, many of them won't even be traded on exchanges, and these exchanges are helping to establish value. But in a peer-to-peer context, when you don't have an exchange to establish value, the most information you can get about it is really important. So, maybe that's prior experience with an asset or something like that, but that's why we introduced the notion of the sporcle, who can help you make that decision to trade by providing price suggestions, based on a number of factors.
Peter McCormack: And there's certainly an ease-of-use thing here. If you're operating with quite high levels of security, even logging in to Bittrex or Binance and putting in your passwords and your authenticator code, it takes time. Similar with Amazon. Sometimes I don't compare the prices of things I buy, because the ease of use with buying something on Amazon, they've pretty much nailed it.
So, I can see people using AirSwap just as ease of use. If you quickly want to buy something, the process is going to be quite quick. But at the same time, I almost feel I would want to be able to see exchange prices next to it.
Don Mosites: I totally agree.
Peter McCormack: Because, a marginal difference is fine, right? But you wouldn't want to pay a significant difference.
Don Mosites: Absolutely not. And that depends on a personal, and maybe not even personal, but a situational sensitivity to price. Say you want to pick something up in a hurry and you go and you see, "Okay, this price looks sane". Maybe in a different scenario, you want to be very specific and you want to make sure that you have all the information about how this is trading elsewhere. So, yeah, it's certainly within our responsibility from a product design perspective to make sure that you have the information you need to make that trade.
Peter McCormack: And another thing that would be quite interesting would be, if you are creating quite a significant order; because, if you're ordering from an order book, the price scales through the order book, yet if you're buying from AirSwap and you're buying a significant amount, is the market maker looking at an order book elsewhere to try and… Do you understand where I'm trying to get to? They're trying to make sure that you're not getting a much better price, or are they selling it at the market price, no matter how much you buy?
Don Mosites: Well, these folks have very --
Peter McCormack: Sophisticated tools!
Don Mosites: Yes, exactly! So, the way that they actually price their trades, we don't necessarily know how they price the trades. This is a great platform for larger trades, for these larger kinds of block-style trades, because if you try to perform something like that on an order book, things will go haywire. So, we definitely see a great use case for that as well. But the way that a market maker's going to price a larger trade, maybe it will be case by case.
Peter McCormack: Could AirSwap, with significant volume, actually affect market pricing; or, is AirSwap more like OTC?
Don Mosites: We think it's more like OTC. We definitely stand behind that classification. You will see these trades being executed on the smart contract, so you do see the amounts that are being traded, so that's emitted as a stream of settled trades at certain prices, so that is informational. But there's no order book there.
Peter McCormack: And, has there been much activity in the last 24 hours?
Don Mosites: Yeah, actually wide range. We've actually gotten some large orders as well come through the system, tons of smaller ones, people just trying things out, which is really awesome. So, yeah, good stuff.
Peter McCormack: So, there are already decentralised exchanges out there, so we already have EtherDelta. And, they had their own security issue that came up recently, but wasn't so obvious whereby it was a DNS attack. What different security challenges do you face as a decentralised exchange over a centralised exchange?
Don Mosites: Okay, so well first, we don't consider ourselves a decentralised exchange.
Peter McCormack: Yeah, I apologise, but you're a market. But you're operating similar to it?
Don Mosites: Well, we are decentralising exchange itself.
Peter McCormack: Okay.
Don Mosites: But, yeah, I mean the way that we see this is that there are three components of trade: one is custody, who is actually holding the assets at any given time; one is execution, as far as the priority at which trades are executed, the price at which they are executed; and then the settlement, which is where the funds are actually transferred between parties. And in many, or if not most cases, the centralised crypto exchanges are centralised in all three of these. So, they hold your assets, they handle execution, they handle settlement.
In many ways, and we say this because it's true, these are even more centralised than their Wall Street counterparts, because in Wall Street, you have different entities handling these different things. So, it just seems kind of crazy that it's not just that in this new decentralised world, you have centralised exchange; but in many ways, it's more centralised than existing trading systems.
So, the idea for us was that, because the active exchange, we believe, was decentralised with peer-to-peer transfer through Bitcoin and blockchain, the custody, execution and settlement is out of our hands. Therefore, this systemic risk, by centralising any one of those three is relieved, because we are not involved in it. So, AirSwap provides discovery, so you come and find a counterparty. Then, once you're interacting with a counterparty, the execution and settlement happen when you settle that trade. And of course, the assets are in your control at all times.
For example, if we went offline for a certain amount of time, there would not be a risk of your assets being lost, because we don't hold them. There's no front-running on our system, because there's nothing to front-run.
Peter McCormack: So, if you went offline, does it just mean that the execution of the smart contract will just fail?
Don Mosites: No. So, you and I could actually make a trade without AirSwap, because I can provide you an order, you can take that and plug it in to execute in Ethereum, the transaction; point it at the swap contract and make the trade. What AirSwap does is presents that in a friendly way so that people can connect and communicate those orders between each other and then make those trades.
So, I think ultimately, we believe that peer-to-peer trade is really the truest form of decentralised trade and we're trying to make that as accessible and easy to use as possible.
Peter McCormack: So, sorry, I'm confused. Where does the smart contract get activated from?
Don Mosites: The smart contract lives on Ethereum and its functions are called by individual users directly. We do not participate in that.
Peter McCormack: Right, okay. So, where are your risks then; what keeps you up at night; what do you worry about?
Don Mosites: I think it's mainly in bad actors, in phishing, in misrepresentation and just the ways that people can be tricked into having confidence in using something that is malicious, basically. So, every day, we have new Twitter accounts pop up; I mean, everybody does, right, that's the nature of the space. But that, I think, for us is the most significant risk. But for the most part, when you talk about decentralised trade, the way that we've designed this, we've decentralised all this risk in as many ways as we possibly can.
Peter McCormack: And I guess the design of AirSwap, you've also, although you aren't an exchange or a marketplace, one of the main issues facing decentralised exchanges is liquidity. But your approach for it, by not having an order book, you've avoided that issue?
Don Mosites: This is why we focussed on what we did over the course of the last few months, basically. So, early on, we figured that what is going to comprise the system is the liquidity, the connectivity and the reach, our distribution. So, we focussed first on liquidity and we said, "What is going to make market makers happy in the system? What kinds of protocols are they going to need to use? How do we reach out to them; how do we communicate with them; how do we make this work?"
So, before we could even launch what we have today, we needed to ensure that we had liquidity providers at the ready, market makers online and available to make trades by the time we opened the doors basically. So, we bootstrapped liquidity with those three market makers we talked about, who are serving trades in these 24 assets, bring in consumers and retail traders, and then having connected those two groups, we have already certainly got more attention on the market making side, people interested in making markets on AirSwap.
Likewise, more and more integration partners. So, for example, with the widget integration, more dapps and websites are going to see that in action and just want to plug into the system.
Peter McCormack: Okay. So, you're not taking a fee on any of the transactions, so how does AirSwap make money? And the second question to that, I'm obviously aware of the AirSwap token. Is there any enterprise value, or are you entirely focussed on token value?
Don Mosites: Enterprise value versus token value?
Peter McCormack: Yeah. So, you obviously have a company here; are you creating value in the company, or are you only interested in creating value in the token?
Don Mosites: Got it! So, the token itself is something that is held by market makers in order to use the system, in order to basically have a place on the Indexer, to be discoverable to make those markets. And so, that's why we sell the AirSwap token, for market makers to use the platform. Because, of course, in developing and operating the platform itself, we incur costs in doing so. So, that's the token model there.
We also have a voting utility that --
Peter McCormack: Do they have to own a fixed amount?
Don Mosites: Yes.
Peter McCormack: Okay.
Don Mosites: So, they hold a certain amount to hold a position on the Indexer.
Peter McCormack: What's the total supply of AirSwap?
Don Mosites: The total supply of AirSwap? Let's see here. In circulation, I believe it's 150 million.
Peter McCormack: 150 million. So, for the AirSwap token to have value, you have to have more market makers want to come in, and then they obviously are going to have to be buying the token to join it. Is that the economics behind AirSwap; is there anything else?
Don Mosites: So, AirSwap as a platform, and we're talking about the token utility now, is oriented around the Indexer and the index utility.
Peter McCormack: Okay. Sounds risky.
Don Mosites: What's risky?
Peter McCormack: Well, it doesn't sound to me like -- it sounds like you're going to have to have a lot of market makers interested in joining. But once you hit a point, say you hit a flat growth of market makers, the token will lose value, because there's no velocity?
Don Mosites: So, I think there are actually ways we're looking to expand the utility as we expand our offering in the platform. Also, likewise, as a company, you're going to see more of this actually in a week and a half or so at an event that we're hosting, called the Fluidity Summit. We actually have some pretty interesting things that we're going to be presenting there.
Peter McCormack: What, like professional services?
Don Mosites: This is more as it relates to basically we, as the company who build and operate AirSwap, so there's going to be more of that. But as far as the token goes, we do believe that there is more; the token utility will play a larger role for professionals on this token trading network as we progress.
Peter McCormack: Okay. Can you say how many tokens you need to be a market maker?
Don Mosites: That is at a price today of 250 AirSwap tokens for an individual, what we call, intent. And so, you need to hold 250 tokens to keep that position on the Indexer for that market, basically.
Peter McCormack: Okay, so there's space for a lot of market makers then, yeah, okay.
Don Mosites: Yeah. These rates, these change over time.
Peter McCormack: Yeah. But I guess it's a common problem facing a lot of utility tokens, when they become tested in the market, is there value in the token, is there value in holding it?
Don Mosites: Well, I think you mentioned velocity, which means to say that I hold and then I don't hold?
Peter McCormack: Yeah.
Don Mosites: A market maker can only make that market on AirSwap as long as they hold that token. So, if they're trading a given token, if they're making a market, they need to hold that token for as long as they're making that market on AirSwap. So it's not necessarily you come in, you do something and it's done and then you shrink back away.
Peter McCormack: No, but I'm thinking if there are 150 million tokens and you need 250 to be part, so far there's only actual use of 750 tokens, so there are 149 million -- you see what I'm going at? There's a lot! So, if someone was to buy the AirSwap token now, they'd have to have a high confidence that a significant amount of market makers will join AirSwap and therefore, they're token will have demand; or, that there's some new utility that will come?
Don Mosites: So, I think there are multiple factors there. One is that we see a future where, I mean, there are an indefinite number of assets being brought online and need to be traded and will be traded by market makers. So, if you consider the number of assets coming online, the number of traders that are going to be doing this as market makers over the course of however many years, this is our platform today; we see a very bright and long future for this.
So in combination of the growth of the network itself and what we're building, and the number of assets that are coming online, we certainly see more and more market makers actually coming into the system and then playing a role. So, this is why we need to allocate a certain amount, so we don't end up in a place where there's just a ridiculously high demand for it and just not enough supply to actually make the markets for what we see ultimately as a global network serving many, many tokens.
Peter McCormack: So, let's fast-forward, ten years, tokenisation of the world's happened, every asset's been tokenised, something's likely going to happen, which is promising. A market maker wants to join the platform, there's no tokens available. Is it a case that they have to buy out another market maker? How do you see that playing out?
Don Mosites: In that case, they could very well acquire the token by some other means, for sure.
Peter McCormack: Okay. Do you know what; it's just a tricky thing. Sorry to press you on it, but it's one of the things that keeps coming up and me as a trader, where is the utility in this? Obviously, there is utility, but the supply and demand in your utility, there's an imbalance at the moment.
Don Mosites: Yes, well we also see this as being pretty early days. We see an enormous potential for this kind of system, so that's why we arranged things the way we did.
Peter McCormack: So, I guess the play you're making long term is you want to be the primary marketplace for tokens; that's your play?
Don Mosites: Absolutely.
Peter McCormack: Okay, cool!
Don Mosites: Cool, thank you!
Peter McCormack: So, I notice that you've got Ledger, you've got Metamask, no Trezor support yet. I assume that's just a technical reason?
Don Mosites: Yeah, we actually have it running internally.
Peter McCormack: Oh, you do?
Don Mosites: Yeah. I'll give you very honest about this. So, as you come into any major release, you've got a lot of things you have lined up, a lot of things you want to include. As you approach the release, you have to face different issues that arise and different scenarios. We were integrating a ton of different things at the same time. The Trezor support required a technical change on one other system, and we decided to not implement that so close to the actual release.
Peter McCormack: Because of their change?
Don Mosites: No, it was on our end. So, the way that you generate addresses from Trezors is different, and actually different wallets treat this in different ways. So, we have to handle the way that we validate a signature versus the public key differently. So, in most cases, you can take the signature and actually extract the public key from that; and in this case, we could not make that do the same calculation, basically. So, you need to pass both the signature and the key, a test that the key that you pull out of the signature matches that.
Peter McCormack: Okay, so that's just a future --
Don Mosites: It's just a technical, yeah.
Peter McCormack: And, how was it different integrating with Metamask over Ledger?
Don Mosites: The key difference is that Metamask provides you an account and you switch the account within the extension. On Ledger, you pull up and present the different accounts that are available and you choose.
Peter McCormack: In researching this, the only thing I could compare you to was decentralised exchanges, and I started looking at some of the challenges they face. One of the things that came up that I thought was quite interesting and I want to ask you about is, blockchain to blockchain transactions. It's obviously something you will have thought about, it's not easily possible now, so obviously you're based on ERC-20 tokens at the moment. But in the future, how do you envisage that's going to happen; where is that within your roadmap; is it within your roadmap?
Don Mosites: So, I think there are two ways that we're thinking about this. One is these cross-chain swaps, and we call them atomic swaps. So, if one side fails, the entire transaction fails. These are somewhat complex and not very fast. They're good for maybe a larger peer-to-peer trade between chains.
So, the alternative view is representing disparate assets as Ethereum tokens, so you have a token that is pegged to the dollar, you have a token that represents Bitcoin. Because then, once you've hoisted external assets as Ethereum tokens into this ecosystem, then they're just freely tradable. But then the trick is the redemption; so being sure that if you hold one of these Ethereum tokens, then you can actually redeem it for its respective asset elsewhere.
Both of these approaches have different challenges. The second one is pretty interesting, because you can do that in automated ways, for example, with an oracle network that controls a multi-signature wallet, and that has its own risks and issues and things like that. You don't want to be in a place where, if you're holding an Ethereum token that represents Bitcoin, it represents maybe Bitcoin.
So, there are different challenges. As a trading platform, we're definitely thinking about these things, and this is becoming even more of an ecosystem project and challenge and we're working with more and more projects on this as well.
Peter McCormack: So, that is something you're tackling right now?
Don Mosites: Oh, yeah. I mean, this is something we're pretty consistently thinking about and talking to others about.
Peter McCormack: And on AirSwap at the moment, just to jump back, is there are a trading pair for any asset, or is it all Ethereum to token? Like, can I swap BAT for ICX?
Don Mosites: The platform supports any ERC-20 for any ERC-20.
Peter McCormack: Okay, that's pretty cool.
Don Mosites: What we did do for this release was make it so that you come in and you either buy with Ether or you sell for Ether. I mean, you're selling for wrapped Ether, but that's a technical issue, but you're basically making trades against Ether and that's because we're really trying to reduce this to the simplest case, the simplest form. You come in with Ether, you make a purchase, you go about your day. For example, with the adChain guys, people just want to acquire some adChain, so they can make some votes in the system, so they come in with their Ether, make a trade, jump back out to the app again.
There is a parallel effort that we're undergoing right now to work on a more sophisticated peer-to-peer trading front end, and that's going to emerge over time. It gives you more flexibility and capabilities in terms of what you can trade and on what terms.
Peter McCormack: In terms of obviously, you're crypto to crypto. Do you ever see a scenario where there will be a fiat exchange within a marketplace such as yours, or decentralised exchange, and is that something you guys are looking at, at all?
Don Mosites: These days, you basically buy in the US system, so you purchase Ether using dollars and then with the Ether, you can do other things. And of course, you need a bank to go from fiat to crypto in that case. This actually goes back to what we were just talking about with representing fiat as Ethereum tokens in different ways, and if that's solved in a reliable way, or you can actually dependably trade fiat currencies as Ethereum tokens, that solves a ton of problems, I think.
So, in the everyday cases where you want to effectively trade for some fiat currency, you can trade for that representation on Ethereum and then have that, insofar as it's instantly redeemable for its actual fiat value, then it's good.
Peter McCormack: Perfect. So, looking forward, you're obviously live now, which is great. What are the things you're looking at in the near term, what are the key challenges for you guys as a team and then longer term, what are you looking at?
Don Mosites: So, we are still in a mode, I mean "still"; it's been 24 hours! We are in a mode of just getting it out there and just working on distribution, working with pulling in partners, reaching out to ecosystem projects that want to bring trading into their applications. Still working with market makers and liquidity providers to come into the system and provide liquidity.
It's still about bootstrapping the essential components of the network, and we do believe that once these components are in place and the plumbing's there, liquidity is just moving freely throughout the system, people's needs being met, that some really interesting things will emerge through just the freeform peer-to-peer value transfer that we can facilitate. That's just about economic potential, and we want this platform to really have a part in that change.
Peter McCormack: And, were you working with Galaxy and Mike Novogratz; is he an investor?
Don Mosites: Novo is an advisor.
Peter McCormack: An advisor, okay. Cool.
Don Mosites: Yeah, so we have an incredible group of advisors that are incredibly supportive and just great people to talk to about a lot of this stuff.
Peter McCormack: Yeah, I guess you just come up against a bunch of things you just don't plan for, right?
Don Mosites: Yeah, of course.
Peter McCormack: I know you're on the tech side, but have you had to become some kind of businessman as well?
Don Mosites: I mean, what's a businessman?
Peter McCormack: Yeah, true. I guess somebody who appreciates the economics of what they're involved in, beyond just the technology and the platform.
Don Mosites: Yeah, of course. Well, trading is an essential activity. Trade has existed as long as we have, and just an appreciation of what that is and what can emerge from new systems of trade is definitely something that, the only reason that I have the kind of visibility into that is because we've been able to create this kind of system. So, I think as a team, we are technologists, but we certainly see the business and economic and really potential for change here.
Peter McCormack: And just to close out, tell people how to find AirSwap and how to find you and what you want them to do and what they should be aware of.
Don Mosites: Definitely. You can find me anytime on @dmosites on Twitter.
Peter McCormack: I'll share that in the show notes.
Don Mosites: Okay, and you can find us at airswap.io. And you can actually just go directly to airswap.io/trade and it will just bring up the marketplace. You can make trades in place.
Peter McCormack: Brilliant. Okay, look, I really appreciate this; very interesting, a lot to learn. I think it's definitely going to be something I'm going to use, because to me it solves a use case issue I have in that I'm lazy, and when I want to buy, I just want to buy instantly. And, you've also got a great interface. So, yeah, congratulations and great to meet you.
Don Mosites: Awesome, thank you so much.
