GRTiQ Podcast: 66 Aya Kantorovich

The following podcast is for informational purposes only. The contents of this podcast do not constitute tax, legal or investment advice. Take responsibility for your own decisions, consult with the proper professionals and do your own research.

Aya Kantorovich (00:00:18):

What the grass did when it launched a number of years ago, was it allowed for folks who didn’t necessarily have the technical background to be able to access the underlying infrastructure in an easy way.

Nick (00:01:02):

Welcome to the GRTiQ Podcast. Today I’m speaking with Aya Kantorovich, head of institutional coverage at FalconX, a comprehensive digital asset platform that enables institutional investors to access and manage their crypto strategies in a single interface. And as you’re about to hear, Aya is truly brilliant and shares many incredible insights throughout the conversation. During our interview, Aya talks about her experience working at Crypto, how Ethereum captured her interest of what was possible in the space, her unique perspectives on institutional investors, and how more and more of them are participating in crypto, her long-term vision for web3 and so much more. Aya is kind enough to begin the conversation with some observations and a general discussion related to recent market turbulence and the Luna and USDT headlines.

Aya Kantorovich (00:01:54):

So this was one monumental moment in crypto over the last few years for the ecosystem, primarily because of how much capital was allocated to some of these environments. So what happened at a very high level was two weeks ago the Luna Foundation Guard, which is the foundation responsible for everything in the Luna Ecosystem, wanted to diversify their balance sheet to purchase both Bitcoin and Ethereum on their balance sheet outside of just their Stablecoin and Luna Token. And in order to do so, they had UST, their version of a stablecoin, which is an algorithmic stablecoin used to make those purchases. What ended up happening though is it was north of 2 billion of UST and that later entered the market in size. And so in making these purchases, a lot of UST abruptly hit open markets. And what that ended up doing was it caused a lot of supply and it being an algorithmic stablecoin, depegged the stablecoin relative to demand.

(00:02:57):

And so you saw that depeg happen and the value of UST drop, this was Sunday, two weeks ago initially, and why did that cause alarm? It caused a lot of alarm because the Luna Foundation has also launched a yield pool, which is called Anchor. And Anchor had $17 billion locked into the pool all in UST. So in order for you to get the 20% yield, you had to deposit UST Stablecoin turn that yield on the algorithmic stablecoin. As the value of UST was decreasing, there were capital calls for folks who needed to top up on the amount in the pools, and you started to see liquidations within Anchor and then all of the Luna applications as well at large. And so there was a huge rush, basically a rush to the bank of folks trying to go in, remove their UST and sell it in order to maintain some of the yield that they may have gotten over time, however long they had deposited those assets in the pool for.

(00:03:59):

And so what you ended up seeing, because more and more people were selling the UST, again, supply was very high. And so that depeg continued. So Sunday we started to see that depeg happened. It dropped down to 0.80 cents on the US dollar. The Luna Foundation proceeded to use that balance sheet, the Bitcoin and Ethereum in order to buy Luna, which is basically the mint and burn token, the collateral behind UST, the algorithmic stablecoin in order to prop up that algorithmic stablecoin to its one-to-one peg. However, on Monday when markets open for traditional finance and the news got around that the depeg was happening, you truly saw that rush come in and on Monday it dropped down to 0.6, so 6 cents on the dollar and then it fell all the way down to 2 cents on the dollar. Anchor itself, within two days, the total value locked in Anchor drops from $17 billion to less than $2 billion.

(00:04:59):

So that is a lot of money both getting removed, moving around, and on top of all of this, Terra blockchain was having issues. When you are moving that much amount of money and that many people are trying to move assets, blockchain can get congested. And not only did the blockchain get congested at one point, it halted as well. And so just a number of core pillars in crypto that kind of broke trust for investors, retail, anyone that was accessing this ecosystem and their applications. And I think why is this important? Why was this such a monumental moment for crypto is because it touched every persona that ever touched crypto. When you have a 20% yield like Anchor and it’s considered to be a safe haven, but then starts trading like distressed assets, you see this immediate rush and you are seeing anywhere from retail globally accessing these applications.

(00:05:55):

You’re seeing hedge funds, venture funds, you were seeing family offices, large asset managers. And so really everyone’s touching it. That’s just directly. Additionally, you were seeing protocols in the space who had deposited some of their own treasury and balance sheet into Anchor in order to earn yield in a safe way. And so the ripple effects were huge last week, and I don’t think that we’ve stopped to see the ripple effects and we’ll continue as now everyone’s accounting for how much value was lost and what that means for these companies, for these individuals, for these funds as they now need to progress into end of Q2 as well.

Nick (00:06:34):

The sensationalized headlines say that this is a verdict on the crypto space at large, but a more reasonable commentary would be what? This is some insight on stable coins. How do you see that?

Aya Kantorovich (00:06:47):

So I definitely would say don’t affiliate this with crypto at large. Crypto is so many different pieces of infrastructure and community that it definitely doesn’t apply at large to all of crypto, although we love a good headline. And so what I would say here is it’s really specific to algorithmic stable coins and moreover, it’s very specific to treasury. So here what we saw was that the structure in which UST was built to have the Luna backing in addition to the treasury, these three buckets that facilitated the algorithmic stablecoin wasn’t going to live through a stress test. But we have seen other stable coins go through that. So die and make or die. I mean that’s a great example of a stable coin that has gone through numerous bear markets and has been stress tested. We’ve even seen that with USDT.

(00:07:44):

One very interesting pattern that we saw was significant amount of concern around stable coins happened last week. And you’re seeing enormous across all personas, enormous amounts of volume of USDT get traded into USCD, which is regulated by the US government. And so again, a lot of concern around stable coins. What is truly stable? What does your treasury and balance sheet consist of, but also a lesson at large in the same way that you have a CFO function at most companies to manage your balance sheet, to manage your financials. That is a very important role and how soon is too soon to hire that role within your company and make sure that your balance sheet is being actively managed.

Nick (00:08:28):

So the last question on this topic then I want to ask you is how long it takes for the space to rebound and somewhat dig out of everything that’s been experienced recently?

Aya Kantorovich (00:08:37):

I think the most important thing to note here is we’re still around $30,000 for the price of Bitcoin. And so the immediate reaction is, wow, this was a black swan event or this was a market capitulation, and in fact, it wasn’t. The market fared relatively well. If you look at even what’s happening in public markets, NASDAQ, the S&P, any really tech stock is trading 3-5X multiples on revenue and crypto, [inaudible 00:09:12], and I think what’s important to note is that’s a affirmation of the maturation of the space and the types of investors that have gotten involved or projects that have launched with capital that’s here to stay very long-term.

(00:09:26):

So I think to reframe that, I would almost ask what does that mean? Does it mean are we going to launch net new stable coins? I do think it’ll take six to eight months for comfort to rise from that and for people to have faith or maybe we go through completely new accounting mechanisms. So we have centralized parties who come in and they review your accounting books and they publish like Tether does, like USDC does around what’s actually in the treasury. But for crypto at large, I think, and The Graph is a great example, the builders keep building. We’ve been through these markets before and none of this has any impact to deliverables, the venture capital money that we’ve raised and our goals for this ecosystem and what we’re here to build and do.

Nick (00:10:20):

Well, I appreciate you taking us through that and sharing some of your thoughts on this event. I want to now turn our attention to why we’re talking today, which is to get to know you a little bit better and the great things that FalconX are doing. So turning our attention to your background, I always like to start with questions about a guest’s professional and educational background. So what can you share with us about yours?

Aya Kantorovich (00:10:39):

Sure. So I double majored from the George Washington University with a major in finance and a major in international affairs. So when I was growing up, I always wanted to be a diplomat. I was convinced diplomacy was for me. And I remember going through my third year of college realizing, “Wow, I don’t know if I can do bureaucracy”, which is funny enough how I’m now in crypto. And I remember just thinking I wanted solutions faster. I wanted to move faster than the way that the infrastructure of governments were built today. And so I got this double major in finance and my real goal was finding a way to create conflicts resolution using financial methods and tools and be able to facilitate that. So that was coming out of college. I then as one does, joined consulting, so I was a consultant for investment banks and did that and again, was consistently reminded of just wanting to move faster and go outside of the realms of the processes that had already been built in certain ecosystems and environments.

(00:11:56):

And so then I joined… I was a first hire of a company called Tegus, which was outsourcing buy-side analysts at institutional hedge funds. It was team-T focused. That was really my first taste in building something from the ground up. As well being the first hire, it was very exciting, but I was consistently enthralled by crypto. I’d gotten introduced to it in 2016 and it was a hobby. I remember while I was at Tegus, I got a Bitcoin mug from the team because I consistently was talking about crypto and so had the opportunity to make my hobby, my full-time job and join Pantera Capital, which is where I’m previously joining from. And Pantera, this was during the boom and bust of the ICO bubble. So funny when you ask around how long it’s going to take for us to dig ourselves out of it, we’ve done this before, this is not our first time and now much larger scale and did that for a bit.

(00:12:52):

Pantera was a fantastic opportunity to see everything that was happening in the space at the time. So very similarly, it was a time where the market wasn’t responding to fundamentals, it was responding to fear in the same way that we’re seeing in public markets in the same way that we’re seeing in token markets in crypto as well today. And what we were seeing was anywhere from infrastructure, B2B, B2B2C exchanges, decentralized applications and technology like CR knowledge proofs. And so it was a really great seat to be in and see everything.

(00:13:30):

And we had made an investment in Tegomi, this was now roughly three years ago, and in doing so, had came across the FalconX team. Absolutely loved the team, loved what they were working on, loved the vision and the mission, and took the opportunity to join. So phenomenal opportunity. Ever since joined as a generalist for the company, part of the founding team at FalconX and have built our sales trading desk from the ground up currently, head of institutional coverage globally for us and really anything and everything in between with just the phenomenal team that we have today. And it’s been a very great journey watching the company grow from those initial stages to where we are now.

Nick (00:14:15):

So if we took a time machine back to 2016, when you first became aware and interested in crypto and particularly Bitcoin, what was it that was an early signal to you that this was something you wanted to pay attention to?

Aya Kantorovich (00:14:28):

So when I first read the Bitcoin white paper, I actually couldn’t understand it. I remember thinking, what is this? And had to sit down and really think through it, work through it, and it wasn’t really Bitcoin that clicked for me, it was actually Ethereum that clicked for me. It was much easier for me to understand then. The idea of digital gold, what’s fascinating, but really what interests me was movement up money cross border in ways that touched people that may not have access to that.

(00:15:02):

And so for me, coming out of this conflict resolution and international affairs study, and there are just data around all these… The humans on the globe, there are 15 billion mobile phones globally today, but far few people have access to the financial instruments and markets that we in the United States for example, or even within the US have. And so that was really what sparked my interest was there’s a technology here that can facilitate that in a way that the current system, again going back, the current system may not necessarily be built for. And so that really, really sparked my interest and I think we’re getting closer. There’s so much more progress for us to do, but we’re definitely getting closer to building that accessibility for the next 2 billion users.

Nick (00:16:24):

It’s a very common rejoinder on this podcast that people have first become aware of crypto because of Bitcoin, but they fall in love with the space because of Ethereum. You’ve got to be the 12th or 15th guest that’s mentioned that. I’m always curious to ask the follow-up. What is it about Ethereum that you feel like unlocked so much value in the world?

Aya Kantorovich (00:17:14):

For me, it was the simple understanding that Ethereum was a technology that helped with the facilitation of additional applications, but the freedom to build those applications was unlimited as long as you had that technology background for the most part, at least in the early days. And so what it very much reminded me of was the internet, right? And if you think about even just take during Covid when you had Shopify or wix.com and the ability to launch a business and all these tools in your toolbox to be able to do that, that really opened up a new world.

(00:17:51):

If you look at just the data analytics today, I believe in the US we’re at the highest number of folks that are unemployed and not unemployed because there aren’t enough jobs, but unemployed by choice because they’re able to facilitate their working means, whether it is through Upwork or it is through social media or it is through being employed at a Dow. And so all of these other mechanisms of people being able to create salaries in this ecosystem, that was something that really clicked for me. And Ethereum does that and did that in the early days back when we had crypto kitties and back where you can really launch any [inaudible 00:18:33] as long as you were able to interact with the technology beneath directly.

Nick (00:18:38):

Something else you mentioned is that it really takes a global lens to understand the potential of something like Ethereum in the space, but oftentimes we frame it from our own perspective. So here in the United States there might be some flawed thinking about the potential impact. Is that true for you as well? Do you think it takes a global lens to understand the potential of these things?

Aya Kantorovich (00:19:00):

Without question, without question, because we are only now starting to understand in this country what inflation might mean for a number of individuals. Where in other countries that are developed around the world, inflation is a second language. And so you see that whether in South America and Africa and Southeast Asia, you see inflation in India, you see inflation all around the world globally. And so what’s so important with this technology and in the initial days of crypto, you saw this pushback constantly where people didn’t understand it because it didn’t apply to themselves directly. But you can even see that in this country in other ways. For example, if you think about when you take out a mortgage, whether it’s for a car or a home, you have to go in person. And a lot of the times it’s unregulated in terms of the rates that you get and the amounts that you pay relative to what you put down and relative to the value of the home, which also can depend on whoever goes in, whatever team sees it.

(00:19:56):

And so all of these human aspects of that process for this mortgage creates areas where whether you are of a minority or you are a woman, any of those issues can create discrepancies around the types of rates that you get. And you see data around this in the United States where being able to create some transparency and standardization would help fix these problems. So inflation is just one aspect of it, but even within the US if you think about some of the problems that we see today, another very easy example is if you think about the Covid checks that went out twice during the coronavirus lockdown and how many of those checks did not go to the mailboxes they were assigned because the mailing address was outdated, or maybe that house didn’t have a mailbox or maybe it was sent to the wrong person. I mean, these were physical checks.

(00:20:52):

So if you just think about all of the area for human error in that process and how large of an impact it might have, inherently technology can help with some of these issues. And blockchain really across the board, whether it’s financial or even infrastructure, is really that core underlying of it. One thing just to double click on here is very often because the technology is so complicated and complex, very easy to write it off as this might be a Ponzi, and this doesn’t apply here or to us, but it’s really because we’re still talking about the layer zeros and the Layer 1s, but at some point the ecosystem will develop where we’re talking about the layer threes and the layer fours and everything underneath, all of this infrastructure will be completely hidden away in the same way that none of us are actually building the website from scratch. And so we’ll get there and once we get there, it’ll be far more comprehensive as to what the value adds of this technology is to folks.

Nick (00:21:59):

Incredible answers. So let’s talk a little bit about FalconX and your role there as head of institutional coverage. What can you tell us about FalconX and what you do in that role?

Aya Kantorovich (00:22:09):

Sure. So FalconX is a digital asset and cryptocurrency platform for institutional investors where we help them access trading, clearing credit along with a number of other use cases for crypto. We are global, which is really exciting, have expanded our reach to almost 200 people, which is fantastic. And in terms of what we aim to do really well is really provide that one-stop shop for institutions to go to access everything in one place and to get capital efficiency, which is something that is really crucial in an environment and an ecosystem that may not have a standard credit rating or risk score that you can transfer from decentralized application to decentralized application and so on. And so FalconX is really here to build that seamless interaction across all of the tools that you need in order to access the markets for institutions today.

Nick (00:23:07):

And so not a lot of my listeners will understand what it’s meant by institutional investors. How should we think about what that is?

Aya Kantorovich (00:23:14):

Sure, yeah. So the personas that fall into that are going to be hedge funds. So anyone who let’s say is a systematic trader, they see a rate on one exchange, see another rate on the other exchange, and they’re performing some arbitrage between the two or they have another algorithmic strategy running via automatic APIs and there’s also going to be venture funds. These are longer term holders. A lot of these venture funds today are going to be both traditional venture funds from traditional markets that are now entering crypto or crypto native venture funds that have always specifically focused on crypto. As well with venture funds, an interesting thing there is a lot of these venture funds inherently get tokens through their investments. So we’re seeing a lot of venture funds also become hybrid hedge funds because now they have tokens they need to trade in and out of, very similar to how you would trade in and out of the stock market when you get stocks that are publicly traded.

(00:24:12):

In addition, you have prop shops. These are trading shops that take risk onto their books and then trade in and out of them in order to find better market opportunities and create some profits relative to those trades. You also have what we call retail aggregators. These are like the PayPals of the world, the Venmos of the world, the cash apps of the world. These are technically institutions in the way that they’re built, but they face retail, so think B2B2C. We have family offices. These are smaller venture funds almost per se, as well as very large asset managers. These are think endowments, foundations that provide their capital to these asset managers to apply into different ecosystems and trade and manage that risk for them. And then lastly, endowments, foundations as well as treasuries. We talked about protocols and them having their book of business or their treasury. So for treasuries we help facilitate all of their creating needs as well. So those are just a number of the institutional personas that we support today.

Nick (00:25:17):

So I know it’s a difficult question, but if we threw all those personas into one bucket and we kind of charted the adoption curve and their appetite for digital assets, how would you help listeners understand that generalization where institutional investors rank in terms of adoption and appetite?

Aya Kantorovich (00:25:35):

A year ago in terms of our volumes, our persona volumes were roughly 80/20 split. So 80% of our volumes came from crypto native and we had 20% of our volumes that came from traditional finance. Today that volume is 50/50 split, and so we have 50% coming from traditional finance and 50% from crypto. On certain days, we’ll go upwards of 60% traditional finance. In addition to that, historically roughly a year ago institutional investors within that persona had roughly 1% of their balance sheet allocated to crypto. Today on average across [inaudible 00:26:14] institutional clients that we support and we work with, it’s roughly closer to five to 7% of their balance sheet. So at large, in the same way that you and I may have gotten involved with Bitcoin and then we started with Ethereum and we fell down the crypto rabbit hole, we’re seeing that same habit and trend along with institutions who start with Bitcoin, ETH.

(00:26:37):

And actually one other anecdote I’ll use here is one of our larger institutional clients, very very traditional market trader shop, they a year ago had asked, “Hey, we’ll just need a Bitcoin wallet. We’re only going to trade Bitcoin.” And six months later they called and they’re like, “Hey, we need our Ethereum wallet now we’re ready. So gave us the Ethereum wallet.” Okay, and following that roughly three, four months later, they called back with a token that wasn’t even in the top 50 market cap and needed a wallet to start to trade that token. And so it was a clear progression for someone who… An organization that was initially like, “We’re just going to touch Bitcoin, it’s just going to be Bitcoin” to “All right, we are ready for top 100 market cap token. We understand, we are able to track revenue across these applications. We understand the technology now. We’ve had these conversations.” And that was a pretty cool anecdote to see because it wasn’t unique just to them. We are seeing it across all of these institutional investors across the board.

Nick (00:27:43):

If we use that five to 7% number you talked about there in terms of allocations in this portfolio of institutional investors, what does a mature market look like? What does that number look like when adoption is a hundred percent and a lot of people are participating?

Aya Kantorovich (00:28:01):

I think what that looks like today is a far more diverse crypto ecosystem than we even imagined. So what I mean by that is this was the first year where we started to see decoupling. So you started to see decoupling where you had users who were getting involved in the crypto ecosystem, not via Bitcoin and Ethereum. This was specific to NFTs. So NFTs was the first time we saw a decoupling from Bitcoin and Ethereum where you had users in engaging with the crypto ecosystem but not directly through our digital gold and Ethereum. And so what we’ll likely start to see is for more decoupling as well.

(00:28:42):

And so you’ll likely start to see in the same way that you have prop shops or trading shops where someone’s focused on FX, someone else is focused on commodities and someone else is focused on technology team T, you’re going to have that same thing happen in crypto where now you have a venture fund that’s focused on defi. You have a venture fund that’s focused on infrastructure like layer zeros through twos. You have another one that is just focused on NFTs and you have one that’s focused on gaming because to be honest, each one is a full-time job if not far more. And so you’ll start to see more and more decoupling and more applications of crypto that are far larger than what we imagine that to be today and continued decoupling that touches more and more people and the use cases that they’re focused on in the traditional world as they come into crypto.

Nick (00:29:40):

On that theme then if you forecast out how does FalconX disrupt traditional finance and brokerages throughout the world,

Aya Kantorovich (00:29:50):

At FalconX, our vision is truly that the world is going to be tokenized and in doing so, be digitally accessible. And so for FalconX, the mission is how do we position the firm in a way that when that digitization happens, as it’s happening now, and the best example of that is stable coins where we sell the US dollar tokenized into the USDC, SDT, some of them algorithmic table coins, maybe not as successful as the others, but we started to see that digitization. We’re seeing it in art now, but how do we at FalconX position ourselves for the future of tokenization as it continues to touch more and more of these different pillars in our day-to-day lives?

Nick (00:30:40):

When I was doing some research on FalconX and I read the positioning statement on the website addressing the problem of slippage and hidden fees, and as someone myself who came from traditional finance, I’m all too familiar with the hidden fees and the things that retail investors in TradFi don’t always pick up on, but I was a little surprised to find that maybe that exists in defi. How do you address that?

Aya Kantorovich (00:31:03):

It absolutely exists in crypto and the biggest reason is as it pertains to slippage, we’re not fully mature to where there’s enough liquidity across the board for the types of institutional orders that are coming in. So for example, if you want to execute, we actually saw this great example two weeks ago with UST, right? So if you push 2 billion plus of UST out into the open market, there isn’t enough demand in the ecosystem today to be able to take that in at the one-to-one, so the price will slip in order to fill those trades. And so you’re seeing that across the board. If you go in and try to put in a hundred million dollars BTC buy order all at once, that’s going to happen. And so for us, when we initially built FalconX, the goal and the target was making sure that institutions, to your point in your background are very used to not having to deal with things like market slippage because the traditional markets are far more mature.

(00:32:00):

And so the idea was how do you create the technology layer and the infrastructure layer that can provide you a point in click quote, so you look, the price you get is the price you see when you go to execute it, it executes perfectly at that price and for you to be able to again go into your accounting page and not see exorbitant amount of fees because a smart order router hit top exchanges and now you’re getting exchange fees across each book.

(00:32:29):

And so that was really the focus and a lot of what the FalconX infrastructure does today, it’s so important because it really helped us facilitate the technology that in a market environment like two weeks ago with UST, in a market environment like Black Thursday, two years ago when supply dries up, what we’ve done is for aggregating liquidity as a riskless principle such that you’re able to pull a quote from FalconX, we’re able to source it from multiple providers over milliseconds of time, make sure that price is live, it isn’t stale, make sure you’re able to execute on it, make sure there’s no less look on the quotes that you are pulling and make sure that again, even in heightened volatility, the price you see is the price you get.

(00:33:17):

And that’s so important because it builds off of trust and building customer trust, and it’s like the Amazon model of whenever something happens, your order didn’t come through, you can always call Amazon Web Services and you have customer support and the customer’s right. And so that was very important as a value for FalconX as the company was built in order to be able to provide that level of trust and provide that level of service, especially in a market that’s 24/7 with heightened levels of volatility as the space matured.

(00:33:53):

And so a lot of the early days was building that initial infrastructure that was able again, to pull live quotes that weren’t stale, to give you a point and click price that remained live for upwards of 10 seconds in a market as volatile as it is today across a number of different tokens. It doesn’t allow for slippage. So again, you can point click and the price you see is the price you get. That was always, to this day, it’s a sentence that is very ingrained into all of our heads because it was really what the early days where all of the resources, the time, the energy was spent on, and it worked really well for us and it created that trust where now we have 99.99% uptime. We’re always on in a 24/7 market. We’re global, we’re 24/7, we are there when markets are volatile and when customers need you most.

Nick (00:34:47):

Well Aya, most of my listeners understand complexity, but finance and defi, this is a whole different genre of complexity and for people that aren’t real familiar with these things, it seems overwhelming. So I’d be curious if you would educate listeners who aren’t going to be able to devote all the time to develop expertise like you have on just a few high level fundamentals, three or four things that as someone who is monitoring the space and wants to check the fundamentals, what are the couple of things they should look at? Is it the price of Bitcoin, is it unemployment rate, is it interest rates? What are some of those things they should track?

Aya Kantorovich (00:35:22):

I would say all of the above. It really depends on what you’re looking to get out of financial markets. If you’re looking to be a trader that’s 24/7, then I would say you need far, far more KPIs and metrics to be watching. If you’re looking at just trying to find higher yields and a better return to put your savings to work, then what I would recommend is really thinking about what are some of the early decentralized applications that have been stress tested through very large market moves. So we talked about Black Thursday, we talked about the recent market move. There have been a number in between that have been smaller in price, but heightened volatility. And what I would do, there’s a number of websites like DefiLlama, which will show you where total value locked is. And the other thing I always recommend is finding the venture funds in the space that you truly respect.

(00:36:23):

And so it might be a a16z, a Multicoin, an Arca, a CoinFund, and look at the companies that they’ve invested in because at the end of the day, that is their full-time job and few of us can do their job better than they can. And so what are the companies that they’ve invested in, not just once, but maybe twice, three times and follow on rounds. And those are some of the things that I always mention to double click on because that’s a stress test. Each one of those, it’s heightened trust in those applications, more due diligence and now a larger balance sheet. The last thing I would say, just for finance at large, I mean inflation’s a big piece now, but while there’s inflation and prices, there’s also the aspect of fear. If society thinks inflation is going to continue to increase, then it’ll increase just based off of the fear of that.

(00:37:19):

So there’s a social aspect to it. So I would almost even say what are some of the large traditional firms doing in ecosystems like this? Are they investing? What are some of their quarterly or annual reports to limited partners? And then read through those. Pantera does a great job of sending out limited partner essays that are really, really good, that walk through the ecosystem and what they’re seeing and letters to shareholders. So those are really interesting as well. But I definitely wouldn’t say have a chart of 15 metrics because to be honest, that will just create a necessary stress. And so I would just say find the podcast similar to this one where there are very smart people who join the folks that you’ve had historically as well and just be a sponge, and soak that information up and then figure out what about finance really interests you.

Nick (00:38:20):

Aya, when you’re with friends and family and the topic of what you do for a living comes up. Obviously there’s going to be some questions I got to imagine about market volatility, especially in recent memory. How do you address that? How do you provide context for people that aren’t in the space to better understand the market volatility?

Aya Kantorovich (00:38:40):

Sure. Well, it’s been far easier recently just given what’s been going on with the NASDAQ. So I would say if you even look at the Peloton stock, it’s been far more volatile at times than crypto combined. And so I think that helps you recognize it’s really the simplicity of crypto has many use cases, but many companies in crypto see their token as shares of the firm. And so it trades in an open market on exchanges very similar to public equity shares would trade on the NASDAQ or the S&P. The only difference here is that these exchanges are 24/7 and the NASDAQ and S&P have both the right to turn off these exchanges, but also it’s only on weekdays during work hours. But otherwise, I think again, if you look at just Bitcoin and ETH through the last three weeks of market move normalized or even this year normalized relative to historic years, it’s been far better.

(00:39:43):

The price itself has been very range bound. And so taking a step back from volatility almost for a second, a lot of 401Ks after the public equity move of the last three weeks have been wiped out in terms of their returns since Covid has started. And that’s going to have a huge impact on people both in the near and long term. And so I think the human memory is very short in practice, and so people forget that equities that are supposed to be very stable and trustworthy and only trade on fundamentals also trade sometimes like distressed assets, like we saw Peloton trade. And so I think having more of those data points unfortunately to be able to compare to has made it far easier for people to understand, okay, why crypto, why this, why now, and how does that differentiate with my [inaudible 00:40:44] stocks that are now down lower than where they started two years ago?

Nick (00:40:48):

I want to ask you a question and I’m afraid to ask it because it’s incredibly naive, but because I think other listeners might have the same question, I’m going to ask it and that is about decoupling. So you mentioned earlier, we’ve seen recently a decoupling and we’re talking largely about digital assets decoupling from the price and the movements of Bitcoin. But I want to frame it from the perspective of digital assets, DeFi and traditional finance. And again, the naivety of the question is I always envisioned a future where those two were decoupled, where digital assets would move about and perform decoupled from traditional finance, but I’m not sure that’s happening and I’m not sure that’s a reasonable expectation. So how would you address that question?

Aya Kantorovich (00:41:33):

We are absolutely going to see more correlation between traditional assets and cryptocurrency. And the reason for that is because we have asked for it, which is the institutionalization of crypto. It’s a great reflection of the maturation we’ve wanted for this space for a while. The reason for that is that the same people who are trading public market, traditional finance are now trading crypto. And so same people, same mindset. Even look at the talent, where is talent coming from? It’s largely coming from large banks, former FX traders who are coming and applying very similar models from traditional finance to crypto. And this happens in any new financial market where you start to see huge opportunity and that opportunity will shrink over time because there’s more and more people. It’s again, it’s always that supply/demand model. But what is interesting is the continued new applications of crypto, whether it is gaming.

(00:42:39):

So anyone who initially played Axie Infinity probably had a much larger opportunity than the most recent 100 or even 1000 users. And these are probably because it started off with a specific go-to-market strategy and a specific use case, then that expanded via marketing and social media and then you had traditional gamers come in and start to game in crypto games. And so the very same thing happens, that’s what’s going to get us to the 2 billion users. And so as more and more people come into the space, I think what is going to be really key too is as you start to see more correlation with some of these markets, it’s going to stress test the ecosystem a lot.

(00:43:24):

And so you’ve seen that happen with OpenSea having to go down because there’s been so much demand for some of the NFTs that they can’t support their infrastructure, can’t support this many people. You’ve seen huge acquisitions between Nike and artifacts happen for future games. I mean these are very large brand names. You’ve seen Coca-Cola get involved in the Metaverse. And so all of this really stress tests the infrastructure and makes it far more ready each time for the next 2 billion users and the next 2 billion users. And so I actually think that that correlation is going to be important because if we want this technology to work for everyone, we need to have it stress tested for that amount of volume of individuals, and there’s only one way for that to happen, which is invite those folks to try it out.

Nick (00:44:45):

Staying with this theme of contrasting traditional finance with DeFi and the crypto space more generally, I always take the opportunity when I’m interviewing powerful female voices within the crypto space to talk about how the space is doing in terms of equality and ensuring that women and other groups are treated fairly and equally, which we all can acknowledge that traditional finance and so many other industries have felt. What’s been your experience in this regard?

Aya Kantorovich (00:45:16):

So I was actually just on a panel recently with Cecily, the COO of Block, Damon and Alyssa, the CMO of Crypto Chicks talking about this exact same topic, which was very empowering to hear because at large the space has very much changed, having both worked in crypto and finance previously, very comfortable with being one of the few, if not the only female in the room. That has shifted drastically in terms of both decision makers, leaders, speakers, builders, and that is really huge. I think one movement as well that helped that diversification was NFT because it did touch on a new ecosystem in a new sector that had more women voices. Finance traditionally is far male heavier than female. And so that really helped expand the diversification as well. The other thing is just the caliber of talent that people are bringing on.

(00:46:19):

We’ve been very fortunate to bring on our head of people, Susie, who is phenomenal and other individuals with that caliber, John, our recent head of revenue. And the caliber of this talent comes from institutions that have gone through the stress test and have built talent and people organizations at scale. And so we’re starting to see far more of that infrastructure being built within these organizations that’s going to really, really help change the conversation for other women and other minorities looking to enter the space. So some examples of that is even how you address people as opposed to guys, you address them with folks. Making sure that on every hiring panel there’s at least one female in order to make sure that we’re being diverse with the mindset of bringing on new people to the firm, thinking about every time you agree to speak on a panel or a podcast, making sure that that podcast or panel has other women that they’ve hosted or are hosting.

(00:47:21):

If they aren’t, then politely decline because that will be the forcing function in order to make people think about that more actively. And the last, I mean just consistent empowerment. I’ve seen far, far more female driven events by the female and minority community within crypto for empowering each other in the space, which has been just tremendous. And the caliber of the talent coming in is great. One. My final word on this, one final example of this is the empowerment of when you do go on broadcast or podcasts or panels following up with a Rolodex of females or minorities that you also would want to recommend for those same opportunities. So being able to share that broadly and empower everyone to build up together is going to be what really changes the space.

Nick (00:48:11):

Incredible. I love the optimism and it’s so important. I’m fortunate enough to have a lot of female listeners to the podcast and would love to know some resources or ways for them to get more involved to meet powerful women in the industry and connect. What advice do you have for them?

Aya Kantorovich (00:48:26):

Absolutely. So a couple of organizations that I’m personally involved in is SheFi as well as She256, and then Women in Blockchain. All of these organizations either are just safe spaces for women to connect with one another and ask questions in an open environment or SheFi primarily focuses on bridging the gap of education around some of these difficult topics which we discussed in detail. So it goes through a six-week course where, for example, I’m a teaching assistant and we actually practice how to use some of these decentralized applications as well. And that’s really cool and it targets women of all backgrounds, whether you’re still in school, just graduated or thinking about making a career shift. And so again, just opening up the accessibility.

(00:49:18):

The other thing I would say is people in crypto love to connect and to talk. I’ve never had the issue… I remember in the early days of wanting to get involved in this space, had the issue of someone saying, “No, I’m too busy, I can’t talk or I can’t help.” It’s always, “Hey, I’d be curious to learn about your experience, or I have some questions, or can you point me in the right direction?” And whether it’s through LinkedIn or cold email, and that has always, always worked. And so my advice, leverage that as while we’re still a small ecosystem and really get connected with some of the strong female mentors in the space. I can think of 15 off the top of my head and I’m happy to share lists afterwards, but we don’t have a shortness of incredible women in this ecosystem, and so definitely reach out to them.

Nick (00:50:05):

Well, I’ll post that list in the episode show notes. So for any listener that wants to see that list and connect, please check the episode show notes. I’ll have a complete list there. I like to ask this question about web3. So much of what we’ve discussed so far have been focused on DeFi and digital assets, but a lot of the broader discussion around web3 and its future is also interesting to listeners. When you define web3 and contrast it against web2, how do you do that for folks that again, aren’t necessarily active in the space?

Aya Kantorovich (00:50:41):

Sure. So I think about web2 as applications that run… If you think about this relationship between users and companies, these applications today are companies will drive users in via free methods and then build an ecosystem, a network in a market in order to then monetize. So there’s a very cool chart on this where I’m again, happy to share, but it’s really this idea of you start with users and you really focus the company’s growth on obtaining as many users as possible. So if you think about, take Amazon as a great example, Google, Facebook, Instagram, web2 focuses on building as many, many users, bringing as many users to the platform in whatever marketing method possible, paying them even to come to the platform to create that market. And then once you hit a point in the equation where that market is large enough, then you start to monetize because you have user data, you have user spending habits, you have user information.

(00:51:53):

And so the company owns all of that and monetizes on it. What I think about how is that different in web3, the difference is that companies and applications will still try to bring in users. We’re all trying to create some adoption across our platforms and our technology. So you bring in users, whether it’s through the form of tokens, airdrops, sometimes it’s in the form of yield. So for example, Anchor we talked about with Terra offered a 20% yield in order to bring as many users possible to then start to monetize. But the difference is really when you hit that breaking point in size is that the way of monetization goes back to the user itself. So one great example of this is if you look at DeFi lending, so the yields maybe you’re initially compound and maker are going to incentivize more and more people supply and demand more and more people onto their marketplace using tokens, this shares of the company.

(00:52:58):

But then what ends up happening is as you’re using the application and either you’re borrowing or you’re lending, let’s say you’re lending out your capital, you’re using it, you still receive comp tokens in the form of trading fees so that the monetization comes back to you, which is very, very important. So it’s always a question of web2 that monetization stays within the company and the decentralized application. In web3 that monetization is shared back with the users upon which the application is built. And that’s really, really important. And it can be seen in all forms, whether take for example, art and music, every time a piece of art or music is sold or shared, a royalty is then sent back to the original creator as opposed to the royalty going to the original company, which was feeding off of their branding and their marketplace in order to monetize. So it’s consistently like how does monetization happen and web3 that monetization always returns in some way, shape or form back to the user.

Nick (00:54:04):

How important is this theme of decentralization to the way you think about web3 and particularly the web3 stack?

Aya Kantorovich (00:54:11):

It’s very important, but I would say not everything needs to be fully decentralized just yet. So again, if we think about what’s important for decentralization, the things that are important are monetization customer data or just data and application data at large. It is also thinking about marketing. How do you incentivize people in different ways? How do they monetize off of that marketing as opposed to you just collecting data on them, et cetera. But things that maybe don’t fully need to be decentralized or we talked about this, but management of balance sheets, core things like accounting, sometimes even trading, right? As you think about being able to trade a hundred million dollars worth of something and all of this core infrastructure that helps with almost, I think of it like sometimes the backend.

(00:55:07):

There’s a number of things that were still not fully there for the maturation of the space to be fully decentralized. Another great example is actually UY/UX. And so the people who build these applications. Another great example is even organizations, DAOs. One can say that perhaps we’re too early for fully decentralized orgs, perhaps we’re not. And it depends on the application that’s being built. And so I would think about decentralization as all of the pieces of decentralization that help the end user are incredibly important, but the tools, the pipes, some of that, if there is a little bit of that centralization, there’s value in that as well too. We’re not fully in a world where everything should be decentralized.

Nick (00:55:54):

So you’ve mentioned data a couple times. You mentioned The Graph earlier on in one of your answers. How important do you think The Graph is to the future of web3 as a solution to enable greater adoption and more growth?

Aya Kantorovich (00:56:08):

It is incredibly important, and the reason for it is because of that transparency and accessibility of data. What The Graph did when it launched a number of years ago was it allowed for folks who didn’t necessarily have the technical background to be able to access the underlying infrastructure in an easy way. We talk about Shopify, we talked about wix.com, and The Graph was able to do that with data queries across all of these different applications. And why is that important? It’s important because it means that you didn’t have to have the computer science background or the cryptography background to actually go in and plug into each blockchain itself and be able to pull and organize that data in the way that The Graph does also in itself and also the subgraphs that it launches. And so all of that is in essence, how do you build that transparency and accessibility unless in the same way that I think about GitHub for traditional code as well. And what does that enable for the ecosystem once that piece has been fully outsourced and decentralized out.

Nick (00:57:12):

Following up on that, in terms of The Graph, a lot of the subgraphs, a lot of the use cases of The Graph early on, especially were in the DeFi space, something that you know very well, what can you share with listeners about The Graph and that early traction it had in DeFi and potentially I guess its impact over the long term?

Aya Kantorovich (00:57:31):

Sure. I would say finance and crypto at large, and especially decentralization at large was driven by Defi. So DeFi was a huge use case for decentralization of crypto for a number of reasons. And The Graph was able to find impeccable opportunity of pain points for creating more accessibility. And what I mean by that is in the same way, so when you have decentralized applications, because in order for them to be fully decentralized, there needs to be some in-source input of data that is trustworthy at a constant flow in order for the application to run seamlessly. And so one form of that is through Oracles. And so you’ve seen a number of Oracles like Chainlink who will send… A good example of that, they’ll send data in order for these applications to run. Why is that important? Let’s say you and I, we enter into a bet where tomorrow if the sky is blue, you pay me $10 and if the sky is red, pay you $10.

(00:58:35):

But in order for that to happen in a decentralized way, the Oracle needs to tell us tomorrow at a specific time what the color of the sky is. And if that Oracle is false, then none of the application can run in a decentralized manner. So very similarly, what The Graph does is does that across data, across a number of different blockchains in an accessible way so that these applications can run in a decentralized manner. And so that’s really, really important. It’s one of those core features that I talked about for the maturation of the space. It’s an infrastructure pillar where it’s one both difficult to understand because you don’t see that happening when you log into Google or you’re logging into a website, but it’s inherent in terms of what it’s doing on the backend at a global scale across millions of pieces of data across these different blockchains.

(00:59:30):

And again, what I think is really important is that The Graph made it very cool to fully decentralize needing to have that cryptography background in order to build some of these applications. And it was really one of the first that did that at scale in order for these applications to run. And I’m sure there are a number of people within DeFi who can attest to this, but it made building in DeFi incredibly more seamless than it was prior to The Graph launching its applications.

Nick (01:00:04):

Aya, I want to finish with this final question, and it’s a little bit about your background and coming full circle to where you are today. So somebody that studies international affairs cares about the global community, cares about impact and change in the world, and here you are, you’ve landed in crypto web3 DeFi space. And so my final question for you is, does web3 change the world? Is this the vehicle by which you can kind of try and travel back to that degree and still have that impact on an international scale?

Aya Kantorovich (01:00:36):

Yes. I feel very strongly about that answer because it is changing the world and it’s doing it at an incremental pace. It’s doing it at global scale. There are companies in crypto today like Goldfinch where you can get a small medium-sized business loan that’s backed by crypto. We’ve seen companies like Notional who were able to provide a mortgage on a house based off of crypto. We’ve seen companies at scale help lower that Western Union fee of cross-border payments from double digits to less than 5%, even just immediate transfers.

(01:01:16):

And we’ve seen crypto provide a 24/7 truly accessible market. In a world today where you have retail investors who are trading GameStop and they’re trading on Robinhood in order to access Dogecoin and Shiba. I mean, the unlock of this next billion users is so important at a global scale, and crypto just helps facilitate that. And I couldn’t feel more passionate about the fact that while when you’re in crypto, it feels like you’re not moving fast enough. But if you take a step back and just look how much infrastructure has been built even in the last two, three years, it’s unbelievable. And I haven’t seen another ecosystem that has built nearly as fast as crypto for the amount of users that it supports today.

Nick (01:02:11):

Well, Aya, we’ve reached the point in the podcast where I’m now going to ask you the GRTiQ 10. These are 10 questions I ask each guest of the podcast every week to help listeners learn something new, try something different, or achieve more. So Aya, are you ready for the GRTiQ 10.

Aya Kantorovich (01:02:26):

Let’s roll.

Nick (01:02:37):

What or article has had the most impact on your life?

Aya Kantorovich (01:02:40):

The Alchemist was the book that had the most impact on my life, hands down.

Nick (01:02:46):

Is there a movie or a TV show that you think everybody should be required to watch?

Aya Kantorovich (01:02:50):

So I actually don’t watch really any movies or TV, but I did see Rocket Man recently and it was impactful. So I will give that answer.

Nick (01:02:59):

If you could listen to only one music album for the rest of your life, which one do you choose?

Aya Kantorovich (01:03:04):

Okay, this is a hard one for me, but I did go to high school in Arkansas, so Southern hip hop is very important to my life. So TI has an album called Paper Trail or anything by Elton John. So I’ll do a little mix.

Nick (01:03:21):

What’s the best advice someone’s ever given to you?

Aya Kantorovich (01:03:24):

Best advice has been what you want or drive or work for today may not necessarily be what you want tomorrow. And in many professions there isn’t a fixed career plan. And so recognizing that things change and priorities change over time is very impactful.

Nick (01:03:42):

What’s one thing you’ve learned in your life that you don’t think most other people know or have learned yet?

Aya Kantorovich (01:03:47):

I would say you get farther in life by recognizing that we’re all humans driven by very similar wants, needs, and affirmations.

Nick (01:03:57):

What’s the best life hack you’ve discovered for yourself?

Aya Kantorovich (01:04:00):

So I feel like this is a little embarrassing, but I do quarterly reviews on myself and so I set goals and targets every quarter for where I want to hit in the next quarter. And then at the end of the quarter will go on a personal retreat and review my progress towards each one of those.

Nick (01:04:22):

Based on your own life experiences and observations, what’s the one habit or characteristic that you think best explains people finding success in life?

Aya Kantorovich (01:04:31):

So tying into the last question, I would say it’s self-reflection and goal setting.

Nick (01:04:36):

And Aya, the final three questions are complete, the sentence type question. So the first one is, the thing that most excites me about web3 is.

Aya Kantorovich (01:04:43):

Accessibility.

Nick (01:04:45):

And the second, if you’re on Twitter, then you should be following,

Aya Kantorovich (01:04:48):

I’m going to give a couple answers to this one. First, our CEO, Raghu. He’s great. The second is definitely give The Graph a follow 100%. And then the last is, especially given what’s happened in the last few weeks, Elon Musk.

Nick (01:05:04):

And lastly, complete the sentence, I’m happiest when.

Aya Kantorovich (01:05:09):

So I am a big words of affirmation person, so I’m happiest when I see that the time I’ve invested into someone or something has panned out successfully. Nothing beats that feeling.

Nick (01:05:27):

Aya, thank you so much for your time. You’ve been very generous and incredible answers, very insightful. So I appreciate your generosity. If listeners want to follow you and follow some of the work you’re doing there at FalconX, what’s the best way to do it?

Aya Kantorovich (01:05:40):

Sure. So we are both live on Twitter. For FalconX, it’s @FalconXNetwork, LinkedIn as well, FalconX, as well as my LinkedIn, our CEO Raghu’s LinkedIn, and Twitter. My Twitter is just my first name, A-Y-A, Kantor, K-A-N-T-O-R. And I read all of my Twitter in mails as well. And my email is just my first name [email protected].