On Saturday 10 October, we welcomed Jack Tan and Ran Yi from Wootrade into the Hillrise Capital Telegram chat for an AMA. Both Jack and Ran are Partners of Wootrade and executives at Kronos Research.
Wootrade itself is a liquidity platform, incubated by Kronos Research. They’re striving to create a superior user experience for all users through deep liquidity and tight spreads, allowing companies to launch with liquidity from day one and empowering traders to trade as efficiently as possible.
Uniquely employing a zero-fee model for end users, the WOO token plays a vital role in creating incentives surrounding liquidity pools and platform fees.
In this post, we have compiled key questions and answers from our AMA event.
Daniel Dal Bello
Hi guys and welcome, thanks for joining us today. I think this will be a great AMA for us to all learn a bit more about some of the architecture and systems common in financial markets that we might not talk about much.
It would be nice to start with an introduction to you both, and the story of Wootrade since your founding in July last year.
Yeah we are definitely pretty unique in this space, a far cry from the usual AMM forks and smart contract platforms you usually see in this space. We’ve got a really important use case, a growing list of clients, some big backers, and a great team (not talking about myself – haha) and we can’t wait to share it with everyone. Wootrade is the answer to one of our biggest problems (we are professional traders also).
The story of why we made Wootrade: We couldn’t find a place with the liquidity, tight spreads, low fees, low slippage, and optimal trade execution… so we decided to make a solution. We also co-founded a leading crypto-quantitative firm called Kronos Research, which now has ~40 employees and does over a billion USD in volume per day.
I am Ran, before I had over 14 years of experience in global asset management. Seeded top quantitative funds since 2014, and I’m now the proud COO of Wootrade.
Hi guys and thank you for joining us here today! While researching, something on your website particularly stood out to me – that Wootrade intends to capture 40% of the liquidity within the overall crypto markets. How are you currently working towards this? Also curious to understand your projections for reaching that goal and any relevant milestones?
The first thing for us [was] to prove product market fit and we have done that with Wootrade v1.0. There are a few new/second-tier exchanges such as HOO.com which utilize our services and the results can be seen on their order books by all. When we first launched a few months ago, the user experience was pretty bad to be honest, and we only had spot – no margin. We honestly didn’t expect the amount of loyalty we received with this launch but instead of leaving the service, we had additional exchanges contact us to use Wootrade – even when the tech wasn’t that mature.
Now that our tech stack is revised and margin trading launched, we expect client flow to increase pretty dramatically. All of this is still an early phase for Wootrade. we plan to add futures and other trading products in the next few quarters as well as launching an ultra intuitive trading platform for active traders Wootrade’s goal is to reduce the barriers to entry for all participants so that will be the major push after the trading platform is launched. We can’t say too much on this at this time.
Daniel Dal Bello
I want to get into the detail of what you are talking about here Ran… so, one of the first critical questions for me is surrounding the concept of “dark pools” and “Alternative Trading Systems”. Can you introduce us to the concept of dark pools, ‘lit’ exchanges, and toxic and non-toxic order flow?
Why are dark pools necessary for the cryptocurrency ecosystem? How do these new or second tier markets as you mentioned actually engage with you and benefit here?
Let’s address the dark pool question now. In traditional markets, dark pools are just private liquidity pools servicing mostly institutional clients. Their orders may be created by thousands of retail [investors] trading through their platforms so it’s the end users that derive most of the benefits. Kind of like Robinhood offering zero fees to their clients and still getting decent execution quality.
Usually the bigger guys care very much about execution quality and privacy. The general market also benefits though since those big spikes up and down will happen a lot less. Since we provide our services without any trading fees and actually rebate those who bring us flow, eventually exchanges will be able to offer ZERO fee trading in spot and futures to their customers.
‘Lit’ exchanges are like Binance / Huobi, etc. where all the orders are visible. If you are a large trader like Three Arrows Capital for instance or QCP, you would not want to show your orders which could impact market prices causing worse execution. Wootrade is a hybrid – we will have lit orderbooks and also have dark liquidity – we provide the tools for serious traders to really take advantage of opportunities in the most efficient way.
Daniel Dal Bello
What’s the difference between dark pools and functionality like on KuCoin, for example, where you can post hidden orders?
Good question! Market-makers in a dark pool are training their algorithms to handle flows correctly from particular clients. Citadel might be super well-trained to take flows from Robinhood and are able to offer prices BETTER than what they can get on lit exchanges AND also provide a rebate to Robinhood. Trading through a dark pool, the client is able to achieve superior execution AND a rebate. Let’s see KuCoin try to do that.
To tie in to this – how are you able to provide this zero-fee (or even negative) trading environment? Building from this, what is the broader revenue model for the business?
A lot of people ask about the revenue model. When users generate revenue from staking into various products, we could take an asset management fee. On the trading side, we do charge margin fees like all platforms even though there are no trading commissions. We also get rebates, and this is a big one, from market-makers such as Kronos Research. Wootrade could route its orders to the big exchanges OR could route to the alpha-based true market-makers, it really depends on who will give Wootrade the best price but typically market-makers offer better prices than exchanges.
In this way, Wootrade earns from the market-makers and uses those revenues to incentivize other flow providers to route orders here. We may also have a flat monthly service fee for a premium app but those details aren’t fully hashed out yet.
The notion of offering stuff for free sounds alien to people. Normally when something is free, you’re the product, but as Jack mentioned we have a sustainable revenue model.
Daniel Dal Bello
WOO is your native token that enables some key functionality within the platform. For example, it can be used as trading collateral, and for mining, staking, and payment. How does the token “unite liquidity providers and seekers into a mutually beneficial economy” as you say in your documentation?
At a high level, liquidity providers (market-makers) and seekers (exchanges) are both incentivized to join the platform in the short term and stick with the platform long term.
For the short term, we are all familiar with economic principles such as liquidity and transaction mining so we are running with a similar concept. Longer term, market-makers will be vying for a spot on Wootrade to trade with the flow here and so they may be expected to stake tokens or spend tokens instead of receiving tokens. They will not only stake tokens but also rebate x tokens per dollar of flow and Wootrade then uses that to incentivize more of the right type of flow into the ecosystem
Daniel Dal Bello
Governance and tokens that have governing characteristics or utility are generally hot right now. Almost every new DeFi project has some form of governance capability designed into their token.
For Wootrade, the direction seems to be toward an off-chain ‘Governing Council’. Who will be a part of this council? How does the token become involved? Lastly, what decisions will the council be making?
Firstly, we disagree with the completely decentralized governance model in the beginning. A project in its beginning needs to be able to make decisions intelligently and efficiently. Having to vote on everything and relying on crowd intelligence would not achieve the right results.
This is why we are decentralizing the governance slowly as we onboard more partners (exchange clients, market-makers, community leaders, VCs). We initially will form the council with the founding team and our CTO. Next we plan to add in a couple of VC / exchange partners. As we iterate on our product, business model and market fit, it will be more clear who is adding value and who isn’t.
A minimum 5M of WOO tokens are required to be a ‘PRIME’ node and we would have the same requirement initially for to be eligible to participate in governance decisions such as which tokens to list, the rebates required from market-makers, etc.
Going forward, as the governance is more open, we will introduce the concept of voting points, which can only accrue based on factors such as duration and amount staked, and your profile – whether you are a VC or user.
Daniel Dal Bello
What impact does your experience at such a large and sophisticated trading entity like Kronos Research have on what you are creating with Wootrade?
Having a trading background definitely helps as the competition becomes more sophisticated going forward. We lean into our experience a lot when designing the minute details of our platform, everything from the infrastructure to the products and features have one purpose: to serve the needs of the most demanding traders.
Daniel Dal Bello
Thanks for joining us, great to talk in this depth.
Really superb questions, the quality of this group is evident. Thank you for taking the time to dig into our thinking!
We are working hard now on scaling what we’ve built to more users and will be happy to update you guys at each milestone!
The best AMA we’ve had so far. Kudos for the in-depth questions. Got some great new content we can share with our community now!
The text in this summary has been adapted to correct grammatical errors and for presentation purposes. We thank our guests Jack and Ran for joining us for this AMA. For more information on Wootrade, visit http://woo.network.