People sometimes forget that DeFi really only started in 2020. So the nascent sector is now entering the first down cycle of its youthful life. Despite this, innovation continues. One of those sectors is derivatives, which I find particularly interesting. While tokenized equities and other conventional trad-fi investment mechanisms are gaining more and more traction, it is inevitable that the net will be wider to incorporate some of the more complex strategies. ZKX is a derivatives trading platform, built on StarkNet, which recently announced that it has raised $4.5 million in seed funding. Among the investors – of course – is Alameda Research, the Sam Bankman-Fried-led company that seems to be making all the cryptocurrency headlines these days. Crypto.com is another notable investor. I had a few questions for the start-up as I was curious to know more. Below you will see the Q&A with ZKX founder Eduard Jubany.
CoinJournal (CJ): How would you describe ZKX and StarkWare, for those who may not be aware?
Eduard Jubany (EJ): ZKX is an open protocol for derivatives built on StarkNet, with a decentralized order book and a unique way of offering complex financial instruments like swaps. The protocol is powered by a DAO and will provide an elevated trading experience with gamified leaderboards and unique net governance. With a prominent position among the StarkNet ecosystem, our mission is to democratize access to global earnings through its offerings for anyone, anywhere. We chose to build on top of StarkNet because it provided us with access to an environment where we could perform tasks that were not feasible in other web3 setups and because it connected us to a community of developers curated within the Starkware ecosystem.
CJ : I see you previously worked for SOSV, a VC with $1B+ in AUM, among other roles. How did you get involved in cryptocurrency (and ZKX)?
EJ: It’s an interesting story. I worked for venture capital funds in Asia and the United States. While working on SOSV with Naman, we discovered a huge opportunity to serve users in emerging markets such as Indonesia and India. We realized the numerous limitations people faced when trying to access financial opportunities. As a result, the idea of ZKX was born to help people in emerging markets gain access to opportunities that were not previously available to them. We wanted to enter the market and we were discovering how the GameStop saga came about. But the reality proved to be a little more complicated. Even buying a GameStop share was very complex and it was difficult for us to buy and participate in this income opportunity. And that’s when we thought: what about the average user in these markets if it’s complicated for us? ZKX was created from the idea that everyone should have access to investment opportunities, creating equal conditions for people from different countries and origins. Ultimately, we decided to focus on the ZK-Rollup technology because we believed it would be the most scalable way to reach these emerging market users.
CJ : Many projects failed during the last bear market. Do you think it will be the same this time around and how is ZKX positioned to avoid that fate?
EJ: In relation to the first quarter of the year, there was a deceleration. Traditionally, crypto and traditional markets have always been inversely correlated. One declines, while the other rises. But sadly, the impacts of Luna’s collapse are still being felt, along with a broader economic slowdown. ZKX and the team building it have already gone through a few cycles and we can plan accordingly. Also, market movements are about price, not value. It does not reflect the value of what is being built in space and the innovation that is happening behind the scenes. We believe that the capabilities we are developing at ZKX are an important puzzle to drive the democratization of global markets. While there is less commercial activity throughout the space, what we are building is future-proof. The advice for everyone in the bear market is to build and prepare a runway for the long term and eventually grow during the bull market.
CJ : I notice that one of the investors is Alameda Research, which has recently been acting as a cryptocurrency lender of last resort, if you can say so. Were you happy to have Alameda on board, and does the increased risk they’ve recently taken worry you?
EJ: Alameda and our other partners have been actively promoting and building the Web3 ecosystem for years. They have a mission to drive the entire industry forward and build better infrastructure and awareness. The slowdown is global and driven by macroeconomic conditions, with the Federal Reserve tightening interest rates and reducing risk across all asset classes. Most of these companies have had solid revenues and finances for years, but now face loans and investments that may have gone sour. This should only strengthen the ecosystem in the long run, cleaning up the bad apples and focusing on the strongest players. Decentralized DeFi platforms remained strong and operational without major issues during the recession, while centralized exchanges and providers failed, proving the case for decentralized finance and infrastructure.
CJ: Are you afraid of regulation amid the cryptocurrency derivatives space?
EJ: Crypto derivatives allow retailers and institutions to protect themselves from any negative price movement. As such, these are healthy tools to have in the ecosystem. The events of the last few months prove that the decentralized protocol can withstand and withstand tough conditions, while the centralized entities cannot. Protocols like Aave or Compound remained strong while other centralized entities perished. As the rules and management are encoded in smart contracts that reside on the blockchain, we hope this will give regulators a better understanding of how decentralized protocols can be fair and safe for users.
CJ : The decentralized derivatives trading area has shown immense growth in the last couple of years. What advantages do you think this has over the centralized equivalent and do you think it can capture significant market share?
EJ: The main barrier to adoption is the user experience. As of today, most decentralized protocols require a cryptographic wallet to connect and interact. With the advent of account abstraction and zk-rollups like Starkware, we realized the potential to offer simple onboarding experiences like an email login credential for everyday users, while avoiding the pitfalls and complexities of the DeFi experience as we know it so far. .
