Johnny Lyu, CEO of crypto trade KuCoin
Crypto trade KuCoin at the moment occupies the fifth spot on CoinMarketCap’s ranking of crypto exchanges, solely topped by Binance, FTX, Coinbase and Kraken. Three of the highest 4 exchanges boast considerably deeper pockets than KuCoin. Binance, the world’s largest trade by quantity, reportedly generated no less than $20 billion in estimated income in 2021. Coinbase, a publicly-traded firm, made roughly $7.84 billion in income final yr. In January, FTX raised a $400 million enterprise spherical, taking its whole funding to $1.8 billion, per Crunchbase.
Launched in 2017, KuCoin has develop into one of many world’s prime exchanges, reaching 18 million customers, in line with the corporate. Its rise in rankings has occurred regardless of having comparatively restricted sources in comparison with bigger exchanges. KuCoin now has improved sources, although, having lately raised $150 million in funding, taking its whole enterprise funding to $170 million at a valuation of $10 billion.
I spoke to KuCoin’s CEO, Johnny Lyu, to seek out out what crypto buyers have to learn about KuCoin, its enterprise mannequin of itemizing altcoins, the position of merchants from growing international locations within the crypto market, the trade’s plans to onboard new crypto customers, competing in opposition to the Binances and the FTXs in addition to KuCoin’s plans for Africa.
Oluwaseun Adeyanju: It’s fascinating that KuCoin launched in September 2017—roughly two months after Binance launched. Binance has gone on to be the most important crypto trade on the planet. And, after all, KuCoin has come an extended technique to develop into one of many world’s largest exchanges too, however actually a tad behind Binance. The numerous distinction I see between KuCoin’s and Binance’s respective launches is an preliminary coin providing (ICO). Binance launched after elevating an equal of $15 million in an ICO; KuCoin didn’t conduct an ICO. Would you say a possibility was missed by not launching by way of an ICO in 2017? Do you suppose it performed an element in why KuCoin didn’t initially develop as quick as Binance?
Johnny Lyu: We didn’t conduct an ICO as a result of we had ample funds obligatory to start out and develop our enterprise, so a token sale wasn’t our precedence. And I don’t suppose there was a missed alternative as a result of we’ve been capable of develop our platform as meant. We have now our personal plans and priorities to stay aggressive. As an alternative of specializing in our opponents, we’re extra vulnerable to concentrate on the folks with us in addition to our product. That’s how we collected our first one to 2 million customers within the bull run from late 2017 to early 2018.
Adeyanju: That’s fascinating. This might recommend you financed preliminary operations by way of a pal and household spherical. Is that proper?
Lyu: KuCoin was funded by the founding crew within the first yr. We raised 20 million {dollars} in a Collection A funding spherical in November 2018, backed by IDG Capital and Matrix Companions. The funds had been used to increase KuCoin’s world attain and create the infrastructure to advertise a lineup of recent merchandise.
Adeyanju: I’m curious to know simply the way you achieved that type of development—buying 2 million customers inside months after launching. I might think about you didn’t have a big crew on the time.
Lyu: When KuCoin began, we had seven co-founders and three workers. We had been a 10-man crew in whole. Seven of us had been engineers and the opposite three dealt with buyer assist and token itemizing operations. I imagine that we did two issues efficiently to make KuCoin increase on the time. The primary one is the launch of KCS, our native token. Truly, the worth of the KCS token surged nearly 100 occasions within the 2017/2018 bull run, which helped us appeal to a whole lot of merchants. The second is that we listed many altcoins within the early days, which additionally helped us get a whole lot of customers by phrase of mouth.
Adeyanju: Was this technique of itemizing altcoins pivotal to rising your userbase to the 18 million customers you talked about in your latest fundraising announcement?
Lyu: Sure, that’s proper. Itemizing promising altcoin is a giant a part of our technique. From the early days, we figured that, whereas bitcoin and ether will proceed to be the key tokens, most merchants will need entry to extra tradable belongings. That’s why KuCoin is without doubt one of the few exchanges that began to listing many promising altcoins. However alongside this, we additionally spent the bear market of 2018/2019 strengthening our infrastructure and product providing. We launched many new options like margin and futures buying and selling, and we’re additionally one of many first platforms to introduce staking providers for proof-of-stake tokens. We additionally adopted the market pattern and launched our personal launchpad platform. These initiatives helped us appeal to many new customers when the latest bull run arrived.
Adeyanju: I’d prefer to go a bit of deeper into your technique of itemizing altcoins. However let’s spend a while speaking about the place you’re headed as an trade, particularly after lately securing $150 million in funding. What’s subsequent? Is there going to be a change of technique?
Lyu: Typically, we’ll proceed to be the folks’s trade simply as our slogan says, and this implies we’ll evolve ourselves on the premise of the wants of our clients. We’ll proceed to seek out and provide the subsequent crypto gem on our platform. Additionally, the trade continues to be in its infancy, and we have to deliver in additional customers. KuCoin is targeted on onboarding as many customers as potential. I imagine three main obstacles forestall new merchants from beginning their crypto journey. The primary one is insurance policies and rules. The second pertains to on-ramping from fiat to crypto. And the third one is about how you can begin the primary commerce.
For the primary half, the regulation half, KuCoin is making an attempt to use for licenses in lots of markets, and we’ve already gotten a few of them. We are attempting to increase our fiat on-ramp gateways for the second half. In November, we launched our fiat account function, which permits customers to deposit fiat reminiscent of euro and US greenback to the platform. We’ve additionally introduced one other fiat enchancment regarding our integration of SEPA, which is sort of well-liked in Europe. For the third half, which is about making the primary commerce, we seen that many new merchants might hardly perceive the order guide in addition to phrases like restrict orders and cease orders. So we are attempting to supply a simplified interface for them. We’ve additionally seen that those that know how you can make a commerce nonetheless wrestle to make buying and selling choices. That’s why we’ve launched social buying and selling options referred to as KuCoin S, which permits customers to get to know extra about how different folks commerce and to get to know what is occurring available in the market. All this data might assist them to make higher buying and selling choices—to enhance their probability of constructing a revenue. On the product aspect, we’ll put money into bettering our choices by way of social buying and selling as a result of we imagine that is the pattern of the long run.
Adeyanju: How does the social buying and selling function work? I’ve seen this concept mooted within the buying and selling of conventional monetary belongings. Particularly, I imagine eToro affords that function. How did KuCoin’s social buying and selling options evolve?
Lyu: We discovered that social buying and selling might assist our clients as a result of many crypto newcomers are overwhelmed by the brand new jargon and experiences. If others in crypto might assist them to know this trade higher by social interactions, we imagine will probably be simpler for extra folks to get into the crypto house. That’s the preliminary cause why we created this concept. I additionally suppose that the trade is evolving actually quick. And we all know that different gamers are keeping track of the market. So, we imagine that after extra gamers have acknowledged the social buying and selling concept, perhaps extra exchanges will comply with this pattern. However we don’t fear about that, although, as a result of we imagine that is the correct transfer for the trade to realize mass adoption.
Adeyanju: Is entry to the social buying and selling function on KuCoin free, or does it require a subscription? Once more, as I discussed, I’ve seen some experiments of this concept within the inventory market, the place you comply with a dealer and pay a subscription, a part of which the dealer receives. Does KuCoin’s work in the same means?
Lyu: At present, it’s completely free, identical to our buying and selling bot options, which had been launched earlier final yr. At present, over 7.9 million bots have been created on KuCoin, however it’s nonetheless free. Customers don’t have to pay an additional price to make use of these instruments, however after all, they nonetheless have to pay the buying and selling price.
Adeyanju: What then is the inducement for a dealer to permit others to repeat their trades?
Lyu: We’ve additionally seen that we could have to incentivize skilled merchants to share their commerce. We could think about including extra platform incentives to encourage skilled merchants to share their methods sooner or later. That will embody compensation from the individuals who comply with their trades, however that’ll be sooner or later, not now.
Adeyanju: You talked about that KuCoin is taking regulatory compliance critically. As you recognize, the unique concepts that noticed the start of crypto revolved round decentralization and privateness. These concepts and regulatory compliance don’t all the time agree. How does an trade steadiness the necessity to fulfill regulatory necessities whereas providing privateness and decentralized entry to customers that need these options?
Lyu: To begin with, with regard to regulation, I wish to say that know-how is harmless and irreversible and that each blockchain know-how and cryptocurrency exchanges have introduced revolutionary advances and improvements to the world. These improvements have enabled the worldwide free circulate of worth. I feel regulation can be sure that this know-how and innovation reaches the subsequent stage. The emergence of any new know-how begins with a interval of immaturity. The purpose of regulation is to not suppress new applied sciences and methods however fairly to domesticate a good surroundings for additional growth.
Additionally, your entire crypto trade doesn’t need to be totally decentralized to attain its unique intentions. In reality, centralization, as a function, is what has helped crypto develop as quick because it has. That mentioned, I feel the decentralized and centralized markets can coexist. That’s why, though KuCoin is at the moment a centralized trade, we’re additionally growing some decentralized merchandise. We lately launched funds to assist Net 3.0 improvements reminiscent of DAOs, metaverse and NFTs. We additionally launched a decentralized pockets that can basically function a gateway to the Net 3.0 world. Our pockets helps multi-chain aggregation, which makes it potential to transact with a number of kinds of crypto belongings in a single place. We intend so as to add DeFi, NFT and GameFi functionalities sooner or later.
Adeyanju: Okay, I see that. I wish to begin concluding with a number of further questions. First, from which area do most of your customers come—I’m assuming it’s Asia, proper?
Lyu: Truly, not significantly. Most of our customers are typically from growing international locations. However by way of contribution to buying and selling charges and revenues, developed international locations in locations like Europe contribute extra.
Adeyanju: Okay. This tells me that you’ve deep pursuits in Europe and growing markets. Do you thoughts sharing insights into how European markets differ from growing markets? Are there any misconceptions?
Lyu: Typically, merchants in growing markets are extra lively; they’re very keen to check out new issues—whether or not a brand new undertaking or a brand new exercise. And by way of their funding quantity, merchants in growing markets choose to commerce often, however the buying and selling quantity is comparatively smaller in comparison with their European counterparts. Alternatively, Western merchants are typically extra rational, most likely as a result of the monetary trade within the area is extra superior. In the event that they imagine in a undertaking, they’re keen to put money into it long-term. In addition they are likely to commerce much less typically however in bigger quantities. Yeah, that’s the overall state of affairs.
Adeyanju: That’s fascinating to know. Do you suppose this pattern is pushed by the truth that Europeans are typically wealthier than merchants in growing markets, and subsequently they see new initiatives as a technique to make quick cash?
Lyu: I imagine merchants in growing markets are extra lively and keen to attempt new issues for short-term funding returns, partly as a result of that is how they perceive the finance world. Their European counterparts grew up in a really developed monetary world. So, basically, I imagine it’s as a result of the monetary trade works in a different way in lots of growing international locations in comparison with European international locations. However I feel, within the crypto house, the place there are a whole lot of improvements on daily basis, we do want these lively merchants who need to check out new issues, these early adopters. Take the latest hype round GameFi, as an illustration. We seen that essentially the most fascinating GameFi initiatives are from Asia as a result of most gamers are from Asia, proper? With out these early adopters, these improvements can hardly go to the lots. I imagine that the activeness of Asian merchants, in addition to these in different rising markets, brings volatility to the market. And volatility is essential for a monetary market as a result of each volatility is a chance for everybody within the trade.
Adeyanju: That most likely explains why you listing a whole lot of altcoins—since most of your customers are from rising markets. However isn’t that too dangerous, contemplating these cash are vulnerable to pump and dump schemes? Do you’ve measures in place to stop or restrict this susceptibility?
Lyu: First, merchants and buyers should perceive the dangers and take private accountability earlier than making funding choices. The essential and most essential suggestion is to test all of the details about an asset and never purchase cash that develop in worth in a short time. Within the funding area, threat and return are equal; anticipating excessive returns will inevitably entail excessive dangers
That mentioned, at KuCoin, we concentrate on high quality whereas making an attempt to deliver a wider vary of promising cash to the general public. We have now an skilled analysis crew who full due diligence earlier than itemizing cash, which ensures that we will forestall our customers from most scams within the trade. However as I mentioned earlier than, this trade is stuffed with uncertainties—together with market impression and human components. Customers nonetheless want to know these uncertainties earlier than investing.
Adeyanju: I additionally need to contact on this new pattern within the crypto trade enterprise. In the end, I feel the trade enterprise shall be a market of capital, the place whoever has essentially the most money to run an trade may construct an outsized moat. And we see markets like Coinbase FTX and Crypto.com spending large on conventional advertising and marketing. How will KuCoin compete in such a market?
Lyu: We’ve seen these large strikes from different exchanges. Typically, completely different firms have their advertising and marketing methods. However for KuCoin, this may not be the very best route for us. To be sincere, a whole lot of sports activities groups have approached us to debate potential collaborations. However after discussions, we determined that, even when we now have such a finances, we wish to put money into our product. As a result of if in case you have a whole lot of advertising and marketing and promoting … sure, you possibly can improve your model consciousness. However model consciousness just isn’t all the things, proper? Even when many customers know your trade however your product just isn’t adequate, the attention is nothing. So for KuCoin, we’re extra keen to put money into our product to make sure that we will higher serve customers’ wants. That is what issues to us essentially the most on the present stage.
Adeyanju: Let’s wrap up by speaking about Africa, a area I cowl. How does KuCoin see Africa, and what are your plans for the continent?
Lyu: I imagine blockchain know-how is a big alternative for all of the growing international locations and the folks in Africa. To be sincere, Africa is a vital market to us. We have now about 15% to twenty% of our customers from the continent. Nigeria and South Africa are two of our largest African markets. I feel KuCoin might help in two methods. First is schooling. Typically, we’d like extra schooling and coaching to assist the merchants in Africa to start out their crypto journey higher and discover real initiatives to put money into as a result of everyone knows that there are nonetheless a whole lot of scams on this trade. I imagine merchants ought to have the experience to distinguish between genuine and faux initiatives. That is an space the place we’re keen to assist. We wish to have extra academic or coaching applications to enhance the professionalism of the African buyers.
The second means we might help is to put money into and incubate promising initiatives from the area. We have now an funding arm named KuCoin Labs, which invests in early-stage initiatives. We’re keen to assist African entrepreneurs to construct localized providers that talk on to African residents.
Adeyanju: Thanks in your time.
