On The Brink with Castle Island - Brett Harrison (FTX.US) on Crypto Market Structure (EP.298)

Episode Date: March 17, 2022

Brett Harrison, the CEO of FTX.US joins the show. In this episode we discuss: Brett's pre-crypto career and the path to leading FTX.US How FTX is evolving on their derivatives product offering Perspectives on crypto market structure in the US will evolve How equity markets may come to be impacted by innovations in the crypto world How FTX is pursuing NFTs and gaming To learn more visit FTX.us and follow Brett on Twitter  

Today I sat down with Brett Harrison, the president and CEO of FTX US. I was excited to have Brett on the show and we had a good conversation about crypto market structure, crypto derivatives, and Ftx's plans for equities and NFTs on their platform. This one didn't disappoint, and I think you'll enjoy it. So without further ado, here's my conversation with Brett Harrison. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an

expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of quantitative easing.

You print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin. Bitcoin. Brett, thanks so much for joining on the podcast today. I said before we started recording that I've been following your market structure ticks on Twitter for a while. So excited to geek out with you today. Yeah, thanks for having me on. I guess a good place to start would be your background and what led you to your

seat now at FTX? Sure. I've been with FTX since May of 2021. I got my start in traditional finance working for proprietary trading firms. So out of college, I worked for Jane Street Capital. It's where I overlap with Sam, Bank, and Freight. We were there several years together. So I was there 2010 to 2018. I was a software developer building algorithmic trading systems and low latency order entry gateways and market data handlers and then also managing software developers to build that kind of technology. I then moved to Chicago with my family. I worked at another HFT called Headlands Tech doing futures trading. And then at Citadel Securities, where I was managing the ETF ADR and Options Technology Groups. And then towards the end of my time there, Sam had reached

out and asked if I wanted to come over to FTX. And at the time, I really didn't know much about crypto at all, but said, you know, let's do it. I'm down to jump into whatever's going on at FTX. It seemed like everything happening with FTCS is amazing. And that's how I got my way into crypto at FTX. It's a wild origin story. I'm always curious what draws people into crypto in the first place. For some people, they hop in and they see Ethereum and it's, okay, this makes all the sense in the world.

Here's a neutral application launching platform. Other people see the monetary use cases. What was it that convinced you that it was real enough to take the career risk? Primarily, the thing that attracted me most was maybe not something so specific to the asset class itself, but more the group of people and the things that were building around it, which is that it's very open. Everyone's talking about what they're working on, everyone's investing in each other.

People are reaching out to each other on Twitter to give feedback, positive or negative, to suggest ideas to create new kinds of initiatives and things like this. It's very different from the super secretive world of proprietary trading firms and hedge funds where you're chasing after that quarter tick

and making things lower latency in the same asset classes and you can't talk to anyone outside of your work from what you're doing. And so it was a breath of fresh air to jump into crypto where things felt so much more collaborative. Yeah, that's definitely the case. I can't think of another industry where people are just sharing ideas in public. And it's really an idea of meritocracy at the end of the day. How many people that you know probably got jobs in crypto because they were saying interesting things on Twitter, right?

Like, it's a fascinating space. Oh, absolutely. A lot of people just say, oh, I got into crypto because I followed these five people and thought what they were saying was cool. And then hooked up with this person from Solana and then they dragged me over to this person and then we started a company, you know, things like that. I have it all the time now. Yeah, that's fascinating. So for those of the listeners who aren't familiar about the FTX structure, talk a little bit about why FTX US is a separate legal entity and what the points of differentiation are there. You guys are just stepping back on a little bit of background. So FTX or FTX.com was

started around two and a half years ago as an answer to other global derivatives exchanges that were something of a mess. You know, they were falling down all the time. They were calling back customer funds, liquidating people in inefficient ways. So Sam and the other co-founder started FTX to build a better derivatives platform, especially for professional traders. And that grew over time to now where it is, which is the second or third largest crypto exchange in the world by volume. Around a year to a year and a half ago, the company realized that we really want to be in the U.S. but the U.S. is the main place where there is license requirements to do most kinds of financial transactions, especially running in exchange. Derivatives in particular, you can't run in the

U.S. without having CFDC approved derivatives venue. So FFTX.com was operating in basically every jurisdiction except for the U.S. So Sam and FTX launched a separate company entirely from FtX.com called FTXUS, and it's separate for regulatory reasons. It needs to be. So it's separate leadership, separate office, separate servers, separate staff, separate compliance and customer support people, a lot of the share technology between FTX.com, FTX, US, but otherwise runs separately. It also has received and is pursuing licenses separately so that it can operate entirely within the US regulatory regimes. And so you guys have done a good job. It seems like the customer experience is very similar across the two platforms, though. Yeah, in many ways,

FTXUS has just been sort of a strict subset of the features of FtX.com, although we can expect that to change a lot this year. But because of the experience and the software technology overlap between the two, we've been able to grow the two platforms together. And not just on the technology side, but on the cultural side too. One thing that makes FTX pretty different as a company is people can reach out to us on Twitter and say, you know, I'm having trouble with my account. And they'll get a response. And that's true whether they reach out to generic FTX or FTXUS Twitters, but also to me or to Sam, they can get a response. And that's how that makes us unique.

Our care for the individual customer has garnered a lot of loyalty for FTX and our brand. I wish you did venture capital custody accounts because we could use a little bit of that right now. But I guess that's neither here nor there. One of the things that I'd love to get your take on is you're someone that understands the U.S. derivatives market structure really well. you guys have made some big, big moves in that space. So just talk about what you're doing in derivatives. This is by far our most exciting potential area for growth for the U.S. business, especially this year. So backing up again, thinking about crypto derivatives. So first of all, most crypto volume globally trades,

not in the spot tokens. It trades in derivatives, things like futures. Options aren't yet that big, but I think they will become bigger over time. But most of the volume globally trades in futures. In order to be able to offer futures to retail and institutional customers in the U.S., you need to offer those products on what's called a DCM or a designated contract market, which is a CFTC approved derivatives venue. So, example, CME, the Chicago Mercantile Exchange, is a DCM. That's a difficult license to obtain. It takes around, let's say, two to three years to get that license.

But on top of that, if you run a DCM, you have to have those futures trades, those futures products cleared, which means there needs to be a clearing house where the members of the clearinghouse, they pair off their trades, you figure out who owes what to whom, where do they have to actually post collateral for margin, where do you do margin calls and liquidations? That's all at the clearing house or the DCO derivatives clearing organization. That's an even more difficult license to obtain. It takes around five years to get that license. So there are very few clearing houses in the U.S.

It only right six or seven. One of the only companies to have both the DCM and the DCO license was this company, Ledger X, which was trying to become really the first crypto-native derivatives exchange and clearinghouse. And we acquired that company. It completed in October of 2021. And we rebranded them to FTXUS derivatives. And what we're working on right now with the CFDC is getting approval to be able to offer margined Bitcoin and Ether cash settled futures,

directly to retail institutional customers. And I'm happy to go more into all of the unprecedented things that we're doing on that front. That makes us very different from other futures venues. Yeah, I would love to hear more about that. And I guess I'd also love to get your take on cash settled versus physically settled and how you think about those two product offerings. In terms of cash versus physical settled, I think they both have their benefits and they both have their disadvantages as well going into the settlement period for a physical settled product.

But sometimes there can be wacky things that happen around settlement time. And I think for Bitcoin in particular, for Bitcoin and Ether, the cash settled product seems to be one that's a little bit more intuitive to people. They're buying something at a particular index price. And they want to settle that to whatever sort of the cash value is. They want the exposure related to the product. And so it's sort of simpler to do the actual settlement procedure when it's in cash. But to be honest, both would work.

If there was a crypto-native platform where you can actually post Bitcoin as, collateral for either the cash or physical settled product, I think that's the thing that's really missing in the U.S. If you think about the CME, they have a cash settled Bitcoin future. Back ICE has a physical settle Bitcoin future, but you can't post Bitcoin at the CME as collateral for a futures trade. You have to post cash. And their initial margin is still pretty high compared to other futures products. So it's still very capital inefficient to trade futures on the CME, which is why CME is something like 2 to 3 percent of the global derivatives volume, even though in things like fixed income futures or equity index futures, CME completely

dominates global volume in terms of derivatives. And then in terms of what is interesting about what we're trying to do that differentiates us from a lot of the existing players, there's two different things to discuss. One is the direct-to-customer model. So the way that derivatives venues are typically set up is they go through intermediaries, for the customer. Those intermediaries are another CFDC license called the FCM or Futures Commission merchant. So these are like your traditional brokers. They're the ones that sort of sit in the middle. They're the ones where the actual clearing members of the DCO. And they sit in the middle and

provide leverage to the customers who are coming in. They're the ones who are doing credit checks on their customers to see if they have enough creditworthiness to be able to offer the margin. if they're running out of collateral and they need a margin top-up are the ones who have to go and chase those customers down to post more collateral. FTX.com and the other international crypto derivatives exchanges don't work this way at all. They're direct to customer. It's sort of like the simplest thing you can imagine building. You go on FTX.com, you type in your name and address, you submit your documents,

and sign of an account, and you're a direct customer of the exchange. You can't go on CMEgroup.com and download like the CME iPhone app and create a user account, and start trading S&P 500 futures. It doesn't work like that. So with this direct-to-retail model that we're able to do, we currently don't have approval to do margin in that setup. And that's the thing that we are very excited about doing right now. So we've submitted like an 800-page application to the CFPC

to get them comfortable with our margin model with our risk engine, so that they will allow us to do that direct-to-retel margin. And so it'll be the first time that an actual exchange in Clearinghouse really own that customer relationship directly. That's sort of number one. Number two is the CME, the way that they do margining, is they set the required margin levels once per day and only on normal trading days. So what's irrelevant to the news going on in the world right now, let's say it's like 3 p.m.

on a Friday and someone puts on a very, very large futures position. And then on Saturday, you find out that there's news that war has broken out. And all of a sudden, futures move violently. Well, they're not going to be able to reset those margin levels until. Monday at the end of the day. And at that point, there's going to be so much dislocation between the market value and the margin required and where people are actually trading what their positions are. And as a result, risk can't really be flushed out of the system until a long time later. FTCs, the way that we do margin is it happens every 10 seconds, 24-7. So the other thing

that we're trying to get approved right now is the first ever real-time cross-asset portfolio margining system that works 24-7. And we think these two things will be really unprecedented in terms of what we're able to bring to derivatives markets and not just crypto. I mean, there's nothing that would stop us from, you know, listing a FDX corn future or soybeans future or crude oil future. And so that's why we're really excited about the potential for getting this all approved this year.

It's really exciting because in other asset classes, you just don't have this 24-7 dynamic. You also don't have a block-by-block dynamic and you also don't have a perfectly visible ledger of all the transactions, right? So there's a lot of just crypto-native things here. So in order to get this market structure approved, is it just a regulatory issue? Or do you imagine that you'll have hurdles around market participants not wanting this structure? How do you imagine this playing out? Well, I think it's all of the above. The primary thing is it requires regulatory approval. But in order to get regulatory approval, there needs to be general support, both from the industry and politically. And you can imagine,

that we're in a position where we are trying to disrupt otherwise intermediate market that's been around for decades. And so there's, of course, going to be natural pushback from the incumbents who want to keep things the way they are. They have the best of interest to keep things the way they are. So it's a little bit of both, but the primary thing we're waiting for is approval from the commodity futures trading commission, which is the regulatory body in the U.S. that oversees commodity futures. And in this case, Bitcoin and Ether for the purposes of regulation are considered commodities. So when you think about just the market structure for crypto, you could almost look at this and say, there's a couple ways this could go. We could just take existing market structure and

put crypto into that framework. Or there's another path where crypto is instructive around new market structure revolutions that could happen in equity. And I'm curious your take there on how that's going to play out in the equity world. Super interesting question. It's definitely the case that right now, there is clear market oversight over spot equities. And to some extent, spot currencies, although it's mostly unregulated, but spot equities. There's also clear oversight over commodity futures, things like corn futures, Bitcoin futures. But there isn't a current market oversight regime for spot commodities, which is where Bitcoin and ether fall. And that first thing I mentioned the spot equities, that's the SEC, commodity futures, that's the CFDC,

this gray area in the middle of what to do with things like Bitcoin spot to USD markets, that's where there is the confusion over who has jurisdiction. And then given who has jurisdiction, how should the market actually look? So an example of a way that crypto has evolved very differently from equities are with equities, the matching engines like NASDAQ, NISI, BATs. All they do is they match up buyers and sellers, but the actual clearing happens somewhere else. That happens, you know, with the DTCC. And the actual prime custody of the securities and the cash behind that happens at prime brokers. And then the firms that are actually introducing the orders to the exchanges are broker dealers. And there's also unregistered ATSs and registered ATSs and dark

pools and 13 lit exchanges. There's so many steps in the process. And if you look through the history of how this all that sort of makes sense. But if given the opportunity to make it all over again, I think you would do exactly what crypto did, which is just say like, okay, the exchange does it all. Right. We'll hold your funds for you. We'll do all the risk and liquidation for you. We'll do the matching. We'll do the clearing instantly. It's not going to be T plus three or T plus two settlement. We'll do it immediately as soon as the trade happens. We'll be your iPhone app and your website where you sign up for an account and trade. And it's all vertically integrated. So things like NMS, like national market system for equities where you have to always go to the best price in any venue doesn't really make sense in crypto because otherwise you'd have to hold cash at each one of these different exchanges.

It's not like it's all going to clear in two days at a net settlement procedure at a clearing firm or with different clearing brokers. So the model itself is very different, which makes it very difficult to imagine squeezing something like FTXUS into the same regulatory regime as NASDAQ. Right. On the other hand, it's clear that there should be market oversight for SPAC crypto exchanges. It should be the case that all exchanges have to follow some rules for, for example, making sure there isn't market manipulation. There are in people who are, you know, layering and spoofing and wash trading in the book. And, you know, these kinds of things that have been hopefully effectively squashed out of equity markets through rules. And of course, we do impose all of these checks and rules ourselves, but there needs to be some sort of oversight to make sure that everyone's playing by those same. rules. So I think hopefully the answer is something like either the CFDC or maybe some joint

combination of the CFTC and the SEC gets jurisdiction over the spot markets. And it fits into a very similar market oversight regime as exists for equities and futures markets. But by and large, crypto market microstructure stays the way it is and how it's naturally developed because that seems to be how it's organically worked the best. I would certainly be in favor of that, certainly versus the SEC having more of a say on these spot markets. One of the things that I find really interesting is around just prime brokerage in general right now. And you have this need. There are market participants that want to have capital that want to have the ability to access various venues,

but they need to have capital tied up on those venues. And there's various ways to approach that. There's some upstart prime brokerage companies that I think are really interesting. But the banks are nowhere on this. I don't think they'll be there anytime soon. So how do you see that prime category evolving? I think that either exchanges or separate private companies that are not banks, like the fireblocks and anchorages of the world, are going to be developed to be able to provide those services. You're exactly right. The downside to the system that I mentioned before is that if you have only $50 million in capital and you're not really sure at any given day whether you're going to trade that on FTX or Coinbase or Cracken or Gemini, you don't want to have to split up that $50 million. into like 12.5 million on each of four exchanges, because that's not very capital efficient.

What you like to be able to do is deploy the entirety of your capital where you need it at any one time. And also, unless you're within certain banking networks, it could be difficult to move the money around those different exchanges in a quick matter. So there are these companies that have come about that provide this custody service where they take your assets and they lock it up. And then they will post basically on your behalf credit for you on the different exchanges and let you trade directly under those exchanges and then just sort of settle up at the end of the day, those are going to become more and more popular for these larger institutions that have capital efficiency issues.

I think that's a way to provide this kind of prime brokerage type model for the people who need it, but not be required for the people who don't and not also require some kind of single central clearing entity where all the capital has to flow through, like the DGCC, for example. Right. Back to that point that you made around the. there is not an entity where you can post crypto collateral. You know, CME just does it cash. Do you imagine that's something that you could build or do you imagine that's something

that would need to be a market utility? How would that play out? I mean, that's exactly how FtX.com works right now. Let's say you want to trade a Bitcoin future on margin. So we see what the initial margin level is for the future. And then we look at your portfolio across all of your assets, not just Bitcoin. We look at your cash, your Bitcoin, your Ether, your Solana, all the different tokens that you have on there, and we assign a collateral value to each one. So maybe USD is 100%

and Bitcoin is 90%, maybe Solana is 75%. And we look at your total portfolio value and assign a collateral value to that. And then you can use that to go put on margin trades. And that's exactly what we're going for in the US, where we will be able to take as collateral actual physical crypto in addition to cash and maybe in the future other things like treasuries. And that be able to be used to post-margin. The big difference between the way we do it and the way that it works right now with the traditional FCM model is we require that collateral to actually be on the exchange in your account for you to trade.

It's different from the FCM model where if there's not enough collateral, they basically have to go and ask for more to the client. Because we've operated in this direct-to-retel mode where we've had clients in 180 countries, If there's like some retail trader in Thailand who starts to go negative in camp post margin, we're not assuming we can go find that customer and get them to post more margin. We need to make sure we can orderly liquidate them and make sure that they don't go completely underwater in the process. And so that's why we think that we're ultimately going to do a better job for risk because we have the collateral on the exchange. We can assess what's going on in real time.

We can do slow liquidations up to the point where they reach zero and not have to worry about this problem of trying to go out and get people to send us more close. That makes a lot of sense. And clearly one of the things that you'll be in a really good position to do here is to cross-sell your customers, other types of financial products. So how are you guys thinking about traditional equities on the platform? In addition to derivatives, the other thing I'm personally working on is building out a stocks trading platform on FTX US. These are just vanilla US stocks and eventually vanilla US options. So not like token eyes or anything like that. And the thinking there is that if you look at the success of a company like Robin Hood, they built this stock trading app that everyone likes to use.

And then they added crypto. If you look at their crypto offering, they only offer two coins. And you can't actually deposit or withdraw crypto from that platform. You can only sort of trade it within the walled garden of Robin Hood. And yet people are still trading a ton of crypto there. And the reason is because if you're a normal retail investor and you have $12,000 in your savings account that you want to invest with, you really don't want to have to split that up between $8,000 on Robin Hood

and $4,000 on FTX. It's just, again, too difficult to move capital back and forth, and it's a high fixed cost of doing so. You want to do all your trading and you're investing in one place. So for us, we're going to go the opposite direction. We have our crypto product, we think is fantastic, but we want people to want to keep their savings with us so they can invest in all the different ways they want to in one place,

whether they're buying a Bitcoin or buying a share of Tesla. And so we're going to be enabling stocks trading platforms. All that can happen in the same place. And we have this grand vision of being able to do anything you'd ever want to do from one place. You want to buy Bitcoin. You want to buy Tesla. You want to buy an NFT.

You want to hedge that exposure with ether future. You'd be able to do that all within one main trading interface. That's what we're really excited about building out. That's awesome. So on that equity front, I'm curious, you know, I spent a lot of time looking at the various private blockchain, like equity on blockchain things over the years. And there's some obvious limitations there just around the SEC's posture towards approving ATSs and defining possession and control. Do you imagine that we're going to get to a point where equity will be tokenized

and traded on a blockchain? I think it's possible. I think it's a difficult regulatory environment to leap frog from the current world of traditional stocks to tokenize equities when we haven't quite figured out where tokenized Solana fits or tokenized Polygon. But I do think we'll get there. The most similar model I can think of is the ADR, the American Depository Receive. This is some number of decades ago. Someone realized that if you want to, as an American investor by Nintendo or Nokia or some sort of foreign company, rather than have to open up a foreign bank account and then convert currency to the local currency, buy local shares, and then eventually move that back to the U.S., convert back, convert the currency.

back, it'd be nice if there was some sort of receipt that could be fungible for that underlying stock, but trade on the New York Stock Exchange, for example. And that's how the American depository receipt was created. And so you have your depository institutions like Bank of New York Mellon, who basically just take hold of the underlying shares from that you create these derivatives by delivering them the shares or paying them to create them for you. And then they can trade on a normal exchange like anything else. Hopefully, tokenized stocks can take a similar path where basically some sort of custody agents can take hold of the actual underlying shares and then issue a token that can always be fungible for those underlying shares. And then that token can

trade on a normal exchange like FTX or Coinbase or wherever. And that can trade 24-7. It can be instant settlement. It can be fully transparent. You can know the exact full short interest in the system which would be interesting to retail people right now. And then be able to leverage all that while still having the full economic tie to the underlying security. And that's actually how tokenized stocks work on FTCS.com, those tokenized stocks are really derivatives, their receipts for underlying shares that are kept at a German broker deal or that actually holds the underlying shares. And so I think that there's at least some precedent in traditional market infrastructure for that to happen. But you are right that the taste right now for blockchain infrastructure

entering the traditional equity markets is not super open-minded right now. And I think we'll hopefully make some progress on that the next maybe 12 to 24 months. I guess that would allow you to do a lot more interesting things on the platform in terms of looking at assets holistically and drawing down margin on certain types of assets. Yeah, and even just the instant settlement 24-7 nature of it, I think would be a really great advance for traditional markets. Yeah, for sure. You mentioned earlier the options market. Why isn't the options market a lot bigger? It's a really good question. I naively thought, well, Bitcoin is extremely volatile and options are a valve product. So people would want to trade the vol product for an extremely volatile asset. My best guess here, this is from talking

to some other trading firms in the industry who traditionally trade options, but have not yet gotten deep into crypto options in particular. I think there's two sides. One is that in the U.S., there hasn't really been a liquid venue for options. And again, something that we maybe hope to change in the coming year is through Ledger X is to be able to have on margin Bitcoin and Ether options. Right now, there's actually fully collateralized Bitcoin Ether options on Ledger X, but I think that the margin is going to be key to making that a successful product. The second is that right now, the intrinsic ball for Bitcoin and Ether, for example, is so high that the options themselves really don't move much when the underlying moves.

So let's say you are a retail investor and you're looking to buy options to sort of like a natural leverage. So you buy some out of the money call hoping that if Bitcoin makes a big spike, you'll get 10, 15x return on your investment, right? Well, it's going to be disappointing for that user when Bitcoin moves up 10% and the options move up 1%. Because how high the intrinsic ball is. And so, like, the actual realized deltas are too small to really matter. And people don't want to trade a product that's a derivative that doesn't actually move

in line with the underlying product in lockstep. And so I think that's also kind of keeping people out of the options market right now. I think maybe as crypto stabilizes more as an asset. which will have to happen when more institutional money flows into crypto, combined with a better liquid venue for it, maybe then we'll see more interest and options in general. Yeah, I think that makes a lot of sense. One of the types of assets that I personally hold on FTX, US, is NFTs.

So you guys have done a good job getting a product to market very quickly there. How are you thinking about NFTs as part of the overall strategy? That's something else that I worked on a lot personally and I'm very excited about. So NFTs right now are a really interesting technology as a way of being able to prove cryptographically digital ownership in a way that's never before been possible prior to the invention of the NFT technology. We think it holds a lot of promise. Right now, the primary way we see NFTs in the marketplace are through these sort of

collectible avatar type projects. And we think it's great and it's really been brought a lot of interest into crypto for the first time, we think the actual potential for NFTs is much greater than that. One of the ways we're most invested in the future of NFT technology is in gaming, and we recently launched a gaming division to actually explore ways of working with game studios on integrating NFTs and blockchain technology into their games. So the example here is, imagine in the world of Warcraft, the game, what people have been doing for the last number of years is leveling up some character a lot, and then wanting to sell that character to someone else.

The way they do it is they go on eBay, they say, like, I have a character for sale. Someone pays them directly through eBay, and then they send them over a password over email or something like that. It's basically like a black market for game items. Imagine instead if that were just an actual NFT and it could transfer on a market and there was price discovery and liquidity provision and all of the normal market dynamics that come with an item that might have some sort of fair market price that people are going to want to trade.

We think that's a really powerful concept that game studios are going to want to take advantage of, basically systematizing the marketplace around their in-game currencies and items. And play to earn might be one small part of this, but we think it's bigger than that. Being able to take technology and apply it to things that are already happening in games, these in-game economies at scale. So that's a little bit why we're so excited about building out the NFT marketplace. It's not just for the existing NFT offering, but it's for all the future potential, like all of the integrations with potential games.

In FTX, the parent entity has been very active in venture investing in the gaming space as well. So it seems like it's an integrated strategy around gaming. Yeah. So a separate company has launched recently, an FTX venture funds, a $2 billion fund that's looking to make all sorts of venture investments, but particularly in the area of games, looking for game studios that are building these great games, but also have general interest in blockchain technology. And if you're right, these two can work in tandem.

The actual company itself, we invest in. We can follow along with their progress, see how they are going to grow as a company, and then also pass them on to the actual exchange side and get them to white label the exchange services for things like crypto custodial wallet services, KYCing for users, if they're going to be able to do payments and trading, NFT, minting and selling and buying. So this is what's going to be in demand from these companies that we're investing in. The other category of NFTs that I find fascinating are real-world NFTs, so fractional ownership in real-world assets that may be immobilized someplace. Do you see that as a growing piece of this

NFT market? Especially real-world experiences. We recently did this partnership with Coachella. We launched these NFTs where there was a limited supply of 10 NFTs where each one would give you a lifetime pass to Coachella, the music festival. And there was all those interest there because instead of NFTs being some abstract idea of ownership over the original minting of a particular piece of art, for example, it actually is linked up to a real world gated experience that only you have access to if you have that NFT. And we think between that and NFT tickets and the different kinds of NFT collectibles that get you into certain experiences or Discord chats or these kinds of things, and that's like a really powerful concept and we'll think will be another killer application

of NFTs as it grows. I think so. I mean, you could imagine having an NFT to allow you to have a good seat at a restaurant under a certain parameter, for instance. It's kind of bringing something into being an asset class that previously was unmonetized. Or monetized, but not in an efficient way. I mean, you could buy like a gift certificate to a restaurant, let's say, and give that to someone. But instead of that being a bespoke thing that each individual venue has to create themselves, there can be this shared marketplace and technology that everyone leverages. they don't have to reinvent the wheel there.

And so it's taking something that really has already existed, but just digitizing it. It's really interesting. So Brett, you guys are hiring like crazy. I'd imagine what's on the roadmap here and where can we send people to learn more about FTX and see the open roles? The big roadmap over the coming year are going to be in four main areas. So one is continuing to expand our crypto offering, especially trying to go after more retail customers.

So right now, FTXUS has around a million customers. which is a lot given that we had maybe 10,000 customers at the beginning of 2021, but it's not yet the 60 million customers of Coinbase. And so we're going to be continuing improving the quality of our mobile app and our website and the whole onboarding experience about those users. That's number one. Number two is going to be growing a derivatives platform, getting that approval from the CFTC, launching those futures products this year.

That's number two. Number three, our stocks offering and four for NFTs and potential gaming integrations. So those are the four main places that are we're going to be able to. we're looking to grow. We do have a lever site where you can go on and see the available openings for jobs at FTXUS. If you go to the bottom of our website, FTXUS, there's jobs openings, but there's lots of ways you can follow us. You can go to FTX underscore official on Twitter. You can follow me on Twitter, but underscore FTXUS. We are always very transparent about what we're doing on social media and very excited about people giving us feedback about what they want from the product

and what they're looking to see. And we like engaging with our customers directly. So we definitely welcome people to do that. That's awesome. Well, I'd love to have you back at some point in the next year, probably, as you start to launch these new derivatives products, talking market structure with you is a lot of fun. So I appreciate you coming on today. Absolutely.

Thanks so much. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island. To listen to all of our podcast episodes, please go to On the Brink-Podcast.com or just click on the tab in our website. Thanks for listening.