The Pomp Podcast - Yoni Assia, Founder & CEO of eToro: From the Army to an Award Winning Crypto Platform

Episode Date: May 29, 2019

Yoni Assia is the Founder & CEO of eToro. In this conversation, Yoni and Anthony Pompliano discuss their backgrounds in the military and what they learned from those experiences, how eToro started and why Yoni got them into crypto, DAOs, and the future of eToro's US expansion. ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. Yoni Asya is the founder and CEO of eToro. In this episode, we discussed our backgrounds in the military, how eToro got started, why Yoni helped build the Colored Coin Project, how Yoni decided not to join Vitalik in building Ethereum, what his thought process was in getting eToro into crypto, and how Yoni is planning to expand into the United States. I really enjoyed this conversation and I hope you do as well. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely

their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys, bang, bang, get ready. I have a secret that I'm going to uncover for you. A bunch of you guys are going to feel real dumb right now because you're about to hear about a company that you've probably heard the name, You have no clue what they do, and you have definitely no clue how big they are. Yoni's here, CEO and founder.

Thank you very much for coming and agreeing to tell some of your secrets. Thank you for having me, Paul. Bang, bang. All right. So you're not American. Most people don't know who you are. Let's start from the very beginning in terms of your career and kind of how you eventually get to starting eToro. Sure.

So I'm an Israeli. All Israelis are badasses. Yeah. Born and raised in Israel. So a real one. Got my first shares of a company for my bar mitzvah. So my father was also a CEO and a founder of a company, which was actually went public on NASDAQ. Okay.

And he gave me some shares as a present for my bar mitzvah. And while my brother and sister sort of were hodlers, just kept it, I actually asked him for a power of attorney to my account to start trading it. He wasn't that happy, but it was his son's request. So I started trading when I was about 13, completely fell in love in the markets. Then the dot-com bubble started, which was fucking awesome to trade. I mean, you know, you could have made 500% in three months on a penny stock. Everything was going up.

It was like, just like the crypto. Crypto 2017, it sounds like you're talking about. Exactly the same. And I learned a lot about the markets, fell in love in the markets. Then went into the army as a programmer. I remember actually in my sort of during the draft, I'm with my uniform and my M16 on the back. And I'm calling my father from a pay phone with, by the way, what's called in Israel a simon or a token. Okay.

A pay phone. And I'm like, what's happening in the markets? What's happening in the markets? So this was like where everything was crushing, 60%, 70%. so then I became a programmer I sort of throughout my army service and the intelligence Corps unit learned a lot about technology then started a company with guys from my army unit which has nothing to do with the markets except the fact that it was around roller coasters roller coasters okay we

We developed video cameras and installed them on roller coasters like in Paramount, Disney. So you could actually buy a video of yourself on the roller coaster. So the only thing that's very similar to the markets are the markets are like a roller coaster. And then I started working on eToro in 2000 and brainstorming about eToro in 2005 with my older brother, Ronen. So Ronen comes from industrial design background. and he used to make fun of me during our childhood that I have an accountant fetish because he used to see me as a 14-year-old finance geek

filled with like screens and the charts and the pink newspapers and hear the conversations around sort of the markets and he said, listen, it sounds super interesting but it looks horrible. Like the user interface of whatever the fuck you're doing is just horrible. Am I allowed to question you?

Yeah, of course. You can do whatever you want, actually. There's zero rules on this podcast. No censorship in podcasts. Okay. So we just started brainstorming about how can we hack the user experience? How can we make it basically simpler and more engaging, more fun to trade the global markets? And that's how we started eToro.

Just thinking about how do we make this more simple, more fun? on how do we engage with more people than are engaging with the markets right now. And so let's go back first to the Army. I'm fascinated. I was in the U.S. Army, right? You're in the Israeli Army. I was actually joking around with somebody at your company a lot, and I told him that every Israeli is a badass because they're forced to go through the training,

and then they each make each other tougher as a nation, right? what was it like to do programming in the intelligence side while being in the army right for me i was just a a dummy with a gun and a foot soldier right and just got told to go do what i needed to do uh you were kind of to be intelligent right what was that like can i tell you off the record yeah of course yeah no so you're gonna be great you're gonna be a podcast cursing off the record great start yeah i'm gonna have to kill you after um but so uh first of all obviously didn't make me any tougher because i'm a geek uh and and i just sort of i i started as uh they called it a pc boy uh where they don't necessarily train you

as a programmer they just give you stuff to do so you know you just walk in the room and people tell you i need this and that and this to automate and you're like okay i'll figure that out uh so it's really interesting because what's really interesting about uh at least in israel the tech part of the army is they pay something like 150 per month for people uh but these are you know very smart people who go through you know very uh specific either training or tests uh so you get into this place where you have the smartest people, you know, everybody in the room is the smartest person in the room. So everybody's brilliant, but they get paid nothing.

So people just give them work and somehow magic happens. So it's a super interesting environment because I've never seen after, and this was like 17 years ago, you can see that amount of smart people in a room together working on on you know on a problem outside i think those places uh because anywhere else you you just calculate and say okay to bring in like 200 extremely smart people you know from all areas uh okay that would cost me for like a month i don't know a gazillion dollars so i can't do it So, and that's how you get very difficult stuff solved.

It's, it's really interesting, those types of experiences, because there's the physical component, there's the intellectual component. And what I've learned, and it sounds like probably some things that you as well, is all the soft skills you learn, right? The leadership, the problem solving, the whole idea of like, hey, go figure this out. You don't really have a chance to say no. And you're just like, all right, I'll be back in two days. And like, you just figure it out, right?

And you're kind of thrown into the deep end. I think that's a lot of my experience from that is exactly that, that you need to throw people sort of into the swimming pool for them to learn how to swim. And the good ones will learn how to swim. And that's the guys you want around you. And it's, by the way, what I've learned across then my sort of business career is that a lot of the experienced managers that I've, you know, either interviewed or seen or worked with, they come from a different point of view of people need to be told exactly what to do. And I think generally, especially in startup world and entrepreneurship world, you just need to assume that you need to tell people what the problem is and that you need a solution. You need to let them find the solution. It's funny because I saw somebody tweet this on Twitter, and I forget who it was, but they basically said, your job is not to hire people to tell them what to do. Your job is to hire people who surprise you by what they can do. Right?

And it's this whole idea of, you know, you just point, look, this is a problem. You guys are all smart, figure it out. And if you've hired the right people and kind of built the team structure, et cetera, correctly, they can do that and will probably do it better, faster, you know, more efficiently than you would have told them what to do, right? And so I think that it is, it's a dynamic of companies in general, but especially startups, young founders take time to learn that and the faster they figure that out, the more effective the whole team is.

By the way, sometimes it's something in the middle. So, you know, you want to get A to Z. In the U.S. we say Z, but yeah. Yeah, Z, A to Z. And like sometimes good leadership is like, okay, we're at A. I want to get to Z. Z. Hey, that's inconsistent.

But I want to go through like D and H and O in the middle. I don't care if we miss some, especially as Israelis like. But generally, that's still fine. So you should be able to tell people, I'm here. I want to get there. And I want to go through. I want to see this happening. I want to go through these specific letters.

And that's fine. You should be able to direct people. And they should fill in the gaps. Yep. Right? That's the difference between vision and execution. I think that's a great way to put it. All right.

Let's jump to eToro. You guys got a massive business. What the hell do you do? So we're the largest social trading network in the world. What does that mean? That means that people can trade stocks, commodities, currencies, indices, ETFs, and cryptocurrencies on our platform. We have last year, we have 10 million registered users who last year traded about a trillion dollars on our platform. And they trade within a social network.

So relatively early on, what we found out is that the most engaging part of the platform, this was a trading platform with a super slick UI. So our first patents was about how do we gamify the user experience in financial trading. and what we've learned is that the most engaging part of a platform is actually the social part where people talk to one another so people were coming into the chat they saw other people's names and they were like hey tal what are you trading are you trading the euro again are you trading dollar are they trading oil so gradually what we did is we took the whole social part and made it the center of the platform so when you join etoro you can actually see what hundreds of thousands of real traders that have real money in their accounts, what they're trading. You can follow them to get updated on the feed on every trade they do or comment that they have on the markets,

and you can automatically copy them. So you can find a trader from Germany trading German stocks who did 30% here for the past three years, and you say, okay, I want to copy this guy with $1,000. It'll automatically copy his entire portfolio into your $1,000, same proportion. So he has 10% in uh in volkswagen 10 in google you'll have a hundred dollars in each and then every time he trades it trades automatically in your account all right so hold on let's uh just so people didn't miss this you have 10 million users around the world yeah who traded a trillion dollars last year a trillion dollars in volume in a single year is absurd right yeah i love that number a trillion a trillion like if you had hit uh what it'd be 990 billion then that would have really

sucked, right? So hitting a trillion is a big deal. And what they're essentially doing is they're coming there for two reasons, right? One is they can trade a whole bunch of assets, right? So stocks, commodities, currencies, indices, cryptocurrencies, ETFs, a whole bunch of stuff. But the part that you're describing is this layer on top of it, right? Because you can go trade stocks, a lot of different platforms. But the social component of having a profile, having a portfolio somebody being able to follow you you follow them communicate right follow not follow all this stuff really what you did was you built a community of traders who then you gave them access to trading these assets and it resulted in what are we 12 years since you started the

company yeah right 12 years later they did a trillion dollars in annual volume it's pretty incredible yeah fun fun as well all right let's talk through what did you start with right so So 2007, you guys start the company. I'm assuming you don't start with all those assets. Right. You don't start with all the social stuff. So we started with visualizing trading in the FX markets. Then we started going through sort of the transition into a social network around 2009-10.

This was also when we heard our first U.S. investors. So Howard Linsen from StockTwits, then Spark Capital invested basically the B round and C round in eToro. And then sort of we became a real social network. And in parallel, we started adding commodities. So it started FX, then commodities, then indices, whether it's S&P, NASDAQ, Dow Jones, but also all of the European ones. So when you trade stocks on eToro, it's not only U.S. stocks. We trade stocks from 13 different exchanges, basically from Hong Kong to European ones, etc. And then we started adding stocks.

I think the first time was about 2014. And so as you're doing this, you're building this massive business, right? And as people at home can probably tell, I'm super impressed by what you guys built. But you had a parallel life in crypto. So when did you first come across crypto? And then we can get into some of the things that you did that probably people don't even know that you were doing. So we started sort of playing around with Bitcoin in 2010.

We actually bought for the company's books. So I got excited from it. This was, I remember buying Bitcoin with PayPal through like a faucet thing on the internet. But we actually started buying in Mt. Gox. I recently, because we still have like 10 Bitcoins there. So I had to go through like the history of our trading in Mt. Gox. So we bought $50,000 worth of Bitcoin at an average of roughly $5 per Bitcoin.

And then I came to my board. Actually, it was a bit more complex. So we started, we called it Bitcoin X. Bitcoin X, okay. Bitcoin X. And the concept of Bitcoin X is let's build a decentralized exchange. This is 2011-12. Let's build a decentralized exchange.

And a part of the presentation of BitcoinX was we're going to launch a token on top of BitcoinX and we're going to give it away to the first contributors. So we're going to do like an ICO. And this is like there was a group there of a lot of the old OGs around this. And then I presented it to my board and they were like, Bitcoin is money laundering.

that you were not allowed to touch that in the company like that's horrible if you have an idea there like spin it out spit it out uh that was when vcs were extremely toxic uh around crypto like investors in general like they're they heard bitcoin back then that was like uh you're a big red alert you're a criminal that's money laundering i had a complete you know heard a couple of lectures of you're running a financial institution you can't touch that shit don't you know you have to get away from that as fast as possible and at some point and they were like sell it sell it and at some point i'm like yeah let's not talk about it in the board anymore um and then i started paying programmers uh i was at bitcoin talk and i i decided okay company doesn't want to deal with

it but it's still interesting so let's just tell the world things that are interesting and and what i think we can do with this technology and i started writing about colored coins um i think mid 2012 i started writing about colored coins and bitcoin talk uh then jr willett who eventually did the second bitcoin white paper and master coin uh started responding to it and there was like a a group of about 250 people in Google groups who started basically some of them coding. I actually send people Bitcoin. So I would send them Bitcoin and ask them to, like,

you know, write a white paper or write some code. Alex Mizrachi was very active. He's a guy from Ukraine who runs now ChromaWay. And then one day I got an email from someone saying, hi, I'm 19 years old and I want to work on your project called Card Coins. I have some JavaScript expertise. I think I can really help your contributing. Do you have anything to do with me for like two days a week? And who was that person?

Vitalik Buterin. so all right and by the way and i replied yes so he wrote the the first javascript uh web wallet for back then there was no web wallets everything was still like downloadable was mostly bitcoin core uh and was a web wallet where you could actually register a new token right so you could actually register ibm shares or the euro or the dollar so our vision was let's tokenized traditional assets, Euro dollars and Yens on top of the Bitcoin protocol. So we actually wrote the code for the wallet. Then he wrote the white paper working with our team. And he actually came to our offices. This was late 2013, late 2013, October 13,

to work on the white paper of colored coins. And at some point he just said, listen, I don't think you can do it on Bitcoin. It's not the right platform. And maybe you need to build a new blockchain. And everybody was Bitcoin maximalist back then, right? By definition, everybody's because it's the only thing you have. And we thought back then, basically, the Colored Coins group started forking away. What was the idea for Colored Coins?

Colored coins concept was you can take a Bitcoin and you can color its origin basically on the blockchain itself to say this specific Bitcoin is actually pegged to gold. And all of the Satoshis, each of each of the Satoshis that represent this Bitcoin, each of them is an ounce divided by 10,000. And therefore, if anybody sends now one of these ounces on the Bitcoin blockchain, you'll be able to backtrack and say, okay, this is actually gold, right? So if I'm the issuer and I'm saying, hey, I'm coloring this Bitcoin with gold and I'm now selling it to people and the value of those Bitcoins is actually the value of one Satoshi is equal to one divided by 10,000 an ounce of gold. And I'm committed as the issuer, whoever brings me back one of those Satoshis, I'm going to pay them back in gold, right? So that was the concept, basically what became eventually Tether on Omni, which is MasterCoin, which was a related sort of project back then. So we thought of let's build a platform to tokenize, to enable tokenization of anything, starting with real world assets, right? So fiat and commodities on top of the Bitcoin network.

And what year is this? This is 2013. Okay. That's a long time ago? That's a long time ago. And it's pretty forward thinking to have been thinking about it at that point. For a whole bunch of reasons, that group, Fragments, doesn't happen, right? So 50-50, it did happen.

So there was coloredcoins.org. Yes. There was an open source project that we supported. um the then basically sort of ethereum forked away to become ethereum okay um and uh chroma way sort of forked away to become what's today chromo police uh but you're not talking about code when you're talking about fork you're talking about the people the people left the colored coins group yeah and to go start different projects it was people sort of forking yep away the concept to to various different groups implementation they wanted to do it

We eventually spun off the company to a separate company called Colu, which then kept on working on colored coins, the protocol, and sort of built the protocol. But I think eventually, after Ethereum sort of emerged, we actually realized it's a better tokenization platform and actually works as a tokenization platform. so we all gave up a bit about the original vision of colored coins yep um it's fascinating because you're sitting there 19 year old vitalik emails you you have no clue what what he's going to end up doing right all this stuff it's just another person you answer um did you have a conversation with him when he kind of said hey i'm gonna go build ethereum and kind of go down that path or walk me through kind of your experience as a theorem got built right so first of all the there's a saying that one of my investors said

from time to time now i need to remind it to myself um don't regret investments that you haven't done because you you need to learn to regret on the investments that you have done so uh first obviously a mistake not believing that vitalik could set up a new blockchain and that it's going to be too complicated right so that was my first reaction building a new blockchain is super complicated why not use bitcoin and i was quite adamant around it second part is when ethereum started happening everyone around me while i you know i saw the vision of ethereum remember sending an email to vitalik i think this was even before the ico like you're trying to do to the legal system what

bitcoin does to money you're like smart contracts as you're trying to replace the entire legal infrastructure globally it's going to take gazillion years like i couldn't see the implementation of eventually an ICO and a term sheet, which basically started the whole crypto boom, in my opinion. But I still think the concepts of smart contracts for governance and for replacing legal systems, that's mind-blowing. Because if you can replace lawyers with coders, and if you can replace legal interpretation with discrete mathematical interpretation, that would make our lives, I think, much better. But I thought it would take much, much longer for something like that to actually happen. And the second part was, even when the network was alive, I still hold a

grudge against the people who told me that. Every person I asked about Ethereum, every single person I knew and I asked about Ethereum and, you know, I'm not technical sufficiently. You know, I have a master's in computer sciences. I'm supposed to be, but I'm a manager, so I'm not really. But every person who, you know, supposed to look at code and supposed to know what's working and what's not working, the difference between does this work or not explicitly told me Ethereum does not work and it is not going to work and it's garbage. And those are what we call today Bitcoin maximalists. And that was a big mistake, sort of being in that echo chamber and understanding I'm in an echo chamber. Again, some of them would still argue that it doesn't work. I have to say

I don't understand that argument. I'm like, but it's working. But I'm working with it. I'm moving stuff. It's actually, look, here's a token. So I really don't relate to that statement. Got it. And so while this is going on, let's go back to,

you're running eToro, which is a big company. And were you keeping kind of the crypto and the excitement and the innovation around money and legal frameworks, et cetera, separate or and at what point did they kind of intersect and you say okay we did the color coin thing right ethereum is obviously going to be a thing um that that's going to be big we probably should incorporate to what we're doing at etoro uh so we first of all uh launched bitcoin trading on the Toro platform, I think, in demo in around 2013.

Wow. Now, 2013, at least nine months, was me fighting with compliance and regulation people, explaining to them why we need to launch Bitcoin and why does it make sense, why can we do it on our platform under our securities broker license,

and eventually we launched it. I think demo trading was late 13. Real trading was beginning of 2014, right? So this was me in my company fighting with every single person in management that this needs to be done now because something's happening. We have to do it.

And then remember what happened in 2014. Mount Gox. So this was, I visited Mt. Gox, I actually looked at the papers for Mt. Gox to buy Mt. Gox, so I was with Mark in emails, I was in Japan, I went to their offices, and I'm like, wow, this is an amazing business. And I call my COO, and I tell my COO, you would not believe the amount of customers they have, and everything is automated, and everything is working. And then when Mt. Glocks happens, my COO calls me and says, you see what happens when everything's automated and there's no controls? I'm like, damn it, he's right. But that sort of started the crypto winter of 14, right? So we were, for three years, we had Bitcoin on the platform.

Nobody would trade Bitcoin. Like 2% of our users actually traded Bitcoin. And did they know what it was and they weren't interested? Or do you think that there was both the people who knew about it weren't interested and also just a lot of people didn't know about it? Most people didn't know about it. Yep. The platform was still much more geared toward, we also launched that year, equities for the first time. Okay.

We actually had a super interesting campaign, which is free stocks, but giving away free stocks. So you would open an account in eToro and we'd give people like free stocks, which was super successful. And sort of people didn't really look at Bitcoin back then. There wasn't any buzz. So it took three years, at least from the launch, till Ethereum happened. So when Ethereum started picking up after the DAO. Because it's like 2017. I think it's like end of Q1, beginning of Q2 is the first time Ethereum goes from like $10 to $30.

So we launched Ethereum with the platform at $6. Okay, perfect. And we started looking at, so first of all, I send this amazing, this was another blow. I send this email to all of the employees in the company. This is like back then, 250 employees about the launch of the DAO. And I'm like, guys, this is the future. decentralized autonomous organization oh my god somebody's launching a vc that has no managers and no voting right wow and i'm like this this thread to all of the employees in the company

uh super excited about it and i'm like you know you can buy like this ethereum and then invest in the dow and then the dow happened and like oh damn two for two on big ideas oh for two avoiding bad execution i still have a big believer in dow's by the way it will it will happen they will happen it's just we got work to do yep but but maybe fix a bit of the bugs first um but uh so that took us back a while and then uh we launched ethereum when it was six dollars and And we just launched like a second before it took off. And we were the only place in Europe and in probably other like 50 countries at least. So we operate in 120 plus countries where you could buy Ethereum.

You could invest in Ethereum and in Bitcoin with a credit card because we're a securities broker. A lot of people deposit funds not only through wires and bank transfers, but also through credit cards, debit cards, PayPal, etc. And suddenly they could invest in the crypto markets through us. And then Ethereum went from $6 on our platform to $400 in like four months. And that became, you know, crazy viral. We saw amounts of users coming from everywhere, and they were just coming to buy Ethereum. And then we started adding more cryptos like XRP, Litecoin, et cetera, et cetera.

And then we caught the boom. And by the way, we have offices in Shanghai. So we got front row seats to really understand what's happening in China. So back then, we already had a big office in China. And China, by the way, I don't think people outside really understand how big crypto was in China. Much bigger than in the U.S. Oh, for sure. The big exchanges.

China, Korea, and Japan. Huge. The pre-ban was an earthquake. There's two places where there was an earthquake. It's South Korea and China. You know, Japan to some extent, but they managed to sort of control it because of Mount Glocks that happened before. But our guys in China for a while, like, thought, you know, it's the end. You know, this is the big, you know, whole new beginning. Finance is restarting.

Everybody's going to look at their wealth from a Bitcoin perspective and measure their wealth only in Bitcoin. Everybody were doing ICOs. Everybody were doing ICOs. It's like you would go somewhere and your sister is doing an ICO, your mother is doing an ICO, your grandfather is doing it. Everybody's doing an ICO for something. There were more than 100 websites aggregating ICOs. In each of them, maybe 100 ICOs, like something really insane in its size. And then there was the Chinese ban, right?

And then August came in and everybody thought, okay, this is the end. By the way, interestingly enough, it got exactly to the point where we are now. So post-Chinese ban, Bitcoin went down from, I think, $7,000, $8,000 to $3,500. And everybody felt like this was the end. What I said is if Bitcoin survives that, that's like, you know, having a whole group of gangsters coming after someone. I don't know, who slept with the gangster's boss's wife. and they come in with these thousand gunmen and they're shooting down the house

and everything's rubble and then suddenly he comes up and he becomes this legend. This is what happened to Bitcoin August, September because everybody was sure like a Chinese ban, it's over.

And when it started sort of taking its head up again, I think that's when some beautiful mysterious forces said like, wow, this can resist a Chinese ban. This is super interesting. Let's go in. And then big money from somewhere came into the market and took us through the wide to 20,000. What's fascinating to me is, so the world you're describing, right? Many listeners to the podcast, they're in the US, right? Most of the listeners are in the US and you've built this whole business outside the US.

So you're a trillion dollars of annual volume outside the U.S. when all this is going on with Bitcoin and Ethereum, 2017, et cetera, all outside the U.S., right? And so what you guys got a front row seat was not just China, right? You obviously saw China, but you're seeing kind of the entire world and different areas are waking up more than others, et cetera. But they're all coming to you and they're saying there is a new type of asset we'd like to participate in. And so maybe talk about, you know, there's kind of initial bull run, China bans, it crashes a little bit. We see this resurgence into Q3 and Q4 of 2017 and even into like January, February of 18. What's that do to the business, right? In terms of like what's the impact for somebody who you have a core business outside of crypto and you add these crypto assets?

Yeah. Yeah. So first, I love how you ask these so rhetorically when we both know you looked at our numbers. I'm going to make you tell me all the fascinating things so everybody else knows how cool this company is. I think you signed an NDA. That's why I'm asking, not telling. But first of all, we grew from 2016 to 17 by about 400%, from 2016 to 18 by about 600%. We saw one day in 2017, I think it was December, peak of Ripple, sorry, XRP. um peak of we saw the number of new funded accounts at etoro in one day i think reached about 20 000 new funded accounts uh which is almost like a year maybe three years before that

or i don't know six to nine months uh so we saw in one day a hundred thousand registrations uh so mind-blowing numbers throughout that period um and then throughout 18 i was i have to say i was in denial the majority of 18 why i did not believe until when was it august uh fall from 6500 to around 3500 yep until that point i'm like it's a correction yep it's a correction i like in in consensus last year about may of 2018 i heard i sat down with a couple of the guys who like the ceos of the exchanges that were um founded back in 2012 13 and they all told me listen this is going to be as painful as the last crypto winter this is going to take a while two three years and i'm like it's a

correction it's a correction and it took me a long while to understand that you know the gravity of of sort of the uh the winter we're in part of that and and that's why we're very lucky editor Toro, or smart, depends who you ask. We're a multi asset platform. So we haven't so our revenues are still four times higher than they were when everything started. Because a lot of our customers who came to crypto, then went on to trade stocks and commodities and indices. And while we saw crypto becoming from 2% of our audience to almost 90% of our audience and volumes in crypto or revenues of crypto from our total revenues going from 2% to 90%, they're now back at 10%. Yep. So what you just described is a world where you went from crypto basically non-existent as

part of the business, right? You had Bitcoin in, but no one was really using it. Low single digit in terms of volume and revenue. And all of a sudden, it became your business, right? It became very high double digit percentages. And then through 18, as this all dropped, they returned. But the interesting thing is they returned to a level that is higher than before, right? I think that it's one of the most interesting charts. If you look at Bitcoin's price, for example, everyone always talks about the highs right and marty bent uh from tales of the crypto he talks about look at the lows every year what's the new low right and in six of the last seven years it's higher than it was the year before and all that but also the people who came in to trade crypto

even though that volume was going away in crypto a high percentage of them started trading traditional assets right so it became e toro users and they were asset agnostic um even though crypto was going away yeah what what do you think is driving that do you think it's the social components of the platform do you think it's just these people have a propensity to want to trade assets that goes to to to etoro's bigger vision i think significantly more people want to trade the markets than they actually do i think when we're talking right now people are hearing this podcast a lot of people in this listening mode they really want to buy bitcoin they think it's a good opportunity to buy bitcoin right now because prices are attractive they've been listening to

your podcast for a while but they're lazy and they're not gonna buy bitcoin until the next bull run and then they're gonna be afraid because it just went from 3500 to 4500 now maybe it's too late then it's five thousand no maybe now it's too late right so the problem is the majority of of the time we're not trading we're not in the markets because we're lazy because it's not accessible because you need to wire money somewhere you need to transfer money somewhere um and it's very hard psychologically for us to move money to move money from your bank somehow became this very very difficult thing to do like to move money from one financial institution to another is like going to your dentist and I think what happened is crypto in general made it

easier but I think for us people came into the platform and became easier for them right and by the way there's a very big difference between the U.S. and the rest of the world the U.S. has E-Trade, Fidelity, Schwab, Ameritrade, sort of went through the E-Trading 1.0 revolution. That never really happened in most places around the world. There's a roughly 5 to 10x difference between the amount of people who trade stocks in the US to every other country in the world. That's a big opportunity, by the way, for eToro. So we're enabling people in, you know, anywhere in Southeast Asia and in Europe to trade US stocks where it's hard, it's expensive, and they're basically not used to it. They're learning on it from the internet, not from TV and not from their local

financial advisors, which want to sell them some shitty bank product. So that's a very big opportunity. And I think that's where, for us, crypto and the world of trading converges. Because once people start trading crypto, they get sort of hooked to the same thing that I got hooked when I traded in the dot-com bubble, right? You fall in love in the markets. You're certainly part of that complex web of the markets. So massive business outside the US. You just announced that you're coming to the US. The part that is very surprising to me. So most US investors, if they were to think, what is eToro like in the U.S.? It's probably Robinhood or Coinbase, right? You're much bigger than, for sure, Robinhood. I'm not sure about Coinbase,

but for sure, Robinhood, both in users, revenue, profitability, etc. Why come to the U.S.? I think from a longer-term perspective, we see the potential of tokenization of assets and sort of the underlying blockchain technology as something that's going to disrupt the infrastructure of financial services. Okay. And that the opportunity there is to really compete eventually.

And again, it's not direct competition, but it's like to build the new Goldman's, the new Morgan's, the new JP's. That's the size of businesses that we have opportunities to build, right? So you think about assets under management, It's a $150 trillion business in assets. And if you understand enough blockchain technology and you understand everything that's happening in the infrastructure and how the world works right now, which is completely chaotic, then it's quite certain that we're going to see transition of, I don't know, somewhere between $50 to $100 trillion into the blockchain in the next 10 years.

And within that transition, companies that are there in the space, positioned well, understand where the money flow is, they're going to manage trillions of dollars. Now, who manages trillions of dollars now? There are companies. I adore these companies. There's, what, less than 10 probably? No, no. You think there's more? There's more than 10 that manage trillions of dollars.

There's actually, I think, about almost 100 with hundreds of billions of dollars. For sure, hundreds of billions. The big Swiss banks, UBSs, was $2 trillion. I'm meeting more and more companies who manage $1 trillion. That's very interesting. The only one I can think of off the top of my head is Fidelity. I think they've got like 1.7 or something. Fidelity, Vanguard, if I'm not mistaken, JP Goldman, Morgan, Citi.

Got it. You've got a few. Okay. And then you think about, okay, this is a very big opportunity. And the opportunity is eventually disrupting the capital markets. there's no doubt about the fact that the U.S. capital markets are sort of the example of capital markets in the world, right? That's the center of capital markets in the world, the most sophisticated capital markets in the world. And it's going to happen here as well. And it might happen on the

JP Morgan blockchain or on the Goldman Sachs blockchain. But we need to be here when that happens. And those are two very big and different trends. It's like one trend is the back end. The back end is going to get blockchain and tokenize and the front end is just going to get a hell of a better user experience so eventually everything is moving from user experience which is you trust your banker you do things sort of on these static forms you're waiting for somebody to convince you over the phone or in the newspaper to to you know to push notifications to emails to online marketing, everything's becoming online, you're getting these hundreds of messages a day to convince you to do a financial transaction. And then you're doing

it very fast on your mobile phone, right? So that's inevitable, from one end. And from the other end, it's the infrastructure becomes faster, easier to basically send and receive any type of financial asset worldwide, right? Whether it's, you know, a percent in a Van Gogh painting, or a percent in an apartment in Poland, or whether it's stock in Japan or Australia. So you've got these two very big trends that eventually make things simpler and easier. I think those two trends are going to sort of converge in the next 10 years. I think the US is going to be a very big part, obviously, of the global open financial system. Yeah, what you're talking about, the way I usually articulate it is we're moved from an analog world or the physical world where literally people traded physical stock certificates, paper money, all this stuff, to an electronic world.

The electronic world started kind of in the 80s, right? Now we can trade ones and zeros on screens, whether they're money, stocks, commodities, et cetera. But there's still a physical settlement time lag, right? Meaning that I may send you money, but there's a two- or three-day settlement time. I may send you stock, all that kind of stuff. We're now going to this digital world. So analog to electronic to now we're going digital. When we go to the digital world, we need three things.

We need a digitally native assets. So these are assets that are issued in the digital world. Those are tokenized assets. Tokenized assets, Bitcoin, all this stuff. So they're digitally native in the sense issued, governed, and exist solely in the digital world. They're not representations of any physical asset. So digitally native assets. Then you need digitally native accounting.

The ability for, if all the assets are computer files, right? And the ability for me just to copy those and then send them out, the double spend problem. Now you need this accounting. And then you also need digitally native contracts to govern all of these transactions. Smart contracts. Smart contracts. So you get digitally native assets, blockchain, and smart contracts. That world looks a hell of a lot like automation, machine-to-machine transactions,

or all the things that you were talking about along the way that you got excited about. That world is coming. It just takes a little bit longer to get there than probably you first think. It's going to take longer, but I'll give you an example. So my father was a Swiss banker. And he started, it's actually an interesting story on its own, but he started a bank in Switzerland together with the Israeli Mossad. And one of, I'm not sure I'm supposed to talk about this, but never mind. And I think that

And one of the reasons is because The Israeli Mossad needed to do payments Overseas back, that was back in the 50s So I heard a lot of stories From him about banking pre-computer age Right, think about it They did banking before computers Now, one of the stories he used to tell me

Is how do they reconcile every day right? And they had these books, ledgers, right? So every person had a ledger, right? Every account manager had a ledger. He had clients coming in and he used to open the ledger and in the ledger saying, okay, this person wants to move money from X to Y or wants to withdraw money, would go to the safe and give him his money. And then he would do all of these ledgers transactions with people one-on-one, and then he would close the ledger at about 3 p.m. every day. That's the bank account manager. Now, there was a process in the bank. He had many branches. There was a process in the bank where now in each of the branch, there was basically a person doing reconciliation

within the branch. He would take all of these ledgers. So you think 20 different account managers, you take all of these ledgers with a pencil and an eraser, and you create this combined ledger of all of the ledgers in the bank. So all of the transfers within the bank close up, but if the transfers are beyond the branch, they're still open. So at 4 p.m., somebody would come with a car and collect with each of the banks, would collect the joint ledger, right? And we'd go to the central branch, we'd take all of the ledgers of all of the banks, with the ledger, by the way, came the difference that the bank, that that branch had to actually move into the other banks or opposite, and he would reconcile all of those, right? And then he would send everybody the next day's ledger, but it was daily reconciliation, right? And the next day people came in and they had, OK, here's our ledger. Right. And then banks with transfers with other banks, that's much more complicated. That by definition could not be settled on T plus one. Why?

Because you had to first close your own books, then just, you could have said, okay, here's the money that's now outside of my banks, now let's reconcile between all of the different banks, and that's basically your T plus two. Now, that's basically banking today, right? So computers didn't change settlement times, they just enabled it to be more efficient, to be global, but the settlement timing process is still based on daily reconciliations. Risk management in banks to a large degree is still based on that. So we're looking at moving from daily to maybe 1,000 times a day or 10,000 times a day or 100,000 times a day. The level of efficiency potentially is not multiplied by 24. You don't have a block only once an hour. You suddenly have a block in real time.

And that's a very big change that also changes things to, like, leverage, right? So big banks offer you leverage, can offer you leverage of up to 25 times, 30 times, 40 times, right? So a process of leveraging the system is quite significant. In theory, in smart contracts, you know, if you think about milliseconds, you can leverage someone with 10,000 times, 100,000 times, right? So suddenly that changes the perspective as well, because the whole concept of leverage is generally based on the fact that the risk timing is one day. If the risk timing is suddenly a second, how much risk are you willing to take for one second, right? That significantly increases that as well. And we haven't started to scratch the surface of what that enables.

You're hitting on my favorite topic in crypto, which is while everyone is arguing over how overhyped is all of this, I actually think the question we should be asking is how much are we underestimating the impact that all this will have on the world, right? Everyone else believes that it's overhyped. I think it's underhyped. I argue the complete opposite, right? And I think that's why I like you so much is this idea that we actually can't comprehend how impactful this will be if it plays out how we think it will. I'll give two things. One is sort of easy to analyze. People can understand it, especially by the way people who understand financial services. So if you look at a country like Israel, when the internet came, everybody said, listen, this is going to destroy local media. And local media say, ah, no. And now it's pretty obvious that Google in Israel and Facebook in Israel is much, much bigger from a consumer point of view than the local newspapers, right?

So local newspapers and local advertising in newspapers and local advertising in TV significantly lost market share to Google and Facebook. And Google and Facebook are very, very, very big companies because they took that market share of local advertising. That's local advertising in a lot of different countries and obviously in the U.S. Now, if you think about the largest advertising companies in Israel, and then you compare them to the five largest banks in Israel, and then you compare them to the five largest insurance companies in Israel, each insurance company in Israel manages about $50 billion, right? There's five of those. There's five big banks. If you think about Australia, there are four banks

that are worth over $50 billion. If you go around the world and look at financial services companies, these are the biggest companies everywhere. In every single country, the biggest companies are going to be those mammoth insurance companies managing trillions or banks, etc. Now, you think about blockchain, what it's disrupting. When it actually disrupts the local financial services, it disrupts those companies, the big banks in every country who, by the way, and the difference is when a big bank or a big insurance company runs into problems, it's not like your local newspaper in wyoming going bankrupt people will might lose their money right there will be bailouts so this is much much this is this is at least 10x bigger than the internet because people don't

understand this impacts the entire financial services system and it's inevitable and that's the easy part which people can understand and relate to. The more difficult part is truly the de-pegging of the creation of money from government and what that means to a lot of countries out there. Now, it's very hard in the US to understand that. And I understand why, because the dollar is the world's currency. And everybody, when they think about the dollar, you know, it's real money, it's physical money, you can trust the dollar. It's been here for a while. But there are about 180, 90 currencies out there. And the average lifetime span of a fiat currency is 30 years. So unless you're in the UK, which by the way, now with Brexit is problematic, or in Euro,

or in the European Union, which again is a bit problematic, or in the U.S. or in Japan, right, if you look at the big fiats, if you're, you know, when most, the majority of people around the world, by far the majority of people around the world are based where their local fiat currency will probably either not exist, devalue by more than 80% or default in the next 30 years. Oh, for sure. And if you realize that that's going to happen,

then that's a very big paradigm shift because previously if that happened, you as a citizen of that country, you're like, okay, Israel had hyperinflation in the 80s. uh okay a shekel now was worth uh uh less than a you know 0.001 shekel okay there's a government bailout all of my stocks are worth now zero okay they were printing me again money i still own my house somehow you know it still still actually works everybody's taking care of you nothing

you know a lot of people lose money things shift whoever's smart sort of stays in the game now when everybody's connected to the internet and where people actually can buy bitcoin and can buy those assets globally it's those changes are going to be significantly different i usually go to this one line where i just say people are going to trust machines over other humans right and the reason why i say that is every fiat currency in the world is run by what is supposed to be a disciplined process of humans, right? The central banks, the Federal Reserve, right? Even dictators and countries, they're supposed to keep monetary policy discipline and it's all human decision making. Like the idea that in 2019, we don't know what the next interest rate decision is,

is wild, right? Where people are going to go in a room, they're going to look at some data, they're going to kind of lick their fingers, stick it in the air and say, I think that we should do X or Z. Absolutely nuts. The idea that I can look at an algorithm that is more transparent, I can see the code, I can look at exactly how the system is designed, I can go back to January 3, 2019, or 2009, look at every single transaction. And I actually know exactly what's going on in real time. I don't I can't say how much money is being printed right now. Right. But I can look on the Bitcoin network and tell you how much money or is how much Bitcoin is being produced right now. And then I can tell you what the disinflationary schedule is moving forward, right? It's coded into

um the code that's a very big shift but it just comes back to you and i already trust machines right if you come to new york and you get lost you don't ask somebody on the street you pop google maps right and say hey machine tell me where to go and so i think that is uh a big shift for people when they make it it's just a of course that's going to happen they just haven't sat and thought about it again it's in my opinion it's inevitable by the way ai coming to asset management is also inevitable okay explain that so you're thinking about things like uh interest rate change right yep and you imagine this room i actually sat in a central bank i won't mention which one very large country uh and i'm sitting in the room with people talking

about blockchain with the main guys there and like does anyone and i ask listen after a big discussion where they explained to me this was i think 2014 or 15 there will never they don't see any chance for a central bank issued digital currency and i'm like what do you think we're going to play with this paper in the next 20 years and they're like financial stability yada yada and i'm like how many people in the central bank have a computer science degree and they look at me and They say no one, no one in the entire central bank. There isn't a single person with a computer sciences degree. And I think that's the shift.

So changes in interest rate are a lot of people who don't necessarily understand how to compute things. they understand logic they understand psychological yeah they're smart people they're smart people they don't understand how things are being computed okay and that's a very big and that's the transition everything eventually should be run in the way computers run them but again the big asset managers in the world still today the active funds, eventually there's a person there saying, hmm, let's invest in Apple $100

billion. There's actually a person there making the decision and, you know, running an investment committee and signing a paper. That's still how it's done. There are ETFs, by the way, is a great example of something being automated. But think about what they automated. They're like, let's automate you know the simplest rule there is market cap waiting let's follow the index and that's it and it beats everyone right those are the simplest rules possible what there are probably smarter rules uh which algorithms and machine learning can come up with um right now obviously secret that's what algorithm hedge funds do but eventually that's where this entire industry is The part that just shocks me, and I joke a lot on Twitter just because it's a way for me to put these ideas out there in a non-confrontational, non-serious way.

But I am serious about them, right? I tweeted the other day and I said, Wall Street is under attack from technologists that are using their weapon of choice of math, software, and memes. Right? Kind of joke, you know, ha-ha, whatever. But the idea that they're actually using math and software, right? And what you're talking about here is the machines are smarter than us. like there's no argument about that anymore right my computer is smarter than me if it is applied correctly and so the challenge is one people have to be uh less egotistical and think that we are

smarter than the machines but also to to your point about the central banks not having computer scientists they could have the best computers in the world sitting there if no one knows how to use them or apply them it doesn't help them right so so there's there is this sort of metaphor not sure metaphor would be the right way to call it but where you think about this uber you know big machine smart machine uh like a dao right and and this dao eventually sort of takes over control of another dao right and all it wants is to generate more profit and these daos eventually sort of learn how they now can buy tokenized assets, there's tokenized securities, they start taking over things and also start making decisions of how things are being run, right? Because there

is governance on the blockchain and nobody necessarily has ownership now on some of these DAOs and they're all running on their own and they're starting to manage how things are actually being managed uh and then you know they start running places right so google needs to generate more profit that's a very easy kpi for a dow and now let's sync everything and all the kpis and everything and the decisions and the mbos and the okrs and everything happens algorithmically and then people wake up and they're like we're working for this huge machine nobody understands what's exactly happening here, but we want more stuff to buy, we have to work more, we have to work longer hours, we need to make money, etc., etc. And then some of them say, you know, we don't

want to take part of it. And they go and they live in India. And they live, you know, just by the river. And they disconnect from computers, because everything becomes too expensive for them. So if you don't you don't enslave yourself into the machine you can't buy electricity or data or or anything anymore and you're like a poor man suddenly on the river and then you say something like you know happen on happiness is not about being a part of that machine and then you think about this uh dystopian future right and you say when is this dystopian future and the guy in india says what do you mean you're living it right in it right now uh-huh right exactly why are you still working on ease horror what what's what's the thing that drives you every day to continue

building company i think we are at a very interesting point in time that happens once in a lifetime uh where the industry which you know i i'm passionate about which is the finance industry, sort of converging with technology is those two industries are going to completely converge. And that's going to be like the big boom. And I know I want to be, I want to be there when that happens. And a part of that. And again, this is a whole other discussion, we're going to do another podcast on it. I think the actual meaning of money and what is money and what do we do in order to get money is going to change in our lifetime. We're actually working, we have this product, Nitoro experiment, we call it truly non-profit social impact project called The Good

dollar about just printing money for trying to bring in a billion people give them a wallet give them a blockchain wallet and print them money and then try to hack what can they do with that money so how can people actually create value so if you print people money and just give it to them how can they create the value to it and I think and that's super interesting because I think that changes really the fabric of of how you know we think about capitalism uh and how things work today for sure um we're gonna get cut short so let's get into there's a couple rapid fire questions i usually end up with uh and then you're gonna have to come back we got a lot more to talk about

um what is the one thing that you believe in crypto that a high majority of other people disagree with you on what's your most controversial thought in crypto there's no good way around what i'm gonna say right now um i think xrp is really interesting okay oh interesting all right man there's a lot of people who are gonna like that you said that go ahead uh yeah so i thought i'm gonna say it then the xrp guys are finally gonna say something positive about me but i just realized i just the actual purpose of your question was a trap um but But I think it's super interesting to see the emotional, almost religious thing happening around the XRP community. And for a long time, I could not understand it.

I could not understand necessarily what people are seeing. But then I realized that if so many people are seeing it and protecting it, that is what creates value for cryptocurrencies. And that's interesting. I'm not sure how it became what it is, but it's a very interesting sort of community fabric that's running there. CZ, the CEO of Binance, he believes something very similar where he said, look, one of the key components to money is everyone buying into the same belief system, right? And if everyone believes it has value, it has value when it is money. So I think that's really interesting.

What's one regulation you would change or improve, if you could, in the U.S. or in an international market? I'll let you choose. i i generally think that kyc uh is is very problematic in a lot of places by the way in the u.s that actually does work uh very well uh in the u.s i i would love to see consolidation of uh sort of the different regulators uh or maybe a fintech regulator that's sort of more easy with fintech firms but outside the u.s kyc is a big issue whether it's a u.s firm eventually accepting people from india or nigeria or whatever so there are still no digital digital identities and because of it the cost of kyc a customer unless you're a french company uh accepting french

citizens or a u.s company accepting u.s customers if you're a global company trying to cater to a lot of users, the cost per KYC, AML, et cetera, for a customer would be north of $10. And that means, and that's the reason you have 2 billion people unbanked. Because you need $40 billion just to KYC AML them. What's the most important company in crypto other than eToro? the most important company uh so companies is a good question because i i'm i'm an ether fan generally okay um but but ethereum is not exactly a company that's okay you can say um so so you say ethereum i'm i'm very yeah i'm i'm i'm still an ether fan it's fascinating to hear that given where you came from from the bitcoin side yeah in terms of all that no bitcoin

and it's truly not a company. But that I couldn't even find the company. Got it. What's the most important book you've ever read? 1984. Why? It brought me to realize that reality is simply a perception and subjective.

And it brought me to that realization with tears. and I think it's a really good book in that it takes you to that extent that is not what I thought reality and what's going to happen. I love it. I usually end up letting you ask me one question, but before we do that, we talk aliens.

Do you think they're real or not? Not really. You don't think they're real? No. Why not? I haven't seen one. That's actually a pretty good argument. Not really, but I'll give it to you.

All right, second part of that question, which is now my new favorite question to ask, is I'm scared when I think of the depths of the ocean. I'd much rather go to space than go to the depths of the ocean. Which way would you go, depths of the ocean or to space? Well, that's a good question, but I would prefer to go to space because it sounds like more fun and we're going to have more tech around. be but i do understand why the depth of the ocean is scary yeah like you're i just i feel like there's things down there that we don't even know about and it's so close that we should and i'm

just not into the ocean stuff space sounds way cooler uh what one question would you ask me what's the most important company in crypto bitcoin that's not a company well maybe that's why why it is the most important why it is the most important uh it's the first it has the the potential to have the biggest impact and i actually think the fact that it is so decent you know what i'm actually fascinated by this related to this uh have you been paying attention at all to uh the lightning torch lightning network torch uh got passed around and there's a bunch of people on twitter who's we're saying uh yeah i got it pretty early on um i actually thought it was like a scam or something right people tweeted me all this crazy stuff and uh uh huddle knot the guy

who started it i think it's a guy um he that guy deserves an award because he literally dm'd me and walked me through here's every single thing like he gave me a bunch of teaching right so i'm super thankful to him but i saw everyone tweeting like who's gonna send it to iran who's gonna send it to iran and uh i'm not exactly sure what happened but i think they sent it outside the u.s somebody you know what got into iran oh yeah it went into iran and they sent it to israel to israel that was awesome it like to me watching that happen is incredible 100 right 100 agree like the idea that we just sent it to by the way if i knew that i could choose bitcoin as the most important company i would choose but i think bitcoin is here 100 to stay more than anything else

simply because of its brand awareness it has the brand awareness of coca-cola mcdonald's starbucks today and that's not going away that's like it's the first my kids my grandkids they're gonna know about bitcoin i had somebody tell me recently that the two things that their kids want to talk about are bitcoin and fortnite vbucks and i thought that was super interesting that to kids same thing right there's like a real world video game you know credit currency and then there's like one actually in the video game but to them they're just growing up with all of this stuff so it's pretty cool um thank you so much i appreciate you coming on uh if you get where can people go find out about etoro us etoro.com and it'll just kick them over to the u.s site all right and what about

people outside the u.s etoro.com man it's like you guys are like automating where they're from all right i appreciate you doing this we'll we'll have to do it again next time we're together thank you very much hey everyone pop here if you like this episode of off the chain and want to help us take crypto to the top of the Apple, Spotify, and other podcast charts, please do us a favor and rate, review, and subscribe. To review, simply go to the Off The Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off The Chain.