Emerging Crypto Applications, Learning from Competition & The 1️⃣ Growth Hack with Nischal Shetty, Founder & CEO WazirX

Nischal Shetty, Founder & CEO WazirX chats with Amit Somani, Managing Partner Prime Venture Partners.

Listen to the podcast to learn about

02:00 - Why Crypto is Growing

12:30 - Building WazirX: Finding Gaps and Building a Community

20:15 - Interoperability in the Crypto World

27:30 - Maximising Optionality Vs Staying Focussed

34:45 - Emergence of DeFi Protocols and Decentralised apps

31:30 - How to Stay Updated in the Web3 world

Read the complete transcript below

Amit Somani 01:16

Welcome to the Prime Venture Partners podcast. Today I have with me Nischal Shetty, the co founder and CEO of WazirX. He is in the middle of the eye of the storm and the opportunity in crypto. So I’m really looking forward to talking to you Nischal.

Nischal Shetty 01:31

Hey Amit, thanks a lot for having me. I look forward to this discussion.

Amit Somani 01:36

Great Nischal, let me just dive straight into it. It seems like now we have more retail crypto investors or certainly owners of crypto assets, like Bitcoin and others in India than retail stock market investors. I don’t know when we crossed that. But it seems to be, at least the numbers I’ve seen, seem to suggest that we’re already at 2x more. So what is this? Is this just a fad? This is just something that people are over indexing on now? Or is it that it is just so early that everybody wants a piece of the future pie?

Nischal Shetty 02:11

Look, I think in terms of numbers, there have been various numbers floating around on the number of people into crypto in India. But I think conservatively it’s about one and a half to two crores. So I don’t think we are still a few millions away from the flipping as they call it in crypto, which is, when you flip something of importance, so maybe the flipping might be for where it overtakes the stock market investors. But here’s the thing. When I think about crypto while it is a financial domain, it’s a lot like the Internet where I don’t think we’ll be worried about participation. Everyone who has an internet connection will get involved. So these numbers will definitely draw off the traditional financial markets. But for now, that’s the race, I guess, for everyone, which is, how do you overtake the financial markets, the traditional ones?

Speaking of fad or anything, I think one thing is it’s been over 10 years. So somewhere, that narrative is weakening. But I guess a few more years before, we can all put that aside. Having said that, I think the reason why everyone’s participating is, and the age bracket is about 22 to 35 year olds, that’s like the largest. I think this group has grown up with technology. And when they see crypto, more than finance they see it as a technological innovation that they can participate in early. And everything else if you think about it, the stock markets, commodities, real estate, any other investment option, we’re all late to that party. It’s been like, grandfathers and fathers were the early adopters.

Now, the question is, does the youth want to follow that and be like the last mover, or get into a new, shiny technology that they understand they are going to explain to their dads and grandparents. And I think that is what is probably the biggest puller. We can go on and on about all the other numbers and returns and metrics. But I think it’s just cool. It’s just cool to be in crypto, I guess.

Amit Somani 04:15

Absolutely. And no, I didn’t mean it as a fad in terms of Is it real or not? Of course it is. And even we at prime are very bullish on crypto and DeFi and we’ll cover a little bit of that. I mentioned this savviness of the retail investor, people who never bought a single stock or perhaps even a mutual fund even a nifty 50 or BSE 200 in their life, are talking about the price of Ethereum or Bitcoin or Solana or what have you. And that seemed to be more of my question, really, but I think you made two very interesting points. One is that it is about the younger audience, really the true millennials, like the 20 to 35 year olds .

The other thing that you’ve said, which is very fascinating, I haven’t heard this before, is that it’s also a lot more about technology, and a lot more about an emerging technology trend, which folks will connect better with. It’s like, there are youngsters who connect better with Snapchat than with Instagram than with Facebook or whatever, now Meta. And I would love for you to elaborate on both those points, the younger audience connecting with it, and what do you think is their tech savviness? Beyond as a consumer, do they really understand what blockchain is and so forth?

Nischal Shetty 05:28

Yeah, I think, let’s tackle the tech savviness. I think the first is most of them know what a white paper is. And that’s very interesting. I’ve been working with engineers all my life. I’m an engineer myself, I think while we vaguely heard white papers, till Bitcoin white paper came across. I don’t think most of us have ever read white papers. And today, people in these sectors, non engineers, non technical background, they talk about white papers. They talk about what they’ve read in it and why it can be different. So there is this automatic pull towards, this technology where they want to understand, they know what proof of work is, what proof of stake is, in fact, when you get deep into all these telegram channels and Reddit groups, you will realise the fight is over there. And this is all non technical people fighting over all these technical stuff.

So I think, what is happening is, it is just getting to be a natural element in everyone’s life. It’s not alien anymore. Where our thought was that only tech techies can fight and have flame wars over what technology that you use, it seems to be happening here. And that’s very good.

And I think it’s probably that progression of software going from the domain of just software developers to everyone. And I think it’s interesting, it’s boring for people to talk about how many products and FMCG is going to release or sell, versus, what is the next technical advantage that this new protocol has over existing ones, it’s just fun. And it’s also completely online, you sit on your computer you’re reading up, you get access to all the information, you don’t have to worry about any insider info or knowledge that you need to gain beforehand, it’s all public.

And I think it is that openness that is probably pulling people, let’s take the example of Bitcoin. If you do enough research, there won’t be anyone else who will have more info than you. You’ll reach on par in terms of understanding and knowledge. And that’s the beauty of this, versus a traditional company where I might read all I want, but the CEO will always know more. There is no CEO in Bitcoin, there’s no CEO in most of the protocols that have been created. So I think that’s probably one of the biggest advantages of where fairness is seen and people are attracted.

In terms of why they are investing, and this young population, I think, like I said, the early mover advantage definitely resonates with most of them. The other important factor is if you look at this market, it’s 24/7, and compare that to the traditional markets where you have to decide between working or participating in those traditional markets, out here you can do it in the night, you can do it in the morning, you can do it over the weekend, you don’t have to worry about when you get to participate. And I’ve seen a lot of them being active late at night. And that’s like, they come back home, they’re sitting on the computers, and they’re getting into this new world for them.

So blogging to a large extent was that, why did blogging take off so much? Why did podcasting take off so much? Why is all of this taking off is because you have the flexibility to work on it when you want, and crypto gives that flexibility work when you want from where you want. So I think that is something very attractive. Apart from that. I think the other factor is, it’s just because you just need a mobile phone, and nothing else. There is truly nothing else that is required to be involved in crypto. And I think that is the way email works. Why does everyone have an email address today is because you just have to sign up and you get it. And that’s what is happening with crypto, you just have to download a wallet and you’re into crypto. I think it’s just that ease of use is making them all get into this.

Amit Somani 09:07

Absolutely. Many things to double click on. Another thing I think that you’ve touched on is this whole visceral feeling about this autonomous decentralised, accessible, fair access. Which is almost like Revenge of the Nerds. I don’t know if you’ve seen that, which is to say, hey, look, now this is not proprietary access, I have the same access as Marc Andreessen or Jack Dorsey and I can participate in it and so on and so forth. That might be further adding to the kind of millennial and the younger people who find it cool and interesting and are studying it.

What do you think about in terms of the, at least in the Indian context, the participation from the tier two, tier three, even tier four places? I was recently in a village in Rajasthan, and one in Maharashtra as of a couple of days ago. And even there, everybody’s talking about crypto. And it just seemed, and I’m an engineer by training, and of course, like we believe in it. So do you think that geographically also it is already kind of getting people in some sense, with some awareness and knowledge, hard to imagine that everybody gets the tech yet.

Nischal Shetty 10:15

Yeah, absolutely. In fact, I think for us, for example, for WazirX till 2020, I think early 2020, we saw more signups from the metro cities. And from the second half of 2022, most of this year, about 55% of the signups have been from the tier two and tier three cities. So it’s already crossed the Metro signups. And I think there’s this proof that this technology is just, propagating itself to every nook and corner of the world. It’s not just concentrated to a few. And I think it also has to do a lot with, if you think about it, if you think about the stock market, for example, you think about oh, I need to be in Mumbai. And you also know that there are always groups of people who have more knowledge and understanding you need to meet them and understand. Out here, you just need to be on the internet. And it doesn’t matter where you’re from.

And I think also probably the pandemic where people have gone back home, like we are a 300 people company today with the completely remote, we’ve not met most of each other. And I think the pandemic might have also pushed people to be understanding that from their homes, they can now start participating in a new sector. And that is probably pushing them. But yeah, I think the propagation of this technology to the nooks and corners of India and the world has already begun.

Even in Africa, for example, you see a lot of innovation happening around this, in remittance in terms of transactions, because the financial system there is even more broken. And suddenly, now you have a financial system that the world is building for you. Traditionally, if you think about financial systems, geographically your entrepreneurs in your country have to build, out here what happens is the whole world is building for you. So you get to pick and choose, you get to use the best of the technology, I think that is probably what is propagating this to everywhere in the world.

Amit Somani 12:01

Great. So switching gears, maybe talk a little bit about just, for the users that are hiding under a rock, and have not heard about crypto exchanges, like WazirX, and Binance and Coinbases of the world. Just a very quick view of what WazirX is? What do you guys do, because I want to then talk about the building of the company and so forth.

Nischal Shetty 12:24

Sure, WazirX is a crypto exchange where you come to buy and sell crypto. So the first time let’s say you’ve never bought crypto and you want to buy your first Bitcoin, you come to WazirX, you sign up, you do your KYC and you transfer your money to a wallet from where you can then buy your first Bitcoin. And similarly the day you realise that you want to sell your Bitcoin and convert it into INR, which is called Fiat in the crypto world, at least it is a more common term. So you can then sell your Bitcoin and convert your INR and move it to your bank account.

So it’s a simple way to get in and out of the whole crypto ecosystem. We see ourselves as like the onboard from Fiat to crypto, and that’s where we focus on similarly, every other exchange, and now in exchange, there are two; decentralised and centralised. We are a centralised exchange, because that’s how you get the entry point and you get into it. Eventually, you can use decentralised exchanges where there’s no middleman. It’s purely on the blockchain. And that is the other side of I would say the crypto ecosystem.

Amit Somani 13:30

Great. And Nischal what have you observed in terms of one of the proverbial things I have heard is that in the stock market, when the stock market as an aggregate whole falls 10 or 15%, the number of traders or investors, if I may call them that loosely, dropped by 30 to 40%. Given that the whole rise and fall of Bitcoin and rise again and of Etherium, and of overall currencies has been quite volatile in the last two, three years since you’ve been founded. Have you seen that here as well that as things crash, you see less interest? Or have you seen that continues through the ups and downs, with respect to investor participation and so forth?

Nischal Shetty 14:13

No, I think it’s very similar. See, the thing is, when the markets are in a bull mode, the participation is always at the peak. And, when it’s a bear market, what happens is a lot of people probably want to forget about that investment for a while. They turn into Hodlers, what we call them. So we see the number of Hodlers increasing a lot. Having said that, every bull market at least for crypto has always come back with a huge force where all those people who were previously dormant also get activated. So that’s something that we’ve seen happen. It’s not like where people stop, and then they never come back. In 2017 and 2018, for example, we saw a lot of people and then they went dormant in 2019, 2020, in the second half they all started coming back again. So there’s a lot of reactivation that happens. But yeah, during the bear phase, I think participation is always lower compared to the I would say bull markets.

Amit Somani 15:12

Got it. One quick question just on the strategy. So there are obviously multiple exchanges, you guys are there, but there are several competitors for you in India and then of course, globally as well. There are companies including the one that acquired you guys. So what will it take for multiple, dozens, if not hundreds of exchanges to survive and thrive? Is it largely going to be the regulatory and the KYC framework which we create sort of artificial boundaries at a country level? Or do you think that in this whole, DAO/Web3 decentralised world that even as an Indian, in India, I could potentially buy crypto assets in some exchange in Estonia or Poland or for that matter, Canada or whatever it is. So how do you think about just that from the WazirX point of view or any other exchange point of view?

Nischal Shetty 16:03

See, I think there are two components. And the first is an exchange that deals with Fiat. So if you’re dealing with INR, there’s no escaping regulation or doing anything global. So you’ll have to conform to the laws of the land, even in the absence of regulation. So that’s where I would say it’s an advantage and a disadvantage. The advantage is that people have to come to an exchange that is supporting INR to get into it or to get out of crypto. Disadvantages, decentralised exchanges don’t really have to worry about any of the legal barriers that centralised exchanges face. Having said that, I think the global approach is going to be of regulating centralised exchanges. So there’ll be more and more regulation. But with regulation also comes confidence in the investor community. If you look at Coinbase, for example, there’s a reason why Coinbase has grown so much and the biggest being that they go the regulated approach, they take licencing. So people know that there is security, safety of funds and everything.

So I think I see a world which will be both which is sent the regulated, centralised exchanges, and probably the unregulated decentralised exchanges coexisting, because as a centralised exchange, I’ll give an example there are sometimes things that you can’t do, for example, listing a new token, when a brand new token comes up, and you don’t know who the founders are, you can’t do due diligence. As a centralized exchange, you can’t list it. But a decentralized exchange can list it, which means for people it’s a win, because if a centralised exchange can’t provide that they’ll go to the decentralisation and buy it.

What a centralised exchange can provide is a cheaper transaction. Because decentralisation right now, it’s still expensive. Maybe a day will come where it gets cheaper. But right now, centralised exchanges are cheaper and faster. So they give you the scale and cost effectiveness. So there’s always this pros and cons, which is why you’re seeing it evolve today, when a DEX is rising, let’s say uniswap, for example, is doing billions of dollars, that has not really lowered the trading volumes of any of the centralized exchanges. In fact, it increases it further. So I think right now, we are also in that market expansion stage, where no one’s worried so much about competition, but more about your own competencies. I think I keep saying that an exchange will only be able to kill itself. And by not working and not living up to the expectation, I don’t think competition is going to be a big problem, because the market is just growing way too rapidly than the competition coming.

Amit Somani 18:36

And just from the point of view of the individual retail investor, what do you think about the silos? Either with respect to the particular crypto assets or ability to move, potentially between exchanges between crypto assets, between Fiat and crypto and so forth. Because one of the things that made Web 2 work was the fact that it was highly interoperable in every way. And I’m not saying it is not. I’m just saying that the more silos we have, the more challenges and more friction there will be with respect to people’s ability to participate in multiple ways.

Nischal Shetty 19:14

Yeah, see, it’s an early market. So right now, we still see these silos, but what is happening is interconnectivity. In fact, I think the last six to 12 months, interconnectivity has become like the buzzword, which is, how do you make movement of assets, fluid between different chains, different exchanges and everywhere else? And, in fact, I think, recently there was Inter blockchain Connectivity Framework, which talks about how you move your asset between different blockchains, different exchanges. For centralised exchanges, I think this is still in the works. But there is this travel rule that IMF is talking about, which is, when you move assets between exchanges, the exchanges can also collaborate between each other, to ensure that the KYC also transfers between them.

So, all of this is in the works early days, but I think a few years down the line what will happen is, you won’t have to really think twice between moving your assets from one exchange to the other one chain to the other it will just be like, really fluid and simple. And there are these protocols being built, which are acting like bridges between you moving your asset from Etherium to Solana or from there to somewhere else. You don’t have to worry, or you don’t have to worry about liquidity, or the fees or the speed. So that’s all happening, then layer one and layer two, they’re building it. So if you see it’s been in the works right now. But I think that’s still not a solved problem. So it’s being solved. But I wouldn’t worry too much and in a few years, I think, interconnectivity will be the expected outcome of this whole thing.

Amit Somani 20:51

Wonderful. Let’s talk a little bit about the early journey of WazirX right before you got acquired by Binance and I know about your background as a growth hacker well, before you at least publicly got into crypto. And I could see some of those traces in the early journey with respect to the community with respect to the early participation, and so forth. So can you talk to us a little bit about just the early days of just getting WazirX off the ground, and any lessons learned that other entrepreneurs that are listening to this might want to learn, how do you get community involved early. How do you get this to happen more organically? And through referral? And viral, if I may say so from your past life?

Nischal Shetty 21:35

Sure. Yeah. See, I think a lot of my learnings from my previous startup definitely helped me a lot. But here’s the thing, before starting what I realised was, anytime when you want a growth hack or something, I think the most important thing is also to find the gaps in the market that you can fill in. And the biggest gaps I found was, this was an unregulated market, which means it was low trust. And how do you build trust? One is you bring in regulation, which you we all knew will take a long time. So the second was you put yourself out there in front of people. So when in 2018, when we were about to launch WazirX, before that in 2017, I started doing the research, I realised that nobody knew the founders of exchanges. So for them, it was just about some reference and just trusting randomly. So I said, How do you build trust is, I should be in front of people.

So that was a reason why I put myself in front of people, I started tweeting, talking about blockchain, to build that trust that did not exist in the market. The second was, I saw that the highest rating for any mobile app of an exchange in India, when we were building was, I think, 3.6, or 3.7. So you still knew that the gap was in the mobile apps. So we said, we decided that on day one, we would have our mobile apps, and we would have a focus that will reach a certain, 4+ plus star, we didn’t want to say that it will be 5, it was 3.7. So we said it should be above 4 for us. I think we have 4.4 now. And then the third was there. If you look at the whole decentralisation aspect, it’s always community driven. Everything in the protocol world is community driven. It’s never founder driven. So we said, Let’s build a community.

Now to build a community what was the best way was because tokenization is such an important part of this whole crypto ecosystem, we launched and released our own token, and we reserved 15% of the token for our community. And we did it very simply. We said if you sign up, we’ll give away 500 tokens on signup. Today that token is worth over I think $1-1.5. So that is what we were giving away back then. But for us, it was about reserving it for the community. And I think that really connected with the people, that a known founder, who was out there talking to us is releasing a token AirDrop for everyone who’s going to be signing up early. So within a week, I think we saw 40,000 to 80,000 sign ups before launch. And the other thing I did was I launched this even before we were launching the exchange.

So in January 2018, we launched this programme. In March 2018, we launched the exchange. So we had three months of time, where we built out the community. And this is how we rewarded the community. And that is what helped us. After that, it was all about finding gaps, keep finding solutions to those and keep growing. And today we are the largest in India, we do about $4-5 billion in monthly trading volume, 10 million plus customers, it’s all been because we just focused on our core beliefs, and we just hammered it. And we don’t try too many things. The biggest problem is when you try too many growth hacks. So it’s just one growth hack. It’s not a hack either, just support the community, go after them and do what they want. And that helped us.

Amit Somani 24:57

Can you talk about certain examples of where the community led you to places that you would have otherwise not gone? Or even perhaps pushed back on? I mean, there are many examples from the web 2 world, like from eBay another set of 20 years ago, but either for WazirX and if you’re not comfortable, just in general in the crypto space.

Nischal Shetty 25:19

Yeah. See, I think there are quite a few instances. In fact, I think a lot of the things that we build for us, what happens is as founders we always read about Steve Jobs, and how he knew more than the customers and he innovated, but I think those are exceptions. And not everyone is Steve Jobs. So the best way for us has been to listen to what people want. Every feature that we’ve built has been a result of people asking us, so we’ve never, and I think we tried once to innovate, we failed. That feature did not take off.

So what we have done is every time people ask for something, we build it, it’s been that simple. And I think even in marketing, people started asking us why we don’t have trading competition? So we launched a trading competition, it works. So whenever we see a lot of people asking for something, we build it and it works. It has never happened where people ask for something, we built it, and they did not want it. It’s just that simple. But what happens is the founder says, No, I know better. And when that founder overtakes people’s ask, I think that’s where you start losing. So we’ve just stuck to that. It’s always helped us.

Amit Somani 26:29

Wonderful. And the flip side of that, Nischal is that, as a founder, you also want to, in theory, maximise optionality, which will make you spread yourself too thin, because you feel like well, I want to do this as well. And I want to do DeFi as well. And I want to do algorithmic, banking and yield farming solutions as well, etc. Whereas the core might be just that, hey, look, this is the onboarding and ramp from fiat to crypto and back, and we will do that the best in the world. So how do you resist that temptation as well? One is the features, what do you launch or not? How do you resist the temptation to get into 15 different things, all emerging?

Nischal Shetty 27:09

See, I think, I don’t think I’m resisting the need to get into all the features. What I’m trying to do is time it well, for example, I give you an example of margin trading, it is something that, again, we’ve been asked for by our customers, and it’s a lot of people asking for it. And we want to build it, and we will definitely build it. But here’s the problem, we don’t see that kind of liquidity existing. So what will happen is, if you bring in margin trading, and there is, let’s say, a big dip in crypto prices, there will be liquidations and there will be issues with the way you handle those liquidation because the India market is not liquid enough for the margin that, we can support at our scale. So we have to wait for it.

So I see this more about, what we have to understand is what is the timing for those asks, because there are a lot of futuristic asks also. So just understanding that timing is going to be the key. And in our market, we look at data because now we are growing, we understand that now the market is ready for this feature. And the people are asking for it. Let’s launch it. So it’s just about timing. I think timing is the key. It’s not about spreading yourself too thin. I believe that if we want to keep building we will build 20 more features, but when to build is going to be the key. And I think that is where we use our understanding of data and the markets, to time it well. I think that is what is probably our job.

Amit Somani 28:36

Absolutely. In fact, in early stage ventures, we have to figure that out. While it’s very, very hard to figure out timing wherever there’s a pull from the market, like your example is well of WazirX that you launched it even without having a product ready saying hey, we’re going to do an exchange, of course, you were quite actively followed on Twitter, even in your past life. And then within #Indiawantscrypto that you’ve got 40,000 signups with no product. That is the biggest PMF signal that one can have.

Nischal Shetty 29:10

Yeah, for me, I think one of the other reasons why I also launched early was one, I’m very restless. And with an exchange, you can’t be restless with putting the product out, because there’s a lot of security features and a lot of things to be done. The second was I also was getting into a market which was crowded. There were already seven, eight exchanges, we were not innovators, or anything. So I wanted to understand whether it was just me thinking of these gaps, or did they exist. And when you saw that 40-50,000 people signed up, then for sure that there is a problem. So, it sort of also gave me more than PMF. It also told me that the market is open, even now. And I think that was helpful.

Amit Somani 29:50

That reminds me of an interesting question. Often people talk about a first mover advantage, and people underestimate the advantage of a late mover advantage. Sorry, pun intended, and because but at the same time, did you just primarily focus just on your insights and the customer insights and your active Twitter engagement with the community? Or did you also see what the other exchanges and others had? That didn’t make sense and was useful. Let’s say, Look, I’m not going to do that. Because like 10 other people are doing that. And I’m going to, even if the insights I have let me go into a more blue ocean rather than just try to out compete with them on what they already have.

Nischal Shetty 30:30

No, I think, yeah, I used to do that before what you said, which is, if a competitor has it I want to be different. Now I’m shameless. If a competitor has it, it works. I’m going to build it. It doesn’t matter. Because, it’s not about our egos or us being like I said, we have to somewhere as founders, keep ourselves aside of who we are, and think about what our users want. And I definitely looked at it. I think competition is always the best. It’s in fact, much more difficult to be the first mover and innovate, it is a lot harder. Competing I think, at least for me, has been a lot easier. And the best thing is you can learn from the mistakes of others so that you don’t have to repeat it.

So I definitely did my research. In fact, the reason I built an exchange was I used one of the competitors. And it took me a week to buy my first Bitcoin. And by that time the Bitcoin prices shot up. So I realised there was this problem with the existing exchanges. But yeah, you should learn from them, you should build the things that work for their customers, because, the customers are the same. And that’s what we do all the time. But now I think we are in that stage where we are building something like p2p, for example, that was an innovation. Nobody had a peer to peer system and the banking ban was coming in India. We built it for the first time, and then everyone else copied it. But yeah, there’s a mix of both. You need to innovate where it’s needed. And you need to learn from your competition where it’s needed.

Amit Somani 31:53

Right. And also, Nischal you went from being the kind of challenger to becoming the incumbent. So you are now the largest exchange. So now, there are other people who are trying out WazirX and saying, what’s missing Or what’s lacking or whatever, as founders, and I’m sure you will keep doing well, but nonetheless, we are both, you and I are both pro entrepreneurship. So I think it’s very different when you’re the leader or the incumbent, and when you’re the Challenger, because you have to get the ball rolling.

Nischal Shetty 32:23

I understand, life comes full circle.

Amit Somani 32:29

Right. So what are some emerging trends that you see of new things that either customers are asking for, or trends that you will see emerging? We at Prime Ventures do a lot in FinTech and so are there other interesting applications that you’re seeing already emerge in the Indian context, or either being pulled from the customer side or even from the b2b side, on the classic sort of real world, Old World, finance, NBFCs, banks, etc. are there any interesting use cases that you’re seeing get done beyond just, asset exchange, trading and so forth?

Nischal Shetty 33:06

Sure, I think, see, while again, timing is going to be prime out here. But I think on the b2b side, what you spoke about, there’s a plethora of things, not the first example, white labelled crypto exchanges, because I believe as regulation we get near it, every bank, every financial institution would want to offer this to their customers, and being able to service them with the right software for them to make it happen. Because building this software is one of the more difficult ones. But I think you can commoditize this, to a large extent, so that all the financial institutions can provide and that’s a great opportunity.

The second is custody, custody is still not really a completely solved problem. Both institutional custody, I think, retail custody, there are still international products, Ledger and all again, very expensive, 7000, 6000 rupees for a ledger device. I don’t think it’s for us in India right now to buy but someone can build an India solution. But there are also custody solutions for corporates and institutions that have not been built from an India perspective. And then there are quite a few, but I’m not a b2b guy, so I wouldn’t have deep insights there. But in b2c, what is happening is the beautiful thing is now because we have about 15 to 20 million people in India. Now the Indian market is priming up for decentralisation. So let’s say a year or year and a half ago, if you were building a decentralised protocol or a solution for India, I wouldn’t be a big believer because the market was small, there were 5 million, 6 million people. And let’s say 10 to 15% of the people get into DeFi right now.

So that’s about 500-600k people that you have to reach out to. Your total market is too small. Now what is happening is you have one to 2 million people in India who are open to DeFi decentralisation. So now we are seeing the emergence of DeFi protocols and decentralised apps focused on the India market. And I think that is going to grow. And in the next two to three years, I believe India will cross 100 million people in crypto or holders of crypto. And what will happen is you will have those 10, 20, 30 million people who want to be into Defi. So that will be like the rapid growth in the next I think the next three to four years that is going to happen. So now is a great time to build for decentralisation. And the best thing about decentralisation is you don’t have to worry about local laws and regulations. You don’t have to run an India Wants crypto campaign. It’s amazing. You just have to be a developer and an entrepreneur and just build. So I think that is going to be the next evolution.

Amit Somani 35:30

And Nischal just to make it real for our listeners. Are there examples of sort of very low hanging fruit I don’t mean like startup ideas, I just mean what do customers or consumers want in Defi? Is it just yield farming or making some value out of their assets? Are there certain basic things or lending or what is it that is some of the early ones that you think will succeed?

Nischal Shetty 35:56

I think, probably I’ll give you an example of our I think the first step will be probably a crossover from centralization to decentralisation like in the US there are products which are centralised and you put in your assets and then they use decentralised protocols to give you a better yield. So we could start with that for India right now, where a centralised kind of a service where I can put my assets and then they’ll use decentralisation, because decentralisation is still hard for people who are new into crypto to use defi protocols directly. So that crossover apps will come.

So the first generation was us, completely centralised, where we just helped you get into decentralisation, the second generation is going to be, CFi and DeFi, centralised and decentralised together. And probably then after that will be the third generation which is purely Defi. So right now you can look at those crossovers, no need to innovate and build a completely new product for India. But to help India onboard to these existing yield farming and staking and everything that you can think of. I don’t think we have more than a few 10s of maybe 10-20,000 people into these protocols today from India. So how do you take this to a million people in India being involved in these protocols? I think that’s where the opportunities are right now.

Amit Somani 37:10

Wonderful. As we sort of come towards the end of the podcast here, what have you learned about yourself as an entrepreneur in this journey, In what way have you evolved? There’s of course, the whole, Web3 and blockchain and crypto and so forth. But what have you learned? And what do you use for yourself to stay current? Because of the rate of pace here, I remember, in the web 2 era, we had this concept of a web year, a web year was like a year in 10 years of pre internet, now it seems like web 3 is like three weeks, Before something completely changes from scratch. So how do you stay abreast, both at a personal and professional level?

Nischal Shetty 37:54

I think what I’ve learned about myself is I think, I’ve not been thinking big enough, every time I build something, then I realised that I have not thought big enough. And I think as entrepreneurs, the bigger we can think because the risk is the same, everything is the same. So, think bigger than the biggest that you can think you are thinking. And I think that’s a great lesson I’ve learned. In terms of how to stay abreast. The thing is, I’ve also realised at least for crypto, you cannot know everything. And so the other approach is probably where you see this maximalism evolving. The reason is what happens is if you try to understand a lot of things, you’re not good at any of these things in crypto.

So you have these maximalists for them, what happens is they have a domain, you’re a maximalist in ethereum, you’ll understand everything about it. You’re a Bitcoin maximalist, you know everything about it, and you don’t know anything about the rest. So that’s one approach. But I’ve taken a middle path, which is I’m saying I’m okay with people telling me things in crypto, which I don’t understand, and I’ll learn it. And I’m okay with knowing some of the things around most of the chains out there. So I read up about new blockchain that evolve new consensus algorithms that come up, new attempts at building new DeFi protocols and all, but honestly, it’s, it’s huge. And, and it’s very complicated.

See I’m a techie. And when I see some of these defi protocols, they have so much financing that, that gets a little difficult for me too. So I try to stick to the tech part of it. And I think it’s just interesting whenever you have time, there’s never a day where you know everything in crypto. So I see this more as a fun timeout for me to learn new things. And I usually reach out to younger people. The other day, I wrote to someone who I think is in college right now. And I was asking about play to earn games. He’s a player in Axie infinity. So some 17-18 year old, making one and a half lakhs playing games on Axie infinite. And it’s amazing to hear these stories and learn from them. So that’s what I do on Twitter. There’s a lot to learn like that.

Amit Somani 40:06

Absolutely. No, I’m very grateful for all of what you share, especially with #Indiawantscrypto, I follow that quite actively. For those that don’t, I strongly recommend following Nischal on twitter, we will link to his Twitter handle. And certainly the #Indiawantscrypto. So thank you so much Nischal, for being on the Prime Ventures Partners podcast. I have a dozen more questions, but maybe we’ll bother you again in web 3 years, which might be three weeks from now.

Nischal Shetty 40:33

For sure. Thanks a lot Amit. Thanks a lot for having me.

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