Last week, we held a much-requested #AMA with @CryptoApeHQ and Qredo COO Josh Goodbody. The event was so much fun that it ran for over 2 hours! Grab your popcorn, your headphones, or your reading glasses – it’s not to be missed!
Listen to the recording here:
Or, check out a breakdown of the top 10 questions:
Q1. Does Josh Goodbody actually have a good body?
JG: You guys are starting off with a tough question for sure. The answer is no. Well, this good body that I had a few years ago has withered into a crypto body, which is kind of like an evolution from the dad bod. So it's kind of a crypto body, which is the next stage of a dad bod or even worse than that. I promised my wife to do something about this and not to sit in front of my computer all day. But who am I kidding? I'm going to be in front of my computer 24/7. It is what it is.
Q2. What are the long-term sustainable value drivers for the Qredo token?
JG: The way I describe the Qredo token is that it's a bit like the fuel to the network effect. So the whole point of building a network is that you would like that network, at some point to enter into a period of usage or utility utilization. And, in this period, there is this network effect that's being built around it where you've got various participants within the network that are further incentivized to keep using that network because they derive some value from it. It can be economic value, it can be an underlying utility.
We wanted to be able to create a token that can touch each of those characteristics. So the Qredo token, being part of a proof of stake blockchain, is an integral part of the stake that validators need to have. And, one of the things that we haven't even unpacked, is how meaningful the launch of the validator program will be on the underlying Qredo token itself. Because you launch these programs and you see a huge flurry of interest in folks wanting to run validator nodes or be part of the validator program.
This all creates a really strong utility of the token that becomes an asset that you can derive passive income from. A lot of people that have been in the space for a long time have moved away from the day trading mentality and are looking for assets (medium and long-term holds) that they can generate passive income from. So, Qredo becomes an asset that you can hold for the long term for the price appreciation, as well as an asset that you can use either as a validator or as part of a validator program.
In addition to that, for everyone that uses the network, we wanted them to derive some additional value from the utilization of the network. So if you're a liquidity provider and you're streaming your prices into the Liquidity Hub (which we are planning to launch in the next couple of months), the Liquidity Hub will act a bit like a cross-chain swaps network and an aggregator of aggregators.
If you're providing liquidity into that, and your liquidity gets taken, you get a rebate of the underlying price or the underlying fee that you're paying in Qredo tokens. That Qredo token then gets locked up for a period of time. It's not an immediately available liquid token that you get, but you get that reward in Qredo tokens. So you're incentivized as a liquidity provider to be part of the overall liquidity of the network.
Zooming out at a slightly structural level, the whole business of custody right now is cost. Anytime you hold assets within some kind of service, whether it's a regulated custody provider or – in many cases – some kind of quasi self-custodial crypto wallet, there's a cost associated with it. And you don't really get much from it, apart from a nice UI; it's just a pure cost. And, if you look at traditional finance, custody has a cost, but, actually, in many cases, it turns a profit. You put your assets with a custodian, they go off and lend the stocks that you've got there, write products over them and you derive yield from them.
So, custody and traditional asset space isn't just a pure cost, it's actually a revenue driver. So, we want to change that model completely and remove custody from being just a pure cost to being a profit center. Within our tokenomics model, we have built custody mining, which is an inflationary based rewards program where, depending on the number of assets you hold and what epoch we're in (an epoch is a period of time within the tokenomics model), you will get a prorated amount of rewards that you derive from that mining program. So, turning a profit out of the overall custody of those assets can be done in numerous ways: You can provide liquidity, you can enjoy custody mining, and you can participate in lending and borrowing on the network. It is something that we want to fundamentally do to really shake up and disrupt the custodial market. And we're doing it on a decentralized basis, which I think makes it even more exciting because people don't have to hand over control of their assets to be part of this.
We are looking at every single step to make the Qredo token an integral part of the incentives and the rewards that are baked into the overall Qredo Network. We're getting a huge amount of ideas from the community about some of the stuff that we can do to make it even more useful. For example, right now we're exploring enabling you to take your fees, or pay your fees, purely in QRDO and have a different fee model to the standard protocol fee model. So, there are all these options we're playing with and exploring, but the Qredo token is always going to be at the heart of the network's reward and incentive model.
Q3. Do you guys have a time frame when the DAO is going to be there or is that not on the cards yet?
JG: The DAO concept is constantly evolving and you have all these different models – from this somewhat parliamentary democracy, where you have “representatives” of the DAO that execute the will of the DAO. Or, you have a real representative DAO, where everyone gets a one-to-one vote, depending on your stake.
So, gaming that out is where we are at right now, and we've just made a number of hires – both at the tokenomics level, as well as game theory and statistical analysis level – that will help us make the right decision for that. It is quite hard to change the underlying DNA of a DAO, and we are conscious of that.
There will be a separate governance white paper that will come out which will outline everything. We're not having a DAO for the sake of it. A lot of people ask “Do you need the governance to be decentralized?” And our answer is always yes. Because the more decentralized this gets, the less it is susceptible to manipulation.
The launch of the DAO will be phased. First, I expect we'll start off with community-based governance. And the governance model will allow you to use your Qredo tokens to be part of governance. Then, the next phase is to start building out the DAO philosophy, and then apply the practicalities of that DAO to the day-to-day operations of the network.
It is front and center, and one of the most important work streams. It’s something that we want to get in front of the community as soon as we can. This year, the white paper for that will be the first piece and we're going to do a community consultation that will give everyone a voice. From there, we'll start building.
Q4. In your discussions with fund managers and larger hedgies and institutions, what's inhibiting their adoption of crypto and pulling their funds into the asset class today?
JG: It's pretty amazing how much of an appetite there is right now to get exposure to crypto-assets. Everyone wants exposure, but not all of them know how to get it. Usually, these kinds of asset managers or allocators have an appetite for that exposure, because there will always be a certain amount of their portfolio that has some kind of higher risk profile And, in many cases, people are thinking, “Well, this should be in crypto.” The allocation of risk could be as small as 2%, or as large as 30% – and of that they may put 1% into crypto, And, because of the sheer amount of money that these guys have, that 1% is enormous. So, then the question for them is, How the hell do we do this? How do we hold, move and report on these assets? And this all comes down to infrastructure.
And that’s where Qredo comes in. Because we can give them an out of the box solution that allows them to hold assets in a way that looks and feels like a bank account. And, you can give multiple people certain access rights and controls over those crypto assets – without ever exposing the private keys.
We provide them with a cryptographic security protocol that enables institutions to mitigate private key risk and the risk that anyone can compromise or hack their custodial account. So, that's what we're selling to this type of client; we're saying this is the infrastructure you need to hold your assets, all backed by state of the art cryptography.
For some clients, they need a custodial solution; they need someone that is looking after their assets for them. And that's why we started working with custodians. For example we are collaborating with Hex Trust, one of the first regulated custodians in Singapore. Some asset managers will have a responsibility to hold their assets with a regulated custody provider. We want custodians to be building on our network so that they can take advantage of the ability to access DeFi through MetaMask institutional via the Qredo network.
So, it all starts and finishes with infrastructure. Infrastructure is the enabler to the operational problems that these firms have coming into the market, as well as the regulatory requirements that some of them have in entering the market.
Q5. How are you guys addressing the compliance issue with these regulated institutions, and how receptive have they been to your approach with the MPC nodes and this completely decentralized way of confirming executions?
JG: When we first started this journey, people said to us,”How are you going to persuade a corporate or an institution to use a decentralized custodial solution?” We told them that we would show how – mathematically and practically – it's much more secure than any other solution.
For example, if you use another MPC technology provider, typically you will hold one shard of the three shards and they'll hold two. What happens if they lose one of those shards? Where do you bring the shards together cryptographically? You can't do that if someone has lost the shard. So, you're trusting your service provider to safeguard and hold your shards.
You explain that to a large organization and they’ll ask what happens if they lose the shard? Well. no one can access your wallet and that's your Bitcoin gone. When organizations hear that, they get very worried. With Qredo, you don’t ever need to rely on one counterparty – you rely on the network. All of that cryptographic information is distributed across the network.
The benefit of that is you can't compromise multiple different actors all at once; you can't hack into everyone's AWS servers distributed geographically, and hack into Google’s confidential computing cloud environment, as well as compromise various validators. It's simply mathematically improbable that you would compromise all of these things at the same time.
When you explain that what we're doing is mathematically reducing the probability that any kind of vulnerability will arise through the simple act of distributing the infrastructure, they get it.
We're having great conversations with large financial services organizations that are very interested in this because – if you're a top three investment bank – are you really going to be relying on a Ledger hardware device? Are you really going to be using a small custodial solution that holds all the keys to your wallets? No, you're not. You're going to have to find another solution. And we're well placed to be having those conversations.
Q6. You guys also have a burning mechanism? From what I read in the Qredo white paper, the tokens get burned if they get used or swapped. Is this correct?
JG: We do have the ability to burn tokens, though it’s not hard-baked into the actual tokenomic module. What we have is the demand module, where any fees generated on the network get collected in the underlying layer one. For example, if you swap Bitcoin for Tether, one side of the trade collects fees in Bitcoin, and the other side collects fees in Tether – and the protocol collects that. Then, the protocol goes out to the secondary markets, and uses all of the fees in its fee wallets. We do this on a random basis, and in a secret way (because otherwise, people will frontrun the dates and say “okay, cool – the protocol is about to buy a bunch of QRDO – we're going to get in before that buy.”). So, there is that demand connection between the fees the protocol generates – (so anytime anyone uses a wallet their fees are generated) – and the QRDO buyback that happens on the market. That QRDO then goes into the validator income wallet and gets locked up for a period of time. At the moment, the current protocol is three months, but it may extend out. As I mentioned earlier, we're looking at all of this kind of distribution modeling, and this may be something that also gets looked at as part of that. So, there's that demand model built in right now.
Q7. RE the recent announcement of Qredo’s $80 million Series A funding from key strategic investors like Avalanche. Obviously, these major Layer one blockchains are seeing the utility behind Qredo, and what you can offer them in terms of MPC custody and the decentralized nodes. The question here is how does the Qredo team plan to utilize the funds? And what are your short and long-term plans with it?
JG: We've raised over $120M over the last year and a couple of months, so we were busy last year and this fundraising which has given us a warchest. We’re going to use it to acquire talent. We want to further strengthen our engineering team, our marketing, and our community team. In addition, we're going to look at accelerating the development of our products. With more hands on deck, we can ship product much quicker. There are also really interesting opportunities in the market to acquire technology, teams and intellectual property.
We also have some really interesting plans that we're developing to further develop the actual Qredo chain. We’re really just getting started with this.
We aren't in a rush to spend; we're going to use this funding round to build out the team, acquire some really interesting technology, and keep the momentum up.
Q8. What are the most important and immediate goals for Qredo in 2022? If you had a list of the top three key performance metrics, what would they be?
JG: I think first is growth – we want to see continued but more aggressive growth across all of our key metrics. These metrics are transactions happening across the network, assets held on the network, the amount of users that we're acquiring on the network. And we want to see that grow significantly.
So, steady but strong growth across all of our key metrics for me is the North Star because what growth means is utilization. More utilization of the network means more protocol revenue, and more protocol revenue means stakeholders are incentivised to participate in the network. So growth for me is the number one priority.
The second is talent. For us to be able to compete and build in an environment which is extremely aggressive and execution-focused, we need to be able to acquire the best talent in the market; the best cryptographers, the best engineers, the best community managers, and the best UI designers. We want to be able to bring on board the best talent in the industry.
The third for me is community. I think we are so early in our journey in building our community. As we get more and more mature and have the ability to build developer communities, we will be able to build communities more focused on certain layer one assets – communities within communities. And the growth of our communities across our various channels, whether it's Twitter, Telegram, or Discord growing those out aggressively this year is a key focus.
Want to work at Qredo? View open jobs here.
Q9. Will Qredo offer some kind of grant program for developers so they can build on and expand the Qredo Network?
JG: Right now, that core piece of code that enables developers to write to, and interact with, the Qredo Network is going through it's third audit. We are very risk averse as a team so we audit, we re-audit and then we audit again. Once that is available for us to release, it’s off to the races – so basically a developer can pick it up and build on top of it natively.
We've already shown that that can happen, through the recent BitcoinBankathon in El Salvador where we enabled developers to pick up certain bits of the code and start building on top of it. You can already build on it today, via the APIs that are all available and accessible, but the underlying code itself hasn't been fully exposed. But, it will be.
In addition to that, we have the ecosystem fund, which is part of the overall token distribution, and we will, at some point, use that to launch a developer grant program. We're also looking at a fellowship where you can enter into a six month or 12 month developer period with us and build alongside us. So, if you have a great idea and we think it's worth incubating, we will fund a fellowship. You’ll be able to build your own third party applications utilising the underlying functionality of the Qredo Network.
So we are a layer two, but, in some respects, we have the scalability or the development capability of some layer ones. And that's very much a priority for this quarter.
Q10. Did you use Atom and Cosmos SDK kit to build Qredo? If people can build on Qredo will their app be automatically cross chain compatible?
JG: We use a fork of Tendermint, which is a founding component within Cosmos. And the reason we chose Tendermint is that it is so easily understood by the developer community. Tendermint is the foundational code for some of the largest chains out there, because you can customize it heavily and add to it in a modular fashion. We've done that so when the code is opened up to developers, it's easy to start building on top of in a way that can be as cross chain compatible as possible.
If you build on top of Qredo network – whatever it might be that you're building – you'll get all of that cross chain connectivity out of the box. And you will have access to the underlying code to build on top of it, in a way that you do right now with any other blockchain.
Thank you to everyone who attended and thank you @CryptoApeHQ for hosting the wonderful event - we had a blast!