Yoni Assia: eToro – The Social Trading Platform (#309)

Transcript

this is epicenter episode 309 with guest Yanni asiye hi welcome to epicenter my name is Sebastian Kiki M my name is Veronica van crane today our guest is yoni Ostia yoni is the CEO and founder of eToro if you haven't heard of eToro it's a social trading platform that allows users to invest in all sorts of assets stocks bonds commodities and cryptocurrencies so they've been around

since 2006 they're a pretty big company over 700 people and they have offices all over the world and what's most interesting about eToro is the social trading aspect that they've pioneered when you're using eToro you can choose to make your trading profile public to others and people will see your performances over time and then they can simply choose to copy whatever trades you make effectively benefiting from your experience and all the research that you put into your own trades so it's it's created this very interesting dynamic where effectively you're kind of creating like your own mini ETF and allowing others to invest in it so it's really cool yoni and eToro have been active in the crypto space for many many

years and we went into this into the interview with yoni he came into the Israeli crypto scene around 2010 and he was closely involved in the colored corns project as the story goes Vitalik butor and was travelling in the end of 2013 and he came into their office in Tel Aviv and he helped them build the colored corns implementation of course this was just before the theorem white paper was released to the world so there's a lot of interesting crypto history and we went into that with yoni during the interview he tour is really interesting because it's a product that lowers barrier to entry to trading and investing they've made onboarding super easy it's a very slick mobile friendly experience and the social aspect of

eToro I think is what attracts people who may normally be intimidated by trading and makes it more much more fun and exciting of course any sort of investment involves risks and this is something that we discussed with yoni as well yeah I mean I remember hearing about eat or I guess in like late 2030 you know maybe was at the start of 2014 back then it was a big news or some some new platform supports like Bitcoin and you know like looked at it a little bit back then I didn't really realize that you know there was such a backstory yoni as a founder had with Bitcoin and crypto and such defaults into it it seemed like a little bit to me at the time as in you

know you had this 2013 crypto bubble and the first bubble or one of this early bubbles and that's companies coming on top of that but it's really interesting to talk with yoni just how long and how deeply they've been kind of grappling with the topic of Bitcoin and cryptocurrencies and yeah I think that done did some really awesome stuff I'm just a the product itself is really cool and I'm excited and the conversation was was really fun I see him as a great advocate for crypto his company is very much embedded in the traditional finance world and he Toros being as big and successful as it is it enables users to trade cryptocurrency just as easily as

they would trade any type of financial asset and that opens the door to just so many more people being exposed to crypto so before we go to the interview I want to talk about SF blockchain week there's a lot going on and so I I want to break it all down for you so Sonny and I will be there attending both Cesc and the epicenter conference of course epicenter is a conference that's organized by other people than this podcast but we're partnering with them so I'm super excited to be emceeing the entire conference I'll be emceeing both on the 31st and the first so I'll be really excited to see all of you there I gotta say it's a little intimidating it's been a long time since I took the

stage in front of that many people but it's definitely gonna be a lot of fun and I'm really really looking forward to it it's gonna be a fantastic event tickets are still available and we have a 20% discount code for listeners of the podcast you can get your tickets at epicenter rocks /s f BW tickets it's epicenter rocks /s f BW tickets and use the code epicenter 2x to get your discount your 20% discount I also mentioned last week that we're gonna be doing casual drinks Meetup well we've locked down the date it'll be on October 29th and since it's right after day one of Cesc will probably be in Berkeley we're still looking for the

venue if you're going the Cesc you know come hang out and have a drink with us it would be so much fun you know every time we do in these meetups it's always great to me you know listeners and former guests of the podcast so register at epicenter dot rocks / SF Meetup and we'll have the location up as soon as we've locked down we're also attending the hackathon that's happening over the weekend and it is co organized by our sponsor cosmos it's from the member first November 3rd the theme is defy and there's a $50,000 prize pool in Adam for winning teams so if you've got a cool defy idea likes taking derivatives or a lending platform or you know if you want to build the

next make or die for cosmos you should definitely register what's really exciting is that the inter blockchain communications protocol IBC is nearing completion and it will be ready by the time this hackathon happens so that means that you can use IBC to interoperate your adapt with other daps in the cosmos ecosystem and that just opens up a whole bunch of other possibilities that weren't possible before you don't need to be a developer to apply anyone's welcome designers project managers legal experts you name it if you're interested in building a codify project and you want to join a team register at epicenter rocks /sf cosmos and be sure to let them know

you heard about it on epicenter I also want to tell you about Bal Toros brand new v2 platform it's been a long time in the making but it's finally here and it's pretty awesome the new trading dashboard looks and feels great they put a lot of effort in making the onboarding process simple it only about two minutes to get verified one of the major improvements is the addition of new trading pairs in addition to Bitcoin they've also added - and new trading pairs will be added soon so recently I've taken a lot of interest in diversifying my financial portfolio a lot of experts are predicting a global recession in the next coming years I don't know if that's coming but if it does I want to make sure that my eggs

are not all in the same basket and that's why I'm using baltoro to buy gold gold is a great hedge against the volatility in crypto but also against the financial system and at epicenter we've been using vault or for years to protect ourselves against the volatility in crypto and we've always been happy to have that security when the markets were really ball time so to create your account go to vault or o calm that's fee a ul tio ro and make sure you let them know epicenter sent you we'd like to thank voltar for their support so you've probably noticed this is a little different from how we normally do ads which are usually in the middle of the podcast I wanted to experiment with talking about our sponsors at the

beginning of the show because I think it gives us a little bit more flexibility I'm curious to know what you think reach out to me on Twitter if you have any feedback so with that here's our interview with Yanni asiye hi so we're here with yoni Asiya yoni is the CEO of eToro yoni why don't you tell us a bit about yourself in your background and how you became interested in financial trading serfs of thank you for having me family I am the CEO and founder of eToro I've been passionate about capital markets since I was very young I started treating the markets when I was about 13

or 14 I got some shares to buy bar mitzva from my father and started trading through my bank and really fell in love with the concept of you know capital markets and how the entire world is connected and I sit in my room in Israel and click a trade and then see that trade happening in the Nasdaq plaughter so I really fell in love during the dot-com bubble in the markets I traded through I made a lot of money I lost a lot of money and I fell through that in love in capital markets and

wanted to have more people participate in the markets and have that same feeling of sort of ownership and collectively simply together I think you're the first person I've ever heard to say the words I fell in love with capital markets but what led you to to found a Toro after discovering this love and passion for financial markets so I've been trading for a while I'm also a computer scientist so I'm a finance geek in my background and I did my master's in computer sciences and at the same time my older brother Ronan who is my

co-founder always looked at what I do and said I have somewhat of an accountant hobby that I sit in front of multiple screens lots of charts spreadsheets and that the user experience is horrible and then we started to brainstorming about how can we make the user experience of trading and investing something that's more accessible and more open for everyone to trade and invest and that's really how we started it or we started de Toro with a concept of simplifying financial trading for everyone to trade invest in a simple and transparent way and throughout basically building eToro we

found out that it's not only about creating a great user experience to access the markets but it's also to find the user experience for people to learn and get educated from one another and that's where we came with a concept of social trading because the best way to learn is to observe what other talented people are doing and potentially if possible copy them that's how you succeed in high school so that's how basically we started forming the concept of the social trading network where every single person on e toro when they opened the account automatically publishes all of their trading activity

so everyone can see what everyone is trading and then follow or automatically copy the top traders on the platform yes this is such a fascinating approach when you guys started it or detect exists before or how did you originally come up with this idea when we started eToro we launched eToro with a social layer around it that enabled people to create profiles and to talk like in what people call today in exchanges troll boxes and when we looked at the engagement of users what we saw is that the feature that they used the most was chat and then specifically to talk to one another

about what they're trading so we launched in 2007 our first year of operation with 2008 and then we launched the open book which basically was the platform which enabled everyone to see each other in 2010 ok ok so I'm curious though do you remember kind of the original I would the idea of like copying trades I mean I guess it's a somewhat obvious idea but like not completely so how did you originally decide on that feature the feature really started from us showing everyone on the platform what everybody does I remember we set here you know middle

of the night talking about names what should we call this concept of copy trading so we were definitely one of the first platforms to suggest that people can actually copy other people it was an extension of the fact that we enabled people to see what other people are doing was to basically extend that so you can see somebody's track record and say hey I want to copy this guy with a thousand dollars and from that moment on you copy his entire portfolio into yours and every time he trades he trades automatically the same time same proportion and same price in your account so what was the reaction to that I mean I can only imagine that some

people may be you know back in those days where social networks were just kind of getting off the ground and also people's people I think tend to have some whatever reluctance to share information about like so their financial well they're saying things like this like how is it received then and then how has that conception sort of evolved over time so I think it definitely evolved over time because we've seen significant growth over the past three years both around crypto and around copy trading I think a lot of people when initially they joined and that's also a big part of our network

effect today then it took a relatively long time since we launched the product in 2011 to generate thousands of clients who have nice track record for a long duration which is relatively consistent and sustainable so when you go through the platform you can see hundreds of thousands of accounts and now in 2019 you could actually find thousands of accounts that have been profitable for three four even five years and you can see the entire history so initially a lot of the challenges we had was about discovery and what's the right way to

let people discover top traders our initial thinking then was let's try to basically create a list and let people sort the list and what we got is people very naively just sorting the list by gains and then choosing the ones who generated the most amount of gains and copy them and that turned out to be a very bad strategy so we started doing a lot of analysis on who are the people that our customers should copy and we got to the conclusion that we should make it more like an app store first try to figure out what you're interested in and then let you find

people who are similarly minded and also always sort of look at risk and reward at the same time so for example today if you trade at very high risk we have a risk score so you guys can actually see the platform here in your eyes so anywhere we mentioned the returns the last 12 month we turns we also mentioned the risk score which is basically the volatility of the portfolio so today you can only copy people up to a risk score of seven and people who are popular investors which basically means there other people are copying them and they're getting paid for it need to manage that risk score and at some extent need to actually lower it to six

and below one of the question that comes up here so let's say you have a hundred thousand active traders on there of course you know just purely from a statistics perspective you'd expect that you know some of them even by pure chance if there's no particular scale but like would you know outperform others even over an extended time so I'm curious like you how do you know whether you know a trader has just gone lucky again and again and then ends up sort of floating to the top and retour or whether there's like genuine skill behind it so you can see here what we're using is we're using a lot of filters today we're

actually also using machine learning so we basically have about 24 plus parameters whether it's weekly drawdown number of trades profitable weeks profitable months the risk or stability of risk or etc including how many people are copying them and the copiers change then we take basically all of these parameters and we feed it into a machine learning algorithm and ask machine learning algorithms to basically rank people with the highest probability of generating profits in the future then we have an investment team who actually talk to these people and understand their strategy and those

would be our popular investors so we went from saying ok let's just put everybody out there and have one big list for people to list to a much were curated a process where we have machine learning algorithms we pick the top traders and then we actually communicate and talk to those top traders to understand what they're doing their strategies and also help them communicate those strategies to our customers this is so cool yeah it's basically like a crowd-sourced way of like finding court folio managers yeah exactly so let's say you took who you chose last year as your or maybe two years ago as the top traders Oni Toro

you know how it does perform versus you know like benchmarks of maybe well-known hedge funds or something like S&P 500 so we're doing this we actually have algorithms that pick top traders so when you go into eToro you can actually choose for example this algorithm that every quarter rebalance is based on basically logic or machine learning who are the top traders on eToro and then you can see the track record of those algorithms across time so we've been able to generate relatively sort of consistent double-digit returns across different

glasses what's really interesting is that those returns are also uncorrelated necessarily to one market because they diverse between stocks currencies cryptocurrencies ETFs commodities so it's a very flexible portfolio across a lot of different assets so you're investing in top traders that get changed every quarter and then actually what the trade is not necessarily related to their performance right so you can invest in that copy portfolio that's the name of the product and that copy portfolio could be 50% stock one quarter and then 50 percent of

currencies and crypto another quarter that's fascinating we did get off to a bit of a quick start here because we wanted to talk to you about your early beginnings in the Israeli crypto space so we'll come back to Ito in a few minutes but yeah so you know Israel has been I've also realized this even more having been there recently and met a lot of the folks there and a lot of our early guests on after Center were from Israel and so Israel has always been in sort of the center of eight of innovation around the block chain space dating back as early as 2012 you know with master coin and everything so I'd love for you to talk about your your involvement with that community in the early days of Bitcoin

sure so so I started a let's call it playing around Bitcoin in 2010 and then found you know the community growing here in 2011 very lucky to have bought for eToro some bitcoins back then at Mount GOx for $5 and $10 and then when I saw Bitcoin for the first time I read sort of fell in love with it the same way that I fell in love in capital markets because of the technology and how it worked and since I'm very familiar with how traditional financial services work and how broken the current system of currencies and the global

infrastructure of finances so when I started paying people with Bitcoin and sort of wandering around a Bitcoin talk we started this concept called colored coins and that sort of discussion started emerging on Bitcoin talk and then we found out also another group which was the master coin group which was sort of running in parallel and both concepts looked at the similar thing which is how do you tokenize assets on top of the Bitcoin protocol so how do you use the Bitcoin blockchain in order to facilitate basically trading or p2p

trading of dollars and euros and yen's etc and then I basically started offering bounties on Bitcoin talk for people to sort of expand on that vision of colored coins and a lot of people reacted to that there was a very big Google group back then that had a lot of the sort of OGIS from 2012 and 13 who contributed to the dialogue of basically launching traditional assets or tokenized assets on top of the Bitcoin protocol and one of those people was also vitalik wealth who actually contributed to the project and came to

Israel to work with us and wrote a significant part of the original colored coins white paper and eventually sort of came to the conclusion that the Bitcoin blockchain wasn't meant for tokenization and sort of went on with aetherium but I think back then a lot of people were excited this was read the early stages of understanding how can you use blockchain for tokenization of assets for clearing and settlement between different counterparts that was really the initial concept of blockchain beyond Bitcoin so talking about italic and you met him I believe around the end of 2013 and then

he went on to found a theorem in early 2014 what was your reaction to this idea that he had of launching a new blockchain - tokenize assets how did you take that back then there was an ecosystem back then the Eco chamber of of maximalism was very very strong so I I was the first or one of the first investors in in master coin when they launched Omni I mean again this was I you know remember these were when Bitcoin was also cheap I think we invested a hundred Bitcoin as he Toro into Omni and then took out two hundred Bitcoin after something like a couple of weeks so this was really the early early

days of I SEOs back then a lot of the ecosystem was or maximalists and thought that a lot of the ideas that vitalik said were not achievable I was just hoping we could build something like that back then on the Bitcoin network and that building a new blockchain is very complex and potentially we could use the Bitcoin protocol but as as etherium sort of started developing and we had a lot of the people involved in the colored coins project in eToro actually keeping in touch with the progress of ethereum we basically

started sort of seeing it to merge as a working blockchain and while we're seeing that still we had a lot of noises coming from the Bitcoin community which surprisingly are still there those voices of maximals saying that this will never work so so I'd say at core I you know I I thought Bitcoin was the only solution and tokenization need to happen on top of Bitcoin but I think eventually when we started seeing smart contracts emerge in the concept of sort of Turing complete language running on the blockchain we thought you know this is the decentralization potential opportunity for everything okay so so

then you you went from from being an obligatory maximalists which which I guess everybody was back things that's all there was to not so Maximus anymore believing that you know other platforms can also serve different purposes is that am i sort of characterizing your views there I went down all the rabbit hole I invested in like 25 different icos so I love I love the concept of block chaining everything I love the concept of the tokenization of traditional assets I I think decentralized finance is a huge opportunity and it's not only it's not decentralized finance as much as it's replacing contracts with code so replacing legal contracts with smart

contracts I think is a huge opportunity for finance today to create a lot of times financial contrasts between companies that are not even necessarily complex but have several counterparties it's extremely hard to do and you need to go through brokers and prime brokers and is the agreements again when you're in the financial services industry you find out how complex that industry is and I think smart contracts and decentralized finance and being able to look at open source code and having trade settle between multiple parties on the blockchain I think that has an

opportunity to completely transform the financial services industry yeah I know absolutely I'm curious cuz I heard an interview before if you were that's something where I really wanted you to go into a little bit more in depth so when you say it could like totally transform the finance industry can you go a bit in detail they're like how is that gonna play out there is a big question of how it's going to play out because I think it's like you know looking at 99 or 2000 and how would the internet play out would be very hard to envision Facebook and Google back then but what is going to

play out is that we're looking today at about 140 trillion dollars of assets of financial assets that right now are registered basically in in local database in various financial institutions I think that a significant part of that I just saw research talking about 25 trillion by 2027 is going to transform him to blockchain assets and when I say blockchain assets there is the the single feature which I think for me was the aha moment starting dealing with Bitcoin is very simple it's your ability to self custody so your ability to basically send and

receive 24/7 any asset that you own and I think that's a feature that's gonna become a requirement of most financial assets in the world so today you can hold financial assets in in multiple financial institutions and they'll just be closed for for most of the day they'll be open for nine hours a day and you have some financial assets in financial institutions that you simply can't really move easily between either different financial institutions or move them into your own custody so when I say blockchain assets I mean your ability from a technical point of view 24/7 to move those assets anywhere around the

world so often when you hear people talk about you know the power of blockchain assets or like decentralize finance they think of like okay the ability to have you know censorship resistance or maybe financial access in developing countries so when you talk about 24/7 the ability 24/7 transfer blockchain assets what's so revolutionary about that this is just the matter you know I want to trade in the evening and now I can or is there something more fundamental that that's gonna change when that happens I think what really happens is it lowers significantly sort of the barriers to entry to participants

if everything is on the same technology layer right so right now if you're investing in multiple types of assets in different countries it's it's very hard for you to move all those assets and when you think about blockchain technology it's it's all around basically creating the same standards and protocols to transfer those assets so censorship resistant is one thing it's your ability to always move assets I think that's core for Bitcoin but I think the other part is for all assets to basically run in a digital way so for you to be able to move those assets to sell those assets so today if you own

stocks it's impossible for you you know there's nine hours a day when one specific stock market where you are works and probably you can't move those stocks by the way it's also about time so when you try to transfer stocks from one broker to another that's a five to 20 days process when you move fiat money around the world in some places it's t plus 2 or T plus 5 when you move an entire industry and say instead of something running and it takes it three days or five days to settle it settles in let's say you know the 15 second block of aetherium you basically

accelerate significantly the time of innovation you accelerate the ability of basically more people to participate and for transactions to happen much much faster yeah and I think this is where you know coming back to your point about we couldn't have imagined what the internet would allow you know 10 years in let alone Facebook or Google I think this is where you know we don't really yet comprehend or can't predict what having 24/7 open financial markets where transactions are instantaneous where you don't have you know this with t plus 24 moving stocks between when I broke a tree neither like we don't know what

that will enable and this is this is I think where a lot of people are scratching their heads about like where the space is heading I think eventually it ends in a place where you'll be able first to invest digitally in a lot of things that today are impossible whether it's you know art whether it's contracts of talents you'll be able to buy five percent of an NFL players contract for the next three years whether in equity in rev-share in fixed income you'll be able to buy potentially fractional ownership of an apartment in the US or in Germany so once you token ah you digitize that

ownership and you put it in basically one global platform you'll be able just to find a tremendous amount of things to buy and invest yeah I agree there I thought would be interesting to talk a little bit about so you know you became interested in Bitcoin and blockchain and saw the the power of tokenization so early on at the same time you're already building your business a vitor so we can see if we can speak a little bit about kind of you know how did those two interplay like how did you think about bringing crypto in to eat or or maybe eat or adopting crypto and how has that evolved from you know when you originally learned about Bitcoin and

became involved there so initially a lot I I would say I saw a lot of skepticism around Bitcoin so I was sort of a very much an enthusiast of Bitcoin and a lot of the people around me thought that you know it's a bit crazy internet money and cryptocurrencies crazy and potentially dangerous so we had a lot of resistance and I think we worked throughout that resistance to be able to launch Bitcoin trading on eToro back in 2014 or late 13 which was a lot of work both with

regulators I think we were the only regulated financial institution in Europe actually offering a Bitcoin trading so a lot of work was around that and then Mount so just as we launched crypto trading on it or o for the first time old GOx happened and then a lot of people lost faith during that I think that was the second crypto winter if the last one was the third one and then for awhile from 2014 to 2017 there were very few people on eToro that actually traded crypto only about 2% of our users traded crypto but because we kept sort of the relationship and sort of kept a look at the theorem

we then at March 2017 were the first broker to actually list aetherium as well when it was about I think was six or eight dollars just before it started picking up this was like four months where it went from six and to $1 it went up to $400 and then we saw a huge wave of people around the internet who came to explore crypto currencies we started adding more crypto currencies into eToro from XRP to today the 16 of the tops crypto currencies trading on a Toro but back then in 2017 we were really at the

right time in the right place to see a huge demand of people on the internet just looking for ways to access and to buy crypto currencies and I think the fact that they had the social network to talk to one another really enabled even lowering and more the barriers to entry so still today were one of the simplest platforms out there to buy crypto currency so you can deposit funds very quickly open an account with five minutes verification is automated eddie Toro so unlike some platforms where you might get half the verification take a couple of days only Toro it's instantaneous within five minutes you can open an account you can fund an

account with a credit card or a PayPal in Europe UK and Asia so it's a very simple fast way to i cryptocurrencies but I think the fact that people were able to see other people on the page so like if you go into the Bitcoin page on eToro you can see thousands of people basically talking about Bitcoin or about aetherium or about xrp for a lot of people that was an opportunity for them to suddenly talk to other people who are already investing in cryptocurrency potentially from another country or from their own country so talk about the script of trading feature on eToro what does it

look like how does it work and how is it different from other crypto trading experiences say on you know Kraken or coinbase or something like that sure so first of all were a multi-asset trading platform so you can on our platform buy stocks from 17 different exchanges from US stock to European stock to asian stocks the same way you can actually buy currencies as well whether it's euros pounds yen's so we started eToro as a social trading platform to basically enable people to access a lot of various assets and we added crypto just as another asset only

torso the same way you can actually buy Apple stock and you can buy everything with no Commission so there's no ticket fees basically on eToro so you can buy Google stock at fractional share for $50 the same way you can actually buy Bitcoin for $100 or for $1,000 so it's a very simple way to basically invest in crypto currencies the same way that you can invest in stocks on the same platform we then launched our blockchain wallet back about a year ago which enabled people to move the assets so to transfer your

Bitcoin from the trading platform into a multi blockchain multi-sig wallet where it's on chain so you can actually when you move your bitcoins from eToro which the majority of assets are in cold storage and Castellini Torro when you move it to your eToro wallet you basically see your own crypto on the blockchain you can go to a block Explorer and look at that address and then you can send and receive basically your a Bitcoin aetherium and all the other crypto assets through the wallet okay so this is this is a feature that you launched a year ago yeah okay because go researching this for this

episode I asked a lot of our listeners and people you know around epicenter what what we should ask you and a lot of them brought up this this idea that you know when you were buying kryptonite or oh that it was locked do you know why you know you have any idea why maybe people are confusing that or maybe have this perception that like your funds are basically locked on here so first of all when we originally launched crypto on eToro then it was locked in and we just launched the wallet last year we also so in the US for example it also depends on which geography so the u.s. we launched our crypto trading platform in the wallet basically at the same time in

Europe it's been running for about a year we've been gradually rolling it out for all of the different clubs so if you are basically when you open an account in eToro you we have a club system so if you have an account with more than 5,000 dollars you're a silver account if you have an account with more than 250,000 dollars you're a diamond account and basically the duration from when you deposit funds into eToro and move them into the wallet depends on your club status and then in Asia we have we haven't rolled out the blockchain wallet yet or the ability to transfer assets from the crypto platform onto the block chain wallet okay understood

can you also dive into it or eggs right so yeah I think this is a more recent initiative where you where you launched a separate crypto currency exchange like why did you wanna launch an you know an entirely separate and a separate product there sure so eToro X is our crypto asset exchange so again the core business of Itoro is a trading platform which includes stocks commodities indices currencies ETFs and cryptocurrencies and the experience is a very simple user experience that enables you to buy and sell very easily on the platform where we wanted any Toro X to basically build

infrastructure to enable us to tokenize assets and to issue them and list them on our own exchange so we can create price formation for a new type of assets so throughout the crypto rally we connected to about 15 different exchanges so when you came to e Toro and wanted to buy it doesn't matter if it's $1,000 worth of Bitcoin ten thousand or ten million dollars you could execute that what you see is what you get with the rate on eToro and we would basically go and aggregate the order brooks of about fifteen other exchanges and then basically go to the market with those orders what we created only Toro X we

basically aggregated the same basically order book of multiple exchanges onto eToro X and also created basically twelve stable coins representing euro dollar yen Pound basically the top ten fiat currencies as well as gold and silver so you can trade Ari Toro X both crypto currencies and actually our stable coins so you can trade Bitcoin vs 12 either stable coins and other cryptocurrencies and you can also trade stable coins versus stable coins like u.s. DX versus euro X or USD X versus gold on the Toro X platform and and that again takes me to our long-term vision

we believe in the future of tokenization of assets in order to transform our platform to a platform that works with tokenized assets rather than traditional assets we wanted to build the entire stack of an issuance plat where we can tokenize assets in exchange where we can list those assets with an order book which basically means we create price formation so the price can basically people can understand how the price is formed of any market that we list only Toro X and then on top of that a trading platform that enables people to easily access those assets okay very

cool so that kind of brings up for me back something you mentioned before right when you talked about the power of blockchain assets you know you talked about the importance or the role of people kind of controlling your own assets being able to move them at any time you know so far if you look at I mean it's I guess it's different with your wallet or I'm actually not sure but at least with each hour and you draw X you still have you know kind of custodial services or like centralized services where you custody your assets for people so how do you see that they're rolling in the future do you see a contradiction here or do you think that in the future it or will move more towards products where people can retain

custody of their assets right so the I think that's a great question we had a lot of this internal dialogue when we launched and planned eToro X whether we want to build a decentralized version of an exchange or a centralized version of an exchange we felt that it's a bit too early on for førde X's so when we built colored coins in 2013 we actually also built on top of the Bitcoin network a DEXA decentralized exchange so you could do atomic swaps of tokenized colored basically bitcoins between one another so I love the concept of decentralized exchanges the

problem is I don't think the market is mature enough for those products from a user experience point of view so what we've learned across time is one it takes time for markets to mature and for user experience to purr effect itself so products are actually more and more usable and other part is for decentralized exchanges to really work well there needs to be a lot of different assets on top of one specific blockchain because these render lies exchanges really work well when there are multiple assets on basically one blockchain and when we looked at

building in Toro X we came to the conclusion that it's still in its infancy and therefore there should be first a bridge between centralized exchanges so creating liquidity in the traditional form between traditional markets centralized services on top of crypto and then moving to what we call decentralized finance or basically non-custodial financial solutions so one of the things that we are doing we have our blockchain labs we recently announced a new programming language that we've developed called lira and that's a formal verification language to write basically financial derivatives

options swaps futures forwards on top of the etherium network in a language that's basically formally verified which basically means it's a language that sort of mathematically is closed to prevent sort of bugs and to make it more efficient and what about defy so you also mentioned defy before and you're just the amazing power and I think a scale of opportunity at defy exists how do you see that playing out do you think maybe there you would sort of give access to defy investment opportunities through eToro and integrate it that way or it's something that we're actually

exploring right now is how to enable users of both the Toro X and our wallet to be able to access defy products it's something that we have an entire team sort of working around how to integrate centralized basically product so with d5 products okay understood so I'd like to come back to this concept of social training a little bit we've touched on it early in the show why do you think that idea is so powerful why you know I think you guys have over 10 million users and I've heard a figure that you know over a trillion dollars were traded on de Toro just last year alone why why are people so drawn to

this idea of social trading I think a lot of people are interested in financial markets many many more than the ones who actually trade the markets because people are still intimidated by the markets they still are afraid of making decisions on their own and it's generally a very sort of it's a very lonely feeling unless you're really connected into the markets and in social trading where you can suddenly see what other people are doing and you can talk to them I think that lowers the barriers to entry we lowered the barriers to entry through enabling people to see follow and automatically copy what

others are doing because you don't need to be professional trader or an expert in order to see what somebody else doesn't define whether he's good enough and copy him and so by reducing this barrier to entry do you see either sort of conceptually or actually in practice do you see this as a risk in some way or does that open up the possibility for for risky behavior I think it's a Superman quote with great power comes great responsibility there is definitely a lot of responsibility that people need to take when they decide to trade with their own money or

to risk their money or to invest their money we have been working a lot on the platform to constantly educate users about the risks that are taking so today based on how you define your profile on eToro we will open different features for you so some people can't trade leverage at all some people can't copy other people based on the answers no one can actually copy people with a risk or hirer of 7 so we've done a lot of these because what we've learned is people need to be very well educated about the risks that they're taking philosophically you can

sort of divide the world into two those who believe people should have the freedom to choose and to take risk and sort of the other half who says no let only professionals manage money so obviously philosophically eToro and we believe in the bunker ization of wealth management and that people should have access to the markets to make their own decisions you know whether it's to move their assets or it's to make their own decisions in what to invest in and I think capital markets works the best when retail investors actually invest in what they believe in rather than delegating all the money in the world to

very few financial institutions yeah that's that's an interesting point so on this idea of education you know recently I saw some of your ads online and you know they're they're really funny and they're they're great and very creative but do you do you think that's when you know people see ads like trade like a Steve for example which is a pretty famous eat or do you think that when people see that they have a notion of the risks cuz I could see that opening up just possibilities where people like hey I can just copy this guy and I'm I'm gonna get rich quick do you think that you guys are doing enough to to protect people from

you know throwing their entire life savings into something that perhaps they're not extremely educated about so we are trying as best as possible to educate people about the risks because when we you open an account or eToro will actually ask questions like what's your you know salary and sort of liquid assets etc we should be able to block you from losing more than you can afford to lose and that's also a statement that sort of keeps recurring in how we educate people when you want to understand risks a you know is don't

risk more than you can afford to lose and I think that's very important when you lick eventually at a lot of the Toro users a lot of the novice users in a Toro a lot of them will start with $500 and $1,000 and when you get to a point where you deposit $5,000 into eToro you actually get assigned an account manager who talks to you once once a month and they will make sure you understand the risks and you're educated in the markets so we're are we definitely do a lot in helping people understand the risks but again as I said from a philosophical point of view we believe people should be able to understand those risks and

they're actually learning about the markets and learning about those risk and how the markets operate is something that is very good for a financial future of a person yeah I think I would agree with that that you learn by doing and sometimes perhaps you learn by failing if you guys have the right fail-safes in place I think that you know you probably limit some of that risk I mean when I went through the onboarding process I thought it was really good like I've seen this on on other websites as well where you do a very good job of trying to figure out what is the risk profile there and how does that evolve over time though so let's say that I'm on the platform and you know I started as a rookie trader and like now I'm making six figures and I've become educated

investor over some time this is the profile then evolve to allow that person to take on more risk etc so again the personalization of the platform is relatively complex because we operate in more than a hundred different countries and because the company is regulated in Australia and the UK in Europe now in the US as well so basically what can you access in every region would depend on where you're from the suitability an assessment of what kind of risks you can take and also where did you open your account in which of our regulated entities did you open an account so you

basically can get the variety you know people in France would open an account in Europe and actually by default see French stocks on their platform people coming in from ads around crypto currencies would actually go into something that's more defaulted view towards crypto we really try to segment our audience and understand what's interesting for different types of users people who are interested into stocks versus people who are interested in crypto versus people who are interested in commodities and try to personalize the platform to what would best fit them yeah I definitely a sort of victim of

that because I'm based in France and I opened my account while I was in Germany and I can see only sort of like Commerce Bank and all these German stocks here and I think I'm think I've I've been I've been flagged as a German investor which I don't know if if that's good or not so I think if you now deposit funds is yes yeah and choose that you're from Germany choose that you're French hopefully you'll see more of French stuff I see my French flag is now up but behind my my little eToro avatar so yeah but I think you know the processes were constant the evolving the platform and try to personalize it more and more as we learn more about our clients we try to make

the user experience more personalized I thought your comment was interesting before regarding you know the importance of having retail investors involved in the markets because I guess when you are trading during the.com right there was a lot in the US for example I like lots of retail participation and then I think after that it sort of disappeared right and now people may be divided like ETS or something like that there seems to be little involvement what's the demographic and what do you think the impact of this is for horatora so the average age only Toro is about 37 in the majority of clients are only Toro are 25 to 45 and we definitely see sort

of that cohort of people more interested in tech stock so if you look at what our users are investing in they invest in a lot of the known brands so almost every person on a Toro if you'll go to see his portfolio and look at the various assets that they're investing in you'll see a lot of known brands because people invest in brands or companies who they use their products and I think that's a very big difference between how financial institutions look at investing versus how people look at investing people look at investing because they're interested in a specific company because

they're interested in their products they believe in the sort of longevity of their product offering for a while and financial institutions generally analyze financials and the truth is probably somewhere in the middle nothing needs to be only from a financial point of view because then you couldn't tell the difference you know if you looked at the world only from a numbers point of view then it doesn't matter what a company does to whether you want to invest to invest in its stock and you don't want the world to be completely naive to say I love that company's products and regardless of its financials I want to invest in that

company so the truth is is somewhere in the middle but I think that over the past 10-15 years it got a lot skewed towards the finance view of let's just analyze numbers and all companies are basically just their spreadsheets so I'm curious do you have a sense of how much wealth like we talked about this one trillion dollars in trades this year do you have a sense of how much wealth you've generated for customers and maybe you know what's what's like the the coolest success story you've heard from a customer so we have a lot of like the coolest success stories that we see of customers are our popular investors so

when you start trading on eToro other people can actually see your profile and then follow you or copy you and I I'd say that the coolest success stories that we've seen our popular investors who start to get copied on eToro now once you get copied on eToro you'll get an email from our popular investor team to basically opt-in to the popular investor program where you can actually get paid to be copied and then we saw a lot of very cool success stories of people who actually got to a point where they could sort of quit their job because suddenly they made anywhere

between 10 to 30 $40,000 a month from us just by being copied by thousands of people and by tens of millions of dollars so I think we saw that to almost an extreme during the crypto rally because people came in to eToro and suddenly saw people generating 300-400 percent returns from trading cryptocurrencies which is obviously hard for a lot of people so they sort of jumped on that wagon through that but a lot of the interesting stories are those who managed sort of manage the risk in the drawdown of the market and sort of emerged as popular investors also

after the crypto winter okay cool yeah I mean this is so cool I guess it brings us back to your previous point about this kind of like discovery of like portfolio managers so the people who really successful at this and you've had like a lot of traders and it or uses copy their platform I mean in essence they're kind of even though I mean they're almost like managing money right anyway but they're not taking any of the risk though no they're taking their own risk I mean it's the highest amount of risk the risking their own money is the same in fact a money man as a manager I mean they're investing other people's money too so in a way they're also not

taking the risk so so what is the scale here like what are the biggest portfolio is that get invested based on you know some of these traders and their portfolio choices it very much varies this if you're talking about the total amount of assets copying one trader then the biggest ones are in the tens of millions of dollars if you're talking about what's the range of people copying other people the the average is a couple of thousands of dollars per copy okay okay cool how does it work here in terms of both the business model for each but then also the business model for you

know a trader that gets copied like how how is it determined how much revenue stay generate from that first of all for the users it's free right so when you copy someone it doesn't cost you anything if you go to a money manager he might charge you a 2% management fee and a 20% carry if it's a hedge fund we basically don't charge the users anything for it so when you copy someone the management part is free for you when underlying trades are happening in your account to do the trading activity is where eToro generates its revenues so when you copy someone it's good for us potentially because you just

did one click but you copied someone potentially is more active and trades more frequently the markets the person who you copied only gets paid from the amount of assets copying him so his sole alignment is to have more people to copy him with more money which aligns very well basically the customer and the person being copied now the person being copied falls under our portfolio management license so we basically give an umbrella and basically take the data from our customer accounts to enable that portfolio management service in

your account oh right cool is there also a risk here that like if I'm trader who gets copied by many people that I have kind of an incentive to like generate more trades because I get paid for for every trade no because you don't get paid for every day you only get paid for the total money copy okay okay that's why we broke we broke that yeah exactly okay so we tried to create the the incentive system in a way that aligns to the maximum the popular investor and there are copiers and of course we realized that within sort of the platform we should curate the platform and try to give constantly

more and more tools for users to figure out who are the right people to copy what I meant to say about they're not taking any risk is that the investors that are being copied that person doesn't need to invest like ten or twenty or fifty thousand dollars in their own portfolio they could be managing maybe like a hundred you know $1,000 maybe $500 some like that and then have like tens hundreds of thousands of dollars being followed by them right or copied so there is you can see here I'm sharing with you guys my screen that when you progress as a popular investor there are a lot of different requirements one of those requirements is how much money you have in your account so in order to manage to

basically have more than a hundred and fifty thousand dollars copying you you will have to have more than twenty thousand dollars in your account okay so you need skin in the game you so you have to have skin in the game you also get a lot of you know different benefits so if you're an elite trader you need to have skin in the game but you also need to lower your risk score significantly versus any regular trader on eToro okay understood so before we wrap up I didn't want to talk a little bit about you know the future you know of trading and so your vision for like where we will see the future of trading go and so traditionally you know people would like

people like my parents for example like we have a financial planner and like they're putting their money with this guy and they're seeing him every month and they're like getting information from him about what kind of trades should be making etc where do you see this going and are these people just destined to you know be disrupted I guess by platforms like HR oh and is this the future or do you think that like these professions will still continue to exist moving forward I think these professions will exist but I think they'll then transform in to much more an online adviser and online global adviser so I think local financial advisors who don't necessarily have the platforms to give the right service the

right advice to a global audience I think gradually that will shift so if you think about your traditional again and that really depends in different countries but there's a couple of things one you need to have access to the markets from the point of view of a customer if you are now doesn't matter you know Germany or France and your financial advisor can only advise you and buying German on French stocks I think gradually everybody understands that the markets are global and you have to diversify your investments globally then the second part is I think our generation would expect most of their communication to be done through their

mobile app rather than a face-to-face meeting and you'd probably want multiple people to be able to give you advice on on multiple subjects within one platform and that's sort of what we're building on it or oh we want to eventually enable access to as many markets as possible ideally you know one day markets that maybe don't exist today for retail consumers like art or real estate but even now with the global stock markets and then we want to give you through the mobile app access to people who understand all of these different markets I think as a platform we will gradually grow also to the place where

you can look at this more holistically from a managed account today it's still somewhere in between you know you it's easier to copy someone else then to choose stocks on your own but choosing who to copy is still a process so me we made that process easier by saying okay here's an algorithms to automatically pick the top traders for you but there is still a gap between that and saying okay the system really understands your goals how much money is in eToro versus other platforms and to help you make financial decisions that are really personalized to your needs and I think

that for us is sort of the next stage of evolution and on the other part we'd love to also see or of the traditional financial advisors sort of on board into eToro cool awesome well one last question I'm curious about so we talked a bit about you know kind of the future that's coming if blockchain when you look at eat or and I mean you guys have already accomplished like such an amazing number of things in the year since you existed but if you if you see kind of this this merging of these different trends like AI that you guys are leveraging and blockchain like what do you see eat or look like 15 or 20 years from now as a company in

organization Wow 15 to 20 years that's a lot so we see ourselves as a as a global investment house with you know we have X amount of customers I would definitely want to see us with more than a hundred million registered users by then with access to millions of various types of investments and powered by hundreds of thousands of popular investors across all those assets so the vision of of building a global digital investment house which enables millions of people to access the global markets and to collaborate and communicate around them

is really what we're starting to do and just scaling that into the same time that there is a huge paradigm shift of digitizing the entire financial services industry in our view is a huge opportunity where do you see AI play in that do you have any idea of like how you might be able to leverage AI so we're we have a great machine learning team eddie toro so i'll give you different examples of what machine learning algorithms do for us so one we mentioned before there is the top trader copy portfolios right so to automatically pick who are the top traders or who should our investments team talk to from the top traders to

have them enroll into the popular investor program another one is we talked about personalization so through basically having all of the data around the users around which banners clicked which ads they saw which part of the platforms they went in maybe which copy portfolio or instruments they've basically visited on the platform were able to basically find the right content to deliver to them through both push notifications emails CRM and even through sort of you know Google gdn or Facebook Ads right so we're able to personalize communication with a

customer - what's interesting for that customer and to optimize that to basically increase customer engagement with a platform other things again that are more forward-looking I do think that a I eventually will replace a lot of the traditional financial or portfolio manager point of view right so you'll be entering a lot of data about yourself your goals your objectives your experience your wealth into the system I think eventually AI would be able to give you a better recommendation of how to manage your money across multiple

people on eToro multiple strategies on a thorough and multiple assets on eToro better than any specific person that doesn't mean you wouldn't want to still talk to a person either from sort of a relationship point of view or somebody that can sort of understand better your needs and enter it into the system but I think eventually a lot of the decisions in portfolio management and investment management are going to be automated through AI that sounds like a very interesting future for you guys yeah I want to thank you very much for coming on the show today it was really fascinating discussion and I'm really glad we could finally sit down with you

and talk for an hour thank you very much I enjoyed it very much thanks Ms Cheney is a great pleasure thank you for joining us on this week's episode we released new episodes every week you can find and subscribe to the show on iTunes Spotify YouTube SoundCloud or you listen to podcasts and if you have a Google home or Alexa device you can tell it to listen to the latest episode of the epicentre podcast go to epicenter TV slash subscribe for a full list of places where you can watch and listen while you there be sure to sign up for the newsletter so you get new episodes in your inbox as they're released if you want to interact with us guests or other podcast listeners you can follow us on twitter and please leave us a review on iTunes it helps to be behind the show

and we're always happy to read them well thanks so much and we look forward to being back next week [Music] [Music]