Korda and welcome to Shared Lunch. We're in a sunny and pretty windy San Francisco standing here on the Golden Gate Bridge, and today we've got another suspecial episode. It's Cracking, and we'll be speaking with co CEO Dave Ripley.
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Dave, Welcome to Shared Lunch. Thanks so much for joining us.
Great to be here.
Hey, it's been a whirlwind trip for us. You're seeking on our US tour and was really cool on the plane in Washington, d C. This morning. In a great place to start, I thought, which was we're really headlined that Cracking signs a contract with the government, So I thought maybe you could start by telling us a little bit about the breaking news.
I never really thought this time would happen where there's a huge amount of crypto news. It's coming out of Washington, d C. Or any government center for that matter. But nonetheless we're here. Yeah, so look the news today not to downplate it all, but I mean I think it's one one part and a much bigger, bigger.
Dynamic going on.
So the news today was, you know, the Department of Commerce they're going to publish some of the kind of like US economic data on a blockchain. There it'll be attested to, you know, validated, time stamped, all that, all those good things that you kind of get with like a public blockchain that has you know, at testation and all those types of things.
So that's what that's about.
But there's certainly a bigger story, like around what's going on in d C, and you know, specifically with governments becoming a customer of crypto. I mean, I think one of the more basic and frankly maybe more interesting one pieces are you know, governments becoming holders a bitcoin.
That's happening in the US.
You have the US government doing it, and you have a number of states that are saying, hey, you know, our state sovereign fund is going to start buying bitcoin, and that's happening for probably I don't know about four or five states already, Texas, Wyoming, a handful of.
Them out there.
We of course see it in other countries El Salvador, and I don't know exactly what's the latest on, you know, across the globe, but yeah, it's interesting and that and of itself is of course still just a small part of all the things that we're seeing kind of come out come out of various different governments with regard to crypto.
Yah.
So tell us a little bit about Kraken's customers and you know who you're supporting every day to help in the crypto space.
Sure.
So, look, i'd break it down in three different groups consumer, professional trader, individual advanced trader institutions. I'll start with that
mental group mentioned before, pro traders, Individual advanced traders. That's kind of our sweet spot from our history where we really went after first for the audience here if you're familiar with like an interactive brokers or something like that, but that individual advanced trader is like looking for all the you know, complex order types, many asset classes, derivatives, leverage, looking for a sophisticated us with a lot of analytical tools, indicators,
all of those you know, features that allow them to kind of like build trading training strategies and execute on them. And then the third thing is probably like highly performance, low latency, all those types of things.
That's kind of that group.
That's where we, you know, have built out all of those things that I just described, probably better than anyone else in the industry. More recently, we've moved into consumer. When I say more recently, probably about four or five years ago, and it turns out that after you've built all of this more complex stuff for pro, it's actually pretty easy to build a more simplified consumer experience, and
so we've had great success there as well. And then finally institutions, so we serve a number of different institutions. We kind of break it down in a few different buckets. One being trading firms, and these are kind of trading firms again similar to the pro traders, very sophisticated, large trading teams do and you know think you know, high frequency trading firms, you know, trading via a PI, you know, thousands, tens of thousands of orders trades per day, that type
of thing. The next would be asset management firms. So this is the big money pensions, endowments, you know, big stock phones, big mutual funds, hedge funds, all that type of stuff. And then the last would be banks, brokers and FinTechs, so cheers these kind of falls in that last last category for us.
That flows nicely that the relationship we have Lusheesy, so one of the big parts of our process once we decided we do crypto and you know, huge amount of due diligence around them, like technology, the solutions we can offer to our customers. The one thing critical in this pace security, So I just love you to share with our audience day a little bit about how Kraken thinks
about security. And you know, particularly given there's been some very high profile crypto case you know, either hacking or security or you know, and ultimately a loss of money. So just how you think about that as a business or as an individual.
None involve and cracking.
But yeah, look this is this has been a super meaningful topic in crypto.
Of course.
You know, it turns out that when you have the ability to like hold the funds on your own and transactions are irreversible, security becomes super meaningful. Lo and behol probably unsurprising, but you know, cracking has a long history in this uh you know, with respect to security, it's frankly one of the founding tenants of the business. There's one of the first really the first crypto exchange out
there was a company called mount Cox. It ultimately was you know hacked, had security issues and went down, but actually earlier in its life, there was a security issue kind of a couple of years before the one that
actually took the company down. And when that first security event happened, Jesse, the co founder and CEO of Kracken, was already in the industry, was already knew many of the meaningful people in the industry, and they gave Jesse a call because he was already a fantastic entrepreneur, a tech entrepreneur, and was able to kind of like figure out tough, tough challenges and went out there to call them out there to go help Mount Cox in which he did and he you know, helped get them back
and moving, and on his way back, he you know, he had a couple thoughts. One was, Wow, that place really isn't doing security the right way and doing all the things that they need to do in order to you know, be fully sure. The other thing he thought was someone needs to do that, and that led to Krakeen, and so that was kind of the foundation of it. The other co founder of Kracken often refers to Kraken as a security company with an exchange on top. But really the way we achieve it, I mean it is
security and depth. It cuts across every function of the company. It's not just the security team. It's not even just the engineering team. You think about customer support and compliance and finance and all of these various different teams have
a role to play. We also have, like one of our values is called productively paranoid, and what that really means is that like productively is the piece of like, hey, let's not be too paranoid, but let's question things anytime there's something that doesn't look like as it should be for whatever reason. And that might just be like, oh, hey someone forgot to do X y Z. Is that is that really intentional or not? Let's look into it.
And that pervades across all two thousand plus krackenites, And that's a really meaningful part of like how we like pervade security across every corner of the company.
So we take it super seriously.
We know that it's not always top of mind for our customers, but over time, we think kind of investing in that leads to a lot of trust, whether it's whether it's clear where that trust is coming from or not, or that it's just Kracking's known to be highly trusted.
What are the other values of the of the company, like the I like the waiting, like productively.
Parently, productively, period.
So like most of the value set for Kraken is really tied to crypto values, right, and so crypto values are kind of this like, you know, frankly this in a way libertarian set of values about you know, like freedom, you know, freedom, independence, all these you know, different aspects and that's kind of like core to our to our value sets. So Kracken's values are very closely tied to crypto values.
So let's just step back a little bit and talk a bit more about you. Nine years at Kraken, and you know, I'd just love to hear a little bit about how you came to be here, a little bit about Dave, but sure.
Just been about your story. Yeah, So definitely a crypto dinosaur, that's for sure. Yeah.
So yeah, I guess it is nine years in krack and I founded a company in the crypto space twenty thirteen, so it's actually now been over a decade that have been in the space. That company is acquired back Cracking in twenty sixteen, Glydadira sorry you and that was called by Crack in twenty sixteen. So that, you know, like you said, puts me in about nine years at Cracking.
Most of the time.
I joined as chief operating officer for you know, was in that role for a good number of years, I don't know, six seven or so, and then more recently moved into the CEO role and co CEO with Argentzathi.
Right now we have a Coco model she is as well.
Yeah, yeah, I caught that. That's great.
And prior to the like, what was your you said, you're a cryptos dinosaur, but it was you know, it's not that old.
What was the lafe before?
Yeah, so kind of a two part career. Before my move into Crypto, so started my cares as an engineer, was engineer, an undergrad software engineer. I worked in what we called at the time mobile and you know, now, of course every company is mobile tech, you know, it has mobile devices, but back in this time period it was very very new. The largest mobile device at the time was a Palm.
Pilot, right, followed by the BlackBerry.
And then I don't know, it's like some Microsoft devices after that or whatever. So early days of mobile, what we did is we basically built mobile applications for enterprise software, which meant that the company I worked for, Cyclo, they eventually got acquired by SAP, and so we're kind of mobilizing those types of things that SAP was like, Okay, we can't figure out this mobile shit, so let's like acquire this company who's already doing it for our software, you know, kind of independently.
And so anyways, that's what that's.
What was kind of part one of my career as software junior product manageer, then business school, and then I worked at BCG or served a bunch of different financial services firms, and.
So that was kind of the second place as well.
Was I was not no, it was it was like is one of those things where it was like the I kind of thought about it as like the the in some ways the worst timing possible, because I was there in mobile when it was like you know, the Palm Pilot and BlackBerry and so forth. And then about the time as graduating business school was right right, it was two thousand and seven, and that you know, the iPhone was hitting right.
And so I've moved pivoted away from it, which was like, you know, you couldn't get worse time. So I actually kind of thought about that the many times through the Bear and Bull cycles and Crypto where it's.
Like, hey, am I gonna like you know, but you know, for a million reasons, I never never wanted to leave Crypto, and you know, just I'll definitely be in this space till I till I die.
Dumably b CG would have been a big player in that mobile transition large companies.
And now just you know, that was sort of the.
AI change we're going through now and various places has been compared to like the last large platform change being mobile, Like now, are you seeing any sort of similarities with like anything different about what what we're working through at the moment.
Yeah, you know, I mean it, I'd be a good interest into what you guys are doing in AI as well. So we're doing a handful of things, you know. The first is we have a number of operational parts of the company. You know, this is kind of like what I would say like most companies like v one for mobile, which is we have customer support, we have you know, compliance function with big operational teams and they do a bunch of work with data and of course interacting with
customers and all this type of stuff. And we're finding that, of course, like many companies, we can use AI to like automate a ton of this ship.
So that's kind of phase one. Step on what we're doing.
Step two, I would say, is to like build it more directly into the product. So instead of you know, opening up a crack and app where you have like an interface and you can go and click on all the buttons and pull up the lists and all the views and graphs and so forth, you just interact with AI prompt. We also just made an acquisition last week, we announced Capitalized dot Ai and there they basically have some tech where you can build trading outgoes trading strategies
using AI. It's kind of a prompt and then you you can build a different trading strategy and prompt so and it.
Like spits out like an algorithms exactly.
So that I mean, so that's kind of what I say is like phase two, where it's more just like the product becomes you know, the product and the interface you know, kind of become AI right, and.
Then phase three.
You know, that's like kind of imaginating what's up to our imagination what that is. I mean, I think there could be some interesting things, how kind of like crypto and AI I'm together actually.
Going to be my next question. We're havn't you asked what we're thinking about? Like, we're having a lot of
fun at the moment. You know, the operational stuff's happening, right, like the the adding time to engineers hands and all that sort of stuff and with their day, and one of the things we're having a lot of fun thinking about is like eight hundred thousand that were in our case a hundred and fifty thousand different UIs or you know, because everyone's going to experience this so differently and it really does change the you know, change the way. But
it's super interesting to think about. You know, you're sort of right in the middle of these two platform changes really right one yeah, yeah, crypto in the block chain space and then this AI. So how are they insecting in what sort of the future you might see from that?
Well, you know, I think this is I mean, it's definitely we get into the theoretical I mean, there are some like crypto AI projects out there and so forth. But I mean in a lot of ways. I mean again this is this is going to feel pretty theoretical, but in a lot of ways, you know, AI is very can can you look at it and be like, hey, this is very centralizing. And of course that's the you know, that's the meme or the even the fear out there
that there's you know, this what the movies are made of. Right, it's like this AI thing is going to take over humankind and blah blah blah.
Okay, why is it centralizing?
Well, you need all this compute power you put in one place, and these llms they get really sophisticated, and you have like you know, one or several lms that are very sophisticated, a huge amount of compute power. It all kind of sits in one place. Who owns the switch for it and so forth. It's very different. You know, central is you know, a centralized tech is you know, quite the exact opposite of crypto.
Right, very decentralizing.
You know, takes something like money, which is you know, meaningfully centralized today in central banks and so forth, and you have crypto now and it's like very decentralized networks are owned by the participants and so on and so forth, right, And so you kind of think, and if you're someone like you know myself, you look at those two different paths and you say, like, okay, well, there's a lot of benefits of the decentralized approach, and a lot of
really meaningful benefits, we think, right, you know, it's kind of more of the you know, individual and freedom and ability to opt in or out and control your own participation and all those types of things as opposed to have it and dictated for you. And that's kind of like a great thing for freedom and independence and all these things that we, like, you know, I think are pretty important.
Right.
So kind of the question is, well, like, if these two things are really big and meaningful, and this one text seems to be fairly centralized, how can crypto play a role to kind of like change that course, or actually can we combine the two and actually then have some type of like decentralized AI. Even though I just got done saying that, like, you know, on the face of.
It, it seems very centralized.
Yeah, So I don't know, I think that's kind of like the when I think about crypto and AI and the phase three think about like, hey, how can we how can we pull that off?
Yeah?
It's because because even like this, like the decentralized nature of crypto like these and the centralized world of reserve banks and this sort of stuff that like they are converging ready right coming together, and like how do you see that? You sort of see there's a happy five path forward for both of them or yeah, like.
Jumping over to financial services and yeah yeah, so so stepping aside from the AI combo, this is a huge thing that we're seeing right now today and in crypto in our space, which I mean frankly is super relevant for our conversation because here we are with a you know, traditional stock equity business, wealth wealth company and that you guys are integrating crypto. And the reality is we see
that across a lot of our markets. We see it in Europe, we see it in the US, you know, across many of our markets where companies are starting to do this or they're in progress of doing this, like adding crypto. So you know, banks, brokers, FinTechs right adding crypto in to their offerings. We had a similar partnership
is what Kraken is doing with Chersey's. We did with boot Bank and which is a large challenger banking in Europe and the Netherlands, and they've seen great success with it, you know, and they have And then we're frankly in conversation right now with basically all the large banks and brokers in the US about.
The same thing.
Now, they might not move quite as quick as you guys, or they definitely won't move as quick as you guys.
But you know, lo and Behold.
I mean they're all like, yeah, they're very serious about this path, and they have teams against it, and they're you know, getting our fps going and looking to figure out how they're going to make it happen.
Like prior to studying at Cheesy's, I worked in a bank and this is nine years ago now, and we hit the founder of Ethereum come along to speak to us at that time, and the Ethereum was tiny at the time, so already those conversations were happening, but none of the banks have made progress really and actually delivering that. But I can you know, it feels like there's now evidence of that happening, right Like there's really large brands around the world where that is happening.
I think the other thing is crypto companies are going to offer yeah as well, And that's like the other thing.
Is gonna happened.
And then the third thing that's going to happen is cryptotech will enable kind of traditional financial products like equities. Talking these equities being one of those examples.
Let's just dive into that now, togonization of traditional asset equities, like I want to talk things like housing is a big one that's been talked about in New Zealand at the moment. I mean there's lots of sort of old alternative as sets like just old coins, but art or all these sorts of things like just what's what's the world as you see it with regards to tokenization.
So that's I think jump into like kind of like you know a number of steps down the line.
So like let's build their way up there. Let's take the steak.
So like I mean, the first step is so we talk about tokenizing real world you know assets that are in trad fi stable coins. Stable coins are actually I mean that is effectively it you basically you know, you create this token on a blockchain, you back at one to one with fiat currency in most cases dollars with you know, tether or USDC, and that is a tokenized asset, a tokenized you know, single dollar of you know.
Whatever reason I had not made the connection with the other assays that this is a that's a great example, but you know one being the most boring example you can think of, probably yeahs like sort of yea where it might go with it great.
Yeah, I mean one hundred percent.
Well, part of the reason I go there is because now let's talk about tokenized equities, which is some crack and just recently launched x stocks.
You talk about that more detail.
But the technology I mean, for someone who understands stable coins like okay, I got this token and it's back one for one by some dollars sitting in a bank account. Well, TOKENI is equities x stocks. Our implementation of it is exactly the same. There's this token that rides on a blockchain several different blockchains actually you know we now support and it's back one for one by a share of Tesla stock or Apple stock or whatever it might be. Right,
And that's the basic premise of the technology. These are just basically asset back tokens. And so you're kind of allowed. It's a hybrid in some ways, right, I Mean, we're still talking about dollars, but now they're just on a different set of rails. We're still talking about traditional equities now, just on different set of rails, and so it's kind of combining the two, if you will, you know, because there are some benefits of dollars today that you know,
people want to hold dollars, people accept dollars. They are less volatile than pretty much all the crypto currencies out there, and there are various different, you know, advantages that they still have today. I think some of those will go away over time for what it's worth, and then much the same I mean obviously equities. I mean there's huge number of benefits you know, to public equities and so forth in that whole structure. So this is basically kind
of combining the two. But we could just keep going on from there, right, We can go on from there to you mentioned real estate. I think that one's a little bit you know, further down. I mean, I think more of the for what it's worth. I think more of the like higher liquid assets are going to be at least in the near term, are probably.
Where we're going to see like bigger adoption for what it's worth.
Like there might be some use cases that are more narrow for more ill liquid assets, I think so like real estate, But I think the broader adoption, bigger adoption is probably going to come for more liquid assets. Probably you know, the most liquid asset out there is the US dollar, I'm pretty sure, and then you kind of move across there and think about the other liquid assets. That's where we're going to see the option of tokenized assets.
Yeah, and the I mean the I don't want to get too far ahead of ourselves and now, but you know, you can think about like if it was property, then what's the part to play of the bank if you can sort of fractionalize your property and has sort of
achieve some sort of ownership over time through that. Or with regards to public markets, like do you, like, have you thought about what that means for public markets into the future or is that just sort of something that you think will work its way out given given if it's tokenized, we're already seeing private assets tokenized and stuff, right.
Well, you know, it's an interesting question. I mean, there's a lot of things that can happen now that you have tokenized dollars or tokenize equities, right, I mean, so again we just start with tokenized dollars, Well, you can move them globally for no cost or near no cost, right, And you can move them globally for near no cost nearly instantly. You kind of go down the line and
these things are just you know, not possible. Otherwise you can also now you know, integrate them into what is DeFi, right, And so these are decentralized exchanges, decentralized lending protocols where we actually have people out there that can go to DeFi and borrow stable coins against some other you know, crypto assets from uh you know, thousands of people all at once on a DeFi network, which.
Is just kind of amazing.
And you think about the level of i don't know, kind of like peer to peer decentralized liquidity that that then provides is really amazing. And so then you can start integrating these stable coins into various different smart contracts where they can be you know, a party two like an AI agent someday you know, actually interacting with these assets. And then the same is true for toke ex equities.
You know, we can start thinking about all the various different things that you know can be done with token ex equities as well now that they're you know, permission less, movable, all these types of things.
So it's cool to think about.
It's just for sure the change and who knows, who knows how to get there that, Like, I think one thing we can probably both say is biscises. You know, I think I sort of believe in that. I believe in the in the future. It's like, sort of what's the path is or do you think there's like a penetration point, was like a level of scale or something that that we are something.
Tips or yeah, that's a good question.
We you know, in crypto in the early days and even still today. I frankly haven't had this discussion too much recently, but yeah, this is you know, where is the S curve hit? Where we at on the S curve? Where did things tip? And you know, I mean I don't think we're at that like vertical part of the ES curve for crypto generally right now, still not today. I mean, I think there's still more penetration to get to,
but I don't know that we're that far off. Honestly, you know, once we get to a place where there is a you know, a significant number of people that you know own crypto, are using crypto daily, just kind of like the.
Level of you know, demand to build applications.
For them will just kind of like continually grow and we'll just see this flywheel move and I think, you know, adoption will just really really spiral.
At that point. Cool.
Well, we've you know, it's been a great chance to chair and meet you as a key pers It's very cool to do that over here, so appreciate.
Your time there.
The last question we're going to have. We've got tens of thousands of people on a wait list already for this product, so there's clearly a lot of interests to do it from our customer base. We're getting close and a bunch of those people will be familiar with crypto, and you know, they'll come in and they'll have expectations and we'll keep building product for them. But there's also going to be a bunch of people who are doing
this for the first time. So I just love to hear what thoughts you have to give to anyone whom I was listening to this and about to start visiting and crypto.
For the first time.
Sure, that's a great question. Look, I mean I got into crypto a long time ago. I think crypto as a technology provides, you know, a set of technology that at its core is you know, faster, cheaper, and more global. Fortunately for those of us in crypto, that is kind of like the the you know, the.
Path of the world to look for those things.
The world is becoming more global, h you know, you know, commerce is becoming more global, and therefore we need you know, faster and cheaper rails to get all of that done.
I think there's an.
Enormous amount of innovation happening in the space, even beyond just payments, and we look into all different aspects of uh, you know, trading in something that's called DeFi decentralized finance. That's another key word of this, which is decentralized. So kind of like historically, you know, in recent hundreds of years, financial services have largely been centralized by a few central banks,
large large individual banks. Now this is actually a technology where the individuals, the participants in.
The network actually own a part of the network.
And so I think it's a fantastic place for people to check out.
Favorably because Craiken, thank you so much for your time today. I appreciate it.
Awesome