May 26, 2023

Episode 280: Vasily Nikonov, Founder of Velvet.Capital

Vasily Nikonov is the Founder of Velvet.Capital - a DeFi Asset Management protocol that helps people & institutions create diversified financial products on-chain: tokenized funds, yield farming strategies, and other structure products.

Prior to Velvet.Capital he was a venture builder incubating Blockchain & Crypto startups at LongHash Ventures (e.g., Xanpool and Astar raised ~$50m+)

Vasily was also a Project Leader at BCG and launched digital products for clients (incl. a WealthTech start-up, a SaaS for financial advisors, and other fintech)

He holds an MBA from INSEAD and BSc & MSc in Applied Mathematics from MIPT.

Julian:Hey everyone. Thank you so much for joining the Behind Company Lines podcast.Today we have Vasily Nikonov, founder of Velvet.Capital, a DeFi operatingsystem that helps launch on chain funds and structured products. Vasily is soexcited to chat with you. I know it's been, I think we were talking, it's beenalmost half a year since we've been trying to schedule this, but ultimatelyexcited to finally get you on it and really talk about, this ecosystem of DeFi,which we hear about decentralized finance, and I think.

A lot of peoplehave maybe some kind of mental structure around what that means but they don'tnecessarily mean understand the diversity and complexity about the differenttypes of protocols and products that are out there. So really excited to diveinto what those look like. But before we get into all that good stuff, whatwere you doing before you started the company?

Vasily:Yeah. Thanks Julian. Thanks for having me. Great to finally be talking to you.Yeah, happy, happy to share more about DeFi, about what we're building andyeah, I think my, my, my past experience would be a great start here cuz Ibasically have a combination of more traditional finance background and Web3crypto background, right?

So on thetraditional finance side, I was actually project leader at BCG here in NewYork, working with a lot of financial institutions, helping them launch digitalproducts, launch new startup ventures launch new, corporate products as well.So it could be. Yeah, because been online banking, mobile banking, investmentmanagement platforms, insurance platforms, basically.

Any, anything,yeah, anything that that company companies wanted to launch and improve in thedigital world. But that was kind of tread fire meets Web2, and then on the, onthe Web3 and crypto side. I've been in the space since I would say 20 16 20 17.Just advising projects, working with them on the side trading as well.

And then finally, Iwas a venture builder at Long Cash Ventures in Singapore. That was one of thefirst incubators and VC funds, specifically focused on Web3. That was back in2019. So we had. The first cohort projects in the PAL system, even before Pallolaunched their main net working with a lot of great projects there as well.

And then, yeah,finally, finally last year decided to break free and launch something on myown. So, yeah, excited to share more about my journey and what we got cookinghere at Velvet.  

Julian:Yeah, it's so, it's so exciting to see kind of where your progression is. AndI'm curious, like you, you hear a lot of. About companies, especially thiswhole, there's a huge movement to neobank, right?

Bringing everythingonline, doing all these services. And you saw that at at B C G, and outside ofconnecting everybody or creating the increase of speed, where was the ceiling?Like the glass ceiling for a lot of these traditional institutions, becauseonce you kind of boil it down, it's like, It's like a trading app or a mobileapp.

It's, it's almostlike a white label application at this point. You, you, there's kind of asimilar experience, so there's not a lot of innovation there. What was theceiling that maybe you saw, or if you did see one, what would that be? And, andalso is it, is it Web3 that that kind of creates a new ecosystem and, and isthat the only thing out there? Is there still stuff in Web2 that, that we'restill waiting to see?  

Vasily:Yeah. Yeah, yeah. Look, I, I don't want discount all the great things that wedid. Right. But I, I, I'm just gonna say that all the innovation that we'vebeen driving that has been, in traditional finance for the last, I dunno, 20years or so been focused on user experience, right?

Sort of the front,front and, and maybe middle layer mm-hmm. Of the tech stack, right? Mm-hmm. Howdo we actually create all these digital services? But if you look underneathinto the core banking, Infrastructure. It was still a code written 50 yearsago, sometimes right before I was born by some guys who are not around.

You gotta find likereal experts to figure out what's happening over there. It's a very monolithicpiece of software that no one has any idea how to, and of course we had someprojects on how do you modularize that? How do you, turn it into microservices,et cetera. But I would still say that, We haven't seen any innovation in thecore banking infrastructure, core financial infrastructure up until theblockchain came out.

Right? So now I seeWeb3. I see DeFi as basically a new. New slice of innovation, right? The firstinnovation on the back end of financial services if you know what I mean.Right. And it's very exciting to be here and very exciting to do something inthe space after working so long in the, in the traditional finance and havingthat kind of constraint, constraints of the core system.

Right. Becausethat, that is the glass ceiling, right? When you're building on top ofsomething that's 50 years old, it's. Is gonna, limit you in the ways you can.Yeah, yeah.  

Julian:And, and it's fascinating where, obviously you, you started kind of. Pre theBitcoin boom in 2018, right there on, on the crux of it.

What were youseeing in terms of, companies or individual projects? What was being builtduring that time to start kind of reinventing? From, from, I, I thinkprinciples that have been around but reinventing the, the financial institutionkind of ecosystem. Having things decentralized.

Who was kind ofleading that forefront and what essentially led you in that direction, and,and, and gave you the traction that you needed to start the company.  

Vasily:Yeah, yeah. Sure. Look, I, I think, I think that's an interesting question.It's kind of a loaded question cuz I, I, I think blockchain and Web3 is notonly.

About technology,but it's also a little bit about philosophical views, right? It's a little bitabout philosophy. Yeah. Yeah. Right. And and, and, and kind of, it's just acombination of of these things that really excites me and I think everyone elseworking in the space. I mean, back then, if you look back to like 2017 mostpeople have been focusing on the Ethereum ecosystem, right?

I think it was thefirst like end of 2017, beginning of 2018, the first boom of People realizingwhat Ethereum infrastructure can do, and then coming up with all the differentcrazy ideas of different decentralized apps that you can build on top of it,right? And it was completely crazy.

Could range from,legit DeFi products. That some of them are now blue chips, right? Like managingprotocols or decks to completely crazy stuff like dating on the blockchain orsome sort of Gaming, gaming et cetera. Right. I think it's, it's still, it wasstill super early, right?

Because we werejust Yeah. Building out the infrastructure. So I think the market just wentahead a little bit of itself and later realized that actually theinfrastructure is not that crazy to support all his crazy use cases. Yeah. Andyeah, finally, finally, I think gradually now we see yeah, the infrastructurebeing more mature, the middleware, so to speak, all the Oracle infrastructure.

Yeah. Developmenttooling got a little bit more mature and finally, now we can enable this usecases, right? But it's still, I would say it's still the early days. So we, weall just. Here building, building it out together, right?  

Julian:Yeah, yeah, yeah. It's, it's fascinating to think about or even just if youwanna give the audience some context, DeFi, like what is decentralized finance?

I think we all knowit philosophically, as, not one centralized location making all the approvalsfor transactions, but a cohesive collection of people confirming that somethingis valid. That's kinda like the big, grandiose philosophy, but how does that.How does that actually get implemented?

Is it on howtechnology or, or, or transactions are being like moved or what in particularare these DeFi protocols that, that we don't see but are on the underlayer thatyou described earlier?  

Vasily:yeah. So, so I think philosophically you are right, and, and, and maybe I wouldgo even further, right?

Philosophically,DeFi is just the way to build peer-to-peer finance, right? So how do weactually build. Peer-to-peer financial products without relying on thecentralized intermediary. Right. And, and I, and I think it's a, it's a verynoble thing to do because if you look at the history for millions of years, weactually had finance as a peer-to-peer as a peer-to-peer structure.

Right. You exchangeit. Goods and services, maybe you had some, way to pay with shells or whatever.I mean, now after that, we got to currency finally, but for the millions ofyears it was pretty much peer-to-peer bar trading. And then the, the, thetechnology limitations that we had before with the internet still required somesort of centralized intermediary to facilitate the transactions.

Right. So you, youhad to trust someone. You had to rely on someone. Yeah. Keeping the ledger andkind of having a little bit of a gut mode on what they can do with your money.Right? Frees your account, block the transaction. Right. And, and blockchainenables that. And there are several things when it comes to DeFi, I thinkseveral specific characteristics that I usually like to highlight.

So first, first ofall, it's programmable, right? So when you, when you talk about DeFi, you talkabout programmability, you actually can write a code and deploy it on theblockchain. Everyone can see, can validate and verify what this code is doing.So I know if I send. One U S D T to that contract. I, yeah, I know how thiscontract will behave, right?

For example, I knowthat if I send one U S D T, this contract will sell me an equivalent inEthereum using this calculation set, right? So that's a very very, very kind ofgood way to see the expected behavior. Then second characteristics, it's it'spermissionless. Right. So, yeah, before, before kind of blockchain movementgetting big I don't know if you remember, there was the open banking movement,which is basically okay, yeah.

Let's let's makeall banks open up their API so that other developers can build new applicationson top of it which was good. Mm-hmm. Like, again, going back to my point, thatwas a little bit front end innovation because of the back end, it was stilllike this legacy banks The blockchain is completely permissionless.

So when anyone canjust build a new product, deploy a new contract, connect it to other protocols,yeah. And then just make it work, right? So it's completely permissionless. Youdon't need to ask Vitalik to, to give you permission to open up an api, right?You can just open your laptop and start building.

Then third Thirdcharacteristics characteristic I, I usually like to give is that DeFi isnon-custodial, right? So again, no one, no one actually. Keeps the custody ofyour assets right. And now I would say there are still new answers with the newdevelopments right now, sometimes, the core team of the protocol still hasmulti C and they can actually, execute something by assigning transactions.

But fundamentally,at a score, DeFi is trying to be as non-custodial as possible cat now themiddle man, making sure that everything's just governed by the rules. Yeah, thenext one, the next one is transparency. I mean, I talked a little bit about it,but that's basically just, everyone can see what's happening on chain.

And the last one isimmutability. So that's just making sure that what you see is what you get,right? Usually when you deploy a contract in the, in the old days, allcontracts were not upgradable. So once you deploy it on Ethereum, it's prettymuch gonna stay there for, for eternity till the end of until the end of time.

Right. And you cansee what the expected behavior is. Right. Again, now there are some nuances.You can upgrade the contracts and now there are new technologies around it. ButI would say those like five characteristics are the core of what we call DeFiand what we, what we move towards.  

Julian:Yeah. And, and what would you say?

I mean, it's socrazy thinking about creating as much of a peer-to-peer experience as possible.Being like, obviously with FCX News, that's kind of old news in today's age,but, kind of more recent news in, in, in, in crypto in the, in the sense that,a company structuring as a centralized entity, but kind of falsely deployingthese philosoph philosophy around decentralization, but, What is the challengesto actually make peer-to-peer transactions and not have that validity?

Is it, is it therule set that you build within, the, the blockchain that you've deployed? Isit, is it having the volume of people to actually transact? What are thechallenges that actually, creating a peer-to-peer transaction network thatdoesn't rely on something centralized?

Vasily:Yeah, so, so I think the main challenge is just solving the call start problem,right? Solving the, the, the, the network the network problem. How do you getthe first liquidity team? How do you get the first user in? And that's when,and that's where the token comes into play, right? Because if you think about,yeah, creep cryptocurrency, what cryptocurrency is, it's usually just aninstant.

Incentivesmechanism, right? So for example, Bitcoin is an incentive mechanism to rewardminers who actually maintain the, the, the network, right? Yeah. Can Bitcoinnetwork Leave without Bitcoin as a cryptocurrency. Theoretically it could,right? But no one would, would mind Bitcoin, right? Because there is noincentive to just burn the electricity, right?

Yes. That's whysince the days of Bitcoin, and if you look at all the other tokens, all theother cryptos, what it, what, what it is, and its core is just a way toincentivize different participants of network, right? So yeah, usually. Tosolve this network problem, right? And to get the sustainable amount of peopleusing the platform and making this peer-to-peer transaction possible projects,release their talking and use it basically as a marketing mechanisms and sensemechanisms to bring the first people in, right, to bring first liquidity.

They give it in theform of staking rewards. They give it some airdrops. They've given it in someother, different mechanisms. And that's, that's really just the way, how to getpeople do what you designed them to do. Right? Yeah.  

Julian:Yeah. And, and how do, how do like a lot of these protocols overcome that ColdStart challenge?

What are the, andwhat are the go to market strategies? Are we starting on Discord? You startedgaining a community, are you. On other channels, like, what is that, thealternative? Twitter's like Mammoth or something. I can't remember exactly thename of it. But there's all these different communities that I, I, from anoutsider's perspective, that start before a protocol gets launched.

Is that a typical,playbook? Is there anything else that people have tried and have seen successin?  

Vasily:yeah. That, that's actually a great question. And people, people even came upwith a new term, right? We have, we ha we used to have mvp, minimal viableproduct, and now we have vc, minimum viable community, right?

Where you actuallycreate. Create and manage the community even before you launch the product,right? And yeah, the, the trick there is how do you get enough like-minded peopleand enough potential, users and supporters to the platform early on? How do youtest the ideas with them even before you actually build something, right?

And then finallyhelp you co-create together, right? And I mean, there's no one size fits all, right?All the projects and right. Their own different path towards decentralizationand community ownership. Yeah. But I, I would say every project starts withDiscord community, telegram, community, Twitter page and Twitter, communityannouncements.

Yeah. And, a bunch,bunch of other platforms. But yeah, the most, the most successful projects. Andthat's, that's what we did as well in the beginning, created the community andthen, brought together like-minded people to test the ideas with them and then finallyco-create together.

Julian:Yeah. Yeah. And obviously just to chat about some of the mechanics ofcommunity. Well, how do you keep people engaged or building towards something?Is it, working on specific projects? Is it doing polls every day? I feel likethis whole ecosystem, I think we all maybe have an idea of how to gaincommunity, but once the spotlight's on, you realize, I only have a few thingsto talk about.

How do you continueto not only break open a discussion, but continue to incentivize people tobuild towards what you do? Is it an association with the mission of thecompany? Is it about the technology? Does it involve everything? What do youconsider and how do you kind of strategically continue to grow that communitywithout, doing it artificially where, or, or even doing it where you're, addingincentives almost like, like a referral program and things like that. How doyou do that?  

Vasily:Yeah, I would say it's everything together, right? And it's, and it's actuallyreally hard. I think the hardest, the hardest part is that everyone's competingfor, for attention Right now. Everyone's overloaded with information, right?Like I receive thousands of different messages. I'm in like hundreds ofdifferent groups.

We, I think every,every single person, not even in crypto, has like email, whatever, WhatsApp,Twitter, maybe Telegram, maybe some other channels, right? Sms so like, It'simpossible to keep up. Right? So I think the, the main trick is how do you, andthen newsletters don't even get me started on that.

Like, I think I'm,I, I used to, I used to be subscribed to like 20 of them, but there are likehundreds of them out there. So how do you break through the noise and how doyou actually create something that, that, that people are excited about? And,and there are several things, right? First of all is, To try and get aninterim, like a very niche subject, right?

Because there arealready hundreds of newsletters about crypto, right? Everyone's sharing cryptonews. But you gotta find some niche that can can unite people around that,right? For us, it's it's DeFi Asset Management, right? For us it's DeFi itself,right? And even looking, looking closer, it's DeFi Asset Management and all thetech around.

And then How do youkeep the discussion, right? How do you keep sharing updates with them? How doyou make them part of your community? And it's again, like making sure theyinclude it in whatever's going on underneath, right? What the team is workingon what help we need from the community, et cetera.

And then finalincentives, right? You, you cannot build it just just on your promises right.We see a lot of people, yeah. Yeah, we see a lot of people releasing thetalking even before they're building a product. Right. That is a little bitrisky from the like, regulatory standpoint, unfortunately.

Yeah. I still thinkthat it, it might be one of the best, one of the best ways to build, but it,but because of the regulatory constraints, this is not the way we did it.Right. Yeah. We still want to. Decentralized sufficiently ourselves, built outthe product and then launch a token. But what we, what we did is weincentivizing people with for example, NFTs.

If we see thatsomeone is contributing to the community to grow in the community or to theproduct, we giving them an nft, which makes them. Part of the Velvet FoundersClub and includes you in a close chat, gives you, additional, additionalbenefits and will give you more benefits once the product is launched.

Yeah, right. Soit's it's, it's everything together. Right. But it's a tough job to to toactually maintain the maintaining and grow the community. Yeah. And make makesure everyone's engaged.  

Julian:Yeah, it's a whole different paradigm that I think, especially Web3 companies,I think are on the forefront of, but seems like a lot of Web2 companies arepicking up the, the message, which is that people want to be connected withtheir brands.

They want to have,a, a saying for what things are gonna be built, launched, whatever. And thenalso they are, equally incentivized to kind of keep aligned with that company'svision as long as they're acting in good part towards that mission. Right. Andit's, it's interesting because no longer is it, I'm selling something that Iknow people want.

It's looking forwhat people want and selling towards that need. So it's a whole different kindof category and thinking about Velvet.Capital just to, mm-hmm. Shift our focusa little bit more onto the company. Describe, what you're doing and how you'rekind of, not only, obviously you're building community and you're incorporatingall these people, you're building so many great products, but what inparticular is exciting about Velvet that hasn't been seen in this space, orvery few people are doing?

Describe whatyou're doing and, and what's exciting about, what inspired you to do thisidea?  

Vasily:Yeah, yeah, sure, sure. So, I mean, a a, as you mentioned, right? I'll justgive a good quick refresher to, to the listeners. Right. We basically buildingan operating system that helps you launch and manage on chain funds and onchain structure product, it's pretty much allowing you to create.

A DeFi fund or aDeFi product using our infrastructure. So what we did, we basically just buildout the whole tech infrastructure connected with different DeFi primitives,decentralized exchanges, lending protocols, staying in protocols all sort ofother yield farming protocols to actually give you an environment where you canexperiment you can create your own DeFi fund.

And we can alsoonboard other people to join you. Right. And there are, there are like severaltarget clients for us. And I would say right now we are focusing a lot on hedgefunds and digital asset managers sort of on the supply side of the, of theequation. And they already. Might be managing some crypto, and now they'relooking to set it up an on chain fund.

Right. Yeah. Sothe, the, the, the exciting thing about it is when you look at the last year,and I think you mentioned ftx, right? We have Celsius and we had like a fewother things. Yeah. And the, the main, the main problem there was that. It wasa complete black box, right? So you just put, put money in they promise yousome sort of whatever high yield, right?

But then you, youdon't even know what's happening with your money. They claim that they puttingit into some DeFi protocols. Maybe part of it they did, but then they didmanage the risk properly so it all went down. Part of it was just outrightfraud, right? What we saw with ftx actually commingling customer funds with thecompany money, and then, just giving it away sometimes or gambling, gambling itet cetera.

So, what we aredoing is allowing you to create a completely transparent DeFi product, right?So that. The clients who use it can also verify on chain what's happening withtheir money, right? So they put thousand dollars, they can see, okay, out ofthis thousand dollars, hundred dollars get converted into, let's say B and b,right?

And it gets stakedinto this protocol. A and then a hundred dollars get converted into e and get,landed out on this platform, right? So you can actually see and verify thewhole strategy on chain, right? Which basically solves, solves everything allthe problems that we saw last year and gives gives client and gives clientscomplete ownership and transparency.

Right. So that'sone thing. Yeah. And then for fund managers, it's also much better because as afund manager, you can basically have your complete track regular on chain. Sowhen you, when you tell people that I was the first to discover this Coin thatwent hundred x, now you can actually, now you can actually point out to yourfund.

And say, okay, thisis a complete on chain records of what I've been doing. I started at whatever,a thousand bucks, right. And I grew it until 1 million. Right. And this isproven on chain. Yeah. This will help them raise raise new funds even faster.Right. So that's, yeah. Those are just a couple of things.

Right. And thenobviously we have a lot of, a lot of sophisticated tech features to, to make itinto the first actually professional grade asset management solution.  

Julian:Yeah. Yeah, it's so smart to target hedge fund digital asset managers. I wasthinking like, oh, this might be great if you're someone who uses a bunch ofdifferent protocols and have different assets and just kinda keep it localizedin one location.

I. But I, I, Ithink personally I missed the point. The, the point is creating an ecosystemwhere not only you can, attract everything that you're invested in but you canalso have some analytics behind it to actually, approve or, or, or supporthypothesis or, or things that done tactics and strategies.

And now from, I cansee it from a fund management standpoint of that digital asset, having so muchtransparency and so much trust into, their, their strategy or tactics and evenbeing able to. I, I could even see them patenting or, or, kind of, copywritingtheir strategy so that it, it it stays within their ownership.

It's sofascinating. How has the adoption from those hedge fund managers been, and andwas that the target audience the whole time? Or did you stumble upon that?Because that's so, that's smart. Once the one per once per one person startsusing it, then he was gonna tell his friends and then you hit network effectand, and then it becomes contagious.

That's the,obviously the ideal I'm, I'm assuming but what was that always the, the, thecustomer that you were looking for? It just seems so brilliant.  

Vasily:Yeah, yeah, yeah. And thank, thanks for that, right? Like, we've been testingwith, with a lot of different personas and we realize that it's it's the best,actually going back to the Coldstar problem, right?

It's the best wayto solve this cold start problem because some of this hedge funds, they alreadyhave clients, right? So they're not just coming and sitting up. Fund withnothing in it, right? They're bringing their existing clients. They might beco-marketing the fund together with us, right? To bring more clients to theplatform, but they, they are now our, our target audience from our perspective.

Right? And. All,all, all we are thinking right now is how do we take care of them? How do wegive them the best tooling possible to actually launch their own chain fund andthen bring as much capital as possible there? Right. And then on the adoptionside, we have around 15 hedge funds and digital asset managers right now thatwe are piloting our second version.

That's gonna be ourmore professional and great solution. And everyone's loving it. Right? And we,we've heard that. We've heard amazing feedback sound them saying that's likethe best that they've seen this year, which is very, very high. Yeah. Hi Mark.Considering, considering all the developments that we see right now.

Yeah. And yeah,we're really excited to onboard more and we will launching our new version inthe next few weeks. So welcome any, any hedge funds and asset managers. Right.And I think. We, we also very happy to, very happy to provide additionalincentives, right? We yeah, we gonna allocate part of our talking error droptowards fund managers to join early, right?

Obviously as a fundmanager you can set up the fee. For your funds, right? So that you're alsoearning from yeah, from managing assets. Right. So you can just set the fewstructure that you're comfortable with and yeah, we're here to support you asmuch as possible.  

Julian:it's so, it's so brilliant because you, it almost.

Your, yourcustomers are your sellers as well. Which is the ideal, which is the idealsituation as a founder to, to get yourself in. Being that there's so many,amazing to hear where the, the, the product is at this point. Tell us a littlebit more about the numbers, the traction, how many people are adopting yourplatform.

You have this newversion coming out. What's been exciting about the traction you've seen thusfar? And, what is your prediction for the next milestone that you're looking toachieve?  

Vasily:yeah, sure. Excited to share. So now we actually. What we have right now, liveis our better version, right?

You can think of itas an MVP just to test the concept, see how people interacting with it. And wehave we have a little bit less than 1000 people using the platform which is anexciting number in the crypto space for something that is not even. Full, afull product yet just a better version.

And yeah, we havewe have three 70 K right now locked in the platform. Uhhuh. That's again,considering that people just test it out with small amounts. It's also a goodstart for us. Right. And now for, and now the main focus is just onboardingthis new H funds and digital asset managers.

Each of them has anaverage 10 to a hundred mill aum. Right. And obviously they. They won't bringeverything at once to the platform and it'll be great deal adoption. But we arereally excited to start onboarding that institutional capital.  

Julian:yeah, yeah. What are some of the biggest risks that you think Velvet facestoday?

Vasily:Yeah, so I mean, I think one of the, one of the risks is obviously on theregulatory side, considering what's happening with SCC going after Going afterall the crypto industry, so to speak and, other, other agencies as well. What,what is lacking right now is sort of regulatory clarity.

So what's left forus, DeFi builders is just we try to navigate and we'll try to protect ourselvesas much as possible. Right. So, for example, yeah. We integrated chain analysisto make sure that we're not onboarding any sanctioned entities. Right? That's apart of the part of the sort of AML compliance procedures that we adopting.

Right? On theregulatory side, again, we ourselves not managing any assets, right? So we justattack platform and we're partnering with fund managers to also createnecessary legal structure for them, right? So some of them, for example, yeah.Want to open up a separate legal entity, and we're helping them structure thatas well.

So the on chainfund that they want to be on Velvet will have a separate legal entity. Theymight have their own K Y C and onboarding procedures. Right. For example, ifthey taking funds on different qualified investors, there's a specialquestionnaire that the clients are filling out the KYC process.

Yeah. So on ourside, we just created flexibility for them to enable to enable all thisonboarding process. Right? And then you can, yeah, only whitelist. If you'regoing down that route, you can only whitelist clients that went through thisonboarding process. Right. So there, there are like different things how webasically manage risk on on that front.

Julian:Yeah, it's so fascinating thinking about, not only the adoption, but the growthof, this whole ecosystem and thinking about, if everything goes well, what'sthe long term vision for Velvet?  

Vasily:Yeah, yeah. I mean, the long term vision for us is just to be the number onecross chain operating system, right?

Because. What we,what we did for our first version is we launched on bmb chain cuz we, weactually begged by violence labs and we parted the BMB chain system. We got alot of balances and support from them, but we actually chain agnostic andEspecially hedge funds and fund managers, they don't wanna be limited to asingle chain.

So for us, beingthe first protocol that's gonna enable omni chain asset management is is thekey, right? And that's something that we are going towards end of the year. Sonow as a, as a fund manager, you'll be able to set up a fund spanning acrossmultiple chains, not limited to just Ethereum or just DMV chain.

But actually ableto move assets across chains and take benefit all, all the best product goals,regardless what chain they built on.  

Julian:Yeah, man, it's exciting to think about where that's gonna lead to. And also,I, I'm just fully impressed with how you've been able to attach yourself tosomething that's hyper-critical.

But also, and, andobviously this transitions into my founder faq, so I'm gonna ask you a bunch ofrapid fire questions. Thinking about, how you're, you're working within thesehedge fund groups, how do you continue to build for them? How do you continueto stay tied in with their incentives?

And have you everbeen faced with things that you can't build and. What do you do in thosesituations where you know your customers want something, but maybe it's outsideeither the scope on a regulation or technology basis? How is that relationshipwhen it's, it's just, it's diff it's different, but similar to early companies.

Yeah, we'd love tohear response to that.  

Vasily:Yeah. Well, for us it's it becomes even more interesting, right? Because whenyou're building on chain, It's it's something in between software and hardwarein terms of the development cycles, right? Because whenever you release a newsmart contract, you need to do security audit, right?

You need to dopenetration testing and make sure it's it's completely secure and and, in thebest shape or form. And that's why. The development cycles are pretty longcomparing to, normal software we trying to release every six six to ninemonths, right?

But obviously,yeah, can get, it can get a little bit longer or, or shorter. So our, ouranswer is usually Prioritizing the features that are asked by for multipleclient clients and then getting them into the nearest version if it's possible.And then everything else we we're trying to build into the next situationsright there is I don't think there's anything that's impossible to build.

From ourperspective, we believe that everything is solvable, right? It's, it's just amatter of prioritization when we can build it and how, how fast we can buildit.  

Julian:Yeah, thinking about, supply and demand, just kinda the simple functions of it.How much are, obviously these head you're servicing, servicing these head fundmanagers.

Really justempowering them with technology to do what they do better and, and moreeffectively. I. How much are they feeling? The demand from the, those clientsthat they manage to actually get into digital assets. I, I hear a lot about, traditionalfinance institutions really shifting their focus and incorporating this as anew asset class that they offer.

Now. How much arethose customers of theirs actually pulling for it? Have you seen an increase inspike of, people who are investing to get into digital assets and using, the,the traditional models as a segue into that? How much do you see the marketpulling for that at this moment, or is it still kind of new and people aredipping their toes in the water?

Vasily:Yeah. I think it also depends on the type of of the institution, right? So Isee, I see it as a spectrum, right? So on one side you have, crypto edge funds,digital asset managers that are already managing crypto. They might already bedoing some DeFi strategies. So we just provide mm-hmm.

The best toolingout there to, to enable them to do it. Better, right? Yeah. Those, those areearly adopters or even innovators, right? If you, if you think about thisadoption cycle for us, but then you have larger clients on the other end of thespectrum, you have like more traditional banks, financial institutions, thatare now just taking their first steps in the, in the crypto journey, right?

Someone is buildingtheir own custody solutions, some basic crypto trading, et cetera. So for them,it's still gonna take some time. But we see on average that among the financialinstitutions, there is a very, very high interest in in the DeFi space. And nowwe see with for example, maker's partnership with traditional financialinstitutions, a lot of, we, we expect a lot of new partnerships to to unveil inthe next in the next few months, in the next year.

And then there'sanother big topic, which is real world assets, right? The real world assets isbasically tokenization of, any, any sort of traditional financial asset thatalready exists in the world. And what's good about our platform, we just builtinfrastructure so, You as a financial institution can use it for any asset youwant, right?

If you want to useit for the real world asset, for us, it doesn't matter. It's the same tokenthat like anything else, like any other crypto. So by using thisinfrastructure, we enabling, we enabling a whole huge industry of potentially16 trillion of of the tokenized assets down the road. And that's that's, that'sthe most exciting for me as well, right?

With just buildingthe. Fun, fundamental base for, for everything that's gonna happen.  

Julian:Yeah. Thinking about, you personally as a founder, going through this wholeprocess, and I I love to ask this question, founders. What, what's the hardest,hardest part about your job day-to-day?

What, what'ssomething that you spend a lot of time on that you wish you would spend less?Something that you spend le little time on that you wish you could allocatemore to? Anything come to mind?  

Vasily:Yeah. I mean, I, I think, I think founders Founder's. Toughest job ofcharacteristics is just being able to stay on top of multiple dimensions.

Right. It'sbasically a multi, yeah, it's a multi-dimensional game where you have, 10 or 20different dimensions from product and tech and sales and regulatory aspects andlegal and admin and everything. Right? And you gotta just stay on top of those.I, I try to spend as much pos as much time as possible on the clientonboarding, right?

Just talking toclients, understanding what they really need, and then spending some time onthe product to make sure it aligns with what I'm hearing from the clients.Right. Obviously fundraising is another aspect. Aspect, right? So foundersfounders might be even number one job, right? To, to make sure that therethere's enough capital to execute on on what we on what we set out for.

Right. And I thinkthat might be, might be now much tougher than it used to be a couple years agowith what's happening in the market. Yeah. And obviously we were in the middleof fundraising last summer and fall, which was, I think historically one of theworst times to fundraise. But we finally did it right and we, we closed weclosed our round led by Binance Slabs, which was a top crypto investor in theworld, right?

But that was tough.That was tough. And now I'm Now, now we're starting to, we're starting the newdiscussions for, for our seed round. And I, I think, I think the market warmedup a little bit, but still it's still very conservative comparing to what wesaw a couple years ago. Yeah, so I think now.

Yeah, it's, it'sbasically the same for all the founders. It's just fighting for, for those forthe, for the attention of less conservative folks to allocators.  

Julian:Yeah. How, what have you seen in terms of the funding environment? How, how hasthat changed in terms of like, I, I see that for, in my opinion, I don't knowif this is contrary, it's like a lot of VCs are turning into private equitycompanies investing in, companies that are profitable revenue rather thanthinking about users and engagement and overall kind of quantity of engagementand, operating on a deficit, but raising capital to kind of go a boomba cycle.

Would you agreewith that or do you have a different perspective on what you've seen? And, andespecially is it similar within the crypto space whereas it, it's as affectedas, the other kind of startup, funding environments. What would it be yourthoughts there?  

Vasily:Yeah, yeah, I think, I think there's, again, there, it, it's not, it's not ablack and white thing, right?

Basically just lookat it as a spectrum and it depends a lot on the stage, right? And obviously,Public relations came down, which means that the later the later stage startupaffiliation came down as well. And everything just re revised downwards. Andnow capital allocators trying to find this, revenue generating companies notnecessarily, paying that much attention to like, Potential companies with highgrowth, but but no revenue, right.

So to speak. Yeah.And, and I think it kind of, it kind of trickles down the stages, but yeah.But, but luckily the preseason and see the earliest stages because the, theamount of time until, until the exit is much much higher. Right. The period ismuch longer. Yeah. There is still not. Not that much of the direct correlation.

I would say thatthe number of deals came down a little bit, but the quality, the quality mighthave increased actually. And yeah, we see, we see all, all sorts of thingsright now, both on the DeFi space. Yeah. And crypto overall. I would say themarket cooled down, which means that you're not gonna get a term sheet withinone day from 10 different investors after one, after like one single call.

Right. But maybe,maybe it means that we just back to, to normality, right. From that yeah. Fromthat boom that we had couple years ago.  

Julian:Yeah. I always like to ask this next question because I love how foundersextract knowledge out of anything that they ingest. What, whether it's early inyour career or now, what books or people have influenced you the most?

Vasily:Yeah. So I think, I think, and again it might, it might be a bit of a cliche,but I really liked Ben Orbit's book hard Things About Hard Things, right?Because I think that that is one of the very few books that is honest. Right.That basically just describes real situations. And, 95% of the books are like,99% of the book is is struggle.

Right. And that'sbasically how you, how you define founders life, right? It's just like, it'sjust everyday struggle, right? And yeah, obviously, obviously there's a lot ofA lot of things going on every day. And it's, it's, it's good to have thatperspective like in like in that book, right?

That it's not,nothing is wrong with you, right? It's just it's just how it works, right? It'shard. You struggling every day, right? Building, building a company is hard,right? This is like, so, so, so I think that's that's one of the good ones. Andthen, and then on the crypto specifically, and especially for people who mightbe new to, to, to Web3 and crypto, I would highly recommend going.

Through a z cryptoschool. They got, they got a lot of public videos, can just watch it onYouTube. I think that's probably still still the best content out there to justget up to speed, especially if you, if you're new to the space.  

Julian:Yeah. Yeah. I, I, I love I love that sentiment. I, and I do like that bookbecause it's reassuring that everyone's going through a similar struggle orchallenge or hardship, but.

As you continue togo through it, you, you continue to hit the results you want. If, if you pushand have persistence, but also, are aware and are conscious of how things mightadapt and change. So it, it's yeah, like you said, it's comforting andreassuring that, that this is how it's supposed to be.

I never come intothe end of the show here, so, I wanna make sure we didn't leave anything on thetable. Obviously, I want to, give you a chance to give us your LinkedIns andyour plugs and everything like that, but, thinking about what we talked abouttoday, is there any question I didn't ask you that I should have, or anything thatwe didn't talk about that you wanted to chat about?

Anything we left onthe table here today?  

Vasily:Yeah, look, I think we covered a lot of things and thanks thanks again for thediscussion. I think that's been great. I've just I'll, I'll just, I'll just doa couple of plugs, right? I think we, we talked about, let's do it, how weincentivize early contributors, how we incentivize.

Everyone, right?Both age funds and asset managers and, and their clients as well. So I wouldjust invite everyone to, to go to our website,, check out theproduct, check out what we're building, go to the documents read what weactually, planning to do what our vision is. Go to our Twitter, follow us onTwitter, follow us on all the social media and yeah.

Keep, keep up todate with everything that's happening in DeFi and follow our productdevelopment. Would be great to to have you on board.  

Julian:Amazing. So it's been such a pleasure chatting with you. And last little bit iswhere can we find you as a founder? Give us your Twitter, your LinkedIn. Wherecan we gauge not only be a fan of you and what you're building, but also even,even connect with and maybe expand on new ideas?

Where can we findyou?  

Vasily:Yeah, sure. I'm on LinkedIn which is my name and last name, Vasily Nikonov. AndI'm on Twitter. You can find me by DeFi va which is DeFi DeFi for decentralizedfinance. And VA is the first three letters of my name.  

Julian:Amazing, amazing. Vasily has been such a pleasure. Like I said, chatting withyou.

I hope you enjoyedyourself today, and thank you again for being on Behind company lines.  

Vasily:Yeah. Thank you so much, Julian.

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