Guilhem Chaumont on market making and liquidity at Flowdesk

0:01I'm Ashton Addison from Block West capital for investment pitch media and today on the Crypto Coin Show we have guillem Shaman CEO of flow desk gilam welcome to the show and thank you for taking the time today thank you so much for having me you're very welcome let's dive into the world of Market making liquidity provision and just the growing defy aspect and

0:21institutional adoption and hopefully more mainstream adoption of cryptocurrencies I know your team is deep in it I would love to start off our conversation by just hearing a little bit of your background in crypto and how you got to starting flow desk and then we'll dive into everything flodesk yes sure So yeah thank you again for the opportunity so my name is Gideon

0:42shomo I'm 31 years old as you can tell from my accent maybe I'm based in Paris France I'm the CEO and co-founder of flodesk I have more scientific engineering background and I started my career in rating derivatives trading that was back in 2017-2018 and right after I dived into an entrepreneurial journey in crypto which led me to create a flow desk

1:05slightly more than two years ago amazing and a lot has happened since since you joined you know it's it's Full Speed Ahead and I'm guessing your team is keeping up with it maybe you could start with in an elevator pitch of you know what is flow desk working on in the space and how have your team handled it so far yeah sure so yeah as I mentioned you

1:29know for this was created back in June 2020 so it's been slightly more than two years we are basically creating a not in one platform for token issuers to address their various financial needs through connectivity to the multiple you know trading venues Castalian and so on and so forth and the first product we started with was a market making as a service which is you

1:50know radically different approach to maintaining liquidity across the set of exchanges it's you know very different from the historical model that has been running both in traditional Financial in crypto which is based off proprietary trading firm ensuring the liquidity with that approach you know we are trying to give more power more control back to the Token issuers

2:12it's essentially in just you know providing them both the technology and the team of Traders worldwide and they provide the connectivity to the exchanges and the capital and what is interesting with this model is that we work with them for them and not necessarily against them like it can be done you know in a in a less healthy you know approach where the market maker is

2:36heavily incentivized you know to just generate profits with this model we are basically just retainer based the projects provide the capital they take all the risk but they also you know capture all the potential planner from the activities and what is interesting is that on the contrary of you know proprietary trading Market making approach they can adjust their trading

2:55parameters the way they want to so they want more liquidity under certain exchange they want a tighter spread on a certain exchange they can of course do it with that approach and of course that comes with working with the technology firm like floodes which is fully regulated trading worldwide we are not 60 people between Paris and Singapore opening offices in the US shortly

3:16So yeah that's kind of you know the approach we're trying to bring with to the space both being regulated offering a high level of transparency you know exactly the trades that you do you know exactly the big Team market share you have in the books and all that comes in the suit of multiple products because now we are launching custody brokerage and treasury Management Services

3:35okay great to know and thank you for that intro now obviously if you're for everyday Trader if you're trying to trade a coin liquidity is key because if there's no liquidity you know if you try to sell you're going to have it's going to drop 10 of the price and there's not a big order book so obviously you're helping with that as well and but from what I understand

3:57in web 3 there's a difference in trading on a centralized exchange like finance and using something like uniswap where there's decentralized and people can add into the liquidity provision does flow desk work on both of those aspects with decentralized and centralized or where is the focus at yeah yeah of course we do and you know in this world where it's definitely a

4:23combination of C5 and D5 there is no other choice to operate on both and you can you can just not forget either one of these so to give you some some metrics and examples we cover slightly more than 80 centralized exchanges as of today and we cover most of the taxis of course obviously all the ethereum compatible ones we cover about 25 dexes and we execute a few million orders

4:48There on behalf of our clients on the daily basis wow that's great to hear and some of these coins that come so the coin will approach you and they're using their own Capital but you manage so is how does that work where you actually manage the liquidity with their capital yeah basically you know there are two approaches on centralized exchanges

5:12they will create the accounts on the exchanges and they will fund the accounts it's their own accounts so they always are in control if they want to cut the trading they can do it virtually instantly they provide the capital on the exchange they provide us the API keys and we just connect our technology we can basically boost up any Market making feed on any Exchange in a matter

5:30of minutes with the tech that we have created and the other approach that we have is they give us directly the funds and we put them in sub accounts that we have all we keep these funds in custody not a b when it comes to Dex trading where we need to need to operate These funds directly to draw infrastructure and right now we are you know obviously working on new

5:52initiatives which would be more and more non-custodial where basically you know the token insurers put some money in smart contracts they give us a mandate to operate on it and anytime they want you know to just withdraw the funds of the city they can do it obviously they lose the more kid making but at least you know it's giving them again more and more control I think this is

6:11what the tree is bringing to the table and that's definitely what we want to push very cool and does your team work with you know the largest coins like on the first page of coin Gecko and coin market cap or and also just coins that are just launching like you're helping them launch the coin as well so sort of from from the beginning and is it variety or

6:33where do you lay on that Spectrum yeah historically we've been working you know with more of the smaller coins we were definitely you know having these like liquidity issues and even you know some of the market makers could not even work with them because they could not assess you know the value of the coin we've had a really good traction over the last two years which led us

6:54basically to work with now any type of coin from one million dollar market cap to a few billions or actually mentioned you know top of coin gecko I think we have maybe six or seven clients in the top 100 market cap more or less so yeah we work now with a much wider range of token insurers obviously Market making as a service is particularly relevant for the new projects we want to

7:16try to bootstrap liquidity very quickly and very efficiently in the early days of the project but as it turns out you know even the bigger projects require liquidities liquidity is always another a matter of magnitude you know 10 000 bhtc obviously is a huge amount and that impacts you know the price of Bitcoin but maybe 10 000 BTC equivalent on some

7:36smaller coin two thousand dollars so it's always a matter of perspective and the type of investors you're trying to get into the project definitely and I saw throughout the summer that your team recently raised a 30 million dollar fundraising round that's incredible so first of all congratulations on that and second you know with that closed

7:58what are the expansion steps and how will that Capital be used to grow flow desk yeah thank you very much for the question you know for us it was kind of a natural path to raise money at some point we've been bootstrapping the company for a while and we really had a good traction so it was just you know natural way to raise capital

8:19and start scanning our activities even even faster because obviously Market making whether it's as a service or not with the ambition that we have is something extremely complex because we're talking about you know running 24 7 365 days a year activities and obviously there was no single room for mistake like it can there can be in other tech companies so that means that

8:39we have this barrier that we need basically to bridge where we need to have this Global team that we are building right now which will ensure you know the global trading sales regulatory coverage on a daily basis and also of course build the tech because we are technology firm before everything at the pro trading firm which would be you know trading off its balance sheets we are

9:01building a platform that is very ambitious and that we have already delivered to most your clients while they can track into all various type of analytics they can view their assets they can have bit valued in real time and so on and so forth and that kind of things so obviously the ambition was really you know to switch from a team of 10 15 people one year ago to you know

9:20this Global team that would both operate the Argo on behind of the clients but also build them as well as the platform so to summarize you know we've been quite lucky you know to have this terrific set of investors joining the journey and yet the ambition is multiple scaling the team building the product you know it's always the same story and

9:40the bear Market is actually perfect to do that definitely and yeah it's it's crazy in the in the cryptocurrency trading that you know there's no stock market close like in the regular markets and you sort of need to have that software running 24 7 and it needs to have about the same up times Bitcoin which is 99.999 otherwise the trading stops then and that's a huge

10:04error for your team so that's great to hear that you're expanding and you mentioned that you're based in Paris yourself and you're working on Singapore offices and expanding out I'm curious on your take being in France on you know the EU as a crypto Hub and how you're seeing expansion of these kind of operations that you're doing in the local area there

10:32Yeah it's it's an interesting question because you know when we created the company two years ago there was definitely the question on the table you know for US based in France we want to do this in Paris or do we try to find you know for an easier place to locate and obviously with the ambition of the company that was really centered on compliance transparency regulation we

10:51met the bet at that time considering of course the momentum that there was already from the regulator to do this in the penis manner as possible and to be based in Paris and a few months after we got registered with the regulator actually were the first crypto trading desk to be to be to be registered and I think since then I mean it's obviously

11:10it's easy to say this now given the resistant news recently but the other day the momentum in Europe has been you know terrific particularly in Paris which is I think becoming you know the main hub for crypto in Europe with many exchanges University at their offices we have obviously the Mika regulation which is inspired to what the french regulator The Regulators did

11:35to some extent which is also I think going in the right direction it brings a new set of challenges which is incredibly big but I think this is what crypto needs you know to hit mainstream eventually so for me it sounds definitely like you know Europe is playing the right card in this game obviously it's it's difficult but on the long path I see you know crypto

11:57being as decentralized from a geographical perspective and it is in practice and Europe China Asia in general the us nobody will be left on the side in my opinion but yeah the what Europe is doing right now is very very reassuring in my opinion that's great to hear and it really is sort of a you know a battle of will you innovate or die you know with the

12:22regular Regulators you they have to work with teams like you that are bringing these Innovative products into new markets because otherwise your team will move somewhere else and continue to do it you know you're not just going to stop if the you know if the French Regulators say no you just move somewhere else and they sort of lose that business and I

12:41felt that with Singapore you know back in 2017 and earlier they seem to be very Innovative in Southeast Asia overall is like really taking a step forward and I think that it only helps the country you know if they if they work with teams like flow desk to find a solution and make sure that everything is you know although there's a new product and you sort of have to

13:05make new regulations and ensure everything's working I think obviously that's the right way to go about it and it's reassuring to hear that they're working with you guys yeah thank you we will see but it is true that we have a very clear line of communication with the regulator The Regulators are clearly you know not being you know a blocker for all the

13:28initiatives and they are quite supportive obviously when it comes to Innovation it's it's about taking risk and sometimes you want to take bigger risk then The Regulators will allow you to do but they are clearly aware that you know Innovation will not come without you know having a framework that make people you know easy to work with and obviously already today we

13:49have some blockers where we cannot do anything we cannot do everything sorry but this is this is what we need to do I think you know I mean I think they are conscious that all the regulations that has been set in the last 20 years on the traditional Finance is probably too heavy to some extent so you know we're not trying to reinvent the wheel here but more trained

14:09you know to take the best of what was in the in the traditional world what you see for instance on the stable points front where it's proposed by Micah I think is extremely interesting and yeah that would take years obviously to build but it's also interesting you know to see that in front of them they have particularly in Europe you know

14:27these these new firms some of them are unicorns which are you know already extremely well sophisticated who have the right balance you know in terms of being Innovative versus being heavily regulated you know we are here to push this all in the right direction and not just start you know trying to defend you know a smaller gray area sort of comfort

14:48So I think it's quite reassuring it will take years but I think it's quite reassuring globally and speaking of Regulation and risk obviously the Frameworks are put in place to help protect people's capital and their and their information as well and looking back at you know this October 2022 there was a lot of defy hacks and exploits that it's

15:14almost setting a record for you know the most money siphoned out of smart contracts in defy and part of that can do with the liquidity provision on decentralized exchanges as well if the smart contracts aren't up to date or there's some kind of flaw a lot of money can be siphoned out how does flow desk play a role in you know maybe you were helping build

15:35The liquidity on some D5 protocols that got hacked how do you ensure that you're protecting the client's digital Assets in that aspect it's it's an excellent point I actually you know there is this like logical thinking that you know crypto D5 will be more and more secure over the years as it matures but we can see in practice that it's far from being

16:01the case and the reason is simple it's because we are still in the very intensive stage I mean there is new things coming every month and just like you know internet has probably not secured back in 1998 or whatever it took you know years and years even even today on the internet you see still a good amount of hacks when it comes to data and so on and so forth like I think we are really

16:24far away you know from having the completely secured crypto world and it worked it would take decades for sure so for this world you know in this is extremely important is it's about first of all it's about identifying the protocols that are safer than others you know as part of our treasury management planning Services there is a high amount

16:45of protocols that we don't work with are talking about stable coins earlier stable coins that are not backed one to one as the Europe regulation by the way recommends it since for future media regulation we don't touch it for the clients protocols where you know we cannot guarantee you know the AML the AML checking we know that the transactions are good we use kyt to

17:06check the source of funds whether it's clean or not we don't go in it for our clients basically it's about protecting our clients before everything the second point you know it always comes down to Market making as a service we are building it's about splitting the responsibilities when it comes to Market making you know we were in historically relying on just a single person a single

17:25provider which both has the technology and the liquidity and they manage it you know effectively or not the flow desk it's about splitting the tools between the tech and the liquidity meaning that if tomorrow through this for instance would be hacked on its operations which are still to the very heavily centralized there is no magic the funds the funds will be still quite protective

17:45because when going to the technical details but the funds are still stored on exchanges or on custody Solutions you know which are very very reputable for this business fire blocks and Ledger for instance and that's that's about you know splitting the responsibilities making basically web 2 and trading infrastructure has decentralized that as web3 can be that's yeah it's as simple

18:07as that in my opinion and of course once you've said this it's not it's not just saying it you know in finance you cannot tell the people trust me I'm a nice person it's about proving it regulation that's that's why once you set up all these good practices that we believe we have done it's about being regulated and getting the stamp you know from the

18:26regulator certification or group of Auditors or whatever to make sure that you can prove to your clients that you are doing the best practices in the market and that's definitely reassuring for the clients now let's look three years ahead say we're likely moving into the next Bitcoin bull cycle and all the coins and I'm sure there will be a huge

18:54Like opportunity for getting more Market making more liquidity for some of these lower cap coins as well what is going to be the key to you know a lot of these new coins coming out and say the coins that are on in the top 100 for them to choose flow desk for their their Market making Solutions you mentioned the best practices you mentioned you know having 100 uptime and

19:22expanding and making sure that you have service are those things going to be enough to be the go-to solution for this or what else do you think will make you guys be the number one I think it's I mean you know it's web 3 is bringing a new wave of innovation but you know when it comes to working with counterparts instant stress all decentralized it's always the same rule

19:45it's about having an efficient product a competitive product and I end up having trust in the products what we are currently building and already delivered on the efficiency side is a global trading infrastructure that gives connectivity to all exchanges already two years you know on the way we cover 90 plus of the exchanges by volume centralized and decentralized it's about

20:06being competitive what we prove already today is that market making as a service is a much more competitive approach than going through a market maker with the collection model the savings for projects is anywhere between 10x to 20x in terms of cost and the math behind it are are quite simple and as you know the market matures the token insurers are

20:26also monitoring from a financial perspective and also trying to understand you know what is the real cost of liquidity and the more they go down the rabbit hole the more you know they have less and less you know appetite for give of giving away one person two percent five percent of their supply to a density that they don't control and that's point it's about the

20:45transparency as I said earlier transparency comes down in two things giving the right tools to the clients to the Token issuers so that they can see real time exactly what you do what is the liquidity that the market maker is putting in the book what is the trading volume that the market maker is doing for me what is the PNF or not that the market maker is generating from and once

21:04you have these two just as I was saying earlier even that is not enough it's about knowing that if the market maker or the technology provider do something wrong there can be an impact from a regulatory perspective so it's also about you know being regulated and all that equation which is obviously is extremely complex which Justified or recently raised is something that we are

21:24currently solving and that we hope will be fully solved for the next Bull Run and the next Bull Run is going to be quite exciting I think just like you said it we are probably two years three years away from it so there is still a lot to build but I have really no doubt that you know we will be there with great ambitions it's great to hear Gillum and for

21:44viewers that want to learn more about flow desk and look into the details what's the best way for them to learn more so you know we are we've been always you know quite the secretive historically speaking because you know we are a technology driven firm I mean we are we are talking about Technologies for everything and we have lots of you

22:04know a background you know coming down coming from algorithmic Finance trading you know regular banking so we always had you know this secretive approach to always protecting the best interest of all of our token issues this being said obviously you know with the reason from the race we are more and more coming out and more and more building of Prisons but always you know

22:23with the spirit of humidity in the sense that it's very early in crypto it's very very very early in crypto and we are all building this together with the total insurance the easiest way to contact us it's there are there are several possibilities obviously right now we have coverage on all Global events or Global physical events you know throughout the world so we always

22:43have someone you know who is there and we are always so excited to discuss you know about the new projects you know even I mean we are we are web 3 you know crypto native before anything so we love you know I love talking to projects discovering the new layer tools you know the new dexis which are based on other books or you know new new interesting

23:02approaches so yeah always talking on event is great and otherwise we have our website where we can be contacted quite easily and yeah we do pretty forward you know to hearing what people are trying to build and how we can help them and trying to solve this together sounds great Gillum thank you so much for taking the time and for your valuable insights into the EU Market

23:23making and web3 I really appreciate it I'm looking forward to the growth of flow desk and let's follow up in the near future thank you so much for the invitation