crypto startups: With trading community turning lukewarm, crypto startups look to rebuild for the future
Nischal Shetty, the founder of crypto trading platform WazirX, is busy building Shardeum, a blockchain-based protocol that can scale up exponentially to simultaneously support multiple transactions of various kinds, including micro payments and trade finance dealings. Shardeum can support 200 transactions or more per second, Shetty told ET. “Our ultimate goal is to scale it up to 100,000 transactions per second. We are away from that level, but we are testing our platform to scale up without slowing down,” he said.
To put that in context, traditional blockchain-based protocols can perform around 40-50 transactions per second.
With such scalable protocols, the idea is to make crypto relevant for micro transactions, gaming applications, social applications and others.
“At WazirX, I realised our customers understood nothing beyond trading. This will not help the industry grow; we need to build for scale, so it becomes affordable for the masses to access services on Web3,” he added.
Mumbai-headquartered crypto unicorn CoinDCX has built a decentralised wallet named Okto, through which users can access DeFi applications from around the world. DeFi, or decentralised finance, refers to blockchain-enabled peer-to-peer financial transactions, which do not require intermediaries such as brokers or banks.
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“Around 400 million people the world over have touched crypto in some form or the other, but less than 2% understand the world of tokens, DeFi and others. Through Okto, we want to push that number up,” said chief executive Sumit Gupta.CoinSwitch, on the other hand, is taking a more traditional route to expand. The company is trying to become a full-stack wealth tech platform to compete with the likes of Zerodha and Groww.
ET wrote on June 20 that CoinSwitch was planning to apply for a broking licence with market regulator Securities and Exchange Board of India.
Initial traction
For a majority of Indian users, crypto has always been about trading and earning a quick buck. Startup founders in this space want to change that mindset.
If the sector is to grow, rather than those solely interested in making a profit, it will need committed users who benefit from those commitments and will stick to them even through a hurricane, say founders.
In a sense, the founders have no option but to widen their horizon. With strict regulatory charges on crypto trading, such as a 1% tax deducted at source and 30% tax on virtual digital assets, the trading community has turned lukewarm to cryptos.
To make up for the lost business, platforms are seeking to build a crypto ecosystem and a gateway to Web3, which they believe is the future of the global economy.
“The world wants more applications around blockchain, but the first generation of protocols were not built for mass adoption. With Shardeum, we want to address that,” said Shetty of WazirX.
Once more and more applications get built on Web3, Shetty believes Shardeum will become the platform on top of which these transactions can be processed.
A similar approach is being undertaken by CoinDCX with Okto. The idea is to get users to access gaming, non-fungible tokens and DeFi services in Web3. As Gupta put it, most users find it very difficult to access these services. With Okto, the plan is to make it simple and easy to use.
“Okto is live among users across 160 countries and Web3 is the future for which we are building this gateway,” Gupta said. “Around 50,000 users are already on Okto.”
Valuation conundrum
Crypto startups raised millions of dollars during the bull market and hired aggressively to pursue their ambitious growth plans. But a slowdown in the market has resulted in those growth targets being missed.
“For the last two years, there have been no significant business volumes. The question is: how do you justify the valuation in this market,” said Sharat Chandra, cofounder of the India Blockchain Forum, a body that brings together blockchain enthusiasts and policymakers.
According to Chandra, the major revenue generation opportunities lay in high-frequency trading and staking. Both have been impacted now, he said.
“Diversification to other financial services is the only option available,” he said.
CoinDCX’s Shah pointed out that revenues have been in a free fall as the market is in a bear phase.
“We are financially strong, hence we are building for the future,” he said.
CoinDCX has raised around $247 million in venture funding till date.
Bear markets give founders an opportunity to think and build for the future, Shetty said. One cannot stick to just one revenue stream forever, he added. “Founders have more bandwidth; there is talent in the team that can be used to build new products. In a few years, crypto will be much more than just the exchange business,” said Shetty.
Shah wants to widen the Web 3 and decentralised market through Okto. The aim is to expand CoinDCX’s current 15 million user base to 50 million by the end of 2025.
Amid all the gloom in the crypto world, one positive is that there are still a lot of people using these platforms. The user base may have plummeted from 2020-21, but is still higher than the 2018 base, industry insiders say.
As the market goes through a tough phase, founders are preparing for the long haul and building moats to defend their investments. The goal is to be better prepared for the next bull phase and ensure that customers who board these platforms stick around.
