- Fee-free exchanges are “inevitable”
- Crypto would be “in a ten times better place” if it had a “clear leader”
- Bitcoin won’t “really ever get there” in terms of mass adoption and it “doesn’t scale correctly”
Zoogg is one of a new breed of exchanges that eschew the existing commission-based approach and allow customers to trade fee-free. The US-based exchanges opened their doors in March after just three months’ development, with the ethos of the company based around founder Chad Garrett’s customer-centric approach.
Garrett spoke to FullyCrypto’s Mark Hunter about the challenges of launching a new exchange in a crowded market, why crypto needs a leader, why decentralization isn’t necessarily a good thing, and much more!
Can you tell me about your background, when you got into crypto, and what made you first buy in?
I’ve been involved in crypto for almost six years now. I wasn’t having too much fun in stocks and stuff like that, and part of the reason I gravitated towards crypto was more from a trader’s standpoint than an actual appreciation of the technology or the space. I liked how visual it was – you could actually see the order book – and it had a real fun factor.
I was only sixteen or seventeen when I first heard about Bitcoin, and I remember watching a YouTube video that outed it as a scam, so I never looked into it further. About two years later the same guy came back and said he’d changed his mind, so I began to look at it again!
How has the crypto space changed since your first days, and how did it lead to form Zoogg?
When I first got into crypto the community was a lot more geared towards achieving mass adoption than getting the price up. We haven’t really moved towards serious adoption, partly because a lot of the technology is not actually that competitive with current systems. When you look at something like Bitcoin, it doesn’t scale correctly. It takes a little bit too long to send. I just don’t think that Bitcoin will really ever get there in terms of mass adoption. I think I think it will be around for a little while, maybe ten to fifteen years, just because it is decentralized and no one can really touch it. But in terms of becoming fully mass adopted, I don’t think that’s where it will be.
I started Zoogg because I felt really annoyed with all the fees that the likes of Coinbase and Binance charge. I started to look into the exchange space and wondered if maybe there’s a way to offer it for free. And so I started looking into it more and more and found that you could, so I started to build this company about three only about three months ago. And we launched about a month ago.
That’s very quick!
In America you tend to push your launch, push your code and see if it works or not. Being in the US we can’t do an ICO or anything – I just wanted to get it out there. I want to constantly improve. We’re getting daily feedback. We’re still having problems here and there, but not much in terms of security or anything. But, you know, we’re fixing the exchange. There’s just little small things here. We’re asking our community and everyone to be patient and we’ll definitely get there. The first one to two months are definitely the hardest, but the most fun, I’d say. You’re putting something out there to see if it works. If it doesn’t, then you fix it.
How does that balance against the fact that you are responsible for people’s money?
I think the way we look at it is that the core structure, the withdrawals and deposits, all that kind of stuff, is working fine. We would say that the exchange side is where we’re mostly focusing on fixing and testing more. We do need to obviously test more, and I fully understand that. There’s small bugs here and there, but at the same time we’re paying the gas fees for withdrawals so people aren’t losing money. Users’ funds are fully intact. But that definitely is a valid point. The way we look at it is that we’re not taking control of the funds. If you don’t want to be patient then that’s perfectly fine, and we totally understand that – you can take your money out at any time you like.
When you say you’re not taking control of the funds, what do you mean? You’re not decentralized, but you’re not taking control of people’s money when they send it to you?
I mean, that is true, in terms of how the structure is, but we’re not taking the money in terms of an exit scam – we’re not ‘taking’ their money in a criminal way. It is centralized and we have the private keys and all that kind of stuff, but we’re not trying to take control, we’re not running. You can perfectly withdraw your money at any time. And it’s on us, at least for now.
How will users be protected? Will there be any insurance of the tokens you hold on the exchange?
I think we’ll definitely look into that. I think that’s a really valid point. I think as you grow you need to look forward towards more and more security. We definitely have security protocols in place now and we’ll continue to be looking into that. But the insurance is totally valid and actually really, really important. I think the move that Coinbase and other exchanges have done with insurance is really, really great. I think it also kind of backs up some kind of user adoption where you have here in the USA the FDIC kind of insurance. And I think something to the effect of that for crypto is really important.
So how does a free exchange make money?
The plan for now is to mainly focus on the customer. We’re trying to mainly focus on building the tools and the exchange and everything for the customer. We believe once we get that right then we can start to look at ways to earn revenue. And we have a few different ways. The first would probably be some kind of freemium model. So maybe you do ‘x’ amount of trades per week or per month then you might have to pay five bucks a month or something like that. It will still be free trading. I think at some point we’ll definitely have to cover the gas fees. Maybe in six months’ time or so we’ll definitely have to start thinking about charging for withdrawal fees. We might also follow a PayPal-type model where we earn interest on deposits.
There’s a few other ways that we’re thinking about making money, but that would probably be the main ways that you would make money on a free exchange or a free trading platform like Zoogg. But we wouldn’t think about that until one to two, maybe three years down the road.
In terms of the other exchanges, is there anything you aspire to be in terms of what’s already out there or do you see yourself as completely different?
We definitely realize that there’s plenty of competition, but we’re trying to be as different as possible. We’re definitely not trying to compete. In the end, competition just either hurts one company or the other, either us having to shut down or Coinbase eventually shutting down, and we don’t want to do that. So we’re trying to be as different as possible. The way that we’re doing things, especially right now, is completely different from any other company. I think so far it’s been working and I hope to continue to do that.
Has the lack of an ICO hampered you financially?
We have a small team and the seed raise has been fine. We’ll definitely be able to last for at least a year until we either have to raise or we have to look at alternative options, whether it’s an ICO or something. We haven’t really decided anything on that. Of course, like any company, whether with Coinbase or Binance, there is still plenty of chance of failure. It is a startup and there’s plenty of chance of failure here, but we’re working hard and we’re working to fix problems. But the risk is still out there, of course.
Of course, if the company fails we would leave it open so people can withdraw all their money within six months or whatever the timeframe would be.
Your litepaper describes the charging of fees by exchanges as ‘anti-crypto’, yet you’re launching a centralized exchange which many would also say is anti-crypto. What would you say to that?
Taking a commission is something that started hundreds of years ago when trading was first invented. We’re not a broker – these companies aren’t brokers. And now in the present you have people you’re actually calling on the stock exchange for your trades or taking questions, and now we’ve had a move to computer systems that are extremely cheap to make, yet they’re still charging a fee for every transaction.
The cost of cloud computing has decreased so much that the cost to build a company like this is so low that to charge fees no longer makes sense. Zero fees is inevitable. Whether Coinbase or Binance want to believe it or not, they’re eventually going to move to this. And this is where we are now. Now, just because it is inevitable it doesn’t mean that this is the right time – are we starting too early? Just because the costs are low it doesn’t mean it is the right time.
We’re looking at decentralized systems, the problem is that they’re just not up to par with where we want to be, but I think eventually we will get there. I think though that there has to be some kind of room for a hybrid system where you can have a lot of automated and decentralized stuff. But there still needs to be something guiding the company, someone guiding the overall vision or mission of the company. Once you take that out, it becomes like the whole crypto community. There’s no one leader that’s taking us…there’s no Elon Musk, there’s no Bezos saying, “Here’s where we need to go”. I understand people want decentralization, and I’m perfectly fine with that, but I think there needs to be a leader. I think that what’s been shown in all movements is that you need leaders. The civil rights movement wouldn’t be where it is today without Martin Luther King. And you need leaders in these kinds of things – I think we really need a clear leader.
And you’re not concerned so that you might alienate a certain section of the crypto community if you do go for a centralized model first of all?
I think there’s a reason, at least right now, why for the most part the centralized model is working. To some extent people could say it’s not working, but I think that’s why some of the biggest companies in the exchange business are centralized. It’s because there is a leader that they [the customers] feel that you trust to take the company in the right direction. I think if decentralized stuff were to get there we could definitely look into that and branch out or make that the main product offering. But I definitely see how we could, either now or at some point, alienate the audience or the customer because of that. I definitely see that in the community.
So are you saying that the idea of crypto and decentralization is nice and fluffy but we’re not ready for it yet, that we need to take a step back first and lead towards it rather than jumping straight into it?
When I think about this, I think of movements in general, revolutions or things that go into effect. There’s too many people [saying], “Hey, Bitcoin Cash is better than Bitcoin”. I just feel like if Satoshi Nakamoto was one person and he created this, and he was actually in the public eye telling us, “This is where we need to go”, I really think the space would be in a ten times better place. Now we just have a lot of people shilling their own coins and shilling different things that are totally useless. And there’s a stain on the community now with so many with so many coins. It moves us away from where we need to be going, which is payments globally for free, all this kind of stuff.
How difficult has it been to set up a money service in America, especially a crypto money service?
It’s certainly difficult and we’re working on all the different regulations and setup and all that kind of stuff. It’s definitely difficult. But it’s just a part of the business, and the way we’re looking at it is to take one step at a time. That’s why we’re really focusing on the exchange side. If we eventually want to expand we need to kind of focus on all the regulation part and on getting that globally so we can offer the service globally to everyone.
So are you as fully regulated as you need to be at this point?
Currently we’re working on getting all of the proper certifications and stuff like that, but we only have like $50 in volume right now and we’re working on fixing up the exchange a lot more. But we will. We definitely will be soon fully regulated and everything like that.
So you can start a money transfer business to the extent that you are without having those regulations in place upfront?
As far as we’re concerned we haven’t done anything wrong and we believe we’re in the right area to move forward with the regulations and that kind of stuff. But we haven’t…I mean, that’s the way we’re kind of looking at that right now.
You say in the litepaper that only the coins with “the most transparency, backing, and usability” will be chosen to be listed. How do you go about deciding that?
We had, I think, too many coins that we added, at least in the beginning, and we have to focus on one main area, whether that’s Ethereum tokens or other things. I don’t think we’re going to be adding at least another couple pairs for a while, and I think before we do that we’ll have a committee where we’ll discuss them – “Should we not add this one? Why should we have this one? Why should we not add this one?” And that’s what we’ll do going forward on choosing coins.
How do you plan to scale and where do you ultimately see that going, not just the exchange, but the company?
It’s just getting a lot of things in place, so getting the volume in place and just getting the community right – that’s where it really needs to scale. Over the next year we’ll be just focusing on the exchange, that just has to be the main focus. So just improving that, making that as comparable as possible to your average exchange in terms of UI, in terms of matching engine, all these different things, while still offering zero fees. That’s where we really need to be in one year, with possibly a mobile app. I’d like to be not just in the exchange business – I really like the payments business.
What would you say have been the biggest challenges that you have faced?
We launched, I guess, a month and a half ago, and the biggest problems were honestly just staying open. We were expecting 100 users in the first week, but we got there in the first 10 minutes. We expected so little users, but now this [the success] has forced us to work even harder and to get a lot more feedback. We’re just trying to get as much feedback as possible, and to improve daily.
From the feedback that you’ve had so far, what would you say customers want from an exchange?
I would say I’d say first, a lot of them want transparency – they don’t want fake volume. They want a fully working system, of course. They want free trading. And they want a strong community. I think the community has been really great so far and I’m really looking forward to that [continuing].
Is there anything else you don’t like about the crypto exchange business that you’re looking to change with your products?
The customer service is horrible, and I think that we know where our company’s going, we know where we want to be in 1-10 years, but I think that we also have to be flexible in where we want to go and how we get there. And so just listening to the users as much as possible is really what we’re trying to focus on – getting the customer experience, giving the customer what they want down to a ‘T’. Part of that is the zero fees, but there’s a lot more we’re looking at to get there. I understand it’s going to be hard to get that right just because you have a lot of people and you’re talking about people’s money. I think that’s going to be one of our main focuses – customer service and just the customer in general.
I’m going to have to ask about the name because it’s so different – can you tell me about it?
I’m actually a dual citizen in Switzerland, so I went to the map of Switzerland. There’s actually a city where my uncle is actually from, called Zug. I put in Z-U-G but that wasn’t available for a dot com domain, then I put in Z-O-O-G but that wasn’t available, then I put in Z-O-O-G-G and it was available. I started looking at other names but it started to grow on me. And so that’s the way we got the name.
Zoogg is certainly a forward-looking exchange, and with a customer focused man like Garrett at the helm there is a chance it could carve out a niche for itself in the competitive world of the crypto exchange. We’ll certainly be keeping an eye on Zoogg in the coming months and seeing if it can reach the potential Garrett and his team clearly feel it has.