This is a transcription from a one-on-one video interview conducted with CoinLion CEO Joshua DeWitt on May 15, 2018.
CoinLion is US-based cryptocurrency trading, portfolio management & research sharing platform
Brent: Can you tell us a little bit about your background and career before launching CoinLion?
Josh: Sure. We are located in Sioux Falls, South Dakota in the heart of the Midwest (United States). My background is in finance and traditional Wealth Management. I have worked for some of the big firms like Wells Fargo, Merrill Lynch — I did portfolio management there, advising, consulting. I have a Masters of Portfolio Management/ Investment Management/ Financial Analysis from Creighton University in Omaha. That is focused on the CFA — Chartered Financial Analyst curriculum. I have a passion for controlled, disciplined investment processes. I’ve traded traditional assets like bonds and stocks, and building portfolios and using the right tools. At the same time, I was getting into cryptocurrency and mining, which is where I got my start — building mining rigs for Ethereum. This was a passion of mine…and then I got into trading cryptocurrency. I found trading to be a bit cumbersome and difficult to track your positions and gains and losses, and it was a lot different from what i was used to. So after working in those industries, I saw an opportunity to build a cryptocurrency trading platform. We had a successful token sale where we were able to raise around $7M USD to fund our project. It’s been about two months and we’re deep into development of the project, planning to launch in about two months. One of the reasons cryptocurrency caught my eye was because I worked in the traditional finance space for eight years or so. There were a lot of paperwork, signatures, slow and costly transactions and there was just a night and day difference (with cryptocurrency) — instant transactions, super low cost and easy once you get the hang of it. That’s what sparked my interest in it — I saw it as revolutionary.
Brent: The fact that you mine is unique to your position as CEO. Usually CEO’s have one or the other — the technical or financial side — and you have both. And this is fintech, so I think you need both to run an exchange. Do you consider yourself more on the technical side? Do you code?
Josh: Yes, i do a little bit of coding. Not specifically to our platform; I let the CTO and dev team do that. I like coding and optimization. I come from an entrepreneurial background. My father is a homebuilder so I grew up liking to work with my hands. I’m still mining a bit and expanding here and there over time. It’s a passion of mine. It helps me understand everything; how it works, the foundation of crypto, and being part of the community; being able to have those conversations with other miners. I am a bit technical and I like to be hands-on. I understand system architecture and have oversight on that as well.
Brent: Why did you decide to build an exchange? And what does CoinLion do, relative to other exchanges out there; what makes it different?
Josh: How to make things different and better was ultimately why we started this exchange. I had been using tools that maybe the regular public is not exposed to. This includes portfolio management, proper controlled investment processes, and how to implement that into cryptocurrency. When I was doing it with my portfolio it was very cumbersome. And this whole new idea of token economics, incentivization, and quantifying the utility of a coin. I liked the idea of being able to integrate that in an exchange. It made sense to bring together token economics, portfolio management tools, and the community aspect; I wanted to tie all those together. I also think the environment is expanding incredibly fast. How do you properly manage a portfolio of 100 or 300 different cryptocurrencies? Maybe you’re an institution and you hold a portfolio of .5% in each position and you have many different position and you want to rebalance, reallocate, and do this efficiently and easily. You can’t do that on any of these platforms currently. At CoinLion, we’re trying to tie those three things together (trading, portfolio management, research sharing). We also want to share those things with the community. So, if you create a portfolio and it’s kicking butt, you will rise to the top (in CoinLion). Another thing is if you want to have an Investment Advisor manage your portfolio, how do you know if they will do the best thing for you? With this type of system on the blockchain, you have full transparency. So you can see which manager is performing well, how many followers he has and if it’s worth it for you to subscribe to that portfolio. So, CoinLion allows for not only the trading of crypto but basically the management of the baskets or portfolios of cryptocurrencies. Tracking multiple different portfolios, you can have objectively based portfolios. Say you want one with exposure to Asian countries or blockchain in a specific region or maybe it’s proof of stake blockchain. If you want to create portfolios designed to meet specific objectives, others can come in and layer in on top of it to create a well-rounded portfolio that is designed to do something specific. Maybe that’s low volatility or large cap vs small cap. We’re still flushing out those classifications. It would be neat to create the classifications for cryptocurrencies, so you can participate in an asset class but not have to sit and monitor it every day. And I think that’s what CoinLion is going to do really well.
Brent: The US regulatory environment is a very challenging one for cryptocurrency. But that’s a good thing — it means consumer protection. Hopefully they can cut down on the masses of people getting hurt by scams, ponzies, pyramids, hacking, etc. How challenging has that regulatory grey area been for you in developing the platform?
Josh: At first it was very challenging and a big concern. But at this point we feel very confident with our legal team and who we’re working with. We have about 10 different attorneys around the county and two in-house here that are working on the money transmitter licenses. We are following best practices as far as what the other big US exchanges are doing — like Coinbase, Kraken, Poloniex, Bittrex, Gemini. We feel very confident with our understanding of what’s happening right now in the US. We firmly believe that no, not all tokens are securities…especially those acting as a utility within a platform. If things change, we will be right there to make those necessary adjustments. We are not trading securities on our platform. In the future, if we need to register as a broker/dealer we will do so. It’s one step at a time. We are listed on FinCen’s website. We’re also working on the other money transmitter business licenses for the necessary states.
Brent: One of the things that attracted me to your ICO back in February was that you were only seeking limited funds to launch — just $7M. Back then, everyone was chasing huge amounts of money in ICOs because they could — $30–50M+. And these were platforms that were WAY less complicated than developing a cryptocurrency exchange. And then of course everything came crashing down around them, and their investors got hurt later. How are you able to pull off launching an exchange on such limited funds?
Josh: As we went into the planning process, we were looking at our team, the regulatory costs, licenses, bonds, and operational costs for a break-even for about 2–3 years to give us time to gain traction and make revenue on the platform. We figured that out and decided we could do it for a minimum of $7M. The big thing is we are located in Sioux Falls, South Dakota — the Midwest US. Our cost of living is lower here. Our cost of employment is lower. We had minimal costs in setting up our office. All our funds right now are going to platform development, legal costs, hiring more developers, and a little bit of marketing. We are really starting to ramp up marketing at this point. But that’s how we came to the $7M number. And so far, there have been no problems. We are fully confident we will be up and running in a couple months. We’ll be generating revenue soon after that. I think some of the platforms that raise more are spending more on marketing and events. That all costs a lot. Maybe our community would like us to do more but we are more about getting the platform out first.
Brent: Probably the most notable and popular exchange in the US,for those of us in the market on a daily basis, is called Bittrex. How would you compare CoinLion to Bittrex?
Josh: I think we’re a little different in the sense that we will have more advanced tooling, the ability to communicate with other traders, and attracting big influencers like you into the research portal. The research portal makes us different, so does the portfolio management tool. And having our own coin. Bittrex doesn’t have one and we do. The Lion Coin will offer you different benefits on the platform, such as free trades in Lion Coin and Lion pairs, discounted trades, portfolio management, access to research, and the community aspect. Also, we are really working on advanced charting tools that will enable you to overlay multiple charts on the same screen of different coins. Like if you want to compare Bitcoin to Litecoin to Ether, you will be able to on one screen. We’ll have all the other indicators as well. Up to about 4–5 charts can be added into one view. The look and feel will be very modern, advanced, sleek and easy to use.
Brent: As people may know, platform coins of strong cryptocurrency exchanges do really well, IF they have the right type of utility. As Josh mentioned, it will be about free trading if you trade in the CoinLion pair, discounted trading using the Lion Coin to pay your fee, and then also for paying for access to the research portal as well as tracking the portfolios of your favorite traders. You can basically mimic their portfolio.
Josh: We’re actually working on creating more use-cases and utility for the coin as the platform matures and develops. For instance, people such as you — on your actual profile there will be a section where you can have premium content — such as videos, articles you write, or maybe if you’re a top trader, you can do some advertising on your profile page. I think there will be more use-cases for the coin as long as it makes sense for the token economics.
Brent: As far as the coin goes today, if someone wanted to buy it , where would they buy it prior to CoinLion launching? And is it on Coinmarketcap.com at this point?
Josh: Yes, people can find it on IDEX right now….IDEX is a decentralized, peer-to-peer exchange. With Coinmarketcap — we’ve been in touch with them. When the coin first started trading on IDEX, the volume was high the first few days but by the time we had our endpoint set up to provide data to Coinmarketcap, the volume had died off because we’re still kind of under the radar and haven’t launched our platform yet. Once we ramp up marketing and the volume picks up a bit more, we’ll be listed on Coinmarketcap. We’ll continue to stay in touch with them….we just need to mature a little bit more.
Brent: Yes, I think this is the calm before the storm, as you continue to ramp up. There is really no point in going full force on marketing if you don’t have a platform to market. So, where are you guys with the development of the platform?
Josh: If you want to track our progress, you can scroll down to the bottom of our website. There is a tab that says “Progress” where you can track our progress. Right now, we have about 30% left. We feel really confident with where we’re at; we have over one thousand lines of code committed to our Github. We’re testing back-end functionality of our matching engine and now we’re working on getting everything plugged in together; back-end, front-end and user interface. We’re hoping that mid-June we’ll have everything up and running and testing it fully internally, among our advisors, and preparing for launch in July. We have some audits coming up with some cybersecurity firms. Our #1 goal is to be fully secure obviously. We cannot risk having an attack or a hack. That’s why we’re going through multiple layers of penetration testing and code audits.
Brent: Yes and that’s probably a deeper-dive I’d like to get into with you in another month…..about what makes you guys different and the lengths that you’ve had to go with legal compliance, banking laws as well. I wouldn’t have invested in this project if they weren’t doing everything by the book…even ahead of the books. The US is in desperate need of another strong Alt coin exchange. Bittrex has a real stranglehold on the market. And I don’t think the other firms you mentioned will even be in your same ballpark. It’s really just Bittrex. I’m really excited for the launch of CoinLion and what you guys are going to do globally. Thanks for the time, Josh. We’ll make sure we do a follow-up when you guys are getting closer to launch.
Josh: Yes, I really appreciate it. If anyone wants to send any additional questions that aren’t answered here or they’re not in our Telegram, you can shoot us an email at Info@coinlion and we’ll try to get right back to you.
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