Alex Wearn is CEO and co-founder of Aurora, the company behind IDEX. He is presently working on many different initiatives, including a rebranding for the famous decentralized exchange and financial platform. Coin Central’s Munair Simpson had the opportunity to interview Wearn and his colleague Forrest Whaling, head of marketing, at Consensus last month during Blockchain Week in New York City. We wanted to ask Wearn a few of questions about the Aurora rebrand, his cryptocurrency banking aspirations, and some of the challenges he faces running IDEX on the Ethereum network.
Munair Simpson: Alex, would you like to introduce yourself, tell us a little bit about your background and what you guys have been up to recently?
Alex Wearn: My name is Alex Wearn. I’m the CEO and co-founder of Aurora. We are best known for our first product, IDEX, a hybrid decentralized exchange built on the Ethereum network.
My background is in software development, primarily product management. I’ve worked for the likes of IBM, Adobe, and Amazon. We started this project a little over a year ago. We started building the exchange around January or December of 2016, January of 2017.
We launched in October 2017, and since January of 2018, we’ve seen pretty aggressive growth. We’ve gone from 3,000 users in the middle of January to recently passing 140,000 users. We’re the top decentralized exchange by volume in the Ethereum network as well as the top contract in terms of transaction count and throughput.
We generally take up anywhere from about 5-7% of the Ethereum network’s bandwidth. We’ve seen some amazing growth, great adoption, and we are really excited to tell you more about our project.
Munair Simpson: Forrest, would you like to introduce yourself?
Forrest Whaling: My name is Forrest Whaling. I am the head of marketing. My background is in traditional digital marketing. I’ve been doing that for ten years, got into crypto through the investment opportunities there. These guys were building a DEX project at the time, so they brought me on to do some advisory work. Once we went through funding, they offered me a full-time position and I haven’t looked back.
Munair Simpson: Some of the team are not here today with you guys. Anyone you want to mention in particular who has been a strong contributor to let people know more about the team?
Alex Wearn: Yes. The core team early on was me and my younger brother Phil. He’s been involved early on in the crypto space and was the one who identified this opportunity for a decentralized exchange, and particularly this hybrid approach that we’ll touch on a little bit further.
Ray was the lead developer on this whole thing. He’s the one who put it together. Also Brian, another core member, who joined us in June 2017 when we were little more than a whitepaper and a prototype version of the exchange. It’s amazing to see what was a one-man initiative now grow to a dev team. We currently have nine folks working on it full-time as well as several contractors.
I’ve really been excited to see the maturation of the product. So, we really appreciate all of his efforts to help us get to this point.
Munair Simpson: Many people are not familiar with the Aurora DAO and the new Aurora network. Would you like to give a brief explanation of both?
Alex Wearn: We began with IDEX. This is our first product. IDEX is a hybrid decentralized exchange. What that means is, we’re using a smart contract for all custody of funds – trade and settlement.
But there’s a centralized component that interacts with that smart contract. All trades are authorized explicitly by end users and their private keys, who are then routed through the exchange. The benefit being that the exchange can queue the dispatch of those trades to the contract and actually provide a real-time trading experience where users are insulated from the latency that comes from operating on the blockchain.
We know there are some drawbacks to having that centralized component, primarily risk of DDOS or DNS attacks. Our future vision involves turning those centralized components into its own network, the Aurora network.
The idea is we are going to use our token, the AURA token, through a Proof of Stake consensus model, and have those components that are currently centralized run by a network of operators. And each of those operators will be incentivized to behave honestly because of the staking model that’s going on behind the scenes.
So, those stakers will get paid transaction fees from the exchange for their role in operating the exchange.
There are a couple of cool things we’ve been doing with the AURA token.
Every month, we are giving away a percentage of the tokens to those who trade on the platform proportional to the amount of volume that they do on the exchange, the idea being that the more liquidity you bring to the platform or the more volume you bring early on, the more of these tokens you are able to earn, and the more you can benefit from the future growth of the Aurora ecosystem.
The cool thing about tokens is you can incentivize a decentralized network of actors to all row in the same direction, to all move towards a common goal. That’s what we really tried to do here with the design of the AURA token and the Aurora network.
Munair Simpson: At the Fluidity Summit in Brooklyn last week, you were on stage with some of the other players in the space like Paradex over the 0x protocol. Would you liken the new change, the Aurora network, to being something like 0x?
Alex Wearn: 0x is focused on a protocol component in order to open up access of the exchange to a bunch of different front-end user-facing components. You’ve got relayers, applications that want to integrate with one another.
That’s a good way to do this notion of network liquidity. But one of the drawbacks that we see is that it is difficult to create a high frequency or a high-speed trading experience within that kind of protocol approach.
That’s really what we’re focused on at IDEX and Aurora—keeping that centralized feel in terms of speed while maintaining the custody and security that comes with using a blockchain for managing all of the cryptocurrency assets. We’re going after different target markets.
Munair Simpson: I guess that it’s a good time to talk a little bit about some of the scaling initiatives that you guys have. I think on your website you mentioned plans to use sidechains. Would you like to talk a little bit more about that?
Alex Wearn: As I mentioned earlier, we are currently around 7% of the transaction volume on the Ethereum network. The Ethereum network has limitations in terms of transactions per second, and if we continue to grow as we would like to, eventually, we are going to bump up against limitations on the network capacity.
The Ethereum foundation is working on their own scaling solutions, but we are actually able to take control of that issue by looking at and exploring other sidechain opportunities. The idea of a sidechain being a separate blockchain that connects with the main chain of the Ethereum network that allows us to offload a lot of the transactions in terms of trading to the specific blockchain that is focused on IDEX trades exclusively.
We’ll be able to get higher transaction throughput, faster block times and faster settlement times by having a side chain that is exclusively focused on IDEX trades. We will also be able to get rid of gas fees. That’s one of the big challenges with having to operate on the Ethereum network, is higher gas prices to deal with congestion.
Additionally, it’s another component where the AURA token comes in to play. The plan is for a Proof of Stake side chain, where node operators will receive transaction fees from the exchange for their role in operating.
Munair Simpson: If someone wants to get involved as a node operator, what do they have to do?
Alex Wearn: To be honest, the specifics are not concrete at this point. We’re still early on in the development phase. We are conscious to not give any specifics because of the tendency for those in the community to hear something and latch onto it as gospel.
We are careful not to give anything too specific but you can liken it to other Proof of Stake networks that are developing out there, where individuals will stake a collection of coins, a collection of assets as a form of collateral, as an incentive to operate on a stake, in this case, in order to process transactions for the network.
One of the other benefits of a side chain and one of the things we are exploring is integration between different smart contract blockchains. A lot of the new smart contract platforms are making sure that they are EVM compatible, meaning that they will be interoperable with the Ethereum blockchain.
We see this as a way to bring all of these assets together onto one sidechain that is exclusively focused on the IDEX trading experience. We will be able to have this pooled, shared network where everyone can access all these different assets from these different smart contract blockchains in a decentralized way while maintaining that high-speed, high-quality trading experience that we have created so far.
Munair Simpson: Since you guys are using a lot of smart contracts to get all of this stuff done, how do you adequately vet that? Do you prefer bug bounties, or do you work with auditors? How do you check the code?
Alex Wearn: We’ve done both. We have multiple experts on the team who review everybody’s code. We’ve worked with a couple of different auditing firms. Hosho was one of the ones that did a recent version of our smart contract. Of course, we have the bug bounty out to the community should anything get missed by any of those other resources.
Munair Simpson: Would you like to talk a little bit about any of the challenges you’ve had recently, anything that you’ve encountered in the last few months that probably you hadn’t anticipated or you wish you might have done differently?
Alex Wearn: One of the interesting things has just been the challenge of operating on a network that itself is dynamic and always changing. Before December, before CryptoKitties, we never had to think about gas prices or transaction backlogs. That wasn’t really a problem. And then all of a sudden, you have that adapt to the network and everything backed up like crazy.
So now all of a sudden, that’s another engineering challenge we are having to solve. As I mentioned, we route all orders through the exchange. Everything has to be queued one after another, which means if my trade is taking a really long time to settle, then your withdrawal, which may be dependent on that trade, is going to be queued behind it.
We have to make sure that everything moves at a brisk pace, which means monitoring the Ethereum network, ensuring that we are using a gas price that will keep things moving quickly in terms of the mining speed. We were using ETH Gas Station for a while, but eventually, we found that we actually needed to develop our own in-house tool to monitor the network, to monitor the pending transaction pool and identify the optimal gas prices.
That’s something that we never anticipated four or five months ago, to become another thing that we had to solve because of the dynamic nature of operating on a public blockchain.
Munair Simpson: One of the things that I noticed was that you have your own stablecoin. Would you like to talk a little bit about this?
Alex Wearn: The name of the stablecoin is the Boreal. It’s not live yet. But we have intentions of releasing it sometime within this next year. The idea behind the Boreal is that it’s backed primarily by the exchange itself. The Boreal will always be redeemable on IDEX at its target value its payment for trading activity in lieu of trade fees.
You can imagine a situation where if the price ever drops below its target value, traders are incentivized to purchase it as a way to prepay their trade fees and actually lower their overall trading cost. There are a couple of different ways that we’d like to think about it.
It is a retailer gift card, in which case you are able to prepay for your activity on the exchange, or tokenizing future revenues on the exchange. In terms of stability, instead of just having an algorithm that controls the price and manages supply and demand in hopes of keeping it at its target value, you actually have a revenue-generating entity behind it that’s actually backing it and guaranteeing its redemption.
So, you can think of it as a more robust system in terms of stability. And by looking at the volume of IDEX, you can feel comfortable with the amount of tokens that are in supply or in circulation. We actually have intentions of using that as a way to programmatically control the amount that is out there.
If there is $100 million in annual revenue and only 100 million in circulation, then you feel pretty comfortable knowing that, within the year, the exchange will be able to bring them all off the market simply through normal operations.
Munair Simpson: The example that you just gave gives a lot of confidence, but what if there are people out there who want some more official auditing of this stablecoin? Do you have any plans to work with auditors, any organization, or is there any plan to make it more transparent?
Alex Wearn: The end goal is a self-regulating system, one that uses inputs such as the revenue on IDEX, the circulation or the velocity of the token, how quickly they are being redeemed, how much are being used on other platforms. It uses all of that to programmatically manage the supply.
And ideally, all of those rules and circumstances are as transparent as possible. This is uncharted territory, so we are going to be cautious about it because, understandably, people are going to be concerned about the idea of a stablecoin, any of these stablecoin systems, where you’re releasing an asset that is backed by fiat or not.
We are trying to come up with a new paradigm, a new approach to managing the stability and guaranteeing the value of the asset.
Munair Simpson: A lot of people in the CoinCentral community are very interested in your project. Now that we’ve talked a little bit about Aurora and Boreal, people might be a little confused.
If they are interested in the long-term success of your project, which one should they try to own? Should they try them both, or one? How would that work?
Alex Wearn: The Boreal is more of a tool built within the exchange platform. Once circulation grows, we plan to use the Boreal as a base currency market or a base currency for markets within IDEX. So instead of just adding Ether trading pairs, we’ll actually have the boreal as a trading pair which will give people a stable hedge in times of volatility.
The idea for the AURA token is that as the exchange in the network starts to grow, so does the value of the AURA token. As the stakers are starting to earn more through transaction fees, the staking model will need additional security so the value of that staking token will increase.
Munair Simpson: People are always concerned about liquidity in these decentralized exchanges. Do you want to talk a little bit about any of the challenges or any plans you have in the future to ensure that you have adequate liquidity on all pairs that you offer on the exchange?
Forrest Whaling: We have folks that are out there talking with new projects and making sure that the community is aware of IDEX and the opportunity to trade the asset when it first launches. That helps to ensure that there’s a market of buyers and sellers on the exchange interested in trading the token early on.
Additionally, we are working with professional market-making firms to ensure that there is a significant amount of liquidity as well as a minimal spread in terms of the price difference between buys and sells, so that anyone who does want to end their position is able to do so without an issue.
Munair Simpson: If we launch a coin or token tomorrow, how will we approach you guys about listing on the exchange?
Alex Wearn: We have folks on the team who handle that. The best way is to join our Telegram room. We have the AuroraDAO Telegram room, or you can find us on social or via our website and submit a support ticket. I will forward them to a listing form where they fill out some information about the token. Our team will review it and we get back in touch with them.
Munair Simpson: What is Snowglobe?
Alex Wearn: The idea behind Snowglobe is a next iteration of what we have been building in terms of this decentralized exchange platform. The end goal is to have a network that is available to pool liquidity off of multiple IDEX-like exchanges.
You can imagine a situation where anyone’s able to open up an exchange platform that has that centralized-look and feel in terms of the trade speeds of IDEX, but then behind the scenes, the liquidity is pooled across various exchanges.
It is a longer-term initiative that we have, but we see the future being an open, global, permissionless, decentralized network of trading. We want to make sure there are as many touch points to enter that as possible. We think that having an open network to share liquidity will be the best way to capitalize on that global initiative.
Munair Simpson: I saw something about decentralized capital. Would you like to talk a little bit about that and anything else that you want to bring front and center?
Alex Wearn: Once the Boreal is in circulation, we want to take that decentralized stablecoin and start lending it via a blockchain-based bank. There’s a lot of identity and credit systems being created that will allow us to understand the risk profile of a particular user.
We will be able to lend Boreals to those users, and those loans will then access another form of collateral backing up the Boreal. As those loans are repaid, individuals will have to purchase Boreal to repay both the principal and interest. There’s another form of upward price pressure on the asset.
This will also generate income for us as a company through generating these blockchain-based loans. The end vision is that we want to recruit other DACs and other applications to play the same role as IDEX and actually guarantee redemption of the Boreal on their platform for payment of goods and services.
For that, they will be able to then share any profits that come from the revenue-generating side of the banking lending platform. The idea here is to reimagine currency issuance. Your national economies that give a currency value, it’s really the businesses and consumers that make that currency have value and have stability.
But there’s a government that has the seigniorage capabilities and the one that actually gets the benefits of being the currency issuer. We are trying to imagine the currency issuance process and make it an agreement between businesses and consumers so they can capture the benefits that come from being able to have their own currency.
Munair Simpson: Who is your chief economist?
Alex Wearn: I am the one doing the most of the research in economic thinking here. But we have also been in touch with thought leaders in this space who reimagined what the world would look like if you brought back the notion of private banking.
It’s not a crazy thought. Only a little over a hundred years ago, most of the banks were private, in the sense that private entities were responsible for issuing their own money, and the soundness of that money was a function of how well those private entities did in managing the risk of their assets, “How risky were their loans?”
And now we’ve got this perverse system where you have a central bank that is in their best interest to guarantee the survival of the large financial players within that ecosystem. But in doing so, you’ve now taken some of the risk from the financial companies and offloaded it onto taxpayers.
We are trying to think of how we can change the incentive structure so that it is more aligned, more transparent, and that everyone is able to be responsible for their own actions.
Munair Simpson: What are your marketing plans and initiatives, and what have you done in the past that’s been successful? What are the efforts you’ve made to make IDEX so successful?
Forrest Whaling: Right now, we are trying to create more of a social presence across Twitter and Reddit. We find that as an exchange, that’s likely the best way to reach the community. We’re announcing new token listings, getting people excited about new features that are coming up. We are going to be pressing on that.
We’re doing more interviews with people like yourself and trusted publications. We’re getting the word out because we feel that most people only know us for IDEX, when we are a much bigger project as Alex has explained.
I used to rely on Google AdWords, YouTube etc.. Not only does that not work, they are actually cutting those avenues off to crypto. MailChimp announced they will be shutting off services too. So, we are having to come from a lot of creative angles and it is really like a grassroots effort in comparison. We’re all learning how to succeed in this business.
Munair Simpson: Is there anything that you would like to talk about that we haven’t covered so far in this interview?
Alex Wearn: I want to give a shout out to the rest of the team. There’s a bunch of people not listed on the website. We’ve since grown through what’s visible on the website, and there’s a bunch of other people contributing behind the scenes.
Those are core members that were part of the team early on but we have since grown to about 20+. We don’t want to forget all of the hardworking engineers, marketing folks and support staff that are out there making sure that IDEX is growing into the best product possible.
Thanks Aurora Team!
Special thanks to Alex and Forrest for taking the time to sit down with us at Consensus. We hope that they will continue to succeed and share those successes via Coin Central. To learn more about Alex’s vision for Aurora, check out the Aurora whitepaper and website.
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