January 19, 2023

The Future & Advantages of DeFi Crypto Exchanges | Jumbo Exchange Interview

Midas Letter
Midas Letter
The Future & Advantages of DeFi Crypto Exchanges | Jumbo Exchange Interview
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Today, we sit down with Alex Yavlikhov, COO of Jumbo Exchange, to delve into the future and advantages of decentralized finance (DeFi) crypto exchanges.

Alex provides an overview of Jumbo Exchange, a decentralized exchange that allows for peer-to-peer interaction and control over assets, and how it differs from centralized exchanges.

He also explains the benefits of using smart contracts on the NEAR blockchain, such as lower transaction fees and a more streamlined user experience.

This is a must-watch for those interested in understanding the rapidly growing world of DeFi.

Company Bio:

Jumbo is an AMM DEX that offers a cheap, seamless, and unfettered way for anyone to trade on.

Links & Resources:

Timestamps:

00:00 Jumbo Exchange COO Alex Yavlikhov

01:09 Jumbo Exchange Overview

02:30 Decentralized Exchange

03:25 Smart Contracts

05:36 NEAR Blockchain

06:51 KYC & AML Regulations

08:51 Contract Fulfilment

10:34 Wallet Risks

12:14 Client Demographics

13:12 U.S. Crypto Regulations

14:27 $19.5M Total Value Locked

15:26 Cost Structure & Fees

17:19 How Jumbo Exchange makes money

Transcript

James West, Midas Letter CEO: Welcome back. My next guest is Alex Yavlikhov. He is the COO of Jumbo Exchange at jumbo.exchange. Alex, welcome.

Alex Yavlikhov, Jumbo.Exchange COO: Yeah, thank you. Thank you for having me. Yeah, it’s great to be on the show. I actually have seen quite a bit of your show and I was quite impressed with the questions and the responses, so I’m looking forward. Yeah.

James West: Well, for dinosaurs we aims to please, what can I say? Alex, let’s start with an overview. What is the business of jumbo.exchange?

Alex Yavlikhov: So the business we operate in is web three. So the space is web three is basically the five decentralized finances. So jumbo exchange in general I can describe it as an exchange. So basically, as you might be familiar with centralized exchanges, there is kind of mediator between people and they basically have kind of control over the assets. When it comes to decentralized exchange, which is jumbo, which is our project decentralized exchange basically allows to get rid of the media and people basically have an opportunity to interact with the other, basically peer to peer. And this the whole idea of defi is that you have control over your assets, so no one is in the control of your assets. And we example is basically trying to encourage people and trying to make the experience ofi more so streamlined. So that’s the very kinda cursory overview

James West: Okay. So then in a decentralized exchange, that’s kind of the opposite of what Binance and FTX was?

Alex Yavlikhov: Yeah. That, that’s basically great way to put it. So in exchange, in like Binance you don’t have there are a lot of issues that can arise when it comes to centralized

James West: Exchanges, like stealing the client’s money.

Alex Yavlikhov: Exactly. there is no way a defi protocol exchange can, there is no way they can do that. Cause everything is based on smart contracts. Smart contracts has have embedded code that basically acts only within the rail of that code. So you can’t manipulate it once you deployed it. There are definitely exploits that can happen, but those exploits can be easily mitigated.

James West: So when you say smart contracts, are you referring to Ethereum then?

Alex Yavlikhov: So you have several blockchains, as you might be familiar with. There is Ethereum. Bitcoin is, is not a blockchain. It’s a ledger. Not a ledger. Bitcoin doesn’t have its own defi. Cause you can’t write smart contracts on, on Ethereum. You can write smart contracts. So on Ethereum you can build. Yes, there is also, you might know Solana is also very popular blockchain right now, but we are, on the other hand, we’re building on near blockchain. So near blockchain the kinda advantages of near blockchain is several, one of those I’m comparing again with Ethereum in this case. So when it comes to near blockchain there is less transaction fees. So on blockchain there is transaction fees. You pay for the gas, you pay to, for example, transfer assets to one another.

James West: So that’s what they call the gas.

Alex Yavlikhov: Yeah, that, that, that’s what they call. So you pay those fees when you wanna transfer or in any way interact with the smart contract, you need to pay the fees, you need to pay the fees. When it comes to Ethereum, you pay the fees for example, minors so that they do their work since Ethereum, when proof of state you don’t pay for to the minors, you pay to Thers those who delegate their tokens in order to keep the network running. So basically is delegated proof of state. It’s basically the same as described, but the advantage of is less transaction fees and the whole experience is more streamlined and it’s more seamless cause it’s built on the kinda backbone of being again convenient to users. So that’s why partially why chosen near in our case.

James West: Okay. So when you say near blockchain what, what is exactly meant by near blockchain?

Alex Yavlikhov: So blockchain generally can be understood as a blockchain contains all of transactions. Blockchain contains all information that goes on within the ecosystem within these kinda pleasure. So every information is written on the blockchain, so everything is contained, everything is transparent. You can basically see through every bit of information that goes on. And when it comes to traditional finances, for example, you can be in the situation when you, for for example, dunno where certain access you can’t trace or those transactions, that transaction, there is no visibility, there is no, and basically allows you transparency publicly and is accessible to all. And you can view all of the information written on it, all the transaction store. So that’s the whole idea of blockchain and why people are raving about blockchain, you know?

James West: Yeah. Okay. So then in terms of KYC and AML provisions under US law, does the jumbo exchange make that possible?

Alex Yavlikhov: So right now, there are a couple of workarounds in terms of KYC. So KYC is your customer. You basically upload documents ID and so on to verify yourself. When it comes to KYC you basically need to verify and check the transactions, know your transactions, instead know your customer, know your transaction is basically you check and vet every transaction within the blockchain on the, and so in this case of example, exchange, we’re trying to make compliance more so on the side. So we, we have kwak approach. So for example, when a user when a malicious user or actor tries to interact with our exchange they’re, they’re trying to launder assets that are not necessarily clean. They might not be able to interact with our exchange because our system, our builtin system of KYC and AML this allowed him or her to basically interact with our exchange. We not trying to a user himself, it would to, it would basically that we’re impinging on the blockchain idea. So we’re, we’re not doing that. We know that it can cause backlash. So the idea we kinda came up with is KYC.

James West: So then the transactors on your exchange are basically writing a smart contract according to your protocol and connecting their, their, their offline wallets to fulfill the fulfillment of the contract.

Alex Yavlikhov: So how it works on Dex exchanges, you connect the wallet when you connected the wallet, you can see on the user interface what kinda liquidity pools you have. Liquidity pool is basically assets that are contained within the, this pool. So you have, for example, U S D to Ethereum, for example, you need to have a certain amount u certain amount of Ethereum. The great thing about again, exchanges is that those assets pool to be withdrawn and cannot with, without basically in, in any case. So that’s a great thing about defi. So you connected your wallet to the decentralized exchange and you can basically do the same as on central exchanges. But the with right now, you know, you know u user experience is basically not great. So what we’re trying to rectify in our case is to make it more so approachable and more so convenient to users because the main people have about defi is that is just not convenient. Mm-Hmm.

James West: So I guess then the user of the jumbo exchange has to have a high degree in the confidence of the security between the platform itself and their wallet, because I could see where that must be a weakness potentially for a bad actor to exploit that connection and potentially access a wallet improperly.

Alex Yavlikhov: So when it comes to wallets, everything that is related to wallets, it’s at, at, at the user discretion. So we can’t, with user wallet in any way, they just connect their wallet to our exchange. There is a bit of that needs to put in place. For example when you connect your wallet, you expose yourself to certain risks that, that is, for example, how people get caught into fishing exploits. They connect their wallet and their assets just in, in a, so there’s definitely a certain trust you need to put when you connect to a certain decentralized application. So that, that’s a very great point that you brought up that you definitely need to build that trust throughout the throughout your kind of cycle. So the great thing about that, that since you connected once and you didn’t get oni, you know that if you connect the second you also the next time, for example. So that’s a great thing about

James West: Okay. So do you have clients in the United States who are American citizens?

Alex Yavlikhov: According to our demographics the majority of our users are in Vietnam, in Asia. The in couple of the cluster, some of the cluster of our users is also in Europe, Western Europe. We have also a lot of people from the Eastern Europe since Russia is battling and are to tap into more so because the restrictions. So they’re kind of also more so engaged in 3D five Eastern Europe and Asia is basically the ma majority of our user base right now. When it comes to the us I think it is basically I would say somewhere at the bottom of the list. Right,

James West: Okay. So then it, it, I mean, my audience is 50% American, so as an American, can they sign up to your system and use it without worrying about being offside with regulators?

Alex Yavlikhov: So when it comes to the US regulations in regards to crypto, the only enforced regulation as far as they know is Texas. So you are tax on the crypto assets that you own, so you can just avoid taxes when it comes to interacting with Defi and with decentralized applications, there are no restrictions. So anyone can basically do what they want. And that’s, again, a great thing about the whole blockchain space. Anyone is basically can interact with it without any restrictions and without any demographic or any, any other restrictions.

James West: Yeah. I see. So it’s incumbent upon the user then of your system to comply with tax disclosure rules and everything within their respective countries?

Alex Yavlikhov: Yeah, exactly. The majority of defi won’t be held responsible when it comes to any, any legal scrutiny, for example. So yeah.

James West: Okay. So you, on your website, it discloses that you’ve got you’ve done 745 million in volume, 20,000 plus unique wallets attached to the system, and total value locked of 19.5 million. What is meant by total value locked?

Alex Yavlikhov: So TDL or total value locked is basically when people can stake some of their assets. Stake means just like depositing assets, they deposit those assets and they can get a return on those assets that they state because they provide liquidity to the pool. The ones that we discussed that are on the <inaudible> exchanges, people provide liquidity to the pool, they provide other people a way to trade, and they get in return the commission from all of the trades, all of the fees that they trade,

James West: They get the gas.

Alex Yavlikhov: Yeah, yeah, exactly.

James West: Okay, so then finally, tell me about the cost structure. So let’s say I’ve got I’ve got a hundred thousand dollars in, let’s say Tether and I want to buy some Solana. And I go to your site and I say, okay, you’ve got, there’s a sufficient volume of Solana that I want to buy, and so I hook up my wallet. I imagine that the tools to execute the smart contract with the vendors or the holders of the Solana are on your site. Is that part of what the service is then?

Alex Yavlikhov: So yeah, the those who are on the decentralized exchange, they provide the iliquidity to the pool. So you, you’re correct. Yeah.

James West: Okay. So how much total fees would the transaction cost for me to swap a hundred thousand dollars in Tether for a hundred thousand dollars worth of Solana?

Alex Yavlikhov: So I think on your on your blockchain, those fees would be negligent. So around maybe again, that’s at the top of my head. The recent transactions that I did I think it was around 2 cents,

James West: 2 cents on a hundred thousand dollars?

Alex Yavlikhov: Yeah.

James West: Wow. So that’s interesting. That’s, so that’s very attractive then because I, I’ve done a few crypto transactions on centralized exchanges and the, the accumulative fees are always, you know, two, three, 4%. And to me that’s, you know, you can’t, you can’t, you certainly can’t day trade, you can’t scalp trade assets when they’re taking two to 3% for money in and money out. So that’s very attractive then. So it strikes me then, like how that’s not a lot of money for you to make, so for the platform to make, if it’s, if every time a $200,000 in value goes through, you only get 2 cents. So how does Jumbo make money?

Alex Yavlikhov: So the, the first one is the fact that we get a lot of transactions. So that kinda accumulates especially daily, especially when it comes to, you know, months and weeks. On the top of that, we also recently raised fundraise a lot of assets. So we are kinda, we can manage our expenses in the way that we can promote our services, and therefore we can also attract a lot more users, which will in turn increase our output and our revenue. When it comes to the defi and earning from commissions it can become a little bit more difficult, especially when, when the market is in slump it’s definitely more so difficult to do. So. However, when it comes to bull market the the fees accumulate very fast. And you get basically a lot, you get a lot of a, a lot of money from the trade.

James West: 

Okay, great. Alex, we’re gonna leave it there for now. That’s I mean, I could talk to you all day about this, but this is a long interview already by our normal standards, so I appreciate your time and it’s a very fascinating space. I am more so attracted to decentralized exchanges as the obvious solution to the Ft Xs of the world. So I think that’s where the future is. So I’m gonna have you back in a relatively decent amount of time and thanks for joining me today.

Alex Yavlikhov: Yes, thank you for.

Disclosure

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