代币化股票与全球流动性：Backpack CEO Armani Ferrante | EP 169

If you ask yourself, “I go to bed and wake up 5 years from now or 10 years from now, and I ask myself, ‘Is the entire U.S. stock market tokenized?’” the answer is, “Yeah, duh, probably.” We’re just trying to build a unified clearing, matching, and settlement layer for global liquidity, ideally based out of the U.S., where you have not Backpack US, not Backpack International—you just have Backpack: a globally regulated marketplace in every country in the world. It doesn’t matter where you are; you can tap into a single source of liquidity and be able to trade and access anything.

No founder, no team, no executive, no investor, as you very well know, Logan, should be able to make a lot of money off the back of that artificial, fake TGE moment, right? People should only make money if you achieve your goals, right? If you contribute a pillar to the world’s economy in the exact same way that any Silicon Valley company does, you don’t get rich as a founder unless you do something amazing.

Yeah.

Right? And if you don’t do something amazing, you could get nothing, and that’s the high-stakes game that you play.

Armani, thanks for joining me. I was looking at the last time we did this podcast, and I think it was 2022 in Miami. A lot has happened since then. Backpack really is, I think, now in 2026, as we’re recording this at the end of September, the thing that everybody is talking about. I think that’s a testament to you guys just grinding through the ups and downs and laying brick by brick, as you always say.

I’m excited to have this conversation at this pivotal time within the crypto markets, but also just the broader markets globally.

Yeah, happy to be here, Logan. Definitely. It’s funny—you were asking me when we were just chatting before this if I felt good, and I came to the conclusion, when I was walking out to get some tea, that I don’t think you’re supposed to feel good. When Alex Honnold is climbing El Capitan, does he feel like he’s on a beach, just relaxing? It probably is just a flow state, and it happens in the blink of an eye.

Mm-hmm.

From 2022 until today, it feels like yesterday. It’s kind of weird.

Yeah.

So, yeah.

It is crazy.

Yeah, “good” is not the word I would use to describe the inner dialogue, but we’ve just been heads down, working.

Yeah, you guys have been cranking, and I appreciate that every time I see you, it’s always about progress, step by step. I think you guys at Backpack are really a testament to that.

I wanted to start off the conversation around what you guys have been doing with tokenized equities, because I think it’s really starting to become more top of mind for the broader, larger community. We really started out focusing on things like Tether, doing tokenization of U.S. dollars. I think the United States was a little wary of that for a while, until they started buying Treasuries and said, “Okay, this is great.”

A similar thing happened with Circle, and now it seems like we’re about to do that with the capital markets. Backpack is really at the forefront of exporting the U.S. capital market, so to speak, to the broader world. I’d love to start with what you guys have been doing on the tokenization front.

1. The Financial System Goes On Chain

I would say the past 10 years in the crypto space have just been a story of layers being built, or, as I like to say, bricks. You start with Bitcoin and this blockchain primitive. People quickly realize how you can put smart contracts on it and make it programmable, but then you realize things are slow, they don’t scale, and they can’t actually support finance for the world.

Things like Solana pop up, and you solve the technology problem and the scaling problem. But then you need liquidity, market structure, DEXs, wallets, users, and an application ecosystem. A lot of people start running experiments on this, and you have this huge boom off the back of DeFi summer.

Then people quickly realize that you need to quote things and price things, and you need a stablecoin concept. That’s really been the story for the past several years: the rise of stablecoins all around the world. That was a really hard thing for the industry to bootstrap, and it took a really long time.

I was chatting with Diego, your partner, the other day, and I think he put it really well. He said, “Well, dollars might have taken a long time, but once you have dollars, everything else follows way more quickly.” People have been experimenting in DeFi for quite some time with all these different crypto-native assets, and there’s always been this debate around, “What are we actually doing here?” Finance doesn’t exist in a vacuum. You need to be trading real assets with real cash flows.

There’s obviously the whole revenue meta with crypto. We have the rise of Hyperliquid, where you have this incredible cash-flow-generating business that’s buying and burning the tokens constantly.

You mean the real business with money?

Yeah, right. Who would’ve known?

The number of crypto-native businesses today is very few when it comes to assets that are at that scale—great assets that you can buy and hold for a lifetime. It sounds so simple to say, but what has all the great businesses? It’s the stock market, right?

The thing that sounds so obvious when you say it after the fact, but is really what’s happening right now, is that all these great asset classes are finally coming into this new market structure that has been built over the past 10 years. You finally have the foundation in place: the technology, the markets, the users, the products, and the dollars.

Tokenization is really just bringing the entire world’s economy into that market. Every day, we’re launching stocks on Solana. Every day, you see these markets get bootstrapped. You see crazy experiments, everything from meme coins paired against stocks and the speculative frenzy there, to vaults and baskets and the experiments people are running there, to the neobrokerages that people are now starting to think about.

There’s going to be a ton of financial innovation happening as you have this global layer for all of finance, whether it’s on Solana or any other blockchain. That’s the moment in time that we’re in. We’re really in the middle, or really in the beginning, of this huge change to global capital markets.

The last piece that has always been very unknown and contentious has been the regulatory side. A lot of folks in the crypto space have differing opinions on this, but my view is really simple: if you want to be working with real businesses in the real world, then the regulatory piece is obviously really important.

Regulation isn’t some nebulous thing. It’s really just about working within the constraints of whatever region you’re operating in, whether it’s the U.S., Europe, Japan, or anywhere else in the world, for that matter. That’s now starting to come into place.

There’s the CLARITY Act, obviously, and the struggle we’ve seen to push it across the line. But you have the SEC and the CFTC pushing, I think, at a relentless pace to establish the future of the crypto economy as it pertains to the U.S. market.

All these things are converging at exactly the same time, which is right now. Folks are going around talking about tokenization everywhere you look, whether it’s crypto companies, banks, publicly traded company CEOs themselves, or the leading fintechs in the world.

If you ask yourself, “I go to bed and wake up 5 years from now or 10 years from now, and I ask myself, ‘Is the entire U.S. stock market tokenized?’” the answer is, “Yeah, duh, probably,” right? We’re going to have 24/7 markets, instant settlement, real-time collateral, and value flowing seamlessly across the world—a global, unified, internet-native financial system that’s not just trading money, not just digitally traded, but truly this global financial substrate for modern finance to be built on.

The answer is, yeah, obviously. But if you believe that, then it’s a very small jump to go from that to everything: fixed income, options, IPOs, private placement, venture capital, real estate. You can see the inkling, or you’re just barely peeking behind the curtains, with equities, even though it’s such a huge market.

But the moment you concede equities, then you concede the entire economy. This is, I think, pretty clear to folks that are building in the space, and I think it's something that's gonna happen a lot faster than people think, right? It'll happen on an exponential curve, and pretty soon you're gonna have the entire financial system running on blockchains. I think that's one of the most exciting things happening in the world right now.

I totally agree. I watched your recent podcast with Raoul Pal, and one of the things that you mentioned quite beautifully was this universal API layer, which I love because all these different databases exist in the world, and you can tap into that liquidity layer, which is super interesting. But yeah, the tokenization of all assets is, I would say, really at the starting line.

Diego wrote a great piece recently highlighting this from the Backpack perspective, but from an even broader standpoint of just tokenized equities. He made the point to me that if we 1,000x the current tokenized equities, I think we would only get to about 6% of all global equities in the U.S. capital markets. That’s not even all capital markets. It’s like, okay, 1,000x only gets you to 6%. We still have a long way to go.

Yeah, I mean, I think it could sound overly nebulous at times. What does this all actually mean? But it's actually really simple. The current financial system is like this: Imagine you wanted to go get a glass of water, and to go get this glass of water, you have to go into this random building in the middle of town, go through security, go to a specific room, sign in, fill out your name, give your ID, and only then can you get the glass of water.

But what if, instead of going to that building, you just had a river or a sink in your house, and you just had a faucet, and anybody could get water anywhere, right? Obviously, it's a bit of a contrived analogy, but it's really just unleashing that whole system to freely flow around the world.

Yeah, I totally agree. Tokenized equities are really, I would say, at the starting point, and you guys have been doing a lot of interesting things there. I would say one thing that people broadly misunderstand or have a hard time delineating is the different types of equities.

I think, to your point, it's not too hard to squint now that these systems are performant, much faster, and spreads are tighter. But not all tokenized equities, so to speak, are 1:1. Can you explain the different nuances of how you guys have approached it versus others in the industry?

2. Tokenized Equity Has A Spectrum

There's a spectrum of security tokenization where, all along the spectrum, you have different models of what it means to hold that asset. Those models have different legal rights, different market structures associated with them, different pricing, different liquidity profiles, and so on and so forth. You have a bunch of different shots on goal being taken right now.

On one side of the spectrum, you have what is called the transfer agent model. This is perhaps the purest form of stock tokenization. The challenge with the transfer agent model is that, although you own the stock directly—arguably even more directly than owning stock in E*TRADE or Fidelity or whatever it might be—it's a very large distribution problem.

Every company potentially has a different transfer agent. There are these very large players in the space, like Equiniti, which is perhaps a great example of this. They are the transfer agent for a very large percentage of companies in the world. But that model is closed-loop. It's very akin and similar to the existing financial system today, and you really just swap out the database back end with the token. So that's one side of the spectrum.

The issue is that you can't really bring that into blockchains, at least in the market structure as it exists today. You can't put it into Aave or Kamino. You can't put it into a DEX. You have to go in and basically do everything that you would do with a brokerage. You have to KYC, whitelist your wallets, and there are only specific markets it might trade on. It's not this freely flowing asset.

Then, if you keep going down the line, you have things like the DTCC tokenization model, which is very similar to the transfer agent model. But instead of having your stock on the books of the transfer agent, you have it on the books of DTCC. The importance of DTCC cannot be overstated, right? It has the trillion-dollar stock ledger that powers everything in the U.S. stock market and, importantly, all the brokerages. It all settles down to DTCC, and DTCC settles down to the transfer agents.

When you trade on Robinhood today, right, and you buy Tesla stock, you're going through this series of intermediaries: the introducing broker, an executing broker, and a clearing broker, which ultimately is settling against DTCC's ledger, determining who actually owns the stock. Underneath it all is obviously the transfer agent.

DTCC really emerged out of necessity in the historical transition from paper trading into electronic trading, where people realized, “Oh, wow, we need a database to know who owns the stock. We need all the brokers to plug into it. We need all the margin accounts plugging into it,” and all this stuff. The power of DTCC is really just distribution. Every brokerage in the U.S. is ultimately settling down into the system.

They are in the process of tokenizing their ledger as well. They have a whole working group and a bunch of experimentation being run on different networks. I think they announced it on Canton, on Solana, on Zero[?], and a bunch of these different networks. That is morally very similar to the transfer agent model, except you have the separate intermediary. You have a security entitlement.

It's a bona fide stock by any common-sense definition of the term, but it has a lot of the same issues as the transfer agent model. Namely, it doesn't have that stablecoin form factor. It's not freely flowing. You can't put it into DeFi. You can't use it in the same way you would use USDC.

Then, if you keep going along the spectrum, on the other side you have what are known as debt security models. That's what Robinhood is doing. That's what Kraken is doing. You don't own the stock directly. You basically have stock sitting in a brokerage account, you wrap it, and you have a completely different security that may or may not be backed by the stock, but it has economic exposure. It follows the price.

Morally, it's more akin to holding a CFD or a derivative of some sort than it is to actually holding the stock. There are fees on minting and redeeming. You're constrained by the liquidity profile of that asset class because, again, it's a separate asset from what's trading on ICE and Nasdaq or what's sitting in your Robinhood brokerage.

But it is freely flowing. It does feel like that stablecoin form factor. That's where a lot of these things started, dating back to FTX. I think they were probably the first, or one of the first, to do this. That's really the model that a lot of these folks are following.

When you actually trade these things, it's all about liquidity. It's all about price execution. It's all about inventory on-chain. The core issue with this is just liquidity, and you see it in the execution price and the volume profiles of these assets being built on-chain.

3. Backpack Makes Stocks Redeemable

When we came to the drawing board and were looking at these different models, we asked ourselves, “Can we have the best of both worlds? Can we have an asset that looks and feels like a stablecoin and fits into the form factor of blockchains today? Not a year from now, not 5 years from now when the world catches up. How do we do something today?”

But then also, how do we have an asset that can actually give you the real stock in the truest sense of the term, with no fugazi, no tricks, no gimmicks? What we've done with Backpack Securities is hit this point, I would say, in the middle of the spectrum that I don't think anybody else has hit.

You have this stablecoin-type asset where you buy a token on Solana, and it's 1:1 backed with the actual share. Any time somebody buys 1 of these tokens, a real share gets purchased to create the existence of that token. The token cannot exist without that share being purchased.

There aren't derivatives under it. It's not cash under it. It's the actual share. But then, to actually make that share flow freely to and from TradFi and DeFi at the speed of a token, it should look and feel like depositing and withdrawing USDC from your Coinbase account.

I can go to Coinbase today, make an ACH deposit, and withdraw USDC to Solana. How do you replicate that exact same experience with a stock? I can go into my Backpack brokerage account, deposit funds or on-ramp Tesla stock from Robinhood, and then withdraw it to Solana. Or I can go in the reverse direction: I can buy SpaceX on Solana today and transfer it into my Robinhood in the same way I would do a wire transfer out.

And this model—it’s not just about marketing, and it’s not just about feeling warm and fuzzy that you, quote unquote, “have a real stock,” right? And that’s a really important part of it, right? If you want to hold stocks on-chain, you do want it to be open access. You don’t want to be constrained by DeFi, where you could only exit the position based on the liquidity in DeFi. You can’t move it into your brokerage account if, for whatever reason, you want to move out of your wallet.

In a very intuitive sense, the simplest definition of what a real stock is: Can I transfer it to and from my brokerage account? If I can’t do that, then at least from a retail perspective—from my perspective—I don’t want the asset, right? It’s not real by any definition, by any common-sense definition of the term, and it’s this separate other thing that kind of feels weird.

But putting all this aside, there are much more structural reasons why this is really important. If you have an asset that’s not just cash-settled, but an asset that’s actually fungible and redeemable for the underlying, then what that means is you can actually move that asset to and from the underlying market structure where all the liquidity is, where all the price discovery is.

So you can have this freely flowing stock to and from DeFi, where I can buy on Nasdaq, sell on Solana, buy on Solana, sell on Nasdaq. And that small change—where it’s simply not cash-settled and it’s 1:1 redeemable for the underlying—has enormous second-order consequences for the ability to establish markets in a new system like Solana.

And if you actually look at the data, you immediately see this. If you look at the stocks on Solana today—namely, if you look at Backpack Securities—and compare them to something like the stocks on Robinhood Chain, you will literally get 40x to 45x better pricing in favor of Backpack Securities. They trade much tighter and much closer to the NBBO than the stocks on Robinhood Chain do.

Mm-hmm.

And the question is: Why? How do you do this, right? Robinhood is this $100 billion behemoth. They’re the biggest, most dominant fintech player in the world, or at least one of them. And why does a little company like Backpack—how can they do this?

It’s for a simple reason: It’s because you can have traders arbitraging the markets. And so when the prices go out of line in DeFi, what you see immediately is folks getting inventory from NYSE and Nasdaq, putting it onto Solana, and then putting the markets back in line, and vice versa. When it trades at a discount, then you have bids coming in and putting more liquidity onto the order book.

So because the asset is 1:1 redeemable, because you don’t have this artificial debt-security market structure that is cash-settled, you can have traders keeping the markets in line, which leads to more liquidity, more volume, and, most importantly, better price execution for people who are trading these markets on-chain.

Whereas if you don’t have a debt security and you have a proper equity security, then you can have this emergent market structure that can give you 45x better pricing than the largest retail player in finance today.

And it’s not just about the chain differentiation, right? You could argue Solana DeFi is much better than Robinhood DeFi. It’s more liquid and more established. There’s more capital in it. But you see this exact same dynamic playing out within the tokenized security offerings within Solana itself, where you see more volume, better pricing, and better liquidity.

And it’s really that 1:1 redeemability that creates the emergent market structure that allows you to bootstrap these markets natively on-chain in a way that no other tokenized stock facilitates today.

And so that’s kind of where we currently stand. And the future that I see is, you have this spectrum, and there are going to be roles and markets for each tokenization model along the spectrum. The Backpack Securities tokenization model is really targeted at the market structure that exists on blockchains today.

But you cannot overstate the importance of what DTCC and the transfer agents are doing, right? What Superstate is doing, what Equiniti is doing, what DTCC is doing. And although that might not be obvious today, those models are going to completely change the entire back end of the financial system.

You take a look at a brokerage product like Backpack today, right? To be able to make that product, whether it’s Backpack, Robinhood, E*TRADE, or whatever, you have all of these intermediaries, all of these ledgers, and, importantly, all of these assets creating float, liquidity, and margin accounts to be able to manage the risk.

And, importantly, you have cash sitting in bank accounts. This is perhaps one of the most frustrating, annoying, and clear inefficiencies that exist in these systems today, where you literally just have millions of dollars sitting in cash and doing absolutely nothing in these bank accounts, where you have T+1 and T+2 settlement to be able to manage liquidity, deal with user inflows, deal with user outflows, and it’s always lagging the stablecoin flows.

And so you always have to be managing literally just cash sitting in banks. It’s a very needlessly cumbersome operational task. But the moment you have tokenized stock in the form of the transfer agents or in the form of DTCC, then you can move from cash sitting in banks to stablecoins.

Then you can have instantly settled stocks moving across brokerages, moving across transfer agents, moving across clearing brokers, dealing with inter-brokerage transfers, and dealing with markets in DeFi. And that is going to 10x or 100x the entire space.

And so although you might not see this today, this is going to be like putting a brand-new engine into an old car, right? It’s going to supercharge the entire space. And so there are all of these ingredients incubating under the hood, and all these different players contributing at different layers of the stack.

And I think you have the early innings of this huge explosion of what’s really going to be the definition of the next chapter of crypto, which is going to be the entire stock market trading on-chain alongside all the altcoins and all the crypto-native assets in this new market structure that exists globally.

Yeah. It’s beautifully put, and I appreciate all the details. One large piece of feedback that we have gotten from people when we talk about Backpack is: “We’re super excited. We believe in that story.”

But as you pointed out, Backpack is a relatively small company in the grand scheme of things versus the Robinhoods of the world, Coinbase, or all of these players that exist today. And I think, in large part, people see tokenization starting to happen and want to bet on that trend.

But where do you see Backpack within this versus something like a Kraken or a Binance? Where does it fit in this super-app category?

4. Backpack Targets Unified Liquidity

So I think there’s Backpack the consumer product, and then there’s Backpack the tokenization product. And I think the way to think about tokenization, putting aside that spectrum, is really thinking about it in terms of the emerging DeFi ecosystems, right?

So you have Binance with bStocks as the backbone of BNB Chain. You have Coinbase, with their stocks as the backbone of Base. You have Robinhood, with their stocks as the backbone of Robinhood Chain, and then you have Kraken with xStocks. They’re kind of all over the place, and they’re kind of on every chain.

You see what they’re doing with Hyperliquid, with derivatives. You see them bringing their stocks to Hyperliquid. They’re kind of in their lane. And you have Backpack that’s really focused on Solana.

And so I think it’s going to be a question of what the emerging global marketplaces of liquidity are and what different waves form within each of them. And so it’s as much a broker-to-broker or tokenization-to-tokenization competitive battle as it is an ecosystem competitive battle.

And I think the one thing that people really underappreciate is how important it is to have a unified settlement layer for not just stuff happening in crypto, but also for stuff happening in TradFi.

And this gets deeper into the broader Backpack story, with derivatives and spot assets and licensing and things of that nature. But really what we’re trying to build is—

Let’s talk about—

Yeah. Yeah.

Yeah, let’s talk about that as well because I think, as you’ve highlighted, we’ve kind of seen these two parallel paths, one of which was like the crypto Wild West for quite some time. And to your point, that ecosystem and experimentation were rather immature.

Block times were fairly slow. Spreads were extremely wide. Over time, spreads have gotten tighter, throughput higher, and latency lower. But now they’re starting to converge, and it seems like you guys definitely took a different path than many others because you went the licensing route, where crypto historically was kind of adjacent to that.

And now, as you pointed out with the US government and equities starting to come online, it seems like you really need more connective tissue to intertwine these things and have them flow seamlessly through one another. So can you talk about why you guys went this path? I think it's much different from what everybody else did, and I think the uniqueness of that should be parsed apart a little bit.

5. Licensing Connects Crypto And TradFi

I think it's fair to say that we are the only exchange created post-FTX that did not just open up to the entire world immediately on day one. If you're in the US, you can't VPN into Backpack. That has been a very contentious strategy that we took.

We probably lost $100 million to $200 million in opportunity costs last year in profit that we otherwise would have made if we had done that. The core reason why we did this is because our view, going back to 2023 when we decided to build this thing, was that the two worlds were going to converge and there wasn't going to be DeFi or CeFi. It was just going to be finance.

A lot of that growth was going to come not just from crypto-native assets, but from the entire real economy coming on-chain. All the stuff that we've been talking about with tokenization is now already starting to play out. There's a lot of incredible innovation happening in DeFi, but there's still not enough innovation happening among the regulated marketplaces.

It's really underappreciated how difficult it is to bootstrap a regulated exchange, not just in one country, but in every single country around the world. I moved to Tokyo from the US three or four years ago, and I love Tokyo, but it wasn't because I wanted to eat sushi every day. It's because I wanted to come here, build a company in Japan, work with the FSA, get a Japanese bank account, and actually be able to integrate directly into the financial system here—not through more intermediaries.

We did the same thing basically everywhere in the world. We did the same thing in Europe; we've been working on that for three years. We started in the UAE and got licensed out of Dubai. We've been heads-down working on trying to figure out how to get into the US for quite a long time.

The dream is to not have this onshore-offshore distinction, which you see with basically every exchange. You see Binance, Binance US, and Binance Japan. You see what Hyperliquid is doing, and then, to come into the US, they're working with Kraken—that is, Payward—to operate a completely separate exchange.

What we're trying to do is not compete with the regional players or the DeFi players. We're trying to build a unified clearing, matching, and settlement layer for global liquidity, ideally based out of the US, where you have not Backpack US and Backpack International, but just Backpack: a globally regulated marketplace in every country in the world.

It doesn't matter where you are. You could tap into a single source of liquidity and be able to trade and access anything, whether it's assets on Solana, stocks on ICE and Nasdaq, options, or the emerging prediction-market space.

Being able to do this requires not just a huge amount of engineering work, which is a huge lift by itself, but also being able to spend multiple years in each one of these regions, which are all different. Japan is very different from the US, which is very different from Europe, which is very different from the UAE.

What you're seeing is different folks starting to tap into different jurisdictions. They're saying, "I'm this unregulated offshore product, but let me go get this license in one country." It tends to be a marketing moment, but it never actually works because you're now operating multiple exchanges. Users are confused; they're not sure whether they should go to one URL or another URL. The exchanges have different liquidity profiles and different products, and you're in this interesting situation where you're never actually able to bootstrap the other market.

This is most clear when you look at Binance and Binance.US, and perhaps most recently Binance Europe, where they just got shut down there. We've always taken the view that the thing to build is a globally regulated marketplace that can access the entire world.

That means doing all of the hard work, no matter how long it takes, to actually go into each region, go in the front door, build up a local team and a local office, go through the entire licensing process, and do all of the hard work to integrate a crypto product into the modern mainstream economy.

It's not just about getting licenses and making things legal, although that is obviously important. It's about the product that directly follows when you can do these things. The first example of this is the tokenized-stocks product.

No DEX could have built that product, because you need to KYC users and have, at the very least, an introducing broker. If you're in the US, you need a clearing broker, along with all these different licenses and registrations.

You can build a custodian. You can build a clearing, matching, and settlement layer. But eventually, if you want to actually tokenize the real world, access mainstream markets, get access to retail, and be able to bridge these two worlds and unify them, then you need to do all of this work to get all these licenses.

If you actually believe that these two worlds are going to converge into one, then it follows that you need to follow that path. This has been a very long path, and I think it's been a very misunderstood path, especially by folks in DeFi.

Over the next year or two, it's going to be very clear that although you're running with a parachute for the previous couple of years, eventually that parachute is what allows you to jump off a cliff and eventually fly. That's always been the spirit with which we built the company. It's really just about laying the foundation and compounding 1% every day so that we can build something net new that nobody else has built before.

A lot of great points. I think what people really underappreciate is that unified liquidity and being able to have all the liquidity aggregated in one place, versus having US entities and international entities. As you pointed out earlier, Payward with Kraken and Hyperliquid is probably one of the more interesting examples happening right now, because it is not the Hyperliquid order book. It has to be a distinct order book that Kraken is really running.

6. Hyperliquid Meets Regulated Finance

I think this is perhaps one of the most important announcements in crypto this year, and it's one of the things that I'm most excited about as well. I do think that it's a very clear sign of the things that are to come and of one of the very important roles that Backpack will be playing in the broader Solana and crypto ecosystem at large.

What has happened? You have Hyperliquid, which has been the fastest-growing exchange and project in crypto over the past cycle. Hyperliquid is the L1; it's the derivatives exchange.

Yes.

There's always been this underlying tension with the project. What are the regulatory consequences of Hyperliquid? Is it a DEX? Is it something else? Nobody really understands it. The token is obviously probably the best trade in the history of crypto, but there's always been this regulatory overhang with the project.

I don't think it's specific to Hyperliquid. There's always this regulatory overhang for all the derivatives products, because derivatives are fundamentally different from spot. The decentralization component of derivatives is very hard to decentralize away, by virtue of the fact that you have the risk engine there.

You have liquidations happening, a risk manager determining how things are parameterized, auto-deleveraging, collateral haircuts, and people taking liquidations and serving as a backstop. You have things like HLP vaults and insurance funds. There's all this rich depth to derivatives market structure that doesn't exist in the same way in spot market structure.

There's always this question for the most important product in crypto, which is perpetual futures: How do we bring it into the US, or into Europe, Japan, or any of these regions?

I think the Payward relationship with Hyperliquid is really going to be a sign of things to come. A line in the sand has been drawn: if you want to get access to the US markets, you are going to have to do it through a DCO, a DCM, and an FCM.

You are going to have to bring not just great technology, but also abide by all the core principles set forth by the CFTC over the past several decades of market structure established in the US.

And this is not an easy task. This is not something that you can have an 11-person product team go out and do by themselves. The burden of acquiring, maintaining, and operating these types of licenses in a region as rigorous as the US is like building a whole other Hyperliquid just to focus on that.

The absolute elegance of that partnership is that Hyperliquid remains an 11-person team, and they really become this technology services provider to bring their platform and expose it as a service to an exchange operator like Kraken, i.e., Payward, where they will build their own exchange. It will abide by all of the regulatory principles set forth. They will KYC users, conduct transaction monitoring and market surveillance, and ensure that the markets are running fairly, orderly, and with integrity, in the same way that a CME, an ICE, or a Nasdaq would have to run.

But they will use Hyperliquid as the technological backbone for that exchange, while Hyperliquid doesn't have to actually go out and do all that stuff. Seeing this announcement gave me a new level of appreciation and respect for the genius of Jeff and the Hyperliquid team, where they will remain perhaps the most efficient operational machine in finance. They are 11 folks, and they offload all of that hard work to Kraken.

They are not building the biggest possible, highest-revenue-generating business that they can build. They are building the most efficient business that can possibly be built. Those are 2 different things, and I think this is a really elegant sign of things to come, where there's really only a handful of people that can play the role of Kraken here.

It's kind of like getting an OCC charter in the US. That's a very high bar to cross, and there aren't that many companies that actually have a leveraged DCO that can do perps in the US. You can really count them on 1 hand. I think it's a beautiful example showing the intersection of how the regulated centralized exchanges—in particular, not the offshore centralized exchanges, but the regulated ones—can bring their unique core competency and use it to supercharge everything that's happening in DeFi.

I think that is perhaps one of the most important things to have happened in the past year, because I think it's going to be a sign of things to come. It's one of the things that I'm very excited for Backpack to do, in particular in the Solana ecosystem, where we took our KYC brokerage product and were able to bring stocks to Solana. You can bring that same infrastructure and that same model and do the same thing for perps, the same thing for options, the same thing for dated futures, and the same thing for securities trading.

There is the whole innovation exemption with the SEC, as people are talking about these tokenized trading venues for stocks. I think it's a great sign of why the 2 aren't mutually exclusive and how both will fuel the other. It's my view that Solana is the unified financial layer for the global economy, and that's clearly going to continue to grow.

That's a role that we hope to play. We hope to be a regulated backbone for that ecosystem. We hope to continue to bring products there, whether it's stocks, derivatives, or the wallet itself. I think it's going to be a pretty interesting market structure that emerges over the next couple of years, and there's a lot of work to do. It's by no means finished.

There's a lot to prove as well with respect to how these markets can not just match the regulatory principles set forth by the regulators, but in many ways actually exceed them—to be more fair, more transparent, and higher-integrity. I think it's just going to be a function of time, but there is a lot of work to do to be able to prove that to the world.

Maybe wrapping that back from the product perspective, I think it allows you to potentially partner with different folks like Solana and others in the DeFi ecosystem. Also, wrapping it back to that single liquidity and single order book, that is something that only Backpack can do because of how you are pursuing the different licenses.

Everybody else either has to take the same path that you have, or has once taken that path and their license is now revoked because they cut some corners, or they have to do what Hyperliquid has done. I think it makes it a really unique spot that you are in because you guys have done this hard work to really build this unified order book, where it is very hard for anybody else to do that from a pure regulatory standpoint.

I think folks are a victim of path dependency, and it's a good example of what you might call the last-mover advantage, where you can actually see all the mistakes that were made and build something from scratch without any of the technical debt or compliance debt. You can reimagine how to do this from first principles to build something that doesn't exist.

The core issue is that you have all these international products with either no KYC or a lack of it, and then you go out and try to get a license in a specific region. Then you realize, “Well, I can't do any of the stuff that I'm doing internationally and do that onshore.” So you have to build a completely separate product from scratch.

But if you do it in 1 region, that might be nice, but that doesn't apply to any of the other regions. If you go and get a license in Japan, that doesn't mean you can serve Europe or the US.

Yeah.

So it's this hodgepodge mismatch of different venues that end up getting built over time. Ultimately, the 2 markets will be pretty different. You'll have the regulated markets and you'll have the unregulated markets. You'll have the permissionless DeFi ecosystem, and you'll have the more institutional ecosystem. They'll all evolve in different ways.

The bet we're making is that the regulated market structure is something that's been underexplored, especially in the US, where you only have a couple of players that have not had any international competition at all. That's really the luxury that the incumbents have enjoyed over the past several years.

Binance was never able to come into the US with their full product and actually compete. If they were able to do that, I think the US would look very different right now. There's a huge opportunity there for folks that are willing to chew the glass and actually take the time to go through it.

It's the long things that are worth doing. If we were sitting and having this conversation in 2021, you would not have taken the position that Coinbase, Kraken, and Robinhood were these indestructible companies. They were great companies, absolutely, and they continue to be great companies, but you would've competed very viciously with them back then.

A lot of people have seen their growth, especially as they're accumulating all this capital through the public markets or through the expectation of going public in Kraken's case, and they view them as these unassailable competitors. I think what we've shown with tokenized stocks is that if you just build a great product and actually do the hard things, there is way more opportunity as the space grows.

We look forward to going head-to-head with the biggest players in the space. We are not so blind and overly confident as to believe that we are at that level at the moment. But if we have this conversation in 1 or 2 years, I think we'll absolutely be there.

I love it, and I believe it because you guys have really done remarkable work thus far just to get to the point that you have. Having known you for a long time and seeing it up close, there was every opportunity to quit, and that was something that you guys never considered. It was always step by step, and it has been truly remarkable.

To that point, one of the exciting things that I've been enjoying seeing is people starting to take notice of Backpack, from the broad tokenization themes that we've been talking about to all of the work and really great products that you guys have put out over time. I would love to talk about the tokenization efforts that you guys have put forth, because I think it's very unique compared to the rest of the industry and maybe not as obvious to other people, where people just launch a token, do a TGE, and call it a day. I'd love to dive deeper into that aspect.

7. Tokens Reward Network Contributors

There are 2 really important points that were the design constraints for us when we were thinking about doing a token. The first, and perhaps most important one, is that a lot of people look at token-generation events and emulate the IPO, where an IPO is the most exciting time for any hardworking startup that's able to reach that level of success.

They ring the bell, their shares are public, they get a bunch of capital in the company, everybody exercises their options, and they make more money than they've ever created or made before.

But it's conditional upon building something that has changed the world. At least in the traditional Silicon Valley venture capital model, you have to contribute a pillar to the world. It's this huge milestone that is celebrated, and it's really an exit event for the investors, the team, and so on, as well as a different phase in the life cycle: becoming a publicly traded company.

The issue is that with tokens, that is not what is happening. The beauty of a token is that it is the most powerful tool ever created to bootstrap networks. You can imagine something like Uber, where Uber built this incredible network effect with ride-hailing. But an important part of that wasn't just the product and the users; it was the drivers themselves. It was all of the people who signed up and contributed their labor to bootstrap the network effect in Uber.

But none of those people got equity. None of the people who contributed in the early days and were as responsible for the success of Uber as anybody else should have had the ability to participate in that upside. Just because they're not accredited investors, they're contributing their labor, their time, and their expertise to creating that network and bringing this thing into the world. There's no principled reason why they should not have received equity for contributing their labor.

This is the core of the mental model that I use for thinking about tokens and distributions. Users should come in, contribute their labor, and earn a piece of the value that they're creating. That's true whether it's Uber—it could have been true for Facebook—and it's definitely true in the context of Backpack.

But if you take that perspective, then you're not doing a TGE in the same way you're doing an IPO, where you're already huge. You already have the network effect. You're already one of the biggest pillars of the economy. You are just getting started.

The TGE event is the starting point. It's not the ending point. It's the formation of a community and the formation of contributors to the network that you are trying to build, whether it's a 2-sided marketplace of liquidity or riders and drivers in the case of Uber.

If you want to design a token in this form, you end up taking a very different tokenomics model than 99% of what has existed up until now, which is to treat the TGE as this exit event. You see all of the marketing and all of the emergent behavior: the Polymarket FDVs, the pre-market perps, the institutional farmers that come into play, and the exchanges themselves all putting the maximum amount of marketing attention and dollars into pumping that moment.

The goal is to have this hugely successful TGE that spikes on 1 day and then slowly bleeds out as everybody exits from then on out. You see it when you look at all of the charts. It's a huge indictment of the exchanges, the token projects, and really the entire industry if you just look at the performance of TGEs and exchange listings on all of the major venues. That's true for the offshore exchanges, and it's also true for the onshore exchanges.

To me, that was just unacceptable. It's not honest with what you're trying to do. It's not good for the users. It's not good for anybody buying the token, and it's not good for the exchanges for their users to lose money.

The spirit with which we approached the tokenomics was really simple. No founder, no team, no executive, and no investor—as you very well know, Logan—should be able to make a lot of money off the back of that artificial, fake TGE moment. People should only make money if you achieve your goals. If you contribute a pillar to the world's economy, in the exact same way that any Silicon Valley company does, you don't get rich as a founder unless you do something amazing.

If you don't do something amazing, you could get nothing. That's the high-stakes game that you play, and that's just normal if you talk to anybody in the Bay Area. But it's not normal when you talk to anybody in crypto. It's this perverse alternative universe that makes absolutely no sense when you actually stop and think about it.

We decided that this was the right thing to do. If you look at our tokenomics, there are 3 buckets. The first bucket was 25% of the token supply, which went directly to our users at TGE.

We did a TGE moment, and it was 100% organic. We did not pay for all these exchange listings, pay for all these market makers, or try to artificially pump the price into fake valuations. The fact of the matter is that you can't fake a market price. The price will go where the market decides it should go.

We wanted to buck the trend and not try to artificially create something that didn't actually exist. The remaining 37.5% is this growth category, where we have a bucket of tokens that we will use for 1 thing and 1 thing only: to grow the product as we hit major milestones.

You have to be very careful with dilution or adding circulating supply into the market. You really only want to add circulating supply into the market if you think that it's actually going to grow the product, grow the revenues, and get you to where you want to go.

Being able to open up new regions is a huge milestone. Opening up brand-new products is a huge milestone. For us, it's very different because, as I said earlier, you can't VPN into Backpack and trade perps if you're sitting in California. You could do that on every other exchange as a US person, but you can't do that on Backpack.

For us, opening up new regions, if we're so lucky to achieve those milestones, is a huge moment where we are opening up huge parts of the world that previously did not have access to the product. Those are huge opportunities for us.

That is 1 element of the go-to-market strategy for these new regions and new products. The theory is that it's going to lead to growth, where we have this greenfield and blue skies to bring our product to users all around the world who currently don't have access to it.

The third and final remaining bucket is what we call the corporate treasury. The first bucket is 25% at TGE, all to users. The second bucket is 37.5% of the token supply to users for big product milestones. The remaining 37.5% bucket is the corporate treasury.

This is the thing that is quite strange. We took the entire 37.5% of the token supply, locked it up, put it on our balance sheet, and said, “Nobody will get access to this—not until an IPO or equity event, but 1 year after that.”

You have to do all of the hard work to become one of the biggest companies in the world. Hopefully, you go public. Only 1 year after that does anybody who is a, quote-unquote, “insider” get access to their token allocation.

And we've never sold a token warrant—not once. Much to the chagrin of every investor we talk to, everybody's like—

That is true.

“What? You're selling me equity? You're not giving me—” Everybody wants tokens because tokens are a much easier investment to make. They're a much easier trade to make. That's why you see much larger valuations in crypto relative to other companies with similar economics.

It's because there's a premium on the early liquidity, and you're almost guaranteed to get this early exit event at a premium because of the entire market structure revolving around it. That's why it's always much easier to be a token investor than it is to be a traditional equity investor.

You have to be a bit crazy, very confident, extremely competent, and very principled to invest only in equity in a crypto company that also has a token. It's really a testament to everybody on the cap table that we're able to take the leap of faith with each other, where we are all in the same boat: every founder, every investor, every team member, every executive, and every board member.

There's no side channel. There's no foundation that has a bunch of BP tokens that got something at TGE. We didn't squirrel away the tokenomics into there. We get exposure by virtue of the company doing well.

The whole thing is engineered not to peak on TGE day. It's engineered for growth from the beginning. Tokens only unlock when we hit big milestones that we think can create growth.

The corporate treasury might not even be unlocked. In the event that we never get an exit event, there's no unlock. So that may or may not unlock. We don't know the time period for that.

I could sit here and say I'm going to go IPO next year, but I would just be making things up. Every founder wants the IPO, and that's a dream for many. But there are a lot of steps between here and now.

And so I would argue this is perhaps one of the most extreme tokenomics for any crypto token ever created. We're simple folks, right? We just want to build something serious, and we're not here to screw around. We're not here to play games. We should only be getting rewarded in the event that we achieve these milestones, and it's really as simple as that.

Yeah. I think if anybody takes one thing away from this conversation, it's just how principled and deliberate you guys have been about each part of these steps. I always say looking back, it's a lot more obvious than it was at the time. But taking the longer path to get the licenses, being deliberate about wanting to build the unified liquidity layer really from day one, as you pointed out, where many people have pushed you or asked about doing a token, and very deliberately focusing and aligning everybody around one single point, which is the equity.

I would say wrapping that all up is really creating and delivering a product that people care about. Because at the end of the day, without a product that's actually better, none of this really matters. And so I hope people take away just how deliberate the Backpack team has been, and you, about really playing the long game, because none of this has really happened by chance. I think it's remarkable just watching you guys continue to execute on this. Even now, you're less than 1% of the way done, laying brick by brick.

Yeah. I think something as simple as the equity conversion piece of the token, which is something I probably should just briefly touch on, is really underappreciated. It's easy for me to tweet something, right? Crypto founders do it all the time. I tweet something, “Here's what we're doing for the community,” or whatever, and then it changes a month later or whatever.

We have this feature in the tokenomics where, if you have BP tokens and you actually do stuff with them, you stake them, you contribute to the network and the product, you have the right to earn equity in the company by converting that token into equity. It's an option, basically. You don't have to exercise it. We've basically set aside a chunk of our equity for the token holders to be able to convert into.

If token holders are our version of Uber drivers, right? If they're contributing to the success of the product, then they should have that ability and that option to convert into equity if they want. But even something as simple as pulling that off—I can sit here and tweet it, but we're sitting a week before TGE, just literally every day painstakingly getting that legal document ready. It's not a tweet; it's not a marketing thing. There's literally a legal structure that's binding and forces us to adhere to this, right?

It's these small little things that, to be honest, no retail user sees, nobody on the timeline sees, and nobody cares about. But actually going through and doing things the right way from beginning to end in a principled fashion, not taking the shortcuts, and just being able to stand by what you've built, I think is a really underappreciated point that has a ton of second-order consequences for businesses and projects. So, if you take anything away from that, it's that there's a legal document.

Yeah. No, I think it's impressive what you've built. I'm not just saying that. I think crypto has really taken this kind of circuitous path, but the interesting thing is it really has led us to the moment that we're here now, where we have performant infrastructure. We're starting to get tokenized equities, and I would say it's accepting—or we're now at the point where the U.S. government is like, “Tokenization is a good thing.”

All these things have really converged, and I think you guys have had the foresight to put these pieces together and execute on them. It's not by happenstance that you just happen to be here at the right place at the right time. It's many years of hard work to ultimately get to this point. And so I think it's a very exciting journey, what you guys have done thus far, but I am really looking forward to what you guys continue to do, and I'm excited that people are now starting to take notice.

All right.

Well, we can leave it there. But I appreciate you, Armani. Thank you, and I'm looking forward to all the things that you keep doing.

All right. Thank you so much, Logan.

Thanks, Armani.