Richard Olsen’s Q&A session for blockgeeks.com

Richard Olsen’s Q&A session for blockgeeks.com

Richard Olsen’s Q&A session for blockgeeks.com

Richard Olsen, Lykke founder and CEO, answered questions of users of blockgeeks.com, a global Blockchain marketplace for learning and teaching online.

Richard Olsen

Founder, CEO of Lykke

Richard is a pioneer in high frequency finance with extensive entrepreneurial experience and well known for his academic work. He was a co-founder of OANDA, a currency information company and market maker in foreign exchange. Under Richard’s stewardship as CEO of OANDA the company was a shooting star that launched the first fully automated FX trading platform offering second-by-second interest rate payments and netted 37 Mio of profits in 2007. Already at OANDA, he conceived the first trading platform with second-by-second interest payments. He is chief executive of Olsen Ltd, an investment manager, and visiting professor at the Centre for Computational Finance and Economic Agents at the University of Essex. His ambition is to transform financial markets into a seamless system without the inefficiencies that we today take for granted.

Mika Douglas:

Please share your views of how regulation will help or hurt blockchain innovation. Why wouldn’t regulators under FinTech pressure cave to a business as usual attitude rather than allow innovation to be the driver.

Richard Olsen:

Regulators are deeply frustrated with their inability to reform the financial system, so regulators are open to innovation. It is key that innovators package their services and products within the regulatory framework – so this packaging is important. Companies, organizations that do this can actually profit from the support of regulators

Mika Douglas:

How are you packaging your offerings so they appeal to regulators?

Richard Olsen:

Lykke addresses issues that regulators wanted to solve for decades – we are highlighting these features: new type of matching engine based on price, time and spread priority, which addresses the risk of flash crashes, intraday interest payments, which ensures intraday liquidity during periods of stress, ability of immediate settlement, which is a continuous clearing system for all types of asset classes and can address the issue of too big to fail. We highlight, why our exchange can solve problems of the existing financial system and then last but not least prepare our applications in a meticulous fashion – we have some excellent lawyers, who support us.

Ameer Rosic:

Where do you see Lykke in 6 months from here?

Richard Olsen:

In 6 months we want to have a complete retail margin trading platform that is superior to any other platform – not just because we are using blockchain with immediate delivery, but also with new features, such as new types of limit orders that are more dynamic than standard limit orders based on price level. Our goal is to have a product that will go truly viral

Mika Douglas:

Lykke has a disclaimer for US citizens in your current ICO. Could you explain this and please status your progress where you are with US SEC approval.

Richard Olsen:

We included the disclaimer to highlight that we were not specifically marketing the ICO to US citizens. In actual fact, US citizens can buy Lykke coins – US citizens are our third largest group of Lykke coin holders. US citizens are welcome to join; they can only own Lykke coins – they will not be able to trade on our exchange for the time being. We are in the process of preparing for getting regulated in US.

Mika Douglas:

What is your strategy to build user growth? Lykke hasn’t got that much attention until now, could you discuss your marketing and partner acquisition strategy?

Richard Olsen:

I did not want to go around with power point slides and pitch abstract ideas – I wanted to deliver products and let products speak for themselves. We use state of the art technology that is highly abstract and difficult to comprehend. As with smartphones and all the apps – they speak for themselves. We want to build a viral product. In addition, we are building three other services that will support our marketing efforts: a competition platform, where we do crowd sourcing for all our services….in this way we have people that contribute to the Lykke project from around the world and they will all be our ambassadors. In addition, I am dreaming of a open access publication platform with prize cascades for the best contribution of the last hour, last six hours, last 24 hours, week, month etc…these cascades reward contributors and editors. This will hopefully attract top quality unbiased news content which is important input to a free and efficient market place. Third, I want us to build a Wikipedia for BigData – a simulation and real time environment for forecasts, trading recommendation with a crowd-based approach. Innovation and stellar products should drive users to our services…and finally our strategy of being open and transparent – we try to be authentic.

Gonçalo Moreira:

Hi Richard, can you explain if the Bitcoin price can impact prices of colored coins? Is there not a risk involved if colored coins are based on Bitcoin? Is there an alternative?

Richard Olsen:

Colored coins are very similar to bank notes – we use Bitcoin in the same way as central banks use paper to print their bank notes. We use for example 1000 Satoshi for one colored coin – the colored coin can represent for example 1000 USD. The market price of the 1000 Satoshi depends on the price of Bitcoin, but it is such a small fraction of the 1000 USD that its price variation is not significant.

Gonçalo Moreira:

When trading a particular colored coin, let’s say a colored coin representing the EUR/USD exchange rate, therefore backed by EUR and USD. Is there is still risk of exposure to the issuer as our counter party when operating through Lykke?

Richard Olsen:

Yes, colored coins always have an issuer and the buyer of a colored coin needs to consider the counter party risk of the issuer. On the Lykke exchange every user can instantaneously sell his colored coins for example for Bitcoin – so he can move out, whenever he wants. This is different to the traditional banking system and the brokerages, where users are locked in. On the Lykke exchange we will eventually have a big diversity of issuers and users can diversify their risk and reallocate at any time.

Shiv Narayanan:

1) How is Lykke different from the other ICOs?
2) Where do you see the future of ICOs going?

Richard Olsen:

The Lykke ICO is for a part of the company – so we are not selling all shares or however you call the ownership rights in one go – we want to build up a strong group of supporters over time, so we want to gradually expand and allow investors to increase exposure to Lykke over time and evaluate our performance step by step.

The ICO market will expand rapidly – I have to say that there is an important issue that few people have discussed – what is the liquidity of a new issue after the ICO. We are implementing algorithmic liquidity strategies that ensure market liquidity. I think that this is an important feature to build a healthy market for a new issue. I am confident that this will contribute to the long-term success of the Lykke coin.

Ameer Rosic:

Can you mention some of your liquidity strategies that ensure market liquidity?

Richard Olsen:

Our liquidity strategies build on a new theory of economics – over the past 30 years, we have evaluated and researched all types of models – they do not work. The basic stumbling block is that they use one universal time scale – our models are based on ideas of classical physics. We have developed a new way of measuring time based on an event indicator which records direction changes… our models track these direction changes and respond to the overshoots of these direction changes. The models are described in some of our papers on the olseninvest.com web site – the models can replicate the behavior of real traders, have very similar exposures and powerful – obviously a big subject and cannot be explained in a short response.

Liquidity strategies – they trade the coastline of the price curve. In a liquid market the price ‘travels’ a distance of 1600% during the course of a year, which compares to price move up or down of 30% from the start to the end of the year; the 1600% are all the up and down price moves during a year. Our liquidity strategies estimate, how far the price is ‘overshooting’, i.e. has moved too far and is likely to revert. Our strategies measure the imbalances of supply and demand – it is all purely quantitative and leverages the scaling law properties that we have described in our papers. Our strategies are very different to typical technical trading models.

We will seed liquidity for the Lykke coin – we will offer the same service to other issuers. Liquidity is key for an efficient marketplace – so we want to use advanced financial engineering technology to provide ongoing liquidity.

Terry Ibele:

Will Lykke be fully built on the Ethereum platform? And if so, will you be considering using other blockchain platforms?

Richard Olsen:

Yes, this is key for us to integrate Ethereum – so this is one of our big projects in the coming months. We will be very user driven and will integrate all the blockchain platforms that have significant traction. We think that is important to integrate – the success of the blockchain revolution depends on building an efficient and inclusive market place, which is fair in the true word and everyone has access to and get an efficient price for his digital asset.

Ameer Rosic:

Besides Ethereum, which other platforms will you be integrating with?

Richard Olsen:

We are planning to integrate to Solarcoin and Hyperledger – beyond this we will have to evaluate.

Terry Ibele:

Thanks!

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