Historical overview and the trigger for the change
A few short years ago, we embarked on a journey to democratize finance. We were not the only ones, but we were one of the trailblazers.
We were adjusting our business model on the go, trying to keep up with the fast evolution of the technology and the explosion of the market. We decided to structure ourselves loosely and explore different avenues concurrently. We were explorers and pioneers.
Throughout this time, our commitment to regulation has been consistent. We believe that governments and regulators will eventually embrace the opportunities offered by the blockchain and foster innovation and growth in this space. For two years, we pushed governments and large incumbents into action. We did not want to wait for the change, we wanted Lykke to be the change.
On the markets, our model was designed to lower all barriers of entry. For a year and a half, we covered all user fees ourselves – bank fees, transaction fees, and blockchain fees. We consciously bore the costs to stay true to our values and focus on the long term.
But over the last few months of 2017, the crypto space exploded. Demand skyrocketed, blockchain fees grew to 40-50 USD per transaction, and our zero-fee platform became the target of churning. We honored our commitment, but not without incurring significant cost. We were eventually forced to switch to a centralized exchange model and introduce fees for deposits and withdrawals to maintain zero commissions on trading in the app. We realized that, in order to be able to deliver against our long-term vision, we need to be sustainable in the short run.
This marked the end of our exploration phase and the moment we decided to enter a consolidation phase. We gathered all the experience, technology, and assets that we have accumulated and focused them on a clear, short-term objective: to become the lead exchange platform, which must necessarily include integrated private wallets, high usability metrics, and high-quality support, to ensure that we grow the total market beyond the hard-core traders and increase access to this space for regular people.
It has always been core to our business plan to build a world-class exchange and user-friendly wallet application. We see it as an essential part of our goal to democratize finance. Putting secure, trustless wallets into the hands of as many people as possible will make it easier for these people to access new categories of assets, once regulation catches up.
As we are taking these necessary steps in the short run, we must also re-energize our own community of investors, shareholders, and supporters. This is why we recently introduced a select number of fees, design to limit churn, while continuing to enable investors to trade for zero fees via the Lykke Wallet app. We will continue to optimize these fees, and we expect that they will disincentivize churn while generating revenue for us to continue building towards our vision.
Over the last few weeks of introspection, we listened to what our community was saying. We re-assessed our strengths and our weaknesses. We employed some structured design thinking, and we devised a simple model.
We will invest in our consumer products: exchange, wallets, and payments. We will invest in the best possible experience for our users: value, interface, and support. We will continue our regulatory work through the perspective of these products. We will scale back our involvement in all other activities until we have reached scale on the market, which we expect to happen by mid-2019.
Our primary objective is to realign with our core products: the Lykke Exchange and the Lykke Wallet. We also intend to stay fully engaged in our regulatory activities. We consider these priorities to be interrelated and crucial to our continued success.
We will focus on our core products:
- Lykke Wallet
- Lykke Exchange, including Web Terminal, Trading API, and Algo Store
- Margin trading
- Lykke Card
- Lykke Payments
- Open API to access the Lykke platform
- Innovative financial products
We will concentrate on providing liquidity to the exchange and channel resources towards the work on the Alpha Engine, the referral and affiliate program, and the structure and rebates for incentivizing fees.
To concentrate our effort on developing our core product portfolio, we will divert from a number of initiatives:
- Modern Money
- Natural capital, TREEvolution, BlueWallet
- Lykke Accelerator
- ICO Platform
We will provide more specific details about the product strategy at a later time.
To execute on this strategy, we have redesigned our organizational structure. During the exploration phase, we nurtured all our seed ideas to grow into projects and tried not to interrupt the growth. This has led to forming a highly decentralized structure with a community of autonomous cells pursuing autonomous ideas. Now we should harvest the knowledge that we have obtained and coordinate the effort of all the cells and direct them toward a common goal. In this new phase, we will operate as a more traditional lean organization following agile practices and structured for scale and adaptability.
Lykke offices in Singapore and the United States will be reduced. Activity in India and Mexico will be stopped.
Regulatory activities will continue, since these are aligned with our target goals during this phase. We will provide a detailed update about structural changes and current regulation status soon.
We also decided to give a new level of depth to the Lykke marketing strategy: strengthening the team with top talent and reinforcing the big picture with numbers, thorough analytics, and research. We have already put out a brief for qualitative market research to collect insights from the community at large to better understand the needs, attitudes, and concerns of our customers. This research will reveal investor profiles and needs, usage behaviors and patterns, and the reasons and values underlying the market segment that we aim to service.
We are also investing in customer success. Navigating crypto investment and ownership is complicated for regular people. Scaling support and improving community engagement as core features of our products and platform will lower the barrier of entry and ensure that we service people who currently lack the confidence to navigate this space alone.
We are revising the marketing strategy and user experience functions in-house to articulate and evolve a powerful value proposition for all our products and ensuring that our product design remains relevant to our customers and evolves based on true insights. Product marketing and customer success will be handled by two new key functions:
Over the next few weeks, we will continue to work from our inward focus, building the plumbing and gearing up for scale. During this time, we will continue to develop and deploy new features. We have assembled a stellar development team, whose progress you can follow in the Lykke.Geeky blog post series. We will continue listing new assets, we will continue optimizing liquidity, and will continue our work with regulation, including in Cyprus, the United Kingdom, and the European Union, but we will be a little quieter as we regear. We are working on our roadmap, and we will be able to share concrete milestones with everyone soon.
Most importantly, we will continue to listen to our community. We plan to provide regular, structured community forums, which will work like free-ranging question-and-answer sessions, with Richard Olsen, Sergey Ivliev, Mihail Nikulin, and the members of the core team. The nearest event will be held on YouTube on February 28 at 2 PM CET - please use this form to send us your questions in advance. The Lykke team has prepared the answersto some of the questions we have been asked by our community recently.
This post is the first of a series of updates for our community members and shareholders. Shortly we will give deeper and more structured updates on the following issues:
- Products update
- Regulations update
- Company structure and team update