Frequently Asked Questions
What is Lykke?
Lykke is a movement to build a single global marketplace with equal access for all. We start with a foreign exchange and expand to equities, fixed income, commodities, and other asset classes.
Lykke Corp, incorporated in Switzerland, issues its shares in the form of Lykke Coins on the Blockchain.
What kind of company is Lykke?
Lykke Corp (Lykke AG) is a Swiss-registered corporation with subsidiaries in Vanuatu, Cyprus, and London. For more corporate information, please refer to http://lykke.world.
How does Lykke operate structurally?
Lykke Corp is a FinTech company that develops a trading platform (see our Github). The company’s subsidiaries, which are licensed as financial companies, provide broker and trading services for clients. All possible asset pair types are tradable: fiat fx to fiat fx, fiat fx to crypto, and crypto to crypto.
Lykke is not related to Oanda.
How does Lykke intersect with the banking system?
Lykke bridges conventional finance with digital assets on the public Blockchain. To ensure this, we plan to be fully compliant with the regulatory regimes in all jurisdictions where Lykke operates.
In the grand scheme, banks may act like digital assets issuers, liquidity providers, and payments facilities.
So, you're a securities firm in cryptocurrency?
Lykke is much more than a traditional securities business. We believe that, in the future, many assets will be digitized, from real estate to freelance time, to music IP rights, to rent, to say nothing about SME private equity, project financing, bonds, community coins, and many others. Our users will be able to trade them all.
What is your business-model?
We will make money by providing liquidity, issuance services, and consulting. The commissions and fees for Lykke Wallet, our mobile wallet application, are essentially zero.
Why have you chosen the United Kingdom for a multilateral trading facility license?
We believe that the UK provides the best-in-class regulatory environment for this kind of trading facility for institutional clients. The compliance is hard, but it enables us to streamline the processes and operations to provide a high-end service to our clients.
What are the regulatory requirements to acquire this license?
The minimum regulatory capital, according to MiFID, is 730K EUR. The application paperwork is also huge: at least 50 documents, with a heavy focus on IT processes. Much of this work is done, but we have not yet completed the process.
Why does Lykke operate as a crowd-based company?
Our corporate organization is inspired by the mechanisms of nature and its unmatched efficiency. The crowd-based approach opens our organization to contributors from around the world and provides us with speed and versatility.
Why does Lykke rely on open-source software?
Open source software nurtures transparency, enables people from around the world to contribute, and makes it easy to integrate our services with other applications.
If Lykke is open sourced, won't some competing company just come in and copy and replicate?
Sure, why not? The space needs to be competitive. The software code is only one of the ingredients that makes Lykke special.
How does Lykke earn money?
Commissions are zero, so Lykke earns revenue from value-add services such as liquidity provision, issuance services, white-labeling, and B2B consulting.
When will Lykke become profitable?
We will first focus on FX, where the daily volume is 4 trillion USD. Lykke will be a profitable company with a market share of 0.025%.
What is the unique selling proposition of Lykke?
Our marketplace is highly efficient and seamless. We provide immediate delivery and settlement; there is no secondary risk as is typical for the traditional banking system. The spreads on our marketplace and transaction costs are low, thanks to our efficient corporate structure and new technology.
How does Lykke differ from other crypto ventures?
Lykke is not a cryptocurrency or distributed ledger technology venture; we are building a marketplace that integrates seamlessly with the existing financial system. Our trading venue uses a matching engine to cross buy and sell orders. The accounting, delivery, and settlement of traded assets use distributed ledger technology. Our initial focus is the foreign exchange market with a daily transaction volume of 4 trillion USD, the biggest financial market in the world.
What is the history of Lykke?
Lykke traces its history to 1985, when our founder and CEO Richard Olsen formed Olsen & Associates, or O&A. This firm collected tick-by-tick foreign exchange data and built an online information system with real-time forecasts and trading recommendations. In 1995, O&A organized the first high-frequency finance conference, making a large tick-by-tick data set available to academia. In 1996, Richard co-founded OANDA, a spin-off of O&A. First, OANDA introduced a currency converter, which was an instant success. Then, in 2001, OANDA launched a foreign exchange trading platform with second-by-second interest payments and uniform spreads for all ticket sizes. There was no price discrimination for small traders. Richard is passionate about reforming the financial industry and creating a seamless marketplace, where any asset can be exchanged against any other asset at minimal cost.
Why is Lykke a commercial enterprise?
A commercial enterprise has equity with shares that can be traded in the market. In the case of Lykke, these are our Lykke coins. The market value of our coins mirrors the efficiency and success of Lykke. This is a clear-cut metric that aligns interests.
Where can I download Lykke wallet?
For iOS devices, go to https://itunes.apple.com/en/app/lykke-wallet/id1112839581.
For Android devices, go to https://play.google.com/store/apps/details?id=com.lykkex.LykkeWallet.
What if my coins are stolen?
It is not technically possible to steal your colored coins from Lykke Wallet unless your private key is compromised (for example, if someone has access to your paper backup). The wallet has similar security to Bitcoin. The private key is not to leave the device. Nevertheless, if something like this happens, please send an email to firstname.lastname@example.org immediately, so that we may take measures to lock your trading account.
Can I store my coins in any Bitcoin wallet?
No. The special code that makes your colored coins yours is in the OP_RETURN field of the Bitcoin transaction. (We use the Open Asset protocol to encode the digital asset metadata). We have designed the wallet so that it will not transfer to a normal Bitcoin address. For the moment, the only wallets that accept our colored coins are the Lykke Wallet and the Coinprism wallet.
Can I send the coins from Lykke Wallet to my Coinprism wallet?
Yes. You can transfer Lykke coins to another Lykke Wallet or a Coinprism wallet.
Is it safe to keep my Lykke coins in my Lykke Wallet long-term?
Yes, but please keep in mind that security does not stop with us. While Apple phones have very good security to prevent malware from recovering data from an app, you should keep a lock code on your phone and take other measures to prevent people from accessing your wallet.
Also, it is very important to create a paper backup of your wallet by writing down your unique twelve-word seed. This seed will help you to recover your private key in case your device is lost or stolen.
Is it possible to use the wallet for offline cold storage?
Assuming there is no malware already on your computer or phone, there are two ways to do that.
One way is to record your wallet’s twelve-word seed in a few different places, and then delete the wallet from your phone. You can always re-download Lykke Wallet and recover your coins using the seed.
Alternately, send your coins to a Coinprism wallet, and back up your private key there to an offline device.
ICO and Lykke сoins
What is ICO?
ICO stands for Initial Coin Offering. Lykke offered 30 million Lykke coins (LKK) from September 13 to October 11, 2016, at a price of 0.05 Swiss francs per coin, representing approximately 2.33% of Lykke’s equity.
What are Lykke coins, exactly ? Bitcoins?
They are colored coins: very small fractions of a Bitcoin (like a penny’s worth), with attached codes that specify the value of the underlying asset. Learn more at https://github.com/OpenAssets/open-assets-protocol.
Is LKK a currency or a stock?
A Lykke coin (LKK) is a cryptographic token that represents ownership of Lykke, a Swiss registered corporation. It is not a currency. There is no mining, and there are no other exchanges that accept it (although that may change). One hundred Lykke coins represents a single share of Lykke Corp. Read more at our Information Memorandum
Are there two classes of stock?
No. In a traditional fundraise, early investors get preferred stock in exchange for cash. In this kind of early public arrangement, investors get liquidity instead. All coins have exactly the same rights.
Are Lykke coins divisible?
Yes. They are divisible to six decimal places. This is probably overkill, but it enables people to buy Lykke coins with an even amount of any currency. In most cases, it doesn’t make sense to divide a Lykke coin, but you could if you wanted to.
How did you arrive at the ICO valuation?
We priced our ICO in reference to other FinTech companies that have raised or are raising money. The FinTech market is active with many different startups at various stages of development, so we had a number of companies that we could compare with. We also used standard present value calculations based on the revenue forecasts for the next three years. The valuation of Lykke was derived from these two methods and then validated by professionals with extensive experience in startup and growth companies.
Can I still purchase Lykke coins after the ICO?
Yes, the coins are traded on the open market of the Lykke Exchange. You can download the Lykke Wallet, deposit Bitcoins, send a SWIFT bank transfer or make a credit-card payment, and buy Lykke coins on the Exchange page.
Can I use my existing Bitcoin wallet?
Lykke coins must be purchased using a wallet that can hold colored coins on the Bitcoin blockchain. At the moment, this includes Lykke Wallet for iOS and Android and the Coinprism wallet.
Are there any fees?
Yes. Using any other colored coin wallet, you will need to provide a fraction of a Bitcoin to pay for the transaction. When you use the Lykke Wallet, Lykke pays those fees for you.
Owning Lykke сoins
What is the exchange rate of 1 LKK as of now?
The price varies with supply and demand. Please check here.
Do my coins have voting rights?
Yes. Shareholders exercise voting rights in proportion to the number of Lykke coins in their possession. Voting results are rounded to full votes. The calculation of the necessary quorum to take a vote is based on the amount of all existing Lykke coins. Lykke is working on building an in-app voting tool that will enable all Lykke shareholders to vote using their tokens. Votes will be held on major topics that the board deems appropriate or on those issues that are required in the bylaws. The goal is to give Lykke shareholders a say in all major decisions of the company.
If I own Lykke coins, am I considered to be a shareholder of Lykke Corp?
Yes. If you own Lykke coins, you are entitled to become shareholders of Lykke Corp, provided that you submit to our minimum KYC requirements. Shareholders have additional rights, such as voting and receiving dividends.
Why is the KYC process required?
The KYC process is a standard AML/CFT measure required by all financial companies and banks. This includes the verification of your ID and proof of residence. An additional biometric factor (in the form of a selfie photo) is added to secure your account.
How safe is my personal information? I don’t want to see my passport on the Internet.
Your personal data is encrypted and stored on a standalone server. Only our compliance officers have access to it.
If I own 100 or more coins, will I receive share certificates?
No. All share certificates are being held by the secretary. The coins represent the value of the company, though the share certificates are legally required to be maintained.
Will the coins pay dividends?
Yes. They will when the company decides to pay profits to investors, rather than re-invest to fuel growth. As with most startups, dividends may be some time away.
Can the value of the coins be diluted?
Yes. At the moment, there are 12,856,900 shares of stock. The company issues new shares on occasion, usually to bring on new investors. Now that the company’s shares are publicly traded, the company will, in the future, set up a voting mechanism for existing coin holders to vote on matters like this. Be sure to see the Shareholder Memorandum for details.
Could there be a problem with liquidity?
Potentially, but unlikely. As with any stock, instant liquidity is not guaranteed. Lykke has reserved ten percent of the funds raised for a liquidity pool, and we will be raising more outside funds for an investment pool that will purchase Lykke coins. In general, the company aims to provide as much liquidity as possible. As more people own and want the coins, liquidity will increase. If, for some reason, fewer people want the coins, liquidity will decrease.
Will the company publish reports?
Yes. We plan to report annually via our Web site. You may find our 2015 Annual report there as well.
Will there be an annual shareholder meeting?
The shareholder’s meeting will be held electronically. Assuming that we know who you are and how to you reach you, we will invite you to this meeting at least 20 days in advance, based on the number of coins that you own. We also plan to have onsite events, which we hope will be an opportunity for learning, meeting people, creating new opportunities, and extending our community.
How can I best keep up with Lykke developments?
Check out the News tab on your MyLykke page. Also, if you register your Lykke Wallet, you’ll get our newsletter (assuming that you haven’t unsubscribed from it).
How do I sell my coins?
Just put in a sell order using the Exchange page of your Lykke Wallet.
What's the total supply of Lykke coins?
The total number of Lykke Coins issued is 1,285,690,000. The ownership structure is stored on the Blockchain: https://www.coinprism.info/asset/AXkedGbAH1XGDpAypVzA5eyjegX4FaCnvM/owners.
In which situations can the number of Lykke Coins increase again?
This may occur only if the shareholders vote for it.
How does the Lykke marketplace function?
The colored coin protocol enables any issuer to use a Satoshi (1 millionth of Bitcoin) as a vehicle for an IOU. The issuer specifies the terms and conditions of the IOU, which can be virtually anything.
Bank AAA, for example, can specify the following: The holder of this colored coin is entitled to receive 1 million USD upon redemption.
If Katherine has a bank account with Bank AAA, she can request that her assets in the amount of 1 million USD be converted into the bank’s colored coin, worth 1 million USD. She can then use the bank’s colored coin to buy and sell other colored coins from this bank, or from any other bank, or from any other issuer, for that matter.
Settlement with the real world is straightforward: Katherine simply converts her colored coins into a regular balance of USD in her account at Bank AAA.
It is obvious that such a system only works well if the marketplace offers efficient price discovery. Lykke plans to implement a new type of matching engine (price, time, and spread queuing), which is more efficient than the traditional approach (only price and time queuing) in preventing price spikes.
What is a semi-centralized exchange?
Lykke is a semi-centralized exchange, which means that the exchange does not take possession of the traded coins, but needs to be trusted to match trades correctly. Lykke has a centralized matching engine and decentralized coin settlement. Matched trades are settled on the Blockchain in an atomic way. Each atomic transaction must be signed by both parties as well as the exchange.
Still, to be able to trade, the user must deposit coins into the Lykke Exchange. But depositing coins is not the same as trusting coins. How so? Lykke uses a multisignatures mechanism to hold the client's funds. Lykke cannot spend coins without the client's private key. Even if the exchange is compromised and Lykke's key is stolen, the client will not lose coins, since the second key is required to spend deposited coins.
The Lykke Exchange also provides a refund mechanism to guarantee fund recovery in case of emergency.
Why is our matching engine price-, spread-, and time-based?
We reward market makers quoting narrow spreads with priority in the queuing system. This improves the quality of our flow and enhances price discovery, resulting in lower spreads, reduced micro volatility, and higher volume throughput. Traditional matching engines queue on the basis of price and time, which creates an unfair advantage for high frequency-traders.
Why does the Lykke marketplace have an intraday yield curve?
A financial market needs to provide liquidity and ensure that there is a buyer whenever someone wants to sell. Interest rate payments are a core mechanism to incentivize market participants to buy or sell a risky asset. A major innovation of the Lykke marketplace is intraday interest payments. The batch-based system of the existing market infrastructure has been an obstacle to intraday interest rate payments and has been a major reason for the disjointed price movements in periods of crisis.
What is Blockchain (distributed ledger) technology?
Distributed ledger technology is the protocol of decentralized data storage in a blockchain, where the consistency of data is guaranteed by the cryptography and consensus of multiple nodes. The pioneer and the most popular implementation of the DLT is the Bitcoin Blockchain.
Distributed ledger technology offers immediate settlement in a non-centralized framework at ultra-low costs. This will pave the way for the emergence of a global marketplace for all asset classes and instruments that use this system.
Distributed ledger technology facilitates step-by-step transactions. If contracting parties A and B decide to exchange assets X and Y, the transfer occurs synchronous and step-by-step; it cannot happen that just one side of the transaction is executed. Distributed ledger technology operates on a global scale and performs the role of a notary service. The technology is highly efficient, and it dramatically reduces risks associated with any type of transaction.
Why is distributed ledger technology so disruptive?
Distributed ledger technology is one of the most profound innovations of humankind, because contracting parties can execute transactions step by step, independent of location, while maintaining direct ownership. The step-by-step procedure is a safeguard against any misbehavior or fraud between transacting parties and dramatically reduces the risk associated with transactions. Direct ownership reduces complexity.
Distributed ledger technology may be used to record ownership of literally any type of financial asset. A new global marketplace will evolve, where all types of assets and instruments will be traded. Literally everyone will have direct access to this market, as is the case for the Internet itself. The market will be a level playing field, where any financial asset can be traded directly for any other asset and instrument. The operational efficiency of the marketplace will foster liquidity. The marketplace will be universal and ubiquitous, just like the Internet, and any asset or instrument will be exchangeable for any other asset or instrument.
What is the Bitcoin refund transaction?
The refund transaction guarantees the return of Bitcoins in case of emergency or the loss of your private key. A refund transaction can be broadcast after a specified refund delay. Read more.
Does Lykke use its own blockchain?
No. It uses the colored coins or tokens of other blockchains, such as Bitcoin and Ethereum.
In theory, could Lykke use any other blockchain?
In theory, yes, as long as the blockchain supports issued coins. In practice, not all implementations make sense.
How dependent is Lykke on Bitcoin?
Currently, we use Bitcoin’s Open Assets Protocol and the Bitcoin Blockchain for settlement. We plan to expand to Ethereum.
Could the block size limit become a problem for Lykke?
Since Lykke settles all transactions on the Blockchain, the block size limit puts constraints on the number of transactions that may be processed. We are developing off-chain protocols for upscaling capacity. See our white paper for details.
Why did we choose the name Lykke?
Lykke was the surname of Richard's grandmother on his father's side. The word means luck and happiness. His father explained to them that they are Lykke.
What are the long-term plans of Richard Olsen, the major shareholder?
Richard has pledged his shares to a social cause after fulfilling his other responsibilities.
Why do we make our payments with Lykke coins?
We use Lykke coins to reduce our dependence on external funding. If a holder of Lykke coins wants to convert these coins into CHF, EUR, USD, or BTC, Lykke will make the conversion and transfer the money to the designated address.
How can I participate in the Lykke movement?
We dream of transforming the world into an Amazon rain forest, so there is no lack of work. We invite you to become a Lykke citizen and contribute in any way that you think is relevant. There is work at all ends, which needs to be done; just take the initiative. We want to emulate the success of Wikipedia, where people from around the world, under no one’s direction, added a tremendous amount of value to the overall goals of the organization. You are invited to initiate new projects. We have a budget of Lykke coins to award to new projects, and there is also a scheme of rewards at daily, weekly, and monthly intervals to show appreciation for voluntary work.
How will the financial industry change?
Today, banks spend massive resources on inhouse operations. The adoption of distributed ledger technology will lead to massive cost reductions and enable banks to focus on their core expertise of managing risk.
What are colored coins?
Colored coins issued by banks are money market instruments. For example: Bank AAA will pay x USD in n days from time t, when the holder of the colored coin notifies the bank that he is cashing in. Banks will issue colored coins for any currency and any maturity. Initially, the Lykke marketplace will trade so-called spot colored coins, which can be cashed in according to terms and conditions as a regular foreign exchange spot transaction. In the medium term, there will be colored coins for any maturity, from ultra-short time periods of 10 minutes to one hour, 6 hours, and 24 hours; to days, weeks, and months. There will be a market for colored coins with different maturities. We will have a yield curve that starts intraday and extends to months and years.
What is the difference between colored coins and Bitcoin?
The colored coin protocol (www.coloredcoins.org) makes it easy to use distributed ledger technology for any type of financial instrument. A financial institution can, for example, buy one Bitcoin on the market and then divide this one Bitcoin into one million increments. It can then use each one of these increments as a so-called colored coin and specify with the colored coin protocol the terms and conditions of that particular financial instrument.
A colored coin issued by the financial institution may represent a share of the company itself, but it doesn’t have to. It can represent any type of IOU, such as the commitment to make a payment of x EUR in n days to the holder of the colored coin, if so requested. The colored coin protocol makes it possible to use the distributed ledger technology to deliver and settle any type of financial transaction of any asset within minutes. Colored coins can have International Securities Identification Numbers (ISINs) to map them into the existing back office and risk management systems of banks, making the system compatible with the existing financial architecture.
Issuers of colored coins will buy virtual currencies to securitize financial assets, but they can use a small fraction of a Bitcoin to issue a colored coin. One Bitcoin can be sliced into one million increments; so, in theory, a colored coin needs to include only 1 millionth of a Bitcoin (1 Satoshi). If Bitcoins trade at a price of 300 USD per Bitcoin, the intrinsic value of the virtual currency per colored coin will be 0.0003 USD, a negligible amount compared to the market value of the colored coin. The price volatility of Bitcoin will therefore not impact the market price of colored coins.