Oct 18, 2023 at 06:42Here’s our new interview with Nischal Shetty, co-founder and President at Shardeum, founder of WazirX & Crowdfire, about ways to build a crypto project with tens of millions of users and become leaders in the country in less than three years.
A few words about the products that Nischal manages.
WAZIRX — India’s most trusted Bitcoin and cryptocurrency exchange.
Shardeum — an EVM-based, linearly scalable smart contract platform that provides low gas fees forever while maintaining true decentralization and solid security through dynamic state sharding.
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Crowdfire — helps people discover and schedule content, and manage all social accounts from one place.
Now, let’s embark on a journey to unravel the core insights from this enlightening conversation. Our exploration begins here.
Q. Could you please tell me a little bit about yourself?
A. I was born and raised in India, and I pursued my engineering degree before venturing into the corporate world. I worked for approximately three and a half years in the corporate sector before embarking on my entrepreneurial journey. My first startup, Crowdfire, focused on social media management and managed to garner over 20 million users within seven years. Following this success, I launched my second venture, WazirX, which quickly emerged as India’s largest cryptocurrency exchange, boasting a user base of more than 15 million individuals. Subsequently, I founded Shardeum, my third startup, which centers around a Layer 1 blockchain solution designed for scalability. This blockchain is engineered to maintain low transaction fees even as its user base grows. Currently, we’re in the final stages of preparation for the mainnet launch, having garnered over 800,000 users who have actively participated in our testnet, resulting in the creation of hundreds of decentralized applications.
Q: Does Crowdfire operate only in the Indian market or worldwide?
A. When I initially launched the product in 2010, it had a global reach from the start. Most of the users, both then and now, primarily come from the United States, with the rest of the world following closely. At that time, platforms like Twitter and Instagram had not yet gained significant traction in India. Therefore, I decided to concentrate my efforts on markets where social media was experiencing faster growth, primarily in the United States and a few other countries around the world. This made the product more globally oriented. On the other hand, the WazirX exchange had a specific focus on serving the Indian market, while Shardeum, once again, is a global blockchain accessible to anyone.
Q. What’s the secret to launching a widely used product with a massive audience? How do you handle it?
I believe there’s no real secret to launching a successful startup; it comes down to a few key principles. The most crucial element is to create something that people genuinely want. Nothing can replace that. To achieve this, it’s vital to comprehend the user’s perspective and be a user yourself. All the products I’ve developed, such as the first social media software, were born out of personal needs. However, I didn’t stop there. I looked around and realized that many others shared the same needs. That’s how I initiated the creation of the initial social media software. I was active on multiple social networks and needed an efficient way to manage them. After building it and sharing it with others, I discovered that they wanted it too. It was this realization that confirmed that I wasn’t alone in facing this problem. There were more people who needed the solution.
The same principle applies to the exchange. In 2017, during a cryptocurrency bull market, I tried to buy Bitcoin on an Indian exchange and it took an entire week to complete the transaction. During that time, the price of Bitcoin had already surged. I came to the realization that for the cryptocurrency market to thrive, we couldn’t afford to have an experience where it took a whole week just to purchase Bitcoin. So, I decided to launch an exchange, but only after ensuring that others shared this problem. Prior to launching the exchange, I created an announcement and a signup page. There was no exchange at that point, just a signup page, stating that we intended to launch an exchange that would be accessible on all platforms (iOS, Android, web) and offer a fast and easy way to purchase Bitcoin. We wanted to see people signing up, and to our surprise, tens of thousands did so without a product in place. Their willingness to sign up confirmed the existence of the problem.
The same validation approach was applied to Shardeum. We recognized the need for a scalable blockchain because Ethereum’s transaction fees were exorbitant, making even small transfers costly. We wanted to ensure that this was a widespread issue. Thus, we announced the Shardeum project, and people immediately began following the Twitter handle and inquiring about its development. This was further validation.
That said, the first step is to identify a problem and ascertain that others face it as well. You then proceed to announce the product or an early signup page. However, there’s a critical second step. You must ensure that when you announce your project, it’s not limited to a hundred people knowing about it; you must find a way to make those hundred people each tell ten others. This ripple effect is fundamental, yet many projects overlook it. They assume that after the initial announcement, growth will happen organically. However, you need to devise strategies to encourage people to spread the word about your project to their friends. This is something I’ve always incorporated into all our endeavors, whether it’s the social media product, the exchange, or Shardeum, the blockchain. We ensure that people naturally share our products with their networks. These two fundamental principles are at the core of successful launches.
Q. How do you ensure users spread the word about your products?
A. I believe there are various strategies to achieve this. Early on, when I was developing my first startup, we adopted an internal framework known as the ETC framework, which stands for Ego, Temptation, and Curiosity. By incorporating these three elements into your marketing approach, it becomes much easier to generate word-of-mouth interest and draw more people to your product.
Let me break it down:
- Ego: This part taps into people’s desire to be at the forefront of something innovative and groundbreaking. In the case of Shardeum, as the first Layer 1 blockchain from India, we offered the opportunity for individuals to become early adopters of a genuinely pioneering project. Think about it – if you had the chance to be an early user of Ethereum during its testnet phase, wouldn’t you take that opportunity? Probably, yes. It’s an experience that money can’t buy, and Shardeum offers a similar chance. It’s an innovative project, not a mere copy of an existing blockchain, built from the ground up, and designed to address key issues like scalability and low fees. Being an early adopter of such innovation is a unique opportunity, and this narrative naturally spreads.
- Temptation: In the world of crypto, early adopters often have the chance to increase their wealth, whether through airdrops or early token purchases. This is a powerful temptation that encourages people to get involved.
- Curiosity: Many people, especially in India, are genuinely curious about the technology behind projects like Shardeum. They want to understand how a scalable blockchain that increases transaction capacity with each new node joining is being built. It’s a technology that’s never been seen before, and this curiosity has been a driving force behind Shardeum’s success.
Our aim is to bring a significant portion of the 30 million people in India’s crypto community onto our blockchain. As India’s crypto community is expected to grow to over 100 million people in the next three to five years, we want to ensure that a substantial number of them are on our blockchain. Currently, most of these individuals are only on exchanges, and they perceive crypto and decentralization solely through the lens of exchanges. However, true decentralization involves bringing them onto the blockchain itself.
Today’s blockchains are expensive and not scalable enough to support India’s vast audience. Our motivation for building Shardeum was to address this gap and provide a solution that can cater to the needs of the Indian crypto community and, in the future, a much larger audience. We aspire to onboard 50 million people onto our blockchain, ultimately bringing them into the world of decentralization.
These strategies, when applied in the right context and combined effectively in your marketing and narrative, can help attract and engage your target audience. It’s important to note that for these strategies to work, your product must address a genuine need and resonate with your audience.
Q. Do you believe the rest of the world also requires your blockchain, or are you not targeting the USA with your product?
A. While a blockchain is inherently a global product, your go-to-market strategy is essential in ensuring its success. It’s crucial to focus on your strengths initially, as winning with what you know well is a solid foundation. Venturing into new markets requires a learning curve, and we’re currently in the process of doing just that. For example, in the United States, we’ve recently brought on a Chief Growth Officer to develop a playbook for our expansion there. Similarly, we’re building strong communities in places like Africa, specifically Nigeria, with emerging communities in Ghana, Vietnam, and Indonesia around Shardeum. These endeavors are experimental, as we’re navigating these markets for the first time.
In contrast, India holds a special place as I had prior experience building my exchange in this market. It was important to ensure that we established a strong presence in India from the outset. However, it’s essential to recognize that Shardeum is a global product, and its appeal transcends geographical boundaries. The goal is to make one-cent transactions the norm, as I believe that even individuals who are financially well-off wouldn’t willingly pay more than that for a transaction.
Moreover, I believe that many people around the world who value decentralization would also be interested in running their own nodes. Shardeum provides a unique opportunity for individuals to explore this aspect of blockchain technology. Additionally, by utilizing the Ethereum Virtual Machine, we’ve ensured that developers don’t have to rebuild their applications for Shardeum. Anything that functions on Ethereum can work on Shardeum without any modifications. This approach simplifies the developer experience, and they’ll naturally be drawn to our platform as it offers access to a substantial consumer base. Our primary focus is on bringing millions of users onto our blockchain, and developers can easily deploy their existing smart contracts on Shardeum to tap into this growing user base.
Q. When does the protocol go live?
A. We’re currently in the final phase of development, and our goal is to launch by Q1 2024. We’re working diligently to complete our project, and we aim to have our release candidate ready by the end of this year. Once we have the release candidate, the remaining steps will involve conducting security audits, tech audits, and other necessary preparations to ensure a smooth and secure launch. So, Q1 2024 is the target date we’re striving for.
Q. How big is the team that is making the protocol?
A. Our team consists of approximately 55 individuals distributed globally. Approximately 50% of our team is based in the United States, while about 20-25% are located in India. The remaining 10-20% of our team members are situated in various other countries around the world.
Q. About WazirX and the banking ban
A. WazirX, with over 15 million users, was launched in 2018, and it faced a challenging start with the banking ban in India coming just three weeks after its launch. It was a difficult period as it coincided with a bear market in the cryptocurrency space, and many other exchanges were slowing down or shutting down.
However, WazirX’s mission was clear: to make cryptocurrency accessible to everyone in India, understanding that this accessibility is a crucial step towards decentralization. Despite the adverse conditions, the team persevered and placed a strong emphasis on education. The banking ban in India was largely due to a lack of understanding about this emerging technology. In 2017, there was a wave of negative media coverage surrounding cryptocurrencies, a stark contrast to the more balanced reporting we see today.
WazirX decided to work on educating the public, even during challenging times. The team aimed to raise awareness about the technology and its potential, beyond the negative narratives. This approach paid off. When the bull market of 2020 began and the banking ban was lifted, the market rewarded WazirX for its commitment to educating the masses. The exchange saw a significant surge in user sign-ups, reaching 1 million users in about two years and then reaching an astonishing 10 million users in just one year.
Q. Why should everyone use decentralized services?
A. When we talk about decentralization, it ultimately boils down to the idea that individuals should have control, whether it’s over their money, their data, or anything else. It’s about personal empowerment.
Now, let me turn the question around: why should someone not have control? If an entrepreneur creates a decentralized service that allows you to have control over your data, as opposed to a centralized service that retains control over your data, which would you, as a consumer, choose? From a philosophical standpoint, most people would prefer the option that grants them control. The issue is that we currently lack the ecosystem that offers this kind of choice. We’re accustomed to living in a world where platforms like Twitter or YouTube can lock us out, effectively cutting us off from the internet. Online activities often hold immense value for people, yet they lack the freedom and security they deserve.
Currently, just a handful of companies have the power to lock individuals out of the internet, and that’s not the future we should envision for the next 10, 20, or 50 years. The task of beating these giant companies may seem daunting, but it won’t solely be about creating decentralized versions of existing platforms like Facebook or YouTube. The new generation of Internet users will grow bored of these platforms that have been around for 10 or 15 years, and they should be given a choice.
I believe that the future belongs to decentralized solutions, but as an ecosystem, we haven’t fully discovered those breakthrough solutions yet. What we’ve seen so far is the replication of existing Web2 models in the Web3 space, such as decentralized Ubers or decentralized Airbnbs, which may not attract significant user adoption.
However, there will come a time when entirely new, decentralized products and services emerge that only decentralized technologies can support. A recent example, albeit not the perfect one, is the realm of Frentech, where you can buy shares of others and engage in trading activities. Such innovations are only possible in a decentralized setting and hint at the potential of decentralized solutions to provide unique and empowering experiences for users.
Q. Will Web3 offer fun and enjoyment, rather than just greed, as a means to grow the market?
A. It will indeed happen. As I was discussing earlier, when I mentioned Frentech, I emphasized that, like it or not, we have to consider removing the greed factor. You’re right in calling it greed. But think about what they achieved from a product perspective. They made it possible for anyone in the world to invest in anyone’s interests, whether you call it shares or something else. This wouldn’t be feasible through traditional means.
Let’s set aside the greed aspect for a moment. Can you create a Web2 product with the same philosophy? You can’t, as you would need to navigate the complexities of establishing financial systems and obtaining licenses in every country. This demonstrates the possibilities. I genuinely believe that you can’t build an ecosystem solely based on greed; it won’t succeed. The exciting part is where mass adoption will occur. This is why in the crypto space, DeFi is thriving. However, DeFi will never reach a billion users; that’s the reality. I’m not a frequent trader myself; I’m passionate about developing products. Yes, I’ve created an exchange, but I’m not trading every day. I derive enjoyment from building products. That’s why I’m in this. I’m a heavy user of platforms like Twitter, and I believe that if we don’t create these engaging products, we won’t achieve adoption.
But to create these exciting products, you need a solid underlying infrastructure. Why did social networks emerge in 2006 and 2007, when the internet was already around in 1995? What transpired during those ten years? Numerous experiments and unsuccessful attempts. There were chat rooms and other social networks that people initially believed might be the future. So, we are currently in an experimental stage. There may be greed and other factors, but it’s bringing people together. Only when everyone comes together can we start building these exciting and diverse products.
If I had developed a thrilling crypto product three years ago with no one to experience it, it would never have succeeded. First, you need to capture attention. I view crypto as being in the attention zone right now, and the quickest way to gain attention is through money. Let’s not forget how Web2 defeated the offline model. How did that happen? It was through the ‘free’ philosophy. Web2 did use money but in a different way. In the offline world, nothing is free; you have to pay for a newspaper. So what did Web2 do? They declared everything free. Google offered free search, and all the social networks were free. That’s how they attracted users. If they had charged $1 for reading an online newspaper when an offline newspaper also cost $1, nobody would have adopted it. They utilized money differently. Now, if we want to transition from Web2 to Web3, we can’t provide things for free since it’s already the norm in Web2. Therefore, in Web3, you give people money, which is precisely what Web3 is doing. It’s a progression, moving from the offline world, where everything has a cost, to Web2, which offers things for free, and now to Web3, which is giving money to people. That’s how this progression works, or else you won’t capture attention.
Q. Could you please share details about the conflict with CZ from Binance, why it happened, and its resolution?
A. I’m unable to discuss this matter as it is currently sub judice. I have tweeted about it, and I maintain my stance on the statements I made in my tweet. You can find more information there. However, as long as the issue remains unresolved, I can’t provide further details. It is still in the process of being resolved, and I would describe it as an ongoing matter.
Q. Are you still the co-founder of WazirX, or have you exited the project?
A. No, I’m actively managing the exchange. I’m still in charge of the exchange, Wazirex. I am overseeing Wazirex, the exchange, and I’m also involved with Shardeum and delegated the management of Crowdfire to a different team.
Q. You’re a bit like Elon Musk, who manages SpaceX, X (formerly Twitter), and Tesla, all at the same time. How do you manage so many significant projects simultaneously?
A. I find Elon Musk to be truly inspiring. I don’t believe I’m even 1% of what he has achieved. I see his accomplishments as a source of motivation. He’s shown everyone what that is possible. Once you witness what’s attainable, it becomes evident that you can pursue those same goals.
However, I don’t think this is a deliberate plan on my part. I tend to gravitate towards problems that need solving. If I encounter a problem that hits close to home, I eagerly engage with it. Currently, I’m deeply involved in these two projects. I’m uncertain if there will be more in the future; I don’t dwell on that too much.
Q. How do you split your time?
A. The level of involvement in a project depends on its stage of development. In the initial stage, from zero to one, when you’re launching a project and taking it from concept to reality, like Shardeum, it demands intense, hands-on work. It’s all about building and bringing it to the market, and it’s unknown how it will unfold. On the other hand, with WazirX, it’s at a different phase, possibly between one to 10 or 10 to 100. It has already proven itself, with tens of millions of users and a strong brand presence. In this scenario, a more strategic approach is necessary. You can’t be involved in every little detail; it’s about guiding and collaborating with your management team to ensure the strategy is sound.
This division allows me to allocate my time effectively. I don’t rigidly compartmentalize my calendar; it remains open. I’m always accessible, and I’m there for the teams when they need me. We schedule calls and have weekly meetings with various teams. Managing this doesn’t feel overly taxing; I still have plenty of capacity to engage effectively.
Q. How much time do you spend working and having fun each day?
A. For me, there isn’t a stark differentiation between work and having fun. I have a deep passion for my work. If I’m not working, it feels like something is missing. However, I do make an effort to take weekends off. I try to avoid working during the weekends to get a good break. This break helps me recharge, and I eagerly look forward to Mondays to dive back into work.
From Monday to Friday, my focus is entirely on the companies I’m involved with. I have a strong work ethic and truly enjoy what I do. One aspect to consider is the distributed nature of our work, which sometimes leads to late-night meetings or early-morning commitments due to different time zones. This can make my afternoons more flexible, so my schedule varies depending on the demands of the day.
Q. You have around 10 investments in different startups, right?
A. I have a lot more projects than that. Some of those might be publicly known or have been officially announced. I have a strong passion for getting involved in endeavors I’m enthusiastic about, even if it’s not on a full-time basis. I often act as an advisor or invest in these projects, although my role tends to be more on the investment side. I don’t always closely track how those investments perform. My primary motivation is to assist others with intriguing ideas that I find captivating and think, “If I weren’t occupied with something else, I’d be doing this.” So, I like being close to the action and witnessing the growth of these startups. Whether they succeed or fail, there are valuable lessons to be learned from the experience.
Q. What kind of startups are you interested in investing in? What criteria are you looking for?
A. I’m open to various investment opportunities, but currently, I’m leaning more toward Web3 projects because that’s where my primary focus lies. In the past, I was involved in Web2 investments, but I’ve shifted my attention to Web3.
When it comes to investing, I believe that I can’t offer much assistance at the pre-seed stage. My expertise as an advisor comes into play when a project is at the zero-to-one stage, where it’s ready to hit the market, scale up, and gain a substantial user base, like reaching a million users, for example. That’s the stage I truly enjoy being part of.
Before that, when a project is in the early product development phase, most founders are generally proficient in building their product. What they often need help with is distribution. This is where I come in, especially considering my tech background. I remember when I started, I built a product, launched it, and thought it would succeed on its own. But that’s not how it works. I later realized the importance of distribution and marketing. Many talented entrepreneurs have fantastic ideas and are adept at creating products, but they may lack expertise in distribution. Working with such entrepreneurs is where I find my role most valuable. I can help expedite their learning curve, saving them from taking five or ten years to grasp the intricacies of marketing and distribution.
Q. Do you have any new ways of monetizing WazirX?
A. When it comes to running an exchange, the primary source of revenue is typically the trading fees. However, it’s essential to consider alternative revenue models, especially during bear markets when trading volumes are low. In the long term, no large company can rely solely on a single revenue stream, and this applies to exchanges as well.
In our case, we’ve focused on being a spot exchange to keep the product simple and user-friendly, aiming to attract more users to the platform quickly. To diversify our revenue streams, there are several strategies we are exploring. One of the straightforward approaches is to introduce staking services. Many users in a bear market may not want to actively trade, but they are open to staking their crypto for running nodes, providing a new source of revenue.
Partnerships are another avenue we’re exploring. With a substantial user base on our exchange, we aim to connect users with innovative Web3 products. This can be a mutually beneficial arrangement, helping our audience discover new Web3 products while also assisting these products in gaining exposure and users.
Lending is another potential revenue stream, but we’re proceeding with caution, considering recent incidents in the industry related to lending. We are carefully evaluating the feasibility and security aspects before deciding on this option.
Experimentation is crucial, and we are actively exploring these revenue models. The goal isn’t to find numerous revenue streams but to identify the ones that work best for us. We aim to refine and potentially expand these strategies in the coming months, still focusing on finding and developing the most effective revenue streams for our exchange.
Q. Are you as big as Binance in the Indian market?
A. In terms of trading volume, it’s worth noting that the situation has changed in India due to the introduction of TDS (tax deduction at source). This has led to a decrease in trading volumes for Indian exchanges, including ours. Many users have shifted their trading activities to exchanges that do not adhere to the TDS model. Whether or not exchanges should follow this model is a separate and complex issue. However, if you operate in India, compliance with TDS regulations is mandatory.
During the bull market and other favorable conditions, we were indeed the largest exchange in terms of the Indian user base. WazirX enjoyed the highest trading volume compared to any other exchange worldwide concerning the Indian audience.
Q. What advice do you have for entrepreneurs competing with major global players on a local level?
A. The way we perceive the world and how it operates is a crucial factor. Many of us tend to accept the idea that monopolies are the norm, that the winner takes all. This concept is true for certain products, particularly where the network effect is dominant. For example, in social networks, if one has already established a substantial social graph and network effect, it’s challenging for a new entrant to compete. Take Threads by Facebook, for instance, even with all the resources Facebook had, it didn’t succeed because Twitter had already claimed that space of a global network disseminating information.
However, in financial products, such as exchanges, it’s a different story. When you examine the financial landscape, you see that it’s not a winner-takes-all situation. In every country, there are numerous banks and financial institutions, both global and local, and they all coexist and thrive. For example, in India, we have a blend of global and local banks, all offering similar products and services.
The reason for this diversity is that the market is vast, and new entrants have the opportunity to capture their share of it. Even the largest player in the crypto space cannot possibly cover the entire market because there are still so many people who are not yet involved in crypto. This means that the market is open for new players to make an impact. Entrepreneurs entering this space are indeed early, so there’s no need to be overly concerned about existing big players. Instead, focus on capturing the untapped potential in the market.
With Shardeum, the same principle applies. People may wonder how it can compete with established blockchains like Ethereum. The total global crypto market size is currently around 200 million people or even less, so there is substantial room for growth. If you believe that the market will expand to a billion people, then you’re only dealing with 20% of the market at present. The real competition is about attracting and retaining new users, the 80% who have yet to enter the market.
Whether you’re operating on a global or local scale, the key is not to compete with existing players but to focus on reaching and serving the new audience. This involves various strategies, such as educating people about crypto, building trust, and providing a user-friendly experience. Trust is a vital element in the financial sector, and it’s not a winner-takes-all concept. Just because someone trusts you doesn’t mean they won’t trust someone else. The crypto market is not a winner-takes-all environment, and this mindset is crucial for success in this space.
The full video can be found below 👇
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