Original Title: The Truth Behind Crypto's Super Apps With Mert Mumtaz & Armani Ferrante
Original Source: The Rollup
Original Translation: Deep Tide TechFlow
· Guests: Mert Mumtaz, CEO of Helius; Armani Ferrante, CEO of Backpack
· Hosts: Robbie & Andy
· Broadcast Date: April 21, 2025
Key Takeaways
· The race for the ultimate crypto super app is heating up. Who can master the user experience?
· This episode features a conversation with Mert Mumtaz, CEO of Helius, and Armani Ferrante, CEO of Backpack. Armani shared his experience transitioning from Apple to Alameda Research and how this journey led him to create one of the fastest-growing platforms on Solana.
· Despite the market grappling with tariff tensions, institutional adoption of cryptocurrencies is quietly accelerating. We delved into the "Fat Wallet Theory," the evolving role of Bitcoin in smart contract platforms, and the opportunities arising from the intersection of finance and cryptocurrency.
· This podcast also discussed how Backpack balances censorship resistance and compliance, which is one of the biggest challenges facing cryptocurrency's entry into the mainstream market.
Highlights
· Bitcoin is the first and only true meme, in the purest sense.
· As long as everything is a meme, Bitcoin will always be the value ceiling for all these crypto tokens.
· Everything starts with trading platforms, starting with liquidity.
· I always felt that the culture at Alameda and FTX was a bit loose, and that kind of engineering culture is not the environment I want to be part of.
· Backpack is built more like a traditional engineering-driven company, and our culture places a strong emphasis on products and creating great things for users.
· I believe now is a great time to reinvest in building.
· One of the most valuable things in the current industry is bringing more value on-chain.
· Finance itself has no direct utility; it is merely an accounting system for transferring representative assets. What truly matters are the actual goods and services in the physical world.
· As the real world gradually merges and accepts the crypto world, cryptocurrencies will truly drive the upgrade of the financial system. We can only achieve this by combining real-world assets and rules.
· We all believe that crypto technology will become an important pillar of the global financial system, but we have a long way to go.
· A bridge is forming between DeFi and the traditional financial world. Bitcoin is that bridge, and its dominance is rising.
· Institutions may provide significant support for Ethereum, potentially driving a rebound in Ethereum's price.
· The entire crypto market's value is still less than Nvidia's market cap. We all believe this situation will not last.
· Crypto, finance, and technology will deeply penetrate the financial sector, closely linking with every major financial institution globally.
· You must possess one of two attributes: either be censorship-resistant or compliant. Anything in between has no way out, and I firmly believe this.
· So many RWA companies have been created; why has none succeeded? Why aren't we all using tokenized securities on-chain now? Because no one has the distribution element; no one has contributed to RWA like Coinbase did for Circle.
· Backpack is a very special product, positioned between two economies: one side is the traditional economy, i.e., the traditional banking system, and the other side is the crypto economy.
Introduction of Armani and Backpack
Andy: Welcome back to The Roll Up. Today we have Mert and Armani with us to discuss Backpack's amazing growth, the story of the Fat Wallet Theory, macro updates on Solana, and the dynamics in this field. I would love to learn about your backgrounds, especially your past experiences working with some interesting figures that led you to create Backpack.
Armani:
My experience is somewhat ordinary on one hand, but special on the other. I entered the cryptocurrency space in 2017. At that time, the Ethereum bull market was in full swing, and prices were skyrocketing. While working at Apple, I saw colleagues trading. I read the Ethereum white paper and then made the jump, and the rest is history. My initial goal was to work on Ethereum smart contracts in 2017 and 2018, but by chance, I joined a small trading firm called Alameda Research in Berkeley, California, before FTX existed. I basically worked there for about three months and quickly realized it wasn't what I wanted, so I left. This was before the FTX story, when Sam and some people from Jane Street were doing a lot of trading, mainly in Korea and on some early trading platforms.
Through my work on Ethereum, I got involved in the development of some L2 technologies, worked on state channels for a while, and also worked on other L1s. I developed a strong interest in scaling issues, as many people did at the time. After that, I went through a winding path, participating in the development of some open-source technologies. In 2020, when FTX and Alameda started investing in Solana, they reached out to me again and asked if I would be interested in working for Solana. So I began researching Solana, met many people, felt very excited, and thought it was the coolest crypto project at the time, truly starting to realize the "world computer" dream that attracted us to this field.
Mert: By the way, I created Anchor. Do you know what Anchor is? Is there a corresponding tool on EVM, Armani?
Armani:
There isn't a direct corresponding tool because there are many other tools that can be considered similar to Solidity and Foundry, even tracing back to early Truffle. If you want to learn about early Solana development, I was involved in many early Solana projects, including wallet tools, DeFi, and developer tools.
Armani's Departure from FTX
Robbie: We won't dwell on FTX, but what was it about your early experience that made you feel you didn't want to stay there?
Armani:
I felt that Sam was a trader, and I was an engineer. In a trader-managed company, traders typically focus on trading, aiming to maximize profits, which is not my goal. I left Apple to participate in open-source projects, and I approach problems more from an engineering perspective. Backpack is built more like a traditional engineering-driven company, and our culture places a strong emphasis on products and creating great things for users.
I always felt that the culture at Alameda and FTX was a bit loose, and that kind of engineering culture is not the environment I want to be part of.
Solana's Technical Vision
Robbie: Cryptocurrency indeed has two aspects: finance and technology. Now let's talk about technology. You joined Solana because it has the mission of becoming the world computer; I thought that was Ethereum's goal. What changed?
Armani:
This question can be viewed from multiple angles. For me, during 2018 and 2019, I was researching state channels and L2 technologies. At that time, Ethereum was pushing hard on sharding and the design of Serenity. I quickly realized that this was fundamentally unworkable and a terrible idea.
Sharding is not scaling in the traditional sense. What you really need in terms of technical characteristics is linear horizontal scaling relative to some resource. Just like traditional databases, such as DynamoDB or Cassandra, these innovative NoSQL databases can scale infinitely by simply adding more machines.
This knowledge was first encountered in higher database research, and Solana is actually the first project to achieve this in terms of machine resources. By adding more cores and leveraging Moore's Law, as machines become stronger and faster, you can achieve higher throughput in the system. You can utilize technologies like parallel processing and pipelining. As an engineer, I believe Mert shares the same view. It's clear that a single-threaded virtual machine won't work. If you ask any engineer in San Francisco, they will tell you the same thing.
This was actually the goal pursued by many during the 2017 and 2018 bull markets, and many professors' projects received funding. Many smart people were seeking solutions to scaling issues. Later, there were projects like Sui, Aptos, and now SEI and Monad. But in reality, all of this applies relatively mature, modern system technologies in the blockchain context. Honestly, this was very obvious at the time; it was just a matter of execution and who truly had the engineering capability to implement it. Solana was the first project to achieve this at scale. Ethereum is clearly affected by path dependency and technical debt, making it impossible to rebuild the entire system from scratch. Therefore, there are many nuances in this story. But overall, Solana is the first team to successfully achieve this, which excites me greatly.
Current Market Analysis
Andy: The market has consistently favored the composable Web3 concept, and we've seen many fast, cheap, and well-designed blockchains achieve great success. We are still very excited about expanding this ecosystem to thousands of chains (whether Rollups, network expansions, or independent L1s, etc.).
Mert, what is happening in the market? Will Solana rise to 500?
Mert:
The situation is clearer now. Although prices seem a bit unreasonable, the direction is clear. Trump wants other countries to pay more, and other countries respond, "No, we are strong too, so you have to pay more." As a result, countries are raising tariffs, affecting businesses, and people are starting to withdraw funds from the market.
Recent macro factors are indeed noteworthy, and the prices of Solana, Ethereum, and Bitcoin are all falling. While the market trends during this period are not entirely certain, people attribute it to seemingly absurd reasons, such as Pump.fun selling tokens instead of holding them. I often say that whenever the economy declines, we should thank Pump.fun or Nvidia.
The comparison about memes is quite interesting. Someone just tweeted that Trump claimed he could stop tariffs on other countries, but tariffs on China would continue. Within just four to five minutes, the market added about $2.5 trillion in market value, which is more than the entire cryptocurrency market's value. However, that tweet was false, and five minutes later, the market fell back. I think this is basically a meme dressed in a suit. The dynamics on Twitter are always unpredictable, and random posts can create a stir.
As for the impact on cryptocurrency, I believe it is completely different from past cycles. Previous cryptocurrency events were almost always due to internal collapses. Initially, it might have been due to a lack of use cases, seen as a Ponzi scheme; later, it was due to the bankruptcy of a trading platform or the outbreak of other scams. Take the FTX incident as an example; I wasn't worried at the time, but others were very concerned. Because if you look at reality, nothing has really scaled or operated well like Solana, especially two and a half years ago. Now, you could say there are viable alternatives, but back then, there really weren't.
However, I just returned from New York, and the sentiment is completely different. This is why it's a mistake to combine your thinking with too much historical data. We have gone through three cycles, so cryptocurrency is still in its early stages. Not just cryptocurrency, but the scale of smart contract platforms is also very early, probably only about three years. Due to the slow actions of institutions and long sales cycles, they started the process months ago and are now going all out. The number of inquiries we are receiving from institutions, trading platforms, and various fintech companies is at the highest level we received during the bull market.
So, even though there are red things on the screen and the candlestick charts look terrible, the reality is that these companies are actually entering the chain. Even if Trump might cause some impact temporarily, he has done a lot of good for cryptocurrency, and many lawsuits against trading platforms are starting to be withdrawn. Overall, I think now is a great time to reinvest in building.
Andy:
Yes, it seems this is the biggest divergence I've seen between fundamentals and price movements. The lifting of many investigations is particularly promising. The news about ETFs is also crazy. I've never seen so many applications from legitimate companies, like PENGU applying for an ETF. Now we just have to see how these will develop. There is constant institutional pressure in the market. I flew from Brazil to New York today, and I will be there next week. I want to leverage this atmosphere and get into that mindset because I feel there is a huge difference between what is happening on Twitter and the market, and the way these institutions think. I feel that in the past seven years of working in cryptocurrency, we have finally achieved a neutralization of career risk. After the bear market in 2017, I was very worried about whether this industry would recover and whether I needed to look for another job. Later, I did some online marketing work and then returned to the industry in 2018 and 2019. Even during the last bear market, I was thinking, can we make it through? Now it feels like career risk has eased, and those who think long-term will win.
Armani:
A key point you mentioned is the integration of the world. The native crowd of cryptocurrency is building incredible financial technology, which is at the core of Bitcoin and many DeFi projects. Although new market structures are everywhere, there is no single place that can fully control it.
But regarding finance, there is something strange: it has no direct utility in itself. Before the sentiment of "institutions are coming," DeFi fell into a slump, questioning what the purpose of DeFi was, why we were making these trades, why we were building yield farming, and why we were engaging in these cyclical, meaningless operations. Because this is actually fintech, and finance itself has no direct utility; it is merely an accounting system for transferring representative assets. What truly matters are the actual goods and services in the physical world.
We all know how to build markets. I believe one of the most valuable things in the current industry is bringing more value on-chain. The statistics Mert mentioned are shocking; a single tweet can cause fluctuations in value greater than the total value of the crypto market. But I want to add that the entire crypto market's value is still less than Nvidia's market cap, and we all believe this situation will not last. We all believe that crypto technology will become an important pillar of the global financial system, but we have a long way to go.
To achieve this, it is not just about solving technical issues like how to scale blockchains or how to build decentralized trading platforms, but about bringing assets on-chain. Stablecoins are a great example. I think this is also at the core of the decisions we make at Backpack because we cannot pretend this world does not exist. Different countries have different rules, regulations, and assets, whether it's stocks in the U.S., bonds from local governments, retirement accounts, currencies from around the world, or real estate. We need to bring these values on-chain to inject vitality into all the amazing things we've built over the past few years.
This integration is precisely the trend we are starting to see, and it is the exciting reason behind "institutions are coming." As the real world gradually merges and accepts the crypto world, cryptocurrencies will truly drive the upgrade of the financial system. We can only achieve this by combining real-world assets and rules. This is exactly what some current developments are about, and it is why I feel invigorated.
Dynamics of Bitcoin and Altcoin Seasons
Robbie:
I think you are absolutely right. The reason we want these values to enter the chain is not just because we built these systems. Yes, we did build them and hope to see people use them, but more importantly, they are actually better than traditional systems.
I often say that blockchain is the best coordination tool that exists. This applies to robot-driven economies, AI-driven economies, and human-driven economies. Typically, coordination involves risk management, staking, and the allocation of scarce resources. All of this can become more efficient, transparent, and visible through blockchain.
Currently, we are observing a macro-level phenomenon of a safe haven, where funds flow into cash, bonds, gold, and then digital gold—Bitcoin. On the other hand, tech stocks represent another part of our industry, which includes Ethereum and Solana. Therefore, Bitcoin acts as a bridge at the intersection of these two worlds. We see cryptocurrencies maturing and integrating with traditional financial systems, and a bridge is forming between DeFi and the traditional financial world. Bitcoin is that bridge, and its dominance is rising.
In the past, these cycles always started with Bitcoin and then expanded to other cryptocurrencies and the blockchain world. Will this time be different? As institutions begin to adopt on-chain technology and value goes on-chain, will we bypass Bitcoin and see funds flow directly to tech platforms like Ethereum, Solana, Monad, and all L1s and L2s?
Andy: When will the altcoin season arrive?
Mert:
This is a complex question. Whether altcoins like Solana need Bitcoin to lead the rebound to warm up or can operate independently is something I personally believe they can operate independently, and there are several different angles to consider.
First, from a historical perspective, Bitcoin was supposed to be digital cash and a P2P payment system over the past eight years. Although the functionalities mentioned in the white paper, like the Lightning Network, have not truly materialized, Bitcoin has become a solid digital gold alternative. Even the Treasury Secretary mentioned two days ago that Bitcoin has found market adaptability to some extent. Although Bitcoin remains a risk asset and has not completely decoupled from the market. A few days ago, everyone was asking why Bitcoin and cryptocurrencies decoupled from the market, but ten minutes later, there was a significant drop.
My point is that the main use case for cryptocurrencies has always been value storage, which is somewhat decoupled from the cash flow of the existing market, possibly around 20%. However, if you look at the upcoming stablecoins, payment integrations, and even emerging things like on-chain listings, these do not require Bitcoin; they work directly with underlying tech companies.
In this case, I think this is their best opportunity ever to decouple to some extent. I do not think this will happen in this cycle; I believe it will take a long time to truly form a consensus. For example, I just came from New York, where people already know what Bitcoin is, but they will ask me why they should invest in Solana instead of Bitcoin or Ethereum. In their minds, Bitcoin is one thing, while Ethereum and Solana are another.
This phenomenon seems to be happening. In terms of market size, Solana's market cap is about $55 billion, which is not too much. Therefore, it only takes a few relatively strong institutions to operate on these chains and hold capital for them to achieve a rebound. So I think Bitcoin no longer needs to lead all of this because they are not the same thing. Although they are all blockchains, Bitcoin is completely different.
Of course, you could say that new L2s are emerging on Bitcoin, which is true, but I am not sure how these L2s benefit more than Bitcoin itself. On the Ethereum side, the situation is exactly the opposite; the benefits of L2s may slightly exceed those of Ethereum itself.
Institutional Adoption of Cryptocurrency
Andy:
This is a very interesting paradox. Indeed, when institutions consider Solana, crypto participants may feel that Solana has clear advantages, which is also one of the reasons Ethereum has performed poorly over the past 18 months.
If investing in Bitcoin, it is indeed the lowest risk and best risk-reward choice, especially for allocation purposes. But if you want to allocate to a smart contract platform, buying Ethereum during the last bull market may not have been the wisest choice, as its market cap was already high, while Solana is faster, better, cheaper, and has more use cases in the current crypto iteration. For "meme," DeFi, and fast trading, Solana is a winner.
Ethereum has indeed faced a dilemma over the past 18 months, trying to figure out its position. However, institutions may provide significant support for Ethereum, potentially driving a rebound in Ethereum's price.
Last night, we talked with Arthur Hayes about Ethereum and all L1 and smart contract platforms. The sentiment around Ethereum is indeed very low right now, and he predicts that after Bitcoin completes its rise, Ethereum will lead the next wave of rebounds. Institutions may see the potential of Ethereum and drive its adoption.
In the long run, institutions may find it difficult for Ethereum to reach a market cap of $1.5 trillion, while projects like Solana, Celestia, Hyperliquid, and others reaching higher market caps may be relatively feasible. This perspective reflects the market's differing views on the potential and value of different blockchain projects.
Robbie:
From a technical perspective, helping institutions realize they are still in the early stages of technology, but this technology is resilient. If they choose to adopt a certain L1, they are actually gaining the entire ecosystem. Therefore, Mert, I think you pointed out the dynamics between the network and its rollups, for example, the value that Bitcoin's rollups are currently gaining exceeds what they are returning to Bitcoin. The same goes for Ethereum's rollups. Ultimately, these naturally occurring symbiotic relationships exist in reality. I am not a fisherman, but the only fish I catch are those little fish that swim with sharks, eating the little bugs off the sharks, benefiting the sharks while the little fish also get food. This is a very symbiotic relationship, and I believe this relationship can be realized on-chain.
Regarding L1 and L2, it seems we haven't paid attention to the dynamics of this relationship. So, Andy, your question is why this is still a valuable investment for institutions? I think it's because they gain the whole ecosystem. If someone buys Ethereum, they believe they are acquiring Ethereum and all its rollups, while possibly overlooking that these rollups also have their own governance tokens.
From what I understand about institutional sentiment, when someone thinks of Ethereum, they think of all of Ethereum and its rollups. This is completely different from Bitcoin. I'm curious about your views on Solana and its network expansions. I think this perspective is more similar to Ethereum and its ecosystem rather than Bitcoin, because when someone thinks of Solana, they think of Solana and all its network expansions.
I have two questions: What is the sentiment around Solana and its network expansions? How do these network expansions and Solana's L1 ensure a symbiotic relationship between them?
Armani:
I want to return to the core of this question, which relates to the idea of Bitcoin leading the rebound and whether they can self-replace. I think it's simple. Anyone can lead any rebound; it just depends on who achieves product-market fit in a specific area.
The reality is that every project now is a meme. Bitcoin is the first and only true meme, in the purest sense. Therefore, it is a way of storing value. As long as everything is a meme, Bitcoin will always be the value ceiling for all these crypto tokens.
When you analyze the relative value between Ethereum and Solana, you find that Ethereum is already quite high, while Solana, Celestia, and other projects have relatively lower values. Clearly, investing in low-market-cap projects is more attractive because they have more room for growth relative to Bitcoin. The question is how to bypass Bitcoin and tell the story of the immense growth potential of Ethereum or other chains. The answer is simple: product-market fit and real use cases. I believe this must be the story of any smart contract platform.
In fact, it only takes one company, one use case, or one protocol to achieve escape velocity. That’s why I am optimistic about any founder daring to create an L1, because you only need one application, one "Instagram moment," or one "Uniswap moment" to create the growth you need. We can say we are still in the early stages, but the reality is that if you want to achieve that breakthrough growth, I think the key lies in having use cases that are used globally, whether it's institutional DeFi, stablecoins, or anything else. But ultimately, it all comes down to product-market fit, which is not surprising.
Recommending Solana to Institutions
Andy: I feel that the concept of network expansions may not be very relevant to our current discussion. I think the main reason to recommend Solana to institutions is its advantages in global data synchronization and high-speed transmission. Mert, have you had any in-depth discussions with institutions about Solana and Helios recently? Is there anything they were particularly interested in or didn't understand about what you said? What was their reaction?
Mert:
Of course, there are several angles. First, it depends on the capabilities of the institutions themselves, but fundamentally, they want to effectively transfer funds from point A to point B or achieve certain functionalities. If it's a fintech platform like Robinhood, they may want to attract new user demographics or expand in the market, such as entering prediction markets. Therefore, they usually express a desire to collaborate with stablecoins or real-world assets (RWA), or they may be more innovative fintech companies themselves, like Klarna or Robinhood, or some fintech company in the U.S. or Brazil.
In the case of asset issuance, they typically adopt a multi-chain strategy. From what I've seen, such as in the case of BlackRock, they clearly do not rely solely on Ethereum but choose a multi-chain strategy. The issuer behind it, Securitize, has just announced an expansion to Solana, and this is not the first time. Companies like Visa, PayPal, Mastercard, Stripe, and Google are generally unwilling to take the risk of investing on just one chain because it is too risky for them. Therefore, they usually focus on the top two or three chains, typically Solana and Ethereum. You can also see these institutional investors, like Evan Echo and Franklin Templeton, whose portfolios usually include Bitcoin, followed by Solana and Ethereum, and possibly some niche projects.
For these institutions, the normal operation of the product is key. They need compliance controls, predictable and stable payment fees, and security guarantees. This is usually their focus. Additionally, there are some companies leaning more towards "Web 2.5" that mainly care about who can attract them. In my view, as long as there is a strong B2B sales team, you can successfully collaborate with them. You can see many such deals with companies like Ripple and Stellar. If you look at their team structures, it’s usually 60 business developers and 1 engineer.
It's a combination, but ultimately, technology is key. If the product is not good, users simply won't use it. Therefore, for those institutions, I think there is some asymmetric upside, which is why Base is important for Ethereum, as they have an excellent B2B team. They know how to sell, which is why Solana has teams like Helius, which has done a lot of work in policy governance and recently hired a Chief Business Officer from Jane Street.
What I mean by business development refers to actual talent. However, Armani's point is indeed interesting. In a world where everything is a meme, Bitcoin is clearly the ceiling. While it is not a pure meme, making it truly work requires many social elements.
If we accept the premise that these chains are more like tech stocks, L1 or other chains, people will actually start to pay attention to some traditional factors, such as how much a chain can earn. As a shareholder of this chain, assuming I am a token holder, can I get a return from it? For example, what happens if I stake on Ethereum or Solana? Can I really make money? These questions become very important.
The discussion around Solana's proposal SIMD-228 is also a good example. This proposal basically states that we will significantly reduce the issuance on-chain. However, the opposition from the Solana Foundation and some institutions is that they actually prefer high staking yields, even though this comes from issuance rights, such as 8% to 9% yields.
This is why I like Rev. While some people may not like it, it is at least a relatively good indicator, especially compared to those that can be easily faked. Rev is relatively hard to fake, especially when it persists. It is not only an agent of demand but also an agent of the flow of economic benefits to users in the network. Therefore, you can start to pay attention to some fundamentals. This may take some time, and perhaps this is related to network expansions.
In my view, when people launch L2 on Solana, although there is not much difference, the implementation is different because the architecture is different. It may be used for storage, or it is a so-called temporary rollup, which you may only launch for specific tasks, execute operations, and then roll back.
The biggest difference is that Solana's L1 does not share. It is basically improving BMS and reducing latency. We do not care what you do in this block space; we care about how to operate as much as possible on this platform because this provides clear economic and technical incentives for users in the network. Therefore, such a design is very reasonable.
In certain application scenarios, it is okay if the technology is not perfect. You can choose to develop an algorithm that utilizes assets on L1. The main advantage of L2 is to expand on the foundation of the existing value ecosystem on L1, which is also the attraction of Bitcoin L2 because Bitcoin itself is very useful. The same goes for Ethereum; it has a large number of assets on L1, rather than simply expanding L1. Ethereum actually supports the development of L2 by adjusting L1, forming a rollup-centric model.
But it is important to note that even with a rollup-centric approach, rollups still need to work in conjunction with L1 and cannot ignore L1, which may be one of the root causes of many issues. If L1 can be well maintained, other issues will be resolved in the long run. Even with Ethereum, after a sufficiently long time, some viable alternatives will emerge, such as those who do not want to use Celestia can choose to use sovereign rollups or similar technologies. At that point, the incentive mechanisms and economic foundations may become blurred. Regarding network expansions, I think the biggest difference between Solana and other ecosystems is that Solana focuses on its own development, while other ecosystems may adjust their solutions so that rollups can benefit from them. Therefore, Solana is more steadfast in its position.
Backpack Theory
Andy:
I think we are basically aligned in our views on "unbiased design." When I think about the dynamics of BTC, I find that the technical design also directly focuses on a single trade-off and maximizes it. The market has always viewed this as a factor that enhances user experience and the overall appeal of the Soul token, while also using and building the Savannah chain. While I am somewhat tired of point funds, feeling that it might be a bit excessive, we can discuss that later.
Interestingly, this combines with what Armani is doing at Backpack and what Mert mentioned, that the Solana ecosystem seems to be growing in a super application manner. When thinking about the concept of the best products in the crypto space, many people think of wallets, trading platforms, stablecoins, and some mix of these, whether on their own chain or on fast, cheap chains like Solana. Jupiter is clearly the main trading venue for Solana, but recently Pump has actually migrated from Radium to Pump Swap. Jupiter has added different product suites, and Camino has just added an aggregator to their platform.
Therefore, we are entering a world of the Solana ecosystem, where it feels like there are many competitors wanting to become super applications. I am curious about what the theory behind Backpack is and why you are building this platform to have the distribution rights of the end users? At the wallet level, you can guide users to trading platforms where they can trade, earn fees, and use those fees for buybacks and other financial incentives. How do you view the acceleration of this flywheel effect?
Armani:
The Backpack theory is somewhat counterintuitive, especially for those deeply familiar with the crypto space. I previously mentioned a point: the total value of the entire crypto sector is less than Nvidia's market capitalization. I believe there are two possible futures for this industry.
One possibility is that we essentially remain in the current state, still an unregulated offshore speculative gamble. Because the main use case is trading some assets on-chain that have no real value, this can also become a decent business. Gambling, as a form of consumption, can bring joy or sadness to people, depending on their views on gambling. But gambling is indeed a real thing, and this may be where we are limited.
I don't think any of us would believe in this possibility. If that were the case, all four of us might choose to pivot our businesses to AI or other fields. Personally, I believe that crypto, finance, and technology will deeply penetrate the financial sector, closely connecting with every major financial institution globally. Regardless of which country you come from, what religion you believe in, or what political stance you hold, ultimately we can use these trust-minimized computers for transactions and value exchanges, spread across the globe.
Next, you might ask what companies and protocols you would build in a world where the trillions of value in traditional finance are tokenized and traded on-chain. I believe there will ultimately be two types of properties.
One type will be completely decentralized and fully censorship-resistant, representing the best of this field, such as Uniswap, Ethereum, Solana, etc. They have a very broad geographical distribution and attract a large number of participants. Everyone is using them, but no one owns them, so the concept of compliance is like an undefined question, akin to dividing by zero, which makes no sense. For example, how can the U.S. impose compliance rules when certain servers are running in China, where the compliance rules are completely opposite to those in the U.S., or in places like the UAE, Africa, or South America?
This is the concept of censorship resistance. I use the Pacific Ocean as a metaphor: the Pacific is a powerful medium of exchange. The U.S. can send ships and containers to Japan, Taiwan can send goods to the U.S., and China can trade with Japan; no one thinks that a country would suddenly destroy a ship because it controls a specific maritime area. The Pacific is effective because no one controls it. This uncontrolled state creates amazing human coordination.
Therefore, I see blockchain as these new natural mediums existing in the environment where we handle financial transactions. Censorship resistance is a very clear and important attribute. If we want this industry to truly matter in daily life, compliance is also a very important attribute.
If you are centralized, controlling certain things, able to shut down a system, or control people's funds, or even reorder their transactions, shut down matching engines, etc., then you must have a physical presence in a country that has a government, laws, and an army. You must follow the rules and regulations of that country.
This may sound somewhat simplistic, especially for those outside the crypto space. Laws and rules exist, but I believe most people do not truly understand this, especially those very familiar with crypto, because we have grown up in an industry without clear rules. Therefore, we have been professionally trained in this counterproductive way, thinking that rules are irrelevant and everything is fake.
In reality, these all have consequences. If you provide services to North Korea, you might end up in prison; these events have real consequences. Therefore, I believe compliance is another very important factor. If you want trillions of dollars of value to run on-chain, and this value is rooted in real life, like Apple in California, you must follow all the rules there. So, you must possess one of these two attributes: either censorship-resistant or compliant. Anything in a middle state has no way out. I am firmly convinced of this.
Thus, the theory of Backpack is that, in fact, not many crypto-native people will choose the compliance path. Many excellent builders, such as Uniswap, Jupiter, etc., are building great censorship-resistant technologies. However, there are not many who genuinely care about what we are building here and want to establish a crypto-native financial version. This is precisely the direction we are trying to position ourselves in, where we can contribute excellent products to the broader crypto ecosystem. I believe this is the foundational ethical background for how we build companies in this way.
Backpack's Super App Strategy
Andy: What is your strategy for effectively implementing the compliance vision or opening up technology to new audiences?
Armani:
There are several key points. I believe for us, the most important thing is liquidity, because once you achieve liquidity, everything else will follow. Platforms like these are liquidity hubs; you are not just connected to one chain, but to every chain. Moreover, you are not just connected to every chain, but also to the fiat on- and off-ramps of every country. In fact, this is a very special product, situated between two economies: one side is the traditional economy, i.e., the traditional banking system, and the other side is the crypto economy. Therefore, if you want to achieve the goals we want to achieve, the primary objective is to climb this mountain of liquidity. Because once you can establish and leverage this liquidity, whether you are trading contracts, holding spot assets, or conducting fiat in-and-out, you can use this position to build excellent products.
You might ask, for example, how to build stablecoins? Undoubtedly, all major stablecoins have a centralized trading platform, such as USDC on Coinbase and USDT on Bitfinex; this is not surprising. Stablecoins are the first example of real-world assets, and even though Circle does not call itself a centralized trading platform, for all practical purposes, they are indeed a centralized trading platform. You deposit tokens on one chain, whether Solana or Ethereum, and then you can withdraw to fiat or other assets. You are essentially converting one currency into another. You are wrapping assets; that is a trading platform. This liquidity enables them to achieve the distribution of USDC and effectively creates one of the most important products in the industry today.
I believe we will see more and more real-world assets (RWA) come into play over time. You might ask, with so many RWA companies being created, why has none succeeded? Why are we not all using tokenized securities on-chain now? Because no one possesses the element of distribution. No one is contributing to RWA like Coinbase does for Circle.
Therefore, the primary goal is to drive this liquidity and establish a very robust trading platform. Because from there, everything will follow. Then you can start discussing wallet technology, real-world assets, remittances and payments, and many other compelling use cases. But it all starts with the trading platform, starting with liquidity.
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