What We Discuss With Robin Ji
In order to allow you to hire and retain the best talent to build your web3 company, having a sound token based compensation is crucial.
Resorting yourself to manually distributing and sending tokens is a painful process, and using excel spreadsheets runs the risk of making transfer mistakes or missing payments.
Token-based compensation is a new and powerful form of incentive alignment and is inherently different from traditional stock options compensation.
To help us understand token based compensation, I spoke with Robin Ji, the CEO and co-founder of Liquifi.
Liquifi is a platform that allows you to automate token distributions and track vesting schedules, and will save yourself time in managing your crypto payroll operations.
[00:00:00] Umar: Welcome to The Accountant Quits brought to you by the web3CFO Club, a community by Request Finance. With a curated community of web3CFOs from companies like Aave, the Sandbox, Binance, Consensys, Ledger, and many more, joining this club will allow you to network and learn best practices on web3 financial operations.
[00:00:24] Umar: On The Accountant Quits Podcast, we discuss how blockchain will impact the accounting profession and how accountants should prepare themselves for the future of work. My name is Umar, your host, and even if some might refer to me as the accountant gone rogue, my job is to provide you with the blockchain knowledge that you need that will be relevant for the accounting industry as a whole.
[00:00:47] Umar: Welcome to Episode 39. The core tenet of any web3 project is a token. In order to allow you to hire and retain the best talent to build your web3 company, having a sound token based compensation is crucial. Resorting yourself to manually distributing and sending tokens is a painful process.
[00:01:07] Umar: Traditional tools have not been built with crypto in mind. And using Excel spreadsheets runs the risk of making transfer mistakes or missing payments. Token based compensation is a new and powerful form of incentive alignment and is inherently different from traditional stock options compensation. To help us understand token based compensation, I have the pleasure to be speaking with Robin Ji, the CEO and co-founder of Liquifi.
[00:01:35] Umar: Liquifi is a platform that allows you to automate token distributions and track vesting schedules and will save yourself time in managing your crypto payroll operations. In 2022, Liquifi raised $5 million dollars led by Dragonfly Capital Partners to build the Carta for Web3 , and was backed by well-known investors like the Y Combinator, Balaji, the former CTO of Coinbase, Orange DAO, and others.
[00:02:02] Umar: In this episode today, you will learn the difference between token based compensation and traditional equity, approaches to creating a token compensation strategy, the optimal token distribution structure, what is Liquifi and how it can be used for token distribution, considerations for token lockups, and much more.
[00:02:25] Umar: Robin, welcome and thanks for making the time to be here.
[00:02:28] Robin: Hey, Umar. It’s great to be here and thanks for having me..
[00:02:31] Umar: To start, could you share with us a little bit more about your background, how you first became interested with blockchain and the story that eventually led you to co-founding Liquifi ?
[00:02:44] Robin: For sure. So let me first give you a quick, high level of my career.
[00:02:48] Robin: When I first graduated, I entered the, I guess the finance world through investment banking, and that’s when I was exposed to just the broader side of trading stocks, companies IPOing, and just generally how to analyze financial statements. And so in the beginning of my career, I think I developed a strong fundamentals around understanding finance at large.
[00:03:07] Robin: Back then, Bitcoin was still a relatively young concept and really the first time I heard about Bitcoin was my friend was like, Hey, just throw some money at this, right? Like it’d be, it’s like cool to see this like fake digital money take off and mistakenly at the time I didn’t really think of much of it.
[00:03:21] Robin: I was like, oh man, it’s only a couple hundred bucks. But you know, I’d rather, you know, I don’t know buy myself a nice gift or something elsewhere. So ended up not buying it back then. And so I kind of kept the arm length towards blockchain because I was just really focused on my initial career and tech and just probably everything outside of blockchain. It was really during like the ICO hype that I started to pay a lot more attention to it. And that’s when, you know, everybody was talking about Coinbase, it shot up to like number one in the app store and literally everybody was talking about Bitcoin and Ethereum and in hindsight, it’s kind of funny to think about, but back then I was like, wow, like decentralized Uber, like Facebook is not gonna be like the king of all the data anymore, right? Everything’s gonna be decentralized and all these tokens make sense, and of course, I didn’t make always like the best financial decisions, you know, bought some tokens that aren’t around today, but we live and learn.
[00:04:08] Robin: And I think for me it was a great experience of like learning, okay, hey, like decentralized, like computing platforms like Ethereum are super exciting, and there’s probably gonna be something here. But then, you know, as you famously know, we went through that bear market and again, I still kind of kept like at arm’s length away from crypto and blockchains.
[00:04:25] Robin: But you know, just at a high level, use Coinbase, had some Bitcoin, Ethereum in my account. Where I really fell into it was around 2020 when I started hearing about it again right, but this time was for a different reason. All these like food tokens and protocols around where you could like lend money and borrow money and exchange money started popping up and everybody was talking about, oh, like you got a yield farm. There’s all these crazy APYs you can get if you just participate early. And so yeah, again, like I really started to play around with like DeFi protocols, installed Metamask and started to use these different apps. And I think the light bulb moment for me was when I saw like millions, like billions of dollars being moved on the blockchain and I was like, holy crap.
[00:05:04] Robin: Like there are real financial services and this is not just like play money. They’re like, this is real money that people are moving. Putting at stake, no pun intended right? Like actually like risking interacting with these like weird websites that I thought, wow, like financial services, can actually be built in a digitally native way, in a way that doesn’t require a middleman.
[00:05:22] Robin: And again, just like seeing the pure volume of dollars being moved with what sort of gave me the light bulb moment. And specifically around like the exchange of assets, where I was like, wow, any tokens can be traded so anyone can literally make up any token and trade them without like needing permission.
[00:05:36] Robin: That’s amazing. That’s like the innovation of like Uniswap. As well as like just seeing what Aave and Compound were doing with just like, oh, you could lend money and earn some interest on some asset. Like, holy crap, like I’m used to like the traditional banking business model where the bank takes like a huge spread of the borrow rate, right?
[00:05:51] Robin: Versus like the lending rate. So where am I going with this? Like, so that’s when I was like, I felt this conviction of like, holy crap, this is gonna be big. Like I wanna get into crypto. And so my career went from working in investment banking, then I worked in like traditional tech and different startups.
[00:06:05] Robin: And then eventually pivoted to a crypto based startup called Eco. And then it was during my time at Eco where my co-founder and I stumbled on this problem. More specifically, I have to give a lot of credit to my co-founder Oliver, who was working at Set Protocol at the time. And he came up with this brilliant idea of like, Hey, like right now, you know, we people get paid in tokens, but it’s being managed through spreadsheets.
[00:06:27] Robin: There really isn’t a good system. I’m used to coming from companies like Amazon or Google where your RSU are available on E-Trade.com or something like that, right? And there was no equivalent portal for that. And we felt like, wow, like we’re used to such luxuries from like the web2 equity side, but that actually doesn’t exist for tokens.
[00:06:44] Robin: And so he came up like famously with this quote, like, Hey, why don’t we build the Carta for crypto? And you know he took the first lead, ended up working on it, and then convinced me to join him, and I’m very grateful for that. Cause, you know, that’s how we got started.
[00:06:57] Umar: Wow I can relate to the mistake of buying a few tokens that don’t exist anymore.
[00:07:02] Umar: I think we’ve all done that mistake. I’d like to start the episode today with comparing Token based compensation versus traditional equity. So if I’m someone working for web2 startup, I’d generally be offered compensation package with stock options. So these stock options will have a vesting period, vesting schedule, and a cliff.
[00:07:23] Umar: For listeners who are tuning in today and not very familiar with these terms .A vesting period would be the time that I would be waiting to exercise my stock options and which is actually an incentive for me to work longer at the company, and I’m more focused now on the long-term growth of the company. If I’m working for web3 company and my compensation includes tokens instead of stock options.
[00:07:50] Umar: An understanding of how vesting works is always useful to have. Robin, could you walk us through the most notable differences between token based compensation and traditional equity?
[00:08:02] Robin: Yeah, for sure. I think there are several angles to answer this question, so let me try starting with the first, which is, on like the actual utility or what you can do with the token.
[00:08:14] Robin: I would call equity a very specific asset that gives you rights to the underlying assets or liabilities of a company. Right? So let’s say we both have equity in a lemonade stand. If the lemonade, you know, stand takes on some debt that’s shared between the equity holders and if the lemonade stand accrues cash flows or revenue that’s also shared by the equity holders.
[00:08:33] Robin: It’s a very specific definition and way of splitting up ownership of a company or an entity organization. So that’s the way I think about equity. Tokens can play a similar role. Right. I think largely what we’re seeing in this day and age is like a skeuomorphic application of tokens. And what I mean by that word is that it’s very much like mirroring, like sort of like a familiar way of doing things.
[00:08:54] Robin: And so tokens, I think people have traditionally thought of a way of splitting ownership of something. And that could be a protocol, it could be a company that’s very similar to building a protocol. and there are a whole bunch of regulatory reasons on like what and what shouldn’t be done. But at a high level, again, these tokens can be used to represent ownership of something.
[00:09:12] Robin: And what we’ve seen recently is that for me, I guess like tokens can, are like more like just digital assets that can do stuff. And right now, like the very most obvious use case is let’s use this, digital item to represent, you know, one token or share or one, like some percentage point of this thing that’s being built.
[00:09:31] Robin: And so let’s say there’s a million tokens for the Uniswap protocol. I think it’s more like 10 billion or something, but whatever the number is, right? Let’s assume you have 1% of all the tokens. Thnn some people consider that of saying, Hey, you own 1% of the governance tokens of uniswap protocol that are for like, you own the governance rights of that.
[00:09:48] Robin: There are other protocols where you get some sort of like revenue share or capture of the fees that are generated. And so if you own 1% of the tokens, then you also get 1% of the revenue capture. And so it looks and smells somewhat or behaves somewhat similar to equity in a lot of ways, but I think that’s only really scratching the surface of what it can do.
[00:10:05] Robin: I think tokens can also be used to represent things like credit or fees that you might wanna pay. Like for example with Ethereum or Ether specifically, you don’t own the Ethereum protocol, but like you earn yield for basically being a validator. You use it to pay for transaction fees. And so again, what I’m trying to paint here is that it can be used in a variety of ways and like that’s the clear difference for me between equity and tokens, even though we’re still deciding what and how tokens can be used for.
[00:10:33] Robin: I’ll pause there on the, I guess, high level differences between equity and tokens. And then secondly, I can talk about how compensation is structured and the differences between the two.
[00:10:42] Umar: Yeah, so coming to token compensation strategy, that’s, that’s no easy task for web3 founders and investors today. Given that we have to take into conservation token liquidity and the volatility in crypto markets.
[00:10:57] Umar: So as a company, founders want to be providing their employees and contributors with a fair compensation package. I mentioned volatility. If my token compensation plan is market based, that would mean someone could earn way more or way less than me. That might not be something ideal and it could create frustration between team members. On Liquifi’s blog page, there is this great article titled ‘The Comprehensive Guide to Token Compensation’. Could you walk us through the different approaches available to designing token compensation plan?
[00:11:32] Robin: Yeah, so, I wouldn’t like, let’s first start off like with the why, right? And so when you think about traditional equity compensation, , there’s two types, right?
[00:11:41] Robin: There’s private company stock, right? So you’re at a startup that hasn’t gone public yet. You own shares or typically stock options in the startup itself. And then there’s like public company compensation. So there’s like, you know, from Amazon, Google, you get the actual shares, which are publicly tradable on the stock exchange.
[00:11:56] Robin: And in the latter case, I would argue it’s because it’s more liquid, because you can sell it more easily. It is closer to functioning, more like a cash equivalent because again, obviously the value fluctuates, but you can sell it immediately for cash. Where as with like private stock options, it’s like immediate, it’s like locked and you can’t sell it immediately.
[00:12:13] Robin: Tokens kind of play this weird hybrid, right? And there’s like future token awards where like, Hey, the token isn’t launched yet, and you might get those tokens in the future. And I think that is a similar parallel to like private company stocks there. And then there are other times when the token is actually live and liquid and tradeable, where I think functions closer to like the Google stock or like the, you know, Facebook, Meta, whatever you wanna call it.
[00:12:33] Robin: And it functions more like cash in that scenario. But the key distinction here is that you know, typically for these larger stocks, they’re much more liquid and much less volatile. Whereas in crypto, it’s like a very high risk, risk on asset. And in any given day it can swing, you know, 10, 15, 20, 50%, right?
[00:12:50] Robin: Depending on like young or new, the protocol is. . And so because of that, you know, the article that we wrote between myself and Zach from Dragonfly Capital, there was a thought on how to structure it in a more fair way where you try to adjust for some of that volatility or make it sure that you don’t really result in a lot of compensation inequity where one person makes a lot more than the other person just by the virtue of joining one week later.
[00:13:12] Robin: And so, you know, there’s no one right way to do this. I think this is all a thinking around like how to manage your HR functions and compensation strategy. But there are tactics like, oh hey, do you use the same like weighted average price for both people in a given window? Or, Hey, do you want to use like a dollar amount based compensation and backing into the number of tokens rather than just giving you a pure number of tokens, which can fluctuate on a given day of price?
[00:13:36] Robin: So those are some of the high level considerations. I’m happy to jump more into those in detail. But yeah, there are tactics to make sure that you’re being more fair and minimize some of the inequity you could see due to the volatility.
[00:13:46] Umar: I started the episode by saying that the core tenet of any web3 project is a token.
[00:13:52] Umar: We often hear that web3 is about ownership. I wanna ask you whether every web3 project needs to offer tokens. I mean, you spoke about the fact that we have to look at the use case for the token, whether it’s a governance token or whether the token can be used to share profits between its token holders. How should web3 projects approach this?
[00:14:14] Robin: Yeah, I’m gonna get a lot of like controversy for this, but let me speak my mind on this. Let’s think about the overall ecosystem, right, of crypto and web3. There are projects where it makes sense to launch a token and there are projects where it doesn’t make sense to launch a token, right?
[00:14:28] Robin: And so, let’s just use a very clear example, like Coinbase, Opensea, like they are like web2 companies moving web3 assets, right? And so they’re probably not gonna launch a token, and that’s fine. There are these universe of players that might be more infrastructure related, more developer tooling related where, hey, you’re completely fines a traditional business charging revenue and the revenue accrues like to, like the equity holders, that’s perfectly fine. And then there are other situations or scenarios where you launch a protocol. And so Maker, Uniswap, Aave, some of these like primitive where it functions to me more like a, like public infrastructure or more like a public good where anyone can use it, ‘permissionlessly’.
[00:15:07] Robin: Then you need to be a lot more creative on like how to incentivize the development of these protocols as well as how to make sure that they continue to exist into perpetuity. One of the bigger questions that the industry is debating is, hey, does the traditional VC backed model work where VCs initially fund a startup, they pull it with initial capital, they get ownership of it, and over time they launch a product that then, you know, becomes self-sustaining.
[00:15:32] Robin: We’ve seen that with a lot of like projects in the past, right? Like uniswap is venture backed. There’s probably a couple more, right? I’m blanking right now. But there are like the Uniswap protocols that went through the traditional classic VC route. There are others like Ethereum that I think it was kind of like a crowd fundraise, right?
[00:15:46] Robin: Like you had people that come into like the initial pre mine and they get to contribute and so like that’s another way to like fund development. Ethereum now is more like a public good where really nobody owns it. Right? It’s like pretty decentralized at this point. And so how is that possible? I think it made sense in the context of Ethereum to launch a token because that’s how they not only raise the initial capital, but they also fund the development.
[00:16:07] Robin: And at this point, it’s gotten to a place where it’s sustainable with encouraging people to contribute via like the Ethereum Foundation. You also have people that just wanna build on top of it. Cause you know, they have ownership in the protocol via the ether that they own. And so in those cases where it’s more like a public good, I think it makes sense to consider a token.
[00:16:26] Robin: Not always, but consider it. The other factor to consider is that because crypto by definition tends to operate in like a more open public way, there needs to be a way to prevent people from just forking your protocol, right? And so Uniswap and Sushi is a famous example of this. If I can just copy Uniswap then what incentive is there for someone like Uniswap to build this protocol if it can easily be copied by somebody else, and if they’re charging a fee and someone can just copy and charge a lower fee, then it’s a race to the bottom. And so I think tokens help to mitigate some impact where you create somewhat of like an allegiance to say like, Hey, I’m incentivized to better the protocol because I’m also a token holder here.
[00:17:04] Robin: And so in that way, I feel like for these open protocols, tokens are a way to create some of that defensibility as well as potentially fund initial development, provided that you do it in the right ways. If that’s not your angle, where you’re not worried about people forking your protocol or like you’re just like a private, you know, web2 database that’s moving assets, then you worry less about that, then I think you can operate with traditional equity.
[00:17:25] Robin: So to summarize, where am I going with this? I think tokens can make sense for certain crypto project. It makes more sense when you’re developing these like open public goods, partly because of like the ‘forkability’ and like the openness of being able to view the source code and to create some of that defensibility.
[00:17:39] Robin: I think you wanna create tokens to manufacture or like facilitate that incentive alignment where users benefit and they don’t, it’s not a race to the bottom where people fork each other’s code and continue to just go lower and lower on the fees.
[00:17:53] Umar: I guess the prime case for building in public then would be for DAOs. So every DAO would need to have a token, right?
[00:18:00] Robin: Well, I think, well, what do we mean by DAOs, right? Because I think of like a group of people, like the BanklessDAO is like a DAO, right? But there’s not really much to fork there, right? It’s more like a community that orients around like a shared ideal or like a mission or goal.
[00:18:13] Robin: If you’re talking about like the Uniswap DAO or like the Maker DAO or like Aave, then yeah, I could see that right? . If your code is gonna be public and you’re trying to create some of that defensibility, then yeah, having that like token incentive alignment helps to create that mode. It’s not required, I don’t think.
[00:18:29] Robin: And I think we as the crypto industry are still figuring out like, how do we fund these public goods that are open source that can be forked, but at the same time, like if it’s so easy to copy and you know, my work is gonna easily get stolen. I’m not gonna wanna build it. Right. And so there’s sort of like this identity, or I guess like tactical tactics that we need to figure out as an industry.
[00:18:48] Robin: And because it’s still so early and young, I think we’re still reasoning through that right now.
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[00:20:34] Umar: In preparing this episode, I came across an article co-authored by Cooper Turley and Lauren, maybe I’ll mispronounce this, Stephanian called the Optimal Token Vesting Schedule whereby they defined the optimal vesting structure as one that produces, and I’ll quote it, the least negative impact on token price upon each vesting dates and the lowest token volatility over the course of the vesting period.
[00:20:58] Umar: Now, not all Web3 projects are alike in their involvement around from the community and their level of decentralization. However, what’s always crucial is hiring the right core team. So for Web3 business founders and CFOs working on implementing an optimal investing structure, would there be a general benchmark they could use to allocate tokens to the team, the investors, and treasury.
[00:21:25] Robin: Yeah, I think that’s a two part question. So you talked about what do allocations look like? And so for like the crypto familiar audience we’re talking about like that, the pie chart that you typically see that says like, Hey, x% goes to the core team, y% goes to private investors, you know, z% goes to the community.
[00:21:42] Robin: I don’t think there’s like one optimal number, right? There’s no perfect number where if you follow this, you’re doing things correctly. Rather, I would reason it from first principles to understand what am I using the tokens for and how does it end up in the allocation that we end up with? So I can start off by saying like, here are the benchmark that we’ve seen from some of the major leading protocols, where on average the core team has around like 15 to 20%, private investors have 15 to 20%, and then community members making up the rest of it.
[00:22:09] Robin: And the community section can be split into, you know, what’s reserved for the DAO Treasury to fund ongoing development or contribution. There’s also what I call like marketing expenses, and that’s like a broad category of, hey I want to incentivize you to use a protocol, right? So for gaming, that’s acquiring initial users.
[00:22:25] Robin: That’s potentially creating like APY or like yield for like staking. So get more people to put their tokens up for liquidity. Just generally you just want people using your protocol and it’s like how do I, how do I solve the cold start problem, right? Where like, I mean chicken came before the egg, or the egg came before the chicken.
[00:22:41] Robin: So those are like the general benchmarks, but I think it’s almost the wrong approach to say, oh, just because you know, some project use 50%, I’m gonna copy that rather. I would reason it from first principles again. Let’s start with each of the breakdowns. I would argue that there’s some portion you wanna reserve to the community, right?
[00:22:58] Robin: Because if it’s a 100%owned by the team and 0% owned by the community, then what’s the point of a token at that point? Right? It’s really more like equity, and so a 100% for the team and 0% for the community doesn’t matter. Obviously, let’s take the other side of the extreme where you give a hundred percent to the community and 0% for the core team, does that also make sense? I don’t know. Right. Because then like the core team is not then properly incentivized to do what’s best for the protocol. So there’s some middle ground or number that makes sense. And I think every project has to figure out on their own. Taking aside like decentralization scores or like the risk of like regulatory, like compliance on like what numbers correct, I think generally you wanna reserve some healthy amount for the team. Now I’m trying to back off towards, let’s call it this community bucket next. If you give too little to the community, then you know you’re not gonna get enough, like decentralized ownership. If you give too little to community, that might mean that you’re under like spending on your marketing side, right?
[00:23:49] Robin: It’s almost like you need to build like the initial network effects before it becomes self-sustaining. But if you overspend right, that’s potentially wasting a lot of the, I guess, the token assets that could be safe for the DAO treasury or for the core team. And so again, like I think about, but I think the smartest crypto founders are trying to like maximize what I call like the spend, the acquisition spend, which is your tokens versus the engagement or lifetime value of, I guess, engagement that you get from a given customer.
[00:24:18] Robin: So almost like akin traditional advertising, there’s like this lifetime value versus customer acquisition costs. You’re trying to maximize that as much as possible, right? And so you wanna get the most number of users for the fewest amount of dilution that’s possible. So that’s the way I would think about it.
[00:24:31] Robin: And you have to be really smart about. One way this gets violated is that if you do like an airdrop that’s completely non-targeted and you just give your tokens literally to everybody, you’re gonna get a lot of people that just get these stuff. But they’re like farming your airdrop and they just dump it on the open market and they’re just like, great, I made some money.
[00:24:49] Robin: I don’t give a shit about this protocol. I’m just gonna continue to move on. That’s being inefficient because you’re targeting the wrong people. If you target the right people, you’re actually rewarding the people that are gonna be long-term users of the protocol and therefore it’s like actually a good use of like the marketing spend that we just talked about.
[00:25:03] Robin: Whatever that number ends up being, I think that makes up your community function. I’ll pause there. Any questions on that before I move on to the investor side next
[00:25:10] Umar: I think that part is clear.
[00:25:12] Robin: Okay, cool. Let me talk about investors and we can kind of talk about this holistically. We talked about core team, we talked about the community portion.
[00:25:19] Robin: There’s a remaining pool where, hey, like not all projects have resources to start from zero, right? Like building a protocol is expensive, getting a smart contract audit is expensive. Hiring developers is expensive. Sometimes you do need an initial capital. And because, you know, in this day and age, ICOs aren’t as common where people can fundraise off of tokens.
[00:25:36] Robin: Oftentimes people are raising funds from private investors or credit investors, and I think there’s also a general adage of like, when possible, you don’t want to give away too much of your company or entity to investors. Cause at that point, like there’s none left for yourself. But at the same time, if you raise too little, then you don’t have enough funds to, kickstart the initial thing. And so there’s also a balance of like raising enough funds so that you can survive and continue to fund development, but not raising too much where like you give way too much of the ownership. So like how you solve for the investor piece I think is like the right, you’re trying to balance between those two extremes that I mentioned with the community piece you’re trying to solve for how do I be maximally efficient with my community air drops or token rewards.
[00:26:14] Robin: And then the remainder would hopefully go to your team. And generally, again, we’ve seen that ratio shake out to what I described before.
[00:26:20] Umar: Perfect. I think it’s a good time now to speak about Liquifi . Like we said earlier, your co-founder Oliver had great idea of building the Carta for Web3. So like I said, we need tools built with crypto in mind.
[00:26:34] Umar: And this is exactly what Liquifi allows to manage token distribution and tracking vesting schedules so people don’t have to use their Excel spreadsheets anymore. Could you walk us through the Liquifi product and platform and the pain point it solves with token compensation.
[00:26:52] Robin: Yeah. so token compensation is like one part of what we do. During this whole conversation, we talked about the entire planning process of like, oh, how much should I give to my community? How much should I give to my investors? How much should I give to my employees? There is a way to be strategic about that, right? And so if you think about your tokens as like a budget, right?
[00:27:13] Robin: You don’t have an unlimited supply of them. You have to give them out and be smart about how you ration them. We help you with the tools for like the benchmark data and you know, planning these allocations. And so you might say, Hey, what is like my, what we call like the token pie chart or the token cap table look like if we give 60% to the community versus, you know, 30% to investors and like trying these different ratios.
[00:27:34] Robin: Allows you to experiment and test out, okay, this gives me enough budget to work with and that’s something that I might allocate to the team to go figure out. So that’s one part of like the planning process. There’s also step of actually executing and distributing those tokens. So we talked about vesting schedule earlier.
[00:27:50] Robin: There’s also a related but different concept of lock up as well. These, whether it’s vesting or lock ups, typically what we believe would be the best way to manage this is through smart contracts. Because not only is it like public, it’s decentralized, and it’s also like the primary way of moving tokens in a safe public way.
[00:28:08] Robin: And so we’ve built these smart contracts to automate the vesting so that you don’t have to manually review a spreadsheet every time of the month and initiate a transfer function for your metamask. And this is beneficial for a couple reasons, one, it’s safer, right? Because you don’t risk making these mistakes where you type in the wrong number or you send it to the wrong person.
[00:28:26] Robin: You save a lot of time, right? Cause if you have, you know, 50, a 100, 200 people you’re doing this to every single month, that’s a lot of numbers to keep you track of. And then there’s a third piece around what Liquifi does is, we’re trying to make your life as easy as possible, not only from an automation perspective, but whether it’s like financial reporting, tracking for accounting purposes, you know, making a log of the cost basis.
[00:28:48] Robin: Whenever you are moving funds as a company, it’s super important to understand all the flow of money. And so this, I mean, technically these tokens are money that’s being moved. It’s important that you keep track of that. And that includes the financial reporting side. That also includes like the payroll tax side and also like unrelated to the financial functions.
[00:29:06] Robin: There’s also like a legal compliance side of, Hey, I might need to KYC or KYB, this person if I’m giving them tokens to make sure that I’m not violating any anti money laundering or sanctions rules. So the infrastructure around the tokens is also where Liquifi very helpful, and that’s also one of the pieces that, you know, Liquifi can help on.
[00:29:25] Umar: And could you tell us how onboarding would work with Liquifi and what kind of groundwork would you expect the founders of these projects to have done even before reaching out to you?
[00:29:35] Robin: Honestly not much. Right. I would argue that the more that this is like a foreign concept to you, the more that you’re confused, then the more helpful we are, right?
[00:29:42] Robin: Because we sort of give you like a very like structured way of approaching this and viewing this versus saying, Hey, go figure it out yourself. So I don’t think we expect any legwork. We provide different levels of services to people with different levels of crypto familiarity, and that’s fine, right? So I wouldn’t tell anybody to like, Hey, do your homework before talking to us.
[00:30:01] Robin: Really, the only requirement is like if you’re launching a token or have already launched a token and you feel like, man, this is so painful. I don’t wanna do this manually anymore, or like, I’m worried that I’m gonna make a mistake. That’s when you reach out to Liquifi and the actual onboarding process is pretty straightforward.
[00:30:15] Robin: We pretty much just collect all the relevant details of like who you’re trying to pay and tokens, what’s their wallet addresses. I mean, we have other features like email notifications and like, you know, sending test transactions, but that’s kind of like outside of like the general onboarding process, it’s really about saying, Hey, I got 10 employees.
[00:30:33] Robin: Some of them have this vesting schedule, some of them have this other different vesting schedule. You input those details, we set it up for you, and then once you set it up, you pretty much just use it as it’s intended, which is, it automatically distributes those token.
[00:30:44] Umar: I think pricing would work differently if it’s a project who already has a token or it’s pre token stage. Let’s say, for companies who already have tokens and they just want to automate that token distribution process.
[00:30:56] Umar: How would pricing work for these companies? Would it be still on a case by case basis, or is it more than like a general pricing structure?
[00:31:06] Robin: Yeah, so we don’t really have like a general, hey, come use our product for the low price of $99.99. Like, it doesn’t work that way. We are like a, what we call like a B2B SaaS product for crypto.
[00:31:17] Robin: And so it’s gonna be really dependent on your use case. Sometimes there are custom implementations, sometimes there are more like heavy onboardings, and so depending on exactly what you’re doing, how many stakeholders you have, how much money you’re moving, we tailor a custom price that makes sense for you.
[00:31:31] Robin: That’s within your budget. So hard to say like, Hey, there’s a blanket price. If you have any questions about pricing, please feel free to reach out to me or at the Liquifi team and we can hopefully hop on a call with you.
[00:31:41] Umar: Cool. I wanna jump on and or speak about streaming and vesting. So one of the new primitives web3 offers is streaming payments and getting paid every second.
[00:31:52] Umar: So now web3 projects can lock up funds and release them periodically in a stream to their contributors and, and employees. And what’s also exciting about this is you could use a dollar cost averaging approach to invest your streamed tokens every second. I wanna ask you, how do you see the potential for streaming to work in conjunction with vesting?
[00:32:14] Umar: And how should web3 teams approach this today?
[00:32:19] Robin: Yeah, so let’s talk about what each of these are. Cause I think there’s some overlap and there’s sometimes there’s, they’re also different in some ways. Both streaming and vesting deal with, hey, there’s a certain time period and within that time period you get some sort of rate of tokens that initially start lock and then unlock or get released to you, right?
[00:32:39] Robin: For streaming specifically, it’s done on like a block by block basis, right? So every second or whatever, every 13 seconds, you get a fraction that’s released to you. I would argue like. Every second vesting class streaming, yeah, right, like functionally it performs very similarly. Right. So I think we’re just talking definitions at this point.
[00:32:55] Robin: So I guess I don’t see streaming investing as like different. I see streaming as a subset of vesting where it’s in a much more micro time interval, whereas vesting was traditionally thought of as different time period of months, years, sometimes weeks, sometimes days. Right. What both of these permits specifically for crypto is that, you’re basically creating like, almost like, I hate to use this word, but like a stream of castles, right? Like this is all like an annuity or it’s like a thing that continues to like send money at some given rate. I think what people in this industry are starting to think about is how can you potentially trade some of these assets, right?
[00:33:27] Robin: And so liquid staking is like a kind of related example, right? Like you have ether, then you have staked ether, and then you have like wrapped staked ether where you can like basically, you know, move those. I think there’s a similar parallel in the future of like getting these streams, wrapping them and representing them as either a token or an NFT, and then moving those around ight?
[00:33:45] Robin: So for example, I don’t know if this makes sense, but like let’s assume that I pay Umar like $10 every day for the next month. In theory, you could sell that to somebody else, right? There’s like a, if you net present value, that there’s some dollar value to that stream, and I don’t think we’ve really explored this in crypto yet, but because everything can be tokenized, whether in a non fungible token or fungible token, I think it’s really exciting to see how you can incorporate these streams as a part of the overall larger DeFi primitive.
[00:34:13] Robin: Again, I’m not seeing much of it now. I know a lot of teams are thinking about it, and that’s something like we have to look for. My team are also thinking about. But I think that’s super exciting, if and when we get there, but still very much experimental and I think there’s a lot to prove out before, you know, we say, you know, this is like the clear use case for it.
[00:34:28] Umar: Before we speak a bit about the challenges for adoption, I wanna touch on token lockups. People who are not familiar or token lockup would be, it’s a restricted time period where your tokens cannot be sold as transferred after you’ve claimed them. Correct me if I’m wrong though.
[00:34:45] Robin: No, I’m being very, very like pedantic
[00:34:49] Robin: Is that the right word? Like pedantic with definitions. Like you don’t have to claim it specifically. So for example, let’s assume I gave Umar a 100 tokens. 50 he claimed. 50 he didn’t claim. You could still have like a global lockup that surrounds these 100 tokens, that can’t be sold or transferred.
[00:35:05] Umar: Very, very minor definition. I’m being maybe overly critical.[00:35:11] Umar: I wanna ask you, have you seen web3 projects address, or how have you seen web3 projects address token lockups to manage their token performance, as these projects now is scaling, we’re still very early in crypto, and many of these crypto projects still have their core team working together. But how have you seen them addressing token lockup?
[00:35:32] Robin: Well, so people are leveraging lockups. For I, there’s multiple reasons why you might leverage them. Most oftentimes, you’re trying to like manage selling pressure for a variety of reasons, right?
[00:35:43] Robin: One common example is, hey, like all these tokens will get released. Like let’s say you’ve vested like 50% of your tokens, and on the date of your token launch, you get those 50% of tokens, on the initial mint, a lot of times projects are like, Hey, because so many people are getting their tokens all at once, we don’t want everybody to sell at once at the same time.
[00:36:02] Robin: And so I might enforce like a lockup period so that we could smooth out some of the selling period. So you could say, for example, hey, instead of initially, you know, on the first day anyone can sell it, you’re gonna make sure that insiders, like the team members or investors, has to at least hold for one year.
[00:36:17] Robin: And that does a couple things, right? One, it prevents like the price from tankingon the first day, not guaranteed, but it helps to like mitigate some of that impact. Two, it creates this incentive of like, Hey, if I can’t sell these tokens for one year, you know, my incentive is to basically increase the value of the tokens, right?
[00:36:32] Robin: I don’t want to decrease the value if I’m like a rational actor. I actually want to increase the value of the tokens. So I should do what I can to support the protocol, whether it’s like to market it or promote it or contribute to it in some way. And so lockups have this added benefit of creating like a stronger incentive alignment for the token holders.
[00:36:49] Robin: There might be also like regulatory reasons why you wanna restrict trading periods, and that’s like a whole another conversation that, you know, I’m not equipped to talk about, but like there are products for, you know, compliance reasons. They might enforce a lockup as well.
[00:37:01] Umar: Moving on to the challenges that you guys are facing for adoption, what would you say today are some of those biggest challenges faced by Liquifi, both in terms of regulation, education or communication?
[00:37:16] Robin: Yeah, I would say like the industry is still so early. A lot of times, you know, we’re, we’re still in this day and age where people are still figuring out like what to do with tokens, how to use tokens. And so we do our part to try to like educate people on what we know. Like, Hey, here’s how you manage the operations of the token.
[00:37:33] Robin: But that doesn’t even get into like, how should tokens be used in the first place and how to do it in a compliant way, especially for like US based protocols or companies. With regulatory, like what I call like the lack of regulatory clarity, I think it’s both an opportunity as well as a potential headwind for Liquifi where like, Hey, it might make blockchain tokens more challenging, but at the same time, if it’s more painful or more difficult to do it, maybe that’s an opportunity for us to help with some of the challenges there.
[00:38:00] Robin: So I would say again, like the overall summary of like what Liquifi is struggling with is not really like, hey, like how to manage your tokens, but more so how does the broader industry think about tokens? What is the perception of it? What’s like an actual consumer use case that makes sense? And I think we’re still figuring it out and that’s okay.
[00:38:16] Robin: We’re like in an early stage where this is all still very experimental and you know, we’re not trying to optimize for like being a massive business today, but we wanna optimize for being a massive business in three to five years, as more use cases are tested and figured out. It’s, you know, you know, it’s building towards that future where we think it’s gonna head to.
[00:38:36] Umar: Yeah, I completely agree with you that I see it as an opportunity that actually Liquifi is trailblazing this path for the rest of us on how do we manage token distribution, and it’s very early, but if the future is tokenized, Liquifi for me will play a key role in that in crypto payroll. Moving on to, so we spoke about the challenges for adoption.
[00:38:59] Umar: Could you share some of the upcoming features or milestones that Liquifi has for this year?
[00:39:06] Robin: Yeah, so for this year, I think it’s just doubling down on what’s worked. So I would say, you know, we’ve been around for like a little over a year now and, in our first year was really tackling that first problem that Oliver, you know, discovered when he was, you know, first working on this, which was, Hey, as an employee, how do I manage my tokens?
[00:39:23] Robin: How do I get this great experience that I’m used to in web2, where I have this portal that takes care of everything for me, for my stock options and for equity? And so it’s continued to double down on that. I would argue it’s just we just have so much to build. Like we got our first start and we have, I think the basic core.
[00:39:38] Robin: We have our smart contracts, we have the UI, we have the that you can use to set up token plans. It’s just continuing to refine that because you know, our product definitely needs improvement. It’s not perfect. We’re continuing to add new features and listen to our customers and, spending time with our customers is where we wanna spend most of our time.
[00:39:55] Robin: Like they’re gonna have feature requests saying, Hey, I need ABC custom thing, or, this quite doesn’t make sense to me. So just doubling down on that broadly, like in our future roadmap, we service any companies that’s preparing for a token launch or have already launched a token and doubling down on the compliance side, whether it’s legal, financial reporting, or taxes.
[00:40:15] Robin: And so any features that help in those avenues is where we’re gonna spend our time in, you know, in the rest of this year.
[00:40:21] Umar: Perfect. Robin, we are coming to the end of the episode today. Has there been anything else that maybe we didn’t touch on that you’d like to share with our listeners?
[00:40:30] Robin: Anything we didn’t touch on?
[00:40:32] Robin: I mean, there’s just so much, right? But I would argue like, I think it’s good for, at a high level, for your audience to, hey, understand that like launching a crypto business can be challenging, but they’re gonna be innovations to help make it a lot easier. You know, we hope that we could play a small part in that where we don’t have to take care of a lot of these like internal administrative functions and you could really just focus on the core innovation. What’s exciting about, you know, I guess the personal mission that I get really excited about is there’s a lot of infrastructure that’s being built and we’re still thinking about some of like the scaling block space challenges at like the L1 or L2 level. But over time we need more and more people to innovate at the application level to make something that people actually need or want.
[00:41:09] Robin: And whether that’s making fun games or useful tools or unlocking financial services. These are all things that I think people need to build, and so if we can play a small part in helping you be more efficient in building those things, I think that’s great. And so please keep that in mind that, hey, like we’re depending on everybody to innovate at the application level.
[00:41:28] Robin: Like it doesn’t make sense for you to just focus on anything else that distracts you from that goal. And so hopefully we can help with that.
[00:41:34] Umar: Perfect. Before we go this, a last question that I usually ask my guests is, do you have a quote or a maxim that you live?
[00:41:42] Robin: Quote or Maxim that I live by, live by is a strong word, right?
[00:41:46] Robin: I don’t wanna say like, this is like my life mission, but let me say a quote that I particularly like and something that we try to emphasize at Liquifi as one of our values. The quote I’m gonna butcher this is, I don’t care if I’m the personal one that’s right. . I just care that we are right. So it’s more important to get to the truth than being the person that comes up with the truth.
[00:42:06] Robin: So I really don’t care if I’m the person that didn’t come up with the idea or I look like the fool that suggested something wrong. I’m more happier, or I’m much more like excited when we get to the right answer and that’s all I care about. So that manifests itself in work and our culture of having a low ego, but hopefully in life of just being open-minded, listening to other people, not always assuming that you’re correct.
[00:42:27] Robin: And approaching a conversation with a desire to learn rather than a desire to be right.
[00:42:33] Umar: Yeah, I love that and I think that’s a fundamental value to have if you are working with a team. It reminds me of something else of another one called, if you want to go fast, go alone. But if you want to go far, go together.
[00:42:44] Umar: It’s among those same lines. Yeah.
[00:42:47] Robin: Yeah, yeah. Love it.
[00:42:49] Umar: Robin, thanks a lot for coming today. I personally learned a ton preparing this episode on token based compensation. It was a subject that we had not yet addressed on the podcast, and I’m so happy that I got to speak to you about it. Before we go, if people want to learn more about Liquifi or if people want to reach out to you, what’s the best way to do so?
[00:43:11] Robin: Yeah, so you can learn more about Liquifi by going to our website. That’s www.liquifi.financw. That’s spelled liquifi.finance. You can also follow us on Twitter. You can follow me @robindavidji.. Or you know, liquifi_finance. At Twitter, we post a lot of content around tokens, token operations, token compliance, etc
[00:43:39] Robin: So definitely that’s one of the best places to follow us.
[00:43:42] Umar: Perfect. Well, thanks a lot for coming in today, Robin, and we’ll speak soon.
[00:43:47] Umar: All right. Thanks so much for Umar it’s great to be here.
[00:43:50] Umar: I would like to thank everyone for listening to this episode. You will find all the links of the episode, shownotes and transcripts on the website of The Accountant Quits at theaccountantquits.com.
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