Four expansion directions of FTX are analyzed in depth

原文标题：《 FTX Trilogy, Part 3: The Everything Exchange 》

原文作者： The Generalist

原文编译：  Katie辜， Odaily 星球日报

This is the third part of the FTX History series, which explores FTX's future and new developments.

Part 1: the 'Risk Guru' SBF: What personality traits enabled SBF to dominate an $18 billion company?

Part TWO: Dancing with the Sharks: A brief history of giant FTX

It's amazing to remember that Amazon used to be just a bookstore.

A young Jeff Bezos never looked back from the hedge fund business and did a lot of research on whether his online shopping site would sell CDS or videotapes.

Selling books seems like a good option. The durability, portability and, above all, variety of books are ideal for selling online. And so it turned out.

Since then, Amazon has gradually expanded its sales to become a "everything" store, a site where you can't buy anything you can't think of.

Now that FTX has successfully followed its road map and become a major cryptocurrency exchange in the industry, we can take a look back at its early days.

Through conversations with leaders, investors, and people in the cryptocurrency community, as well as access to internal strategy documents, this paper Outlines a business scenario for FTX that is not just a cryptocurrency product, but a place where any asset can be bought, sold, and traded. Whether that ambition can be achieved, we can wait and see.

This paper will analyze the development trajectory of FTX from four aspects, including company development and mergers and acquisitions. Focus on the following:

1. Bet on sports tracks. Why might FTX's sponsorship herald more plans in the industry?

2. The cryptocurrency business landscape is expanding. How does FTX strengthen its institutional and consumer encryption products?

3. Become a bank. What does IT mean that FTX sees itself as a full-service finance company?

Step 4 Dabble in social media. Should FTX buy a social network? It may offer the best opportunity to attract a large number of customers and mainstream cryptocurrencies.

Sports world: Make an appearance in the sports world

FTX's decision to spend more than $500 million to sponsor the Miami Heat, Major League Baseball and TSM, a prominent US esports club, has left some scratching their heads. Why should cryptocurrency exchanges waste the equivalent of a growth cycle on such scatter-net, aimless marketing? How many avenues has the company neglected to make money for the sports world and fans?

If marketing is often a game of snipers and scalpels, then FTX seems to be charging into battle with a shotgun. Indeed, why haven't more established entities like Coinbase or Gemini made similar high-profile moves?

When you start to think that FTX's unusual path might have a purpose, it is no longer a random event, but that FTX's goal is different. In the next few years, we may see FTX play a big role in guessing, token pooling, NFT and ticketing systems.

The most obvious first step is betting on sports, as well as traditional sports and esports.

When I asked the SBF about FTX's foray into sport, his response was businesslike: "Maybe."

Although not confirmed by FTX's leadership, the move makes sense on the face of it. Many believe the past year has shown a link between retail investors and sports guessing. While casinos and sports leagues closed during the lockdown, trading platforms like Robinhood and Coinbase thrived, and the frenzy of adventurous football fans created chaos in the market.

FTX has been catering to this thrill-seeking user by offering highly leveraged products. But so far, it has only attracted people who can afford the high risk and are also skilled in encryption. But this is only a small part of a huge audience.

A move into sports betting would change that. FTX will find itself serving not just academic traders but ordinary people who take risks. Of course, players on the platform are also able to satisfy their guessing needs and increase average revenue per user (ARPU). Internal documents list DraftKings as a competitor for a reason.

This is not FTX's only approach to the sports market. Nearly a year after parting ways with the NBA, Washington Wizards point guard Spencer Dinwiddie has won the right to sell his tokenized partnership shares in 2020. Few investors are interested, though. Probably because Spencer Dinwiddie only sold 90 tokens for $150,000 each, but it set the stage for future projects.

FTX may be the only exchange willing to try tokenization and treat them fairly. What if thousands of fans who invested in NBA player Luka Donč I ć 's supermax contract might use that money in return for benefits? What status do these investors get, perhaps through the NFT? And, once a full market has been established, can these positions be traded like any other asset? This points to a third opportunity: sports NFTs. According to FTX's US NFT page, the company was interested in the opportunity, with NFL player cards making up most of the inventory.

The FTX NFTs

It is hard to judge how these assets should be structured. In many ways, they look like a visual "space," one that fills the space and waits for a better option to appear.

This may be an area best addressed through acquisitions. There are already a number of NFT exchanges, and while FTX will point to the large customer base it has accumulated, it is not clear whether traders will necessarily want to buy NFT from where they exchange tokens. If one is motivated by financial gain, the other is motivated by status. Issues of branding and aesthetics are important, and FTX is not good at either.

In terms of m&a, FTX could take two approaches:

1. Purchase NFT creation tools;

2. Buy the NFT market.

Dapper Labs is the most famous company to create NFT, with NBA Top Shot as its main asset. Given that Dapper is now valued at $7.5bn, the company may well be out of FTX's reach. Sorare, an Ethereum fantasy football game that sells soccer NFT trading cards, is another option, but at a premium of $3.8 billion. Moreover, given football's relative lack of popularity in the US, the latter may not help FTX win the crucial US market.

Of course, FTX would be better off focusing on the NFT market rather than specific NFT creation tools. In many ways, this makes more sense given the company's current business positioning.

Opensea, "the world's largest NFT market," was recently valued at $1.5 billion. This could strain FTX's resources. Because Opensea will bring considerable sales and moderate brand influence. Opensea has a wide range of businesses, from offering trading cards, music and sports NFTs, all of which seem to be in line with FTX in spirit. The Rarible NFT platform, which has raised $14.2 million, is likely to be much cheaper and could bring brand power to FTX.

While crypto art trading platforms such as NFT SuperRare and Foundation may appear to be smaller on the surface, such markets may represent other advantages. Both companies are known for their high-minded, elegant aesthetics, reminiscent of a gallery listing art rather than a cluttered bazaar. Whether this will fit with FTX's needs remains to be seen.

Interestingly, THE SBF notes that there is a lot of interest in sports-related NFTs, although in a different form than anything we have mentioned so far. In particular, he pointed to the potential of ticketing. SBF describes the significance of the NFT, emphasizing that tickets have a numerical representation, value, and can be interesting collectibles.He also points to the unregulated resale market, where popular tickets often sell for several times the pre-ordered price, benefiting middlemen rather than artists, players or teams.

With 19 years of exclusive naming rights to the Miami Heat stadium, FTX has plenty of time to exploit its advantage. Over time, fans are likely to bring FTX's NFT into FTX stadiums to watch the players they have invested in their contracts play, as well as the images they have acquired in digital form.

Cryptocurrencies: Chasing users and financial institutions

If you don't want to take too many risks, FTX could focus on cryptocurrencies. In the next 1-2 years, we can expect service organizations to improve, offering more mature pledge products, as well as more consumer-friendly products. We may also see the company detail its current forecast market offerings.

In spite of attracting whales, FTX's institutional business is relatively immature. Last week, for example, we noted that the company involves 2,700 institutions, a fraction of Coinbase's total. Earlier this year, Coinbase, a US exchange, reportedly had more than 8,000 services.

As interest in cryptocurrencies increases, institutional investment is likely to increase. Investors in the sector have noticed that allocations to the sector have increased dramatically. FTX will want to ensure it is positioned to attract an influx of users.

Doing so requires a strong business development and sales team. The sales cycle of such organizations is long and often requires multiple contact points. As a newcomer to the field, and a company known for its bold avant-garde, FTX will have a lot to prove.

Improvements in the platform will help. Anchorage, an institutional crypto hosting service, is clearly a top-notch player for institutions and the super-rich. To date, the company has raised $137 million and offers advanced, secure escrow solutions, insurance, easy-to-audit data and robust transactions. Can FTX build a partnership with it?

FTX is unlikely to acquire all of the crypto companies it is interested in, even though market maker Alameda Research (FTX's parent company) has invested in most of them.For now, it wants to focus on acquisitions that expand its user base. The deep integration with Institutional crypto hosting Service Anchorage could serve both parties and give FTX the opportunity to convince organizations of their maturity while placing institutional crypto hosting service Anchorage's assets into custody. There will be more development over time.

FTX should offer equity as part of its institutional upgrade. A stake allows a client to earn a return on entrusted assets, similar to interest. While the company has offered equity in its own special token, the FTT, it has a long way to go. In recent years, Coinbase has upgraded its capabilities in this area by acquiring Bison Trails, which it reportedly acquired for more than $80 million. In Alameda's portfolio, Coin98 appears to be a comprehensive DeFi solution that could help solve this problem, though it seems more focused on users.

It makes sense for FTX to offer similar products to retail investors, whether through equity stakes or otherwise. Companies like BlockFi attract a lot of customers by offering interest on their cryptocurrency assets. While this is achieved through loans rather than bets, the return for the end user is similar, albeit with a different risk profile.

Rival Nexo has raised about $50m (a tenth of BlockFi) and, despite having 2m customers, could sell at a cheaper price. The money came from Arrington. XRP  Capital, a fund linked to Ripple's crypto project, has also had problems with THE US authorities. FTX should not let these issues stop its plans, but in this case, perhaps creating it might make more sense than buying it.

In addition to these larger initiatives, FTX wants to expand some of its other product lines, beef up its quantitative trader tools and bring options trading to a less sophisticated audience, a move that could bring the same risks and criticisms as Robinhood and increase the number of markets it offers.

It predicts the expansion of the market will be particularly interesting. As far as it goes, it's a unique product in its field, and it's likely to attract a lot of attention. While there is little trading at the moment, there was a sharp spike during the US presidential campaign. Can FTX achieve sustained gains by offering more current prediction-based bets? What if every election, every Grammy or Oscar result could be bet on?

Just as sports bets can make FTX attractive to risk lovers outside the cryptocurrency space, a robust prediction market will promote speculation independent of either party's interests. It may be quite dystopian. This is another way to encourage guessing, but it fits with the idea of being the venue for everything.

Banking: Adopt defensive and offensive tactics

In SBF's view, the distinction between traditional finance and cryptocurrencies is an artificial one. When I ask him about the future of FTX, he immediately starts talking about his vision of building a full-fledged financial giant, a currency super-app that can handle payments and custody and, of course, investing across asset classes.

FTX has made it clear that it will prioritise the development of stock trading and payments capabilities.

As we detailed last week, FTX provides a market for tokenized shares, meaning users can buy synthetic Tesla shares around the clock. While this is a compelling add-on, true stock market aficionados are unlikely to shift their volumes to FTX. To compete, we should expect FTX to launch a "Robinhood contra". Just as free exchanges have added support for cryptocurrencies to strengthen their core business, FTX can sweep traditional trades.

Getting regulatory approval can take time, and patience is neither FTX's strong suit nor the market's strong suit. So an acquisition is the most likely outcome. In past interviews, SBF has said it would buy CME group, the world's largest derivatives exchange. It is not impossible. Its current market value is probably $75 billion.

What does Miami International Holdings (MIH) mean for FTX?

Admittedly, FTX would have attracted attention if it had acquired a company in one of the most cryptocurrency-friendly CITIES in the US, not to mention the home of its hottest sponsors. More importantly, MIH is the owner of the Miami Exchange (MIAX), the Minneapolis Grain Exchange (MGAX) and the Bermuda Exchange (BSX), and has won praise for its impressive technology designed specifically for the derivatives sector. In its portfolio, MIH offers some valuable products that FTX considers interesting, including agricultural contracts and volatility indices. A market for commercial real estate derivatives is coming.

Whatever FTX does here, SBF clearly wants to unify trading across asset classes on the platform, and we'll see.

FTX Pay reveals the company's other main interests. While the product is currently designed to handle online purchases, FTX is expected to expand into payments, with implications for businesses and individuals alike. The company already has an FTX card in partnership with Visa. While only partially mature, it illustrates how FTX sees the infinite future of money and wealth, where users can pay with dollars, bitcoins or other tokens and merchants can use them easily.

Blockfolio, a crypto asset management tool acquired by FTX last year, can play a key role in extending these capabilities. This is by far FTX's most mobile and consumer-friendly product. Will it be the basis for real-world wallets or peer-to-peer payment products? Blockfolio has 6-7 million users, roughly the same as Cash App's user base in 2017, which is a good place to start.

Over time, we may see FTX trying to build a truly new banking sector. Scepticism about FTX is usually a dangerous idea, but it is possible to be sceptical about the company's competence in this area.

Of course, SBF wants the business to be a full-fledged financial platform, but what does the user want?

Fintech is converging, with market leaders frequently showcasing each other. Payments giant Square has done it best, with its Cash App beating Venmo's payments, Robinhood's stock, and Coinbase's cryptocurrency space, while its recent acquisition of Afterpay reveals the possibility of a "buy now, pay later" operation. Everyone wants to play this game, everyone wants to beat their opponent.

What should FTX do?

FTX is hoping it can move faster than its competitors and claim their territory before they reach its fertile cryptocurrency territory. It's a game of attack and defence. Can FTX do that? Clearly, FTX has some advantages, namely the explosive growth of its start-up division and an impressive team. But it is very much competing with other well-run, impressive and innovative organisations.

And that's without even mentioning the uniqueness of FTX's weaknesses. While its focus on cryptocurrencies has led to its rapid rise, it could turn off consumers who consider the sector speculative and unsafe. Even many tech-savvy customers may not want a bank with the "high risk and high return" nature of cryptocurrencies.

FTX's ambition to dominate the financial world is admirable. Time will tell.

Going social: Think in terms of the CAC (Cost of user acquisition) equation

Here's a crazy idea that haunts me: FTX should buy Reddit.

Please listen to me.

As we mentioned in our previous post, Reddit has been terrible at monetizing its user base. This is reflected in the valuation of the platform, which has a daily active user (DAU) value of 1/18 that of Facebook. The new $10 billion valuation, though, reflects the rise of the company's advertising platform, which brings in $100 million a quarter. But its leverage is still low.

FTX has shown a talent for acquiring large numbers of users and monetizing them effectively through transactions. As we outlined last week, the company acquired Blockfolio's user base for the equivalent of $23 per user cost and then ramped up its cryptocurrency investments. With an average revenue contribution of $337 per user, this acquisition approach pays off quickly.

Could something similar happen to Reddit? It would be an incredible move, but it could make sense.

Reddit has 430 million users, 50 million of whom are active daily. It is arguably the most crypto-savvy of the major social networks.

Of course, Reddit is also home to the Wall Street Bets(WSB) forum behind the GameStop episode. These are the potential users from which FTX can make money. Not only are they used to trading frequently, but they also seem to favour options trading, which is more profitable.

What if the community could trade from the same interface they use for chat, doodling, and "doing things"? How powerful will this online culture be? How much money can you make from it?

This is just the beginning of a possible combination of features. What if Reddit/ politics combined with prediction markets, or Reddit/NFL player cards inserted into the sports betting industry? From the perspective of a company like FTX, the users on Reddit are like a bunch of traders waiting to be tapped.

The price tag can make such a purchase difficult. But if FTX can structure the deal effectively, it can ensure a minimum user acquisition cost very similar to that managed by Blockfolio. Reddit, valued at $10 billion, costs just $23 for 430 million users.

Of course, there are many reasons to think this is unwise. Reddit is notoriously weary and cautious about governance, which means the new ownership could cause a storm, especially in larger communities like Wall Street Bets. In addition, Reddit's user base is largely anonymous, a status that does not mesh with the principles of financial exchanges. While it is possible for users to remain anonymous, they still have to provide more information to the platform itself.

While buying Reddit may be the boldest move and creating a true social and monetary network, there are plenty of other ways FTX could achieve its vision of a mass-market business. Working with Reddit or Twitter is one option, and perhaps a good one to try. Twitter CEO Jack Dorsey was one of the first major executives to embrace the cryptocurrency "red-pill," suggesting he might be supportive.

While that won't do much from the perspective of making cryptocurrencies mainstream, it could also seek to strike deals or partnerships with social platforms in specific industries. Despite its substandard mechanics and unpleasant history, social network Bitclout has attracted attention and money with its "Crypto Twitter." However, the number of users is not set to grow significantly -- Bitclout had about 300,000 registered users at the end of June -- and a poor reputation could hinder FTX's efforts to regulate.

More interesting strategies may come from other products. Although the ethereum game axie; Infinity isn't really a social network, but the "Play to earn" game could open the way for the acquisition of non-encrypted users. According to one source, about 50% of Axie's 1 million daily active users (DAUs) had never touched cryptocurrency before signing up, which is exactly the kind of people FTX wants to attract.

Can FTX or Alameda become a big player in Axie and drive cross-platform distribution? It's unclear whether FTX's user base will be drawn to the game, although Axie's loyal players and creators could benefit from storing SLP and AXS tokens and converting them into other currencies.

It will also add an interesting feature to the FTX section, giving participants a digital domain to spend their windoms. In that respect, it could change the nature of FTX, making it less of an exchange and more of an economy, with more volume and user activity than ever imagined.

We can see how FTX will put these ideas into action in the future.

When I asked SBF about potential partnerships with social networks, he said: "We'd love to. We're looking into it."

For those who think "in CAC (cost of user acquisition) thinking", social networks may be the best opportunity to reach a large number of potential customers in the future.

FTX started out as a crypto derivatives trade, but that doesn't mean that will be its final state. Just as Amazon CEO Jeff Bezos thought books were the best card to dominate the early e-commerce market, SBF seems to have understood that cryptocurrencies represent the most dynamic component of the financial revolution.

FTX has proven itself to be a company willing to innovate and experiment, to expand its business beyond cryptocurrencies, into sports, banking and social media, and to be a place where everything can be traded.

Amazon used to be just a company selling books. In time, we may find it just as odd to think of FTX as just a cryptocurrency company.

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