Building a multi-asset trading ecosystem with Fabriik’s Roy Bernhard
This week on the Meet the founder series, host, Paul Gordon was joined by Roy…
This week on the Meet the founder series, host, Paul Gordon was joined by Roy Bernhard, CEO, Chief Visionary, and Co-founder at Fabriik to discuss the company’s vision for building a full suite of services designed from the ground up to simplify access, trading & management of not only native digital assets but all asset classes for the next generation of financial markets.
Roy comes from a formal engineering-computer science background with a ton of experience as the CTO and head of technology in a lot of different industries spanning online video gaming and creating MMO RPGs for kids. More recently, he has built a quant fund as well as a law firm for the past 10 years, marrying his experience in tech and law to surmount the complicity and regulatory hurdles of the crypto space. Two years ago, after his execution education at Harvard, Roy was inspired by an old friend who opened the door to digital assets and cryptocurrency.
The Origins of Fabriik
(03:15) Fabriik started with an idea from Rob’s friend on cryptocurrency arbitrage. The fellow had been in the digital asset space and found that were lots of discrepancies between the pricing on different exchanges when moving capital back and forth. Knowing that Roy had built a quant-based fund in the past and, they leveraged on their collective experience and built a digital/cryptocurrency asset hedge fund, and launched it in the Cayman Islands.
“We started it off as the Bayesian group, and our quant fund was based on the Bayesian inference principle…We then found out that the technology that we developed, we called it “Project Inference,” was much more useful than just acting as a backend to a hedge fund, to move into a lot of the markets, businesses and financial services industry required. So we took all that technology and we refactored it slightly. And then we were able to use it as the core platform for market-making liquidity provision and fully automated OTC services. And that allowed us to just springboard from there and grow,” Roy explained.
(05:08) “We use that as a tenet in asking, how do we create a financial services ecosystem that allows not just somebody who’s high net worth or ultra-high net worth, or an institution, but somebody who’s sitting in a village in Africa, or a rickshaw even in North America or in the UK, who makes $10, $25…, how do we take one of those people and help them to do things?” Roy added.
The Fabriik Ecosystem
(07:51) Fabriik is filling the gaps within the current ecosystem of products that exist, starting from the Fabriik smart wallet. The premise is of the wallet is simplicity and accessibility, Roy said.
“We feel that the next battleground for the digital asset space and the blockchain space, and it’s been for a while, is about accessibility; giving people the ability to use all of that function and power but feel safe, protected, and be able to do it in a super simple and easy way. The smart wallet is a manifestation of that” Roy elaborated.
For the smart wallet to truly deliver on components like open finance, open banking, integrating different institutions like lending and borrowing and trading and holding, it needs to be powered by a very complex and interconnected backend.
(08:48) That backend for Fabriik consists of things of three core products; that is the qualified custodian product, which is both digital and non-digital assets, the Fabriik markets business (OTC, market-making and wholesale liquidity platform to give exposure and accessibility to many different liquid markets) and the exchange, which allows for more traditional trading.
Fabriik’s exchange, with the help of its technology and licences, will allow for both spot and derivatives trading. It will also push into tokenized securities and tokenize real-world assets and digital assets, to altogether create pairs that currently do no exist.
Underneath this tri-fold infrastructure is the Fabriik Digital Objects offering, a tokenization platform that will tie all of those pieces together. The resulting magic of those tied pieces makes it possible for someone at the wallet level, for example, to take their Fortnite Skin (the value of them in their wallet, say $200) as a tile, and then drag that tile and drop it onto their credit card and pay that amount off and not worry about all the complication that happens in the background on the exchange seamlessly.
SECURITY: CUSTODY vs 3RD PARTY WALLETS
(11:31) As with many things, Fabriik takes a hybrid approach on wallets. They do not advocate solely for pure self custodial types of wallets or infrastructure or others at the third-party end.
“We think that there’s a balance between the two. There is an opportunity for people to have control, but the reality is the reason why banks existed in the first place was that people who had gold or assets did not feel like they have the resources to keep them safe, and we feel, we have the same philosophy” Roy said.
Fabriik wants people to custody assets, hold their keys and details to unlock access for them. But for others who believe they need that support to safeguard their assets, the qualified custodian allows Fabriik to both custody assets in a regulated and secure manner, properly licensed and checked on regularly. Fabriik is also going to allow for stored assets to be insured, a feature they are still implementing.
Why Fabriik is Building on Top of the Bitcoin SV network.
(15:15) While some people may find Fabriik’s choice of blockchain controversial, the company believes it serves its purpose best.
Three elements were most important for Fabriik in the selection of a blockchain: scalability cost efficiency and speed of transactions. On those three elements, BSV handled them elegantly, Roy said.
Fabriik admits some politics surround BSV refuses to focus on it.
(15:29) “It would be silly not to use open-source, publicly available, decentralized technology if it’s the best thing to use, just because there are some political issues that other people are having. No one person can destroy this blockchain. It doesn’t work that way. We felt very strongly it is going to give us a massive edge…” Roy stated.
Building and Scaling Fabriik in a Pandemic.
(17:23) Fabriik is headquartered in London, with subsidiaries that are wholly owned all around the world. Fabriik was built at the cusp of the pandemic with six people. The company now employs 152 people in nine different regions around the world.
(18:43) Fabriik believes instead of barriers regulators act more like guideposts. Previously, no lines had been paved on the analogical “road” and so you don’t know if in one kilometre from now you are on route to go into a head-on collision, Roy explained. Regulators are now starting to paint lines on the road and that allows regulatory-first companies like Fabriik who are not trying to be “Cowboys” to lead into relationships with regulators, regulatory bodies, governments, lobbying groups.
As of now, the Fabriik Markets product is up and running, together with the OTC desk, the market-making product and wholesale liquidity.
The Fabriik qualified custodian just launched a little less than a month ago, with clients already being onboarded. The company’s exchange is in what it calls a “dress rehearsal house.”
It is being operated internally for some weeks before it goes public.
Fabriik leverages its global employees based to test in house how the product would work for several people across different geographies.
Fabriik’s exchange is going to be launched in the US and the EU, initially we starting in California as a marketplace.
The company has also applied for the MTF license in the EU, which will allow it to be regulatorily compliant to launch in the EU. The company hopes to be fully operational across all of the US and all of the EU with the exchange product as well as the custodian in the next year.
Acquisition of Money Botton
The company has also acquired Money Button which was a leading wallet in the BSE ecosystem. As a result, the product has already a significant user base on its wallet and the tokenization platforms. The tokenization platform has thousands of tokens that have already been minted and issued.
(23:20) “There have been two developers that have built full NFT marketplaces actually on their own, just using the API without even having to talk to us” Roy added.
The company’s massive funding has enabled it to achieve these significant milestones.
(24:11) “There is a lot of competition. Some of the incumbents are incredibly well-funded so we felt that what we needed to do right up front was get a significant amount of capital and hit this as an enterprise organization, which is why we ramped up and hired so many people very quickly, and why we made that ecosystem play” Roy stated.
Building for Everyone
(25:35) For all the services that Fabriik provides, there exists an API layer to business and channel partners as compliance-as-a-service, tokenization-as-a-service, payments-as-a-service and so on.
Fabriik believes that to create an ecosystem that has a full gamut of liquidity, and attracts both institutional retail players, you need to have different products and services that work either ways. So for example, Fabriik’s custodian can onboard an individual, a large institutional, an endowment or a hedge fund.
The Future of Fabriik and the Industry at Large
The future lies in tokenized real-world assets and tokenized securities where almost every asset on the planet is associated, or is linked to a digital token or component, Roy said.
“…as soon as you do that, the fungibility, transferability and movement of all of those assets become completely seamless and you can do some pretty amazing things. For example, instead of going to a bank to get a mortgage for my property, I can take a mortgage from a collective group of individuals that live within 25 kilometres of my home, take advantage of the aggregation of financial products and services that are typically being done by an intermediary while still having intermediaries involved for security and insurance and protection” Roy added.
(30:08) Over the next three to five years, there is going to be massive unlocking of assets that people don’t even know exist that are locked tightly in a 15-year real estate trust that is locked in some country, Roy believes. Further, people will transact in the financial services space the same way that people are communicating.
“…when people think about communication now, it doesn’t matter where you are in the world. I don’t think twice, but when I was younger, getting a calling card… was so complicated. And I feel like we’re 30 years ago, as far as the asset space goes, where comms was 30 years ago. And I think that we’re going to see a much quicker adoption…” Roy explained.
Find Fabriik at fabriik.com, interact with them via the chat on their website, on LinkedIn and Twitter as fabriik_market.
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