Overview
Late 2021, GnosisDAO voted to invest in what was then called TickDAO.
The investment was to develop the TickSpread, a hybrid cryptocurrency exchange powered by an off-chain, auction-based order matching system.
TickSpread has been under development for over four years (since early 2020), and last year was rebranded to Quiver. You can see our current exchange live here.
In a similar fashion to CoW Swap, Quiver implements batch auctions. Quiver batch auctions, however, happen in a fraction of a second, and their main purpose is not finding coincidence-of-wants, but rather protecting liquidity providers from losing money to arbitrage bots by getting the bots to compete with each other on price.
Quiver currently focuses exclusively on derivatives, rather than spot/swaps.
Until very recently, we were mostly in building / iterating on product-market-fit mode. Product was very much in beta (as seen by the fact that, even today, users still face a $500 deposit limit).
Recently, however, our volume has been growing significantly, and as of last week we’ve closed a strategic partnership to increase our liquidity significantly. Thanks to our unique technology, this will be very much sustainable and require no subsidies.
We’re sharing information from the last report that we sent to investors (early June) with the entire Gnosis community.
JUNE REPORT
Recent Traction
Revenue comes from (1) trading fees, which scales directly with trading activity, and (2) liquidity providing bots. Revenue from (1) is more predictable, but ~65% of the total revenue comes from (2). Here is the breakdown (fees + liquidity bots):
Exchanges frequently face a cold-start problem: they need a lot of volume to get good liquidity, but they also need good liquidity to grow and get new users and more volume.
In order to keep a good user experience while having shallow liquidity, our strategy has been to start with small deposit limits, and then work to increase our liquidity as more users start to demand bigger trades.
Considering the fact that we offer high-leverage trading, and that we are currently bootstrapping our own liquidity, and in order to offer a good experience for users with low slippage trades, we have set the limit to $500 per deposit.
Recently our users have been demanding higher deposit limits and experimenting with larger trades and positions on our exchange:
- For example, we recently had a user make 18 different deposits for a total deposit amount of $9,000, which was used with >50x leverage to open a position of over $500,000 in size.
- Many users are currently opening and closing positions “slowly” (in many different small trades) due to our still relatively shallow liquidity, in order to avoid high slippage.
- We suffered two different attempts at price manipulation. In both situations our funding mechanism worked as expected and the manipulation attempt was unprofitable to the user.
- In the above attempts our safety price-band mechanism prevented undue liquidations, but nonetheless this generated some disruption to other users.
Based on this information, our exchange has the potential for much more growth with increased liquidity.
- Our unique technology differentiator, our frequent-batch auction (FBA) matching engine, has succeeded at ensuring that we don’t need to subsidize liquidity, even while we maintain very small bid-ask spreads. The liquidity providing bots have been steadily making money for more than a year.
- As a result, we are confident that a lot more capital could be allocated to providing liquidity at Quiver in a sustainable way:
- We are looking for strategic partnerships to provide deep liquidity to Quiver.
- We are working to implement liquidity pools for our own users to provide liquidity, while benefiting from the protection provided by our auction-based engine.
- Given our experience in the market making business, we are also considering a separate structure for investors interested in providing liquidity in our platform.
Finances
| Total 2023 | YTD 2024 | |
|---|---|---|
| Volume | 152MM | 184MM |
| Fee Total | $6,537 | $10,146 |
| Revenue Total | $21,526 | $20,142 |
Quiver Assets:
Liquidity Bots: $140,497
Stablecoin Pool: $50,000
Hot Wallets: $44,166
Operational Capital: $234,663
TickDAO Cold Wallet: $187,402
Other Internal Accounts: $42,726
Company Wallets: $37,105
Fiat Currency: $36,897
Total Treasury: $304,130
Total Liquid Assets: $538,793
Burn
Payroll: $29,695
Operating Expenses: $4,438
Marketing Expenses: $5,240 (monthly average YTD).
Monthly Revenue: $4,028 (monthly average YTD).
Average Burn: $35,345
Total Runway: 15.2 months
Runway (excluding operational capital): 8.6 months
Team
Team size/structure: 11 full-time, 1 part-time:
- Founders: 2
- Development: 6
- Marketing: 3
- Product: 1
Key Metrics
Cumulative revenue per user over time (filtered by traders making at least a $20 deposit). This shows the LTV from users trending towards $100.
Active users (2023): 622
YTD 2024:
Active users: 4312
Marketing Campaigns: $15,449
Tournament Rewards: $10,750
Total Acquisition Costs: $26,199
New Users (filter: >20$ deposit): 566
Estimated CAC: $46
Average user LTV (after 70 weeks): $96
LTV/CAC Ratio: 2.09
Value Proposition
Our current user base is composed of small “degen” traders and early adopters, and they use Quiver mostly due to:
- Very low fees and small spreads
- High available leverage (up to 100x)
- No KYC requirements
- Chance to be among the winners in our tournaments
- Expectation of future airdrop
Many of our existing users exhibit martingale “double-the-bet” behaviors, leading to significant churn after a few months. This is demonstrated by our LTV cumulative revenue chart, which indicates that most of the revenue is obtained from our users in the first three months of their joining our platform.
As we grow and increase our liquidity, we want to gradually incorporate a more sustainable user base of bigger and more sophisticated traders, as well as providing more risk-management tools for our existing users.
Crypto Market Outlook
We think that regardless of the growing popularity of crypto as an investment asset (exemplified by the approval of ETFs), crypto as a technology is still far from mainstream and will remain so until people can easily create secure wallets without having to store private seed phrases/keys.
We are optimistic with the recent progress on account abstraction and smart wallets (e.g. social recovery wallets), which is necessary to really move crypto into the mainstream (>1 billion users with wallets).
We’re therefore positioning ourselves for a future world in which access to smart contracts will not be a major barrier to user acquisition.
Next Steps
We are going to release a Quiver token (QVR) later this year. This is important both for attracting capital and as a mechanism to increase awareness and promote our exchange. More details will be provided soon.
We are also ready to launch a variety of unique experimental markets on our platform.
Starting this week, we’ll be launching conditional markets, a concept pioneered by the prominent economist Robin Hanson, who is serving as our advisor. The very first conditional market pair is going to represent what the Bitcoin price will be depending on who wins the US presidential election.
We’re also working on adding liquidity pools to our platform: these are going to be the very first liquidity pools protected from losing money to arbitrage bots.
Cap Table
An extra 20 million tokens/shares (~4%) have been added to the employee pool and allocated to new team members, with a vesting over 4 years from their respective start dates. The company retains the right to buy these shares back at a ~1B USD valuation.
END REPORT
NEXT STEPS – Message to GnosisDAO
Continuing Vision
We remain steadfast at our long-held goal of creating the most liquid exchange for all kinds of derivatives, by leveraging frequent batch auctions technology.
It has been a widespread assumption that, due to significant scale effects of cryptocurrency exchanges, small upcoming projects would have significant chicken-and-egg liquidity problems, making them unlikely to succeed against large incumbents, such as Binance.
For a while it seemed like then fast-growing competitor, FTX, was poised to overcome these effects, ostensibly due to the superior liquidity technology of its trading desk, Alameda. We now know, however, that FTX’s liquidity was completely dependent on the heavily money-losing operation at Alameda, which was subsidized by large-scale criminal fraud.
Decentralized perpetual protocols have so far not been able to get enough of a market share to be a real threat to the dominance of centralized exchanges. Binance has actually increased its market share on the derivatives segment over the last couple years.
Quiver offers a technological solution – leveraging batch auctions to protect liquidity providers – that for the first time opens up the game, and which we believe will be fundamental for derivatives exchanges to one day dominate, not only derivatives on cryptocurrencies, but also on real-world assets such as stocks, bonds, and commodities.
Scale / Growth
Technological advantages notwithstanding, there are still large gains of scale in the cryptocurrency derivatives business, and we’re planning to unlock a new scale of growth, with increased volume and liquidity reinforcing each other.
To help accelerate that, we’re planning a token launch later this year. This will provide some initial liquidity to both GnosisDAO and other early investors.
As GnosisDAO launches its GnosisVC Venture Fund, we hope that its early investment in TickDAO/Quiver will be increasingly seen as a success case, both financially and as a contributor to the overall Gnosis ecosystem, as we’ll be below.
Gnosis 3.0 and Quiver
Quiver is in many ways related to the Gnosis 1.0 prediction markets vision.
While we are not focusing specifically on the prediction market segment, Quiver believes strongly in the promise of conditional markets, both as a tool for incorporating information into markets more effectively, and as a governance mechanism for making better decisions.
We’ve recently launched a beta version of conditional futures (prices of Bitcoin depending on the winner of the 2024 US presidential election). As far as we’re aware, this is the first implementation of conditional derivatives.
More interesting than the absolute prices of conditional markets, is the predicted impact on various metrics. Just as we can see the predicted impact of the US election on bitcoin prices, we can use them to estimate the impact on expected inflation, GDP, unemployment, stock prices, chances of war, and much more. In the future, this can be used as a credibly-neutral information source on metrics people care about that can guide decision-making.
We’ve long been believers in the concept of futarchy created by Professor Robin Hanson: the idea that decisions could be made based on the estimated impact from conditional markets. This concept can be easily applied to DAOs – leading to FAOs (Futarchy Autonomous Organizations). Quiver itself will be run as a FAO according to this mechanism.
Professor Robin Hanson and I are working on a futarchy paper with some practical proposals both for for-profit, token-prize-maximizing futarchies, but also for other finds of futarchies where capital can be allocated to maximize specific metrics.
Among the things we’re working on is a procedure on how to auction off “proposals slots” for new improvement proposals, as well as how to reward creators of proposals proportionally to the value their proposals contribute to the ecosystem. Hopefully this will dramatically increase participation in DAOs/FAOs adopting such a scheme!
We hope to contribute to the Gnosis 3.0 vision by running conditional derivatives on metrics the Gnosis ecosystem cares about, fostering credibly neutral strategic and economic alignment.
As such efforts mature, we envision ourselves potentially contributing to futarchy governance procedures of GnosisDAO and other organizations in the Gnosis ecosystem.
– Kelvin (kas.eth)