The Anatomy of WazirX
by — Mr. Sanket panda (sankepa7.substack.com)
Coinbase, the most popular US-based crypto exchange, recently got listed in the stock market at a market cap of ~ $70 billion. Dogecoin passed the valuation of SpaceX, crypto adaptation is at an all-time high, a large no of investors are looking at crypto as an alternate asset class and this post musk crypto era is seeing huge growth in terms of cryptocurrency adaptation, It has recently reached an inflection point of consumer adoption, reaching new all-time highs in terms of users and market cap(~$2Tn). Crypto has been an interesting space for investors, consumers, entrepreneurs, and regulators alike. Indians appetite for cryptocurrency has grown significantly over the last few months with India’s leading crypto exchange WazirX adding 1 Mn new users and crossing $5.4Bn in transactions just in the month of April 2021. In this piece, I will be stepping out of my comfort zone to cover the nuances of crypto in India via an analysis of WazirX. Dive in because WazirX may just be your next BSE.
Overview
WazirX is India’s leading cryptocurrency exchange where you can Buy, Sell & Trade digital currencies. It has built the world’s first auto-order matching fiat P2P exchange. WazirX is expanding globally by bringing P2P solutions for Fiat to Crypto conversion across the world.
*Fiat money is a government-issued currency that is not backed by a commodity such as gold. Most modern paper currencies, such as the U.S. dollar, INR are fiat currencies. The gold standard was ditched way back and is only alive in your economics textbooks. Our currencies are not much different from crypto. Cryptocurrencies are as real as INR.
Market and Background
The cryptocurrency market is still in a nascent stage, there has been tremendous growth recently and the market cap has touched $2 Tn and is expected to grow with a compounded annual growth rate(CAGR) of 30%, with Bitcoin accounting for over 50% of the cryptocurrency market.
Indian crypto market is a small chunk of it, regulatory uncertainties are a major factor to blame. In 2018, When WazirX was 3 weeks old, RBI imposed a blanket ban on cryptocurrencies, this caused panic in the investors, trading volumes slumped on existing exchanges and a few shut shops in India. In March 2020, the Supreme Court overturned the restrictions imposed by RBI on the usage of cryptocurrencies. This gave the crypto market a firm boost. While the markets were a little sluggish, Investors turned to crypto amidst lockdown. There has been no looking back ever since, While the recent proposal by the Indian government to ban all private cryptocurrencies had dampened the sentiments it has failed to dent investors interest in digital assets, the volumes have soared soon after and have hit record highs.
“I’d like to compare the market opportunity to that of the existing stock exchanges in India, where nearly $10 billion worth of transactions takes place every day. I definitely foresee crypto assets achieving the same figures five years down the line,” — Nischal (founder WazirX)
Journey and Strategy
Nischal Shetty is the founder of Crowdfire and WazirX. His journey in the ecosystem started with burrp where he was a software engineer, he used to work on different passion projects on weekends and one such project was crowdfire a social management app, those were the early days of social media and the app gained huge traction which led Nischal to quit his cushy job and pursue entrepreneurship. Nischal had a bad time with the tech giants, the constant tweaking of rules had put crowdfire in a precarious position and reduced it to B2B. This dependence on centralised giant corporations got him interested in cryptocurrency and blockchain which are by definition decentralised.
His first stint with crypto started in 2010 when he tried to mine bitcoin using his PC but never took it seriously until 2017 when there was a lot of chatter around crypto and this time Nischal decided to jump into it. He had a difficult time and found that there was a huge disparity between the Indian and global exchanges in terms of the user experience. He would then set up WazirX in a bid to fill the whitespace.
3 weeks after the launch of WazirX, RBI imposed a blanket ban on cryptocurrencies, this caused panic amongst the investors, trading volumes slumped on existing exchanges and a few shut shops in India. WazirX found itself in a tough spot, but being very new and small it had nothing to lose.
In a bid to bypass this regulatory hurdle, WazirX launched a peer-2-peer system barely two days after the ban which would completely eliminate the need for financial institutions and link sellers and buyers directly. This master move would pull a lot of users who were having a hard time liquidating or transferring their holdings as the other exchanges closed and the WazirX’s P2P revolution would begin.
Surviving the ban and all is cool but how did they become India’s largest crypto exchange in a nascent market, how did they manage to be at par with the global standards, after all, they were running a social media tool for all we know. Ans: Binance, those of you who have explored crypto would have heard of it, Binance is the largest cryptocurrency exchange in the world in terms of the trading volume. It was 2019 when WazirX and the P2P caught the eye of the crypto giant, they moved quick and acquired WazirX for an undisclosed amount (Grapevine estimates: Rs 50cr). This acquisition gave WazirX access to global innovation, which had been seemingly difficult before and the access to capital for rampant growth. 3 months post-acquisition supreme court of India would reverse the RBI ban on crypto payments and WazirX would see 20X-30X growth in users and volume, lockdown would further help WazirX, there was no looking back ever since. As of last month, WazirX added 1mn new customers upon existing 2mn and the volumes shot up to $5.4 Bn.
Business Analysis
WazirX’s product has 3 different segments
- Trading platform: crypto to crypto market with 80+ cryptocurrencies
- P2P(peer-2-peer): convert money to crypto instantly where WazirX acts as an escrow for safekeeping of the transaction.
- Smart Token Fund (STF): community-driven initiative where you can find expert traders, and let them grow their cryptocurrency portfolio on WazirX
Revenue Sources:
*There is little financial data available in public for me to derive the metrics and give a holistic picture this time.
WazirX is launching a decentralised Non-Fungible Tokens (NFT) marketplace for India. This will enable the seamless exchange of digital assets and intellectual properties. Indian creators can now place their digital assets for auction over the blockchain-based NFT marketplace and earn royalty thereafter.
‘Disaster girl’ meme NFT was sold for $500K.
Conclusion
Around 1 crore Indians have already invested in cryptocurrency and around ₹10,000 crores worth of Indian assets are in it…There is an entire ecosystem around cryptocurrency in India — do we really want to destroy it. India needs to recognise crypto tokens as digital assets rather than currencies and clarify policies on regulation.
*Cryptocurrencies are not illegal in India; they are unregulated.
Sources: WazirX website, economic times, yourstory, India tech org, Nasscom community insights, coindesk, scroll.
Credits — Mr. Sanket Panda (https://sankepa7.substack.com/)
