Recap: Velo Labs live on the Gokhshtein Unfiltered Podcast
David Gokhstein recently hosted Velo Labs’ Economic Advisor Gaurang Desai on Gokhshtein Unfiltered. The host, a long-time fan of Ripple (XRP), recently took an interest in Velo Labs and their Velo Protocol.
The pair started off with a casual discussion touching a wide variety of topics include the impact of COVID-19 on fintech, before swiftly moving on to more prodding questions about the VELO token, comparisons to XRP and other blockchains, the Federated Credit Exchange Network (FCX), the partnership with Visa, and more.
For everyone’s convenience, the entire interview is transcribed below. The full video interview is available here. Enjoy!
Please note that some portions of the interview have been slightly edited for grammar and readability.
David Gokhshtein: This is Gokhshtein Unfiltered! What is going on? Thank you very much for tuning in tonight! Right off the bat, we’re going to electrify the crowd as we always do. We’ve brought on a really really cool guest: Gaurang from Velo Labs. How’s it going tonight?
Gaurang Desai: It’s morning in Bangkok, Thailand! Things are good here! Sunny.
D: We were talking about that before we came on the air; that it’s always sunny out there. Though the air, you said, is polluted or something, right?
G: Yeah. Depends, you know. It’s Always Sunny in Bangkok! That’s the follow up to Always Sunny in Philadelphia.
D: I want to ask this quick question. How’s COVID out there?
G: Not bad. This might sound stupid to say. COVID is not bad, but even since the beginning, we’ve been in lockdown. I think the cases were under 1,000 - 2,000. 60 deaths or something for the entire year, which is, I mean, compared to some other major cities including New York, is nothing, right? So far so good. Hopefully, as we open up to tourists… everyone, all your viewers, are welcome to stop by. They just need a 14 day quarantine. Then, the beaches of Thailand are open to everyone! So it might be worth it because daily life is pretty normal here. Once you get in.
D: I am dying to go on vacation already. I am tired of the lockdowns. Moving on from COVID, don’t want to make it a depressing topic. Listen, I’m happy to have you on the show. I’ve read a lot of stuff about Velo. I’ll ask you some questions. I want you to educate my audience on it. So let’s start off with: what do you do for Velo? I know that you’re an advisor.
G: Yeah, so for Velo Labs, I work on the economics of it — like the system. In general: how it works, how the flows work, looking at the different countries we want to service, the requirements, the pain points and trying to make sure that the technical solution fits the economic requirements. So that’s where my angle comes in. So I’m not a programmer, I’m more on the economic side.
D: Well, I want to ask you, because I’ve been reading on it. Are you, I don’t want to say “competition”, but is your DNA close to XRP?
G: Velo is actually built on the Stellar blockchain. It’s sort of a a layer two solution. So, Stellar is amazing and you could say Stellar is a competitor of Ripple. Stellar, in our view, has a similar philosophy to what we’re trying to do for the world: to get underbanked people the ability to transfer funds back and forth to each other in a cheaper and faster way. And so that’s why we partnered up with Stellar because they already built that core tech, which is fantastic. Then, there are many solutions you can build upon it and the Velo Protocol is one of them. So, in that sense, you could say we’re a competitor of Ripple. However, I would say we’re trying to service a different segment of the market. But, in the end, of course, we want to service all markets.
D: And what segment is that? What segments are you trying to service here?
G: So, in the beginning, the genesis was similar to Stellar: serving the underbanked. I don’t know if your viewers know Southeast Asia very well, but it’s basically 10 to 11 major countries that have different currencies and different banking infrastructures. You have a lot of flow between the countries from immigrant workers who come over on work permits. They’re generally lower income and don’t have bank accounts back home. They don’t have bank accounts when they get here either. They can’t even open one here unless they’ve been working for two or three years.
So, when they want to send money back home, it becomes a very high-fee and very informal process. They have a couple of options. If they have a local agent nearby, they can give them a bag of cash. That’s the worst option. A week later, hopefully, 70% of their money is there, and it’s still not guaranteed.
I mean, seriously, that’s the way the bad option works. And in between those are multiple options. One will be just going to a regular money trap like Western Union. The problem is Western Union isn’t in these little villages everywhere. So, the guy who’s receiving the money back home has to travel two hours by car to get the money at the local Western Union, two or three towns over.
That’s kind of the current status of what’s going on in these countries. Now, if you happen to have a bank account, what happens is that you go through the normal SWIFT system. In Southeast Asia, that means you can transfer Thai Baht to Cambodian currency, but it has go through USD first. And then it comes back and it has jumped five times — that’s for people with bank accounts. I’m sure these are common problems your viewers know about. These are problems that can be solved using DLT (distributed ledger technology) and blockchain, right?
We looked at the current situation, and it’s like you have this well-built Stellar infrastructure. We have the expertise in the region because we’re backed by major conglomerates here, enormous ones like the CP Group. CP Group in Thailand has many businesses across agriculture, food distribution, and so on. They also own all the 7-Elevens, which is a point of sale for different types of people. So, we have all this business expertise here and Stellar has this amazing technology. We can build a layer on top of it to make all kinds of flow easier for local people.
D: Were you thinking about building it on any other blockchain other than Stellar?
G: Oh, actually, even before I started working here, the Chairman, Vice Chairman, and Jed (McCaleb, Stellar) met many times to talk about the situation. It was kind of a chance meeting where they spoke about these problems and realized that Stellar was perfect to help us build the solution. That’s kind of how it started. It wasn’t a survey of different blockchains debating which ones can we can use. I think, philosophically, they kind of met in the middle and had the same vision.
D: So it was nobody else. It was just straight, boom, first blockchain, Stellar. We’re not looking anywhere else. That’s pretty cool because I like Stellar. I think Stellar is super fast, a great blockchain and has some DNA from XRP. I’m a big XRP guy. Everybody knows that. So, I’m a fan already. Also, real quick before we move on, the group (CP Group), am I right, that they bought a magazine?
G: The Chairman (Chatchaval Jiaravanon) has many businesses. One of those businesses is Fortune Magazine.
D: If you can put a word in: 40 Under 40 (Fortune Magazine). I’m 39.
G: You don’t have much time, man!
D: That’s what I’m saying. I need to get this done!
G: Next call I make will be straight to the Chairman. I mean, the 50 Under 50 is going to be much harder to break into. At that point, people really get to the next level!
D: With COVID running rampant… I don't if I’ll catch it! So 40 Under 40. I would appreciate it, but again I'm just throwing it out there.
G: I’ll see what I can do!
D: Tell me about this Visa partnership that you guys have.
G: Sure. So Visa has a vast network, right? And one of our philosophies is that we’re network agnostic, meaning that we will work with anyone. We want to really reduce the friction between cash and digital, and different types of digital and different types of cash. So Visa has a vast payment processing network. What we can do is provide liquidity and take the liquidity from that network as well and put it into our Federated Credit Exchange Network.
Additionally, Visa is also very interested in working with us because of, as I was mentioning, our focus on the underbanked population. There’s also underserved SMEs (small to medium enterprises) all throughout Southeast Asia. In many of these countries, even Thailand, I think 95% of corporations are actually SMEs. They’re not big corporations. These guys can’t get any lending. They have problems with banking.
And so, the same philosophy, we have this liquid exchange where it’s not just payment transfers but, eventually, when you have enough liquidity there, you can actually have lending markets. It’s a credit exchange and you can have this decentralized lending where people need loans and then people will bid for them. There’s a lot of interesting things you can do when you build that core liquidity between all these business partners.
Another reason Visa is interested in working with us is because we are building this liquidity. We’re building this instant transfer. That can really help get them into more of that market — the SME market — because right now, they want to crack that because it’s such a huge underserved market.
D: Now, are you also going to be issuing Visa debit cards?
G: Right now, like on the card product front, we’re not really allowed to say. There’s a few avenues we can take. One is decentralized lending like I was just talking about. Until we actually formalize something, I can’t really mention anything.
D: You guys talk about bridging legacy finance?
G: Yeah, so it’s kind of similar to what I was saying about the Federated Credit Exchange. As I was mentioning before, the issue is a lot of these countries have their own currencies. But everything has to go to the US dollar first, before you transfer money. What we’re trying to do with the Velo Protocol is we’re using our native VELO token as a kind of entrance requirement into this network, this FCX, that allows businesses to print their own localized digital credit that they can use directly to transfer, let’s say, Thai Baht to Cambodia Riel. You can just do this direct exchange, and you don’t have to pay the spread twice.
So what we’re doing is building all this liquidity. This approach lends itself well to both DeFi and the traditional banking space because we’ll have banking partners in all these countries that actually can do the physical cash out once the credits are there. We’re building this seamless network between all of these different players. DeFi is kind of a catch all phrase right? But when I think of DeFi, I think of, for example, the SMEs and lending I was talking about. It’s like an auction place for lending, where you don’t have to go to a bank to get a loan. Maybe other players who are in this exchange can get a partial loan to complete the total loan amount that the company needs.
It’s really just taking out all the middlemen and trying to make it as direct as possible; to make it cheaper and also to make it more competitive. You’ll get a better pricing when people are competing for interest rates and things like that.
D: You’re combining CeFi and DeFi. How do they co-exist?
G: There are various staking and lending protocols in DeFi. They could, once vetted, hook into this Federated Credit Exchange Network and could become liquidity providers or loan providers. We’re trying to make this so people can actually add to liquidity, benefit themselves, and benefit our users as well.
D: You know, I thought I would stump you on questions but you have all the answers and… and I like that! Sometimes you get somebody on and they just don’t know how to go ahead and answer a question about their own project. So I appreciate it. I want to ask you this: which countries are you trying to attack here with the Velo Protocol?
G: Sure. In Southeast Asia, we’re doing Philippines, Indonesia, Vietnam… Not right away, but eventually. Thailand, of course, because a lot of the team is based in Bangkok. Also, Cambodia and Laos. But, Laos’ volume is kind of small. Those are the main ones. Like I said, the genesis of this was immigrant workers coming into Thailand. That’s the very beginning before it even started. How do we service them? And Indonesia is huge in the SME market. They have so many small and medium enterprises that need help on the lending and transfer side.
D: Are you going after the United States or North America?
G: Well, the idea is that the United States is already well-serviced. But, the United States has a lot of migrant workers in terms of Filipino nannies and people like that who send money back to the Philippines. It’s enormous. That we will try to tackle. But, domestically in the US right now, we’re not going to do much until we get the liquidity in this region. This is our expertise. We’re trying to target Thailand, Korea, Japan, China, and get that cross-border flow in payments first before putting full efforts in the United States.
D: I mean, the Velo Protocol sounds real. That’s what I’ll say. I usually call out people that’ll come on to my podcast, but, the protocol sounds real. I did my homework on it. The answers that you gave me were stellar, no pun intended. And I appreciate that. Do you have anything else that you would like to add? I mean we got the audience here tonight, they’re listening.
G: Keep an eye out for our progress! I really look forward to next year because that’s when we’re going to be building the liquidity I’m talking about. This year, we’re building the foundation of all the tech. Next, we’ll sign up as many partners as possible and really build this liquidity and get out there. So, please keep your eyes open for Velo Labs and the Velo Protocol. Hopefully we’ll be back to talk about all the successes we’ve had.
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