CryptoSlate recently had the opportunity to speak with Ethan Rapid, the Chief Technology Officer and co-founder of Author Exchange, a self-custody decentralized exchange that has been gaining substantial traction and attention in recent months. In our exclusive interview, Ethan shares his journey into cryptocurrency, what motivated him to establish Author, the challenges of creating a quality user experience for crypto traders, and his vision for the blockchain industry's evolution in the coming years.
Could you share your professional background and when did you first enter the cryptocurrency space?
Ethan Rapid (EF): I'm a software development entrepreneur who has also spent considerable time in academia. I founded a web analytics platform in 2011 after completing my undergraduate studies, which received funding from Y Combinator. That experience taught me valuable lessons about entrepreneurship and the mindset required for startup success. I subsequently pursued a PhD in Computer Science and Human-Computer Interaction (HCI) at Stanford, where I worked on various projects, most notably applied research in Programming Languages (PL) and Natural Language Processing (NLP).
I purchased my first Bitcoin in 2011 but didn't deeply explore the technology until 2017. During that period, I became particularly fascinated by Ethereum's smart contract applications and wanted to better understand what kind of design possibilities this technology enabled. Working in HCI, similar to my startup experience, when you encounter a new technology, you naturally begin thinking about how it could transform how people interact with the world.
What motivated you to establish Author Exchange?
EF: During the final years of my PhD, I began collaborating with an exceptionally talented group of individuals who essentially bootstrapped the NEO blockchain open-source ecosystem. We worked exceptionally well together and shared a passion for the future of digital assets, making the decision to start a company feel like a natural progression.
Regarding specifically "Why Author?" – the most concise expression of our mission is "democratizing finance for everyone," which effectively summarizes why we're building this company. Cryptocurrencies are unique among asset classes in the level of control and empowerment they offer holders. We aim to make these assets and their properties accessible to everyone. Another motto we use is "be your own bank," which perhaps more directly captures our goal: we want to empower people with that capability! While we all enjoy working with the technology, these broader principles are what truly drive us.
Where is your team located and why did you choose that structure?
EF: We have a globally distributed team. Our parent company is based in Vaduz, Liechtenstein, which has provided regulatory advantages, but we have team members in more than fifteen different countries. The United States and Europe are most strongly represented.
Among the co-founders, Tom and I reside in the US, Fabio in Austria, Kai in Switzerland, and Luciano in Brazil. So we've been a global team literally from day one.
What are some of Author's notable achievements or milestones?
There are various ways to categorize our progress, but I'd say our first major milestone was the public sale of our Author Exchange security token (NEX) in 2018. This was extremely significant for us and, indeed, the entire ecosystem, as no one had previously publicly sold and issued a token that also held legal status as a Liechtenstein security. Accomplishing this required over a year of work and extensive discussions with regulators at the FMA in Liechtenstein. We went through this rigorous process to provide investors with legal protections and explicitly distribute dividends from the services we're building, which is only possible with a proper security token. Ultimately, more than 15,000 people invested, and we raised approximately $48 million in the public sale.
Our second major milestone was the launch of our exchange in early September of this year. We're the first exchange to implement non-custodial, cross-chain trading of assets and tokens residing on different blockchains (for example, Ethereum and NEO) with throughput comparable to centralized exchanges. I cannot overstate how challenging this was to implement and how proud we are of our team for successfully launching it. All three of these features—non-custodial trading, cross-chain functionality, and high throughput—are critical for our users. I should also note that our work on this product is far from complete. We're still optimizing and improving user retention before fully opening the product to the public and working to add more assets, including Bitcoin. Having Bitcoin on a non-custodial exchange will have a tremendous impact on the industry.
Why is self-custody so important yet such a challenging concept for mainstream users to understand?
EF: I don't believe it's inherently difficult for people to understand if explained properly. In its simplest form, custody equals control. Therefore, self-custody means you control the asset. On nearly all exchanges that people use today, if you want to trade cryptocurrency, you must surrender custody (and control) of that asset to the exchange. This is problematic because you have very little recourse if an exchange is incompetent or untrustworthy. If an exchange is hacked or steals your funds, there's little the legal system (or anyone else) can do to help you. Self-custody makes it impossible for attackers or malicious exchange operators to seize all your assets and disappear.
What are the advantages of using Author compared to other exchanges?
EF: Self-custody combined with throughput and liquidity comparable to centralized exchanges is the primary reason you should use Author right now. So you should choose Author if you want to maintain control of your assets while trading on an exchange that offers an excellent user experience.
Can you share details about Author's product roadmap? What upcoming features are you most excited about launching?
EF: Support for non-custodial Bitcoin trading is particularly exciting. Personally, I've also been spending considerable time working with something called threshold signatures, which we're going to leverage to make user accounts even more secure. The basic concept with threshold signatures is that you can grant us the ability to enforce arbitrary security policies on your account without giving us custody of the assets. For example, you could have us implement a daily withdrawal limit of your choosing, or freeze withdrawals outside a specific time window. There are too many technical details to explain the system fully here, but this is a very exciting technology.
What are the main challenges of building a product and useful user experience for cryptocurrency users?
EF: This is a substantial question, but I'm happy to discuss one of the major ones. The first and perhaps most significant issue is the general lack of safety measures that comes with self-custody. Self-custody is powerful because you have complete control. However, complete control also makes it very easy to shoot yourself in the foot or walk off a cliff. Even worse, it's extremely difficult for a third party to step in and rescue you. We saw a lot of this with Argon Wallet, where users would lose tens of thousands of dollars (or in some horrifying cases, even more) because they didn't properly back up their private keys. Creating self-custodial applications where it's much harder for users to get into these disastrous situations, regardless of their actions, is a fundamental design principle for Author across everything we build.
A second major challenge, which I believe gets discussed frequently, is the fundamental performance limitations of blockchains. Across most interactions with them, blockchains are quite slow. If you look at Nielsen's famous book Usability Engineering, he discusses the time scales at which a user will remain engaged with an interaction. You need to be faster than 0.1 seconds for a user to perceive something as instantaneous, after 1 second a user's flow of thought begins to be interrupted, and after 10 seconds it becomes very difficult for a user to remain focused on a task. Typical blockchain interactions exceed these thresholds. Even in relatively fast interactions, it's rare for them to complete in under ten seconds. This performance issue, along with the related bandwidth constraints, makes "second-layer" scaling solutions extremely important. These are protocols that operate on top of a blockchain and provide useful security guarantees while minimizing direct interaction with the blockchain itself. We utilize a variation of this type of technology to achieve the speed of Author's APIs.
What other projects and/or blockchain developments are you most excited about?
EF: I'd be excited to see regulators clarify some of their positions on digital assets, and governments entering the space with something like a USD-backed or CNY-backed stablecoin. Even if these assets aren't as decentralized, the right kind of framework would allow users to engage with other third parties without trust, and I believe such national initiatives would drive broader adoption. I'm also excited to see the Elrond blockchain gain adoption. Elrond is solving some very challenging scalability problems, though I should mention here that I serve as an advisor to the company.
Do you have any blockchain and/or cryptocurrency predictions for 2020 and beyond?
EF: I'm optimistic that the space will experience another boom cycle, hopefully this time driven by new companies and technologies solving real-world problems.
What are the main obstacles to mainstream cryptocurrency adoption?
EF: The most crucial factor is that any cryptocurrency or token needs to solve a real problem that many people experience, creating value or utility. When that happens, adoption will be swift and inevitable. The second issue is that self-custody of these assets needs to be accessible to everyone: easy to use and low-risk to manage. Author is working on both of these challenges, and each is quite difficult, but the second is definitely easier than the first!
What is your most controversial opinion relating to blockchain and/or cryptocurrency?
EF: Many, and perhaps most, tokens traded on US exchanges fail the Howey test.
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