Samsa Indexes Hope To Metamorphosize Crypto Investments

FinTech, Investing, News | March 12, 2018 By:
Samsa aims to bring indexes to the world of cryptocurrency, allowing users to create custom portfolios from a basket of indexes. The goal is to take crypto investments from single asset purchases to index investments, such as the Top 20 Coins, or Protocol Tokens, in a manner similar to stock indexes.

CEO Chris Slaughter Talked with Block Tribune about the company’s plans.

BLOCK TRIBUNE: So first, tell me, where does the name of the company come from, Samsa?

CHRIS SLAUGHTER: Gregor Samsa is the protagonist in this book, The Metamorphosis, by Kafka. It’s kind of funny, it was just a git repo branch name. We made a version of the software that was using this component called “Kafka” and we just named it “Samsa” as a joke. Then we figured, “Oh, it’s probably as good a name as any.”

BLOCK TRIBUNE: Okay. Fair enough. Walk me through how this works for someone who joins. First of all, your minimum investment.

CHRIS SLAUGHTER: There’s no minimum and it works directly with applets that are already sitting on the exchanges. Basically, any minimum quantity you can hold on an exchange could be integrated into Samsa.

BLOCK TRIBUNE: Okay. So, somebody arrives at your site. Then what happens? Walk me through it.

CHRIS SLAUGHTER: Sure. You arrive at our site. You learn a little bit about what Samsa is. You create an account. As soon as you create an account, it takes you to an onboarding work flow. It’s step-by-step instructions to integrate Samsa with your exchange.

You first select whether you want to operate Samsa with GDEX or Binance, which are the two exchanges we operate on top of. Let’s say, for example, you select GDEX. It’ll take you to a step-by-step workflow to integrate GDEX with Samsa. It will give you a link to the part of GDEX where you create APIPs and open that in a separate window. It’ll first ask for the passphrase to generate the APIP. Then it will direct you to set of permissions on the APIP to “view and trade only”, which mean that we can’t withdraw funds. We can just manage them. Then it will generate that key and input it into Samsa. As soon as you’re done, after you’ve input your passphrase and your APIP, you hit “next” and it negotiates with the exchange. Before you even hit the dashboard, it knows all the assets that you hold on your exchange account and what the current value of those assets are. Then it takes you right into the dashboard, in less than five seconds.

BLOCK TRIBUNE: That’s a fair amount of steps and involves keys and putting stuff in. What happens if you make a mistake?

CHRIS SLAUGHTER: The typical mistake that the user will make, will be maybe they’ll copy an APIP and leave one character out. Like, highlight it and just forget the last letter. If you do that, it will prompt you to do it again. Typically, it’s not that bad actually. Users make it through this process from creating their account to being onboarded with the exchange in as little as 45 seconds. The average is about a minute and a half.

BLOCK TRIBUNE: That’s good. Once you’re all set up, let’s assume you’ve done it successfully, (do) the algorithms kick in automatically and start making trades for you?

CHRIS SLAUGHTER: It initializes a manual strategy that looks identical to what you already have on the exchange. Simply linking the Samsa is not immediately going to trade. At your disposal, you have trading controls that are much easier than working with the exchange right away. And we have a whole listing of indexes, so if you change your manual controls or if you link to one of our indexes, it’ll go in and start trading your account.

BLOCK TRIBUNE: Tell me what the indexes are typically pegged for. Give me an example of one.

CHRIS SLAUGHTER: Sure. We have market-weighted large cap indexes, similar to coin-based indexes or bit-wise investments. However, since they operate directly on users’ exchange accounts, we don’t have an institutional minimum like those indexes have, we’re sort of app feature … we have identical indexes to those market-leading private solutions. Which, of course, are available to everyone. Beyond that we have a lot more indexes that vary by number of coins, exposure to different altcoins, some of them are themed. We have an alternative payments index, which is basically alternatives to bitcoin. We have protocols for emerging protocols like EOS and Cardano. It’s sort of the safest indexes you can be in, and then if you want exposure to more volatile altcoins, we provide those under themed indexes.

BLOCK TRIBUNE: What are some of the more successful ones that you’ve had so far? What are the performances like?

CHRIS SLAUGHTER: So, Large cap market-weighted index performed last year at 1700%, which beat Bitcoin. That’s one that operated first … we’re monitoring that index, first as a private hedge fund, and that’s now offered on our platform. A lot of these alternative indexes we just started monitoring a month ago, so it’s probably too soon in market conditions to speak for them; because there’s been week-long or two-week-long periods where all accounts are up 35% and there’s periods where they’re all down 20%. It’s just a short time horizon for the current market volatility.

BLOCK TRIBUNE: Okay. How do the algorithms react to real-world events? Today we had a situation where the markets are dropping because China has blocked social media, therefore stifling the market a little bit even more. How’s the algorithm react to something like that? 

CHRIS SLAUGHTER: Sure. Our algorithms … the main objective of our index algorithms is to diversify crypto holdings. There’s two types of events that you need to look at. There are these macro-events that seem to affect the entire market, like the allegations of the Binance hack today or the recent news about money transmitter requirements for ICOs. Those types of events tend to affect all cryptos, large cap cryptos, altcoins. They tend to react to poor news poorly and good news well.

Then there’s news that will be specific to altcoins or specific to large caps. For example, a new integration of Bitcoin in an app like Robin Hood or Square. What tends to happen in those cases is individual assets will move differently. The way that our algorithms react is that … all of our algorithms, whether they’re market weighted or equally weighted, they’re all weighted by the face or UFC value of the individual assets. What that means is; when a coin is performing well, it’s heading up in price, our algorithms will tend to buy it. When a coin is performing poorly, we tend to sort of marginally exit that position. This is sort of the same investment principles that underpin Vanguard ETFs, for example. That’s a sensible thing to do in response to these macro trends.

In addition to that, we do smaller scale things that are sensible as well. For example, all of our trades are executed a limit orders. That means on GDEX our users never pay fees and on Binance, where maker orders and taker orders have the same price, we tend to avoid market slippage as well. For markets … if order books are really thin, meaning there aren’t a lot of people that are buying and selling at a given time, our larger accounts won’t place orders that are going to drive the price down, if it’s selling, for example.

It’s a mixture of A) just responding to price movements by buying coins that are performing well, and B) making sure that when we place trades, that we place them as limit orders to avoid slippage and avoid paying fees.

BLOCK TRIBUNE: Some of the exchanges have had outages. How does your server react when that happens?

CHRIS SLAUGHTER: When an exchange experiences an outage, our platform will still show the underlying assets in the last state they were in. Of course, if the exchange isn’t receiving API requests our bot will stop trading.

BLOCK TRIBUNE: Are there any limitations on withdrawals on a daily basis?

CHRIS SLAUGHTER: Only limits that are imposed by the exchange. Again, our platform operates over the top of the exchanges, so we’re an advisory service. That means when users want to look through all their funds, they go back to their exchange and withdraw their funds. With some of the trading bots, that can be really confusing for the bot. Our platform, if you withdraw from your underlying exchange, we’ll update to reflect that within 10 minutes and resume rebalancing, just as if it had never happened.

BLOCK TRIBUNE: How are you making money?

CHRIS SLAUGHTER: We charge an advisory fee. It’s a management fee style and right now it’s one third of a percent per month; which is one third the price of PRISM. It’s compatible with all tokens, not just ERC 20. That percentage is a percentage of assets under management. User right now don’t pay it. The platform is free in its launch stage. Ultimately we’ll collect that fee by receiving Bitcoin-like coin ethereum. There’ll be a page to transmit that to us and then we credit that to the account.

BLOCK TRIBUNE: Do you have ICO plans?

CHRIS SLAUGHTER: It’s highly unlikely that we’ll ICO. The regulatory environment for ICOs is tightening. We’re very focused on building a real product. ICOs are a lot of work and they distract from building a real product. That’s been the case for some of our competitors. Our goal is to get a product out into the market that users love, that they stay engaged with, and then consider whether to do a token offering later. I think an ICO is unlikely for us. I would never say “never”.

What is potentially interesting is to decentralize key aspects of our platform. We could imagine taking our platform credits and turning them into ERC20 tokens, which insures finite supply; but we would probably not do that coincident with an ICO.

BLOCK TRIBUNE: What about adding exchanges? Anything on the horizon there?

CHRIS SLAUGHTER: Internally, we already support more exchanges. We have internal support for Poloniex, Bitfinex, and Bittrex. What we tend to monitor, when deciding whether to add an exchange, is just how much cross section we have with potential users. We’ve seen users willing to move funds onto exchanges specifically to work with Samsa and we think our current exchange offerings addresses up to 55%-60% of the market. Things that we’re supporting internally we’re obviously doing because we’re considering adding them. What we tend to look at is what cross section of user base would we address by adding one more exchange and also what is the stability of that exchange; both in terms of API access, like is the API really reliable, and then, in addition to that, sort of the regulatory posture of the exchange, do they appear to be in compliance with all the regulatory requirements.

BLOCK TRIBUNE: What is your background?

CHRIS SLAUGHTER: My background is in computer vision and artificial intelligence. I worked for years in licensing computer vision technologies into augmented reality and virtual reality headsets.

BLOCK TRIBUNE: So you worked in illusions. You made a lateral move, essentially. Those are my questions. Do you have anything that you want to bring up that I didn’t ask you about?

CHRIS SLAUGHTER: You asked about my background; but my business partner, Ari’s background is interesting as well. He founded the ambassador group program for Lyft, in Lyft’s early days; and focuses on consumer grid marketing and online marketplaces.

BLOCK TRIBUNE: Obviously he’ll be in charge of doing the outreach to various entities.

CHRIS SLAUGHTER: Yeah. He innovated the referral program for Lyft, the college ambassador referral program. Incentivizing our users who love the platform and have 98% engagement right now, incentivizing them to spread the word is going to be pretty central to our growth strategy.