The Stellar Podcast

Accessible and Affordable Investing with Craig Mc Gregor from DSTOQ

Episode Summary

What if I told you it were possible for anyone anywhere to get unrestricted access to stocks, bonds, or ETFs for zero fees! Sound too good to be true? It's not, it's DSTOQ. As Stellar Development Foundation's first enterprise investment we couldn't be more excited with the vision and product behind DSTOQ. Listen in to hear DSTOQ's CEO Craig Mc Gregor walk us through the why and what of this incredible project.

Episode Notes

What if I told you it were possible for anyone anywhere to get unrestricted access to stocks, bonds, or ETFs for zero fees! Sound too good to be true? It's not, it's DSTOQ. As Stellar Development Foundation's first enterprise investment we couldn't be more excited with the vision and product behind DSTOQ. Listen in to hear DSTOQ's CEO Craig Mc Gregor walk us through the why and what of this incredible project.

Episode Transcription

Craig (00:00):
The thing about Stellar in my opinion is that it's a protocol that's built for financial applications at the end of the day. That's really what it is.

Tyler (00:22):
Hello, Stellar community. Welcome to the Stellar Podcast. I'm Tyler van der Hoeven, and with me today, I've got Craig McGregor on the line. He's the CEO of DSTOQ. I'm extremely excited to hear more about the product that they've been building. They are one of our new enterprise fund recipients.

Tyler (00:45):
When we came out with our new mandate a few months ago, earlier, beginning of the year, we had outlined a large portion of our lumens would be split up across an enterprise fund, so large enterprise level investments into big players in the space. DSTOQ is one of those enterprises. Craig, thanks so much for being willing to jump on and talk about your product. If you just want to intro yourself and then we'll jump right into it.

Craig (01:26):
Yeah. Thanks, Tyler. I'm happy to do so and also happy to be here with you on the podcast. As you mentioned, I'm the CEO and one of the co-founders of DSTOQ, and we are essentially an interface for the buying and selling of security tokens built on the standard blockchain. As you mentioned also, very happy and proud to be in fact the first recipient of funding from the Stellar Enterprise Fund, and of course also proud to be a part of the Stellar community.

Craig (02:02):
As a company, we've been building on Stellar now for a few years. It takes a long time in a business such as ours to actually get a product to the markets. It's also super exciting times for us right now, because we're just about to release our product. Yeah, happy to talk about it with you.

Tyler (02:19):
Yeah, super. Let's back up just a little bit before we talk too much about DSTOQ. Let's talk a little bit about your own history. You mentioned you're a co-founder of DSTOQ, so maybe what was that process, either finding co-founders, why did you land here? Everybody's got an interesting story for, A, how they landed in cryptocurrency and then the products that they're building. How did you arrive at the product that you have?

Craig (02:49):
Yeah, sure, definitely do have an interesting story there. As you may be able to tell from my accent, I'm actually from South Africa. In fact, I'm South African, and originally founded DSTOQ with a German guy that I met in South Africa, in Cape Town, a few years ago. It was about three years back now. We, at that time, so me personally, I actually come from a finance background. I was working at in asset management prior to starting DSTOQ. Basically buying and selling shares, investing, trading on the stock market in South Africa, but for a global fund, so really my background is on the finance side.

Craig (03:35):
I met my initial co-founder through an acquaintance essentially. He's an entrepreneur from Germany and was down in Cape Town looking to do business there. He had some real estate business and he was thinking about porting a model to South Africa. He realized that it was actually really expensive to move money from developed markets into an emerging one and back and forth. He was speaking to his bank about how much it would cost to transfer money to South Africa and was just getting crazy quotes that he was super unhappy with.

Craig (04:13):
A friend suggested he speak to me because I was also in fact, had been in crypto for a while prior to that, and that's basically how we got in touch. From there, we started looking at what problems can we solve with crypto or with blockchain basically. Out of that, it evolved into essentially a problem that we saw, which I was aware of because I was from the finance background, and we thought we found a solution to that problem, which was crypto.

Craig (04:48):
The problem is basically moving once assets cross borders. When you're coming from an emerging markets, it's just ridiculously expensive to do that. It's crazy. If you want to make payments abroad, you pay massive amounts of money. That's of course what Stellar's trying to solve, making it easier for cross border payments. But on top of that, we found an even bigger problem which was investing. Just to give you an example, it also talks to kind of the problem we're trying to solve.

Craig (05:20):
As a South African, if I wanted to buy shares of a European or American company, basically any company outside of South Africa, I would be paying about 10% in fees to do that. Unless I'm investing huge amounts of money in which case, okay, it's a bit cheaper, but really it's so exorbitantly expensive that I just found, there was a massive, massive problem there. Myself and my co-founder, we looked into how to we can solve that problem and realized that actually using blockchain to facilitate cross border transactions can add a lot of efficiency, because you can cut out a lot of the middlemen that basically charged a whole bunch of money.

Craig (06:01):
We, on the back of that, essentially developed a peer to peer platform, where users through the Stellar blockchain can trade assets and wealth and value amongst themselves and do it all directly on chain. At the same time, also keeping control of their own money, and that's very important to us, but yeah, we could touch on that perhaps in later questions.

Tyler (06:25):
As you start to recognize this problem and begin developing a solution, you come up with DSTOQ. I assume you're looking around for blockchains to do this on. You're ultimately trying to actually solve the problem and not just tack blockchain onto existing solutions. You're really trying to reinvent something to solve the cost and efficiency problem.

Tyler (06:50):
As you're beginning to think about those problems and how they might be solved, what's the process there, what's the research that happens? Ultimately, how do you land at Stellar in the solutions that you've come up with?

Craig (07:05):
Yeah, very good question. This was quite a few years back when we started this, and at the time, like you correctly alluded to, I think at that time, a lot of what was happening was companies looking at blockchain as a buzzword and thinking, how can we use this without really having a problem to solve? It was the other way around, which is historically not been a very successful business model.

Craig (07:35):
Yeah, we really did start with the problem, and we had been doing assessments into different blockchains. We found, of course, Bitcoin was far too slow, not really programmatic to the extent we wanted, so that wasn't an option. We looked obviously into Ethereum and also was far too slow we found. On top of which the fact that you do have the smart contracting language on it introduces a lot of security concerns that were problematic for us, plus how easy it is to fork things that has some issues for our business model that we didn't like.

Craig (08:16):
We looked into a bunch of others. We were looking into Cardano. We were looking into TRON at one point, Binance, a lot of different opportunities, and ultimately we chose Stellar for a few reasons. First of all, the fact that it has the decks built in on the protocol level is really an amazing feature. Something that is now a core part of our tech stack, basically. It is super good in terms of route to market, because we no longer had to even think about that side of things. Stellar had to solve the already.

Craig (08:53):
On top of that, the fact Stellar as a language is non Turing complete, and it only has set features, set functions that one can use, is actually super, super good for our specific use case because the functions that it has are exactly the things that we and our users would want to do. Again, simplified for us the route to market and gave us on top of that, an extra layer of security, because we didn't have to worry about smart contracts getting hacked like you do on Ethereum.

Craig (09:24):
On top of that, of course, many other factors, just the speed of setup. We are really, really proud that the app we've built right now, we think from a user's perspective, most people won't even know that it has anything to do with blockchain, and that's the beauty of it. The reason that that's the case is because the transactions happen so fast. You push confirm, place an offer, and a couple second, there's a little blue spinning wheel, a couple seconds later, everything's done. That's the type of experience people are used to having on apps anyway, and that is not really possible on a lot of other blockchains. Again, that was one of the main reasons why we ended up with Stellar.

Craig (10:09):
One last thing, which I think is super important also, is that Stellar as a company, back then but also certainly now, is looking to solve problems in the same markets we are looking to solve problems. That helps us too, because as Stellar as an ecosystem grows, as more anchors come on board, as fiat on and off ramps become smoother, that of course improves the user experience. Considering that where Stellar's focusing are the markets that we are focusing on, we've just found that there's some excellent synergies from that side.

Craig (10:47):
I hate to bring it up, but compared to Ripple, for example, they have the complete opposite markets that they're looking at and have a completely wrong approach in our opinion. There were just a lot of synergies, first of all, from the tech side between Stellar and what we think our users would want, as well as from this perspective of where Stellar as a company is focusing, it's super aligned with where we are focusing. We even wrote a blog post on it awhile back. It's a match made in heaven.

Tyler (11:15):
Yeah. It makes a ton of sense and it certainly seems to align extremely well. It's neat being able to recognize those things and identify that what might be seen as missing features, right, the Turing complete no smart contracts are actually benefits. They're not drawbacks if you're willing to look at them that way and see how that separation of interests adds a lot of security and usability, and is the reason that we can be so quick and confident in the deliverables that we have.

Craig (11:47):
Exactly. especially, the thing about Stellar, in my opinion, is that it's a protocol that's built for financial applications at the end of the day. That's really what it is. If you are a company or a user that's looking for some sort of protocol for financial transactions, Stellar's perfect for that. I definitely wouldn't have come to those... I might not have come to the same conclusions if we were like, whatever. If we were a gaming company or something else, but specifically when it comes to the financial side of things, I think Steve has done a super good job of actually laying the foundations for some interesting stuff to become possible.

Tyler (12:35):
Yeah, absolutely. You've built a product, you've got a company that is a blockchain company. Congratulations, you've arrived, but have you achieved your goal? Is moving money with a cross border investments, is that cheaper now? Have you achieved the goal? Has adding blockchain to the problem accomplished something that you couldn't have done without blockchain?

Craig (13:03):
We think of ourselves actually as a FinTech company that happens to use blockchain, not the other way around, and certainly our entire focus is user centric. We definitely just thinking about the user experience side of things. I think that what we've achieved... We have a product now that's ready to ship. We have a lot of indication that there's a good fit in terms of product market fit.

Craig (13:34):
Of course we can only say that we've achieved our goal once we have a lot of users and once they're using our product, so maybe it's slightly too early for that, but we were just on the cusp of it, which is super exciting. From the fee side, definitely. We don't charge in fact any commissions when it comes to transactions on our platform, and that's mostly due to the fact that we just much more efficient than the traditional systems.

Craig (14:05):
We don't have all of the costs that a normal company trying to create a product such as ours would have. As a result, I think we have a much better product at the end of the day for users. The other super interesting thing where blockchain in our case, I think has empowered us relative to how a centralized institution might try and tackle the same problem is that in our case we never hold customer's funds.

Craig (14:37):
Customers are always in control of their own funds. We help them through the app to set up, basically a Stellar wallet or Stellar account, and we never get access to their private key or anything like that. They control it themselves. What that means is users can transact amongst themselves through our app, which just helps them... It makes it easier for users to transact with the blockchain essentially. The main benefit of that is we can offer our product, not just into one country at a time, but into a multitude of countries at a time. Maybe if I can just talk through a little bit of how it works, I personally find it super interesting on.

Craig (15:19):
On our platform, what becomes possible is a citizen of, let's say Nigeria, could at one point in time decide they want to buy a tokenized share of, let's say Apple, and you can have another user sitting in Vietnam that wants to sell. Through the platform and through the Stellar decks, we allow those two individuals to connect directly with each other. That's amazing. That's in no way what's happening right now in finance.

Craig (15:56):
Currently, if you were in Nigeria or you were in Vietnam, first of all, you wouldn't even have access to those products most likely. Secondly, if you did, when you wanted to place, when you wanted to place a trade, you'd be doing it directly with the broker, then that broker would do it with someone else and you don't really have a peer to peer platform.

Craig (16:17):
We find it really interesting that through the way we implement blockchain into our interface, we are really allowing for these peer to peer connections in a way that reduces fees. We do think we'll actually achieve our goal, which is to make it easier for value to shift amongst different countries, especially when it comes to cross border investments at a far cheaper and more efficient way than it is right now.

Craig (16:41):
Just one last point on that, sorry, I know it's a fairly long response, but in a normal environment, when a individual places a trade, it can take up to two days for that trade to actually settle. That means two days for the legal ownership of whatever you bought or sold to be transferred. It's not actually yours until two days. On our platform, it takes five seconds because that's how long it takes for a transaction on Stellar's.

Craig (17:16):
I think the product that we've been able to build on top of Stellar is actually significantly better than anything that's out there from a cost perspective, from a user experience perspective. Also in terms of empowering our users to basically take back control of their own assets rather than having to rely on banks.

Tyler (17:36):
Yeah, that's phenomenal. It's something I've caught on to and mentioned multiple times even on this show, is the ability, because of the builtin decks on Stellar, the ability for you to open up business with anyone in the world who's connected to that network because everything can happen peer to peer rather than having to go through third parties. That capability is unbelievable. It's incredible that you can create something and immediately have access to the entire world as long as they're willing to connect into that network.

Tyler (18:15):
As the network continues to grow and mature and have greater options, the friction or barriers to connecting to that network become lower and lower and easier and easier to get into, which becomes absolutely essential and incredible to opening up markets and beginning to provide access to financial services and platforms that traditionally just aren't possible.

Craig (18:42):
Yeah. I've got a good example on exactly that like. Let's take an example. You and I want to do a trade. Let's say you want to start a token for 100 and I'm prepared to buy that same token for 110. If you place an offer to sell at 100, and I place an offer to buy at 110. What's going to happen is because of the logic behind the Stellar decks, me as the buyer, I'm going to end up paying a 100 for it. Even though I was prepared to pay 110, I'm going to pay a 100 because that's how it works.

Craig (19:15):
In a normal financial product, there's an intermediary in between. They see an opportunity where I'm prepared to pay 10% more. They're going to sell it to me at 110. They're going to buy it from you at a 100. They're going to keep the 10. This is where the efficiency comes in. We're cutting out that middleman who are seeking rent from the transaction. At the end of the day, the user's getting by far better experience. You're getting buying something for less than you're prepared to pay, and it automatically gets implemented like that. It's awesome.

Tyler (19:43):
I am super excited about it as well, as somebody who early on really wrestled with stock options and how to manage investing. Even your academy that you've been working on with the education side of it is just so important. You can build a phenomenal product, but if nobody really understands, if you're so close to how this thing works, that you completely skip the education piece, because it's so obvious to you, you're really going to cut yourself in the foot for actually getting people on board because they don't know it like you know it.

Tyler (20:20):
Seeing you target the education side of things, as well as the product side of things has been really encouraging and exciting to me. You get it, that you have to have education along with a good product. Otherwise, you really don't have a good product.

Craig (20:36):
Yeah. I definitely agree with you there. The way I think about it actually... I totally agree with you when it comes to the product side of things, but maybe just to take a step back and look at holistically where [inaudible 00:20:50] stand right now. I think things are fundamentally changed since our parents' generation. Back then, and this isn't that long ago, but in our parents' generation, you would get to the age of 20, maybe 21, you start working. You work at a company for 10, 20, 30 years and they're investing part of salary that whole time into some retirement fund, or it's just a standard thing that was done all over the world.

Craig (21:19):
By the time you're 30 or 40, you might've actually accumulated quite a lot of investments without actually knowing anything about it, but you still did it because there were these good habits that were put in place, and that was just the structure of the workforce at that point in time. On top of that, you also had people buying real estate much earlier. Compared to where we stand right now, our parents' generation, people get to the age of 30, 35, probably have a house and probably have a pretty substantial sized investment portfolio just because the company forced them to do it.

Craig (21:53):
That's all good. I think that's actually very positive because you get set up to have a more fruitful life and you'll be safer when it comes to retirement and all of that. Contrast that now. People are working at companies for two years, three years, that's the average, no one knows where to get started with investing. No one can afford real estate. There's an interesting statistic that 72% of people would rather go to the dentist than trust their banker.

Craig (22:24):
Where do you get started? If you don't know anything about investing, everyone's assumption is, okay, well, I'm not going to go to the bank. I don't have enough money to buy real estate. There's very few apps or ways for me to actually get started, so where do I get started? We've done polls too around trying to understand users and what prevents them from getting started with investing. Mostly it's actually a lack of education.

Craig (22:50):
We've done a bunch of marketing too, looking at a Google search words and things like that. A lot of the stuff that performs best is people searching how to invest, how to learn how to invest, things along those lines, which is a big part of what drove our decision to start putting some time and resources into the educational side. Because I think there needs to be a structural shift in our whole generation to get people more comfortable just getting started with investing.

Craig (23:17):
If that doesn't happen, we're going to see massive issues down the line where people get to retirement and just don't have any money anymore.

Tyler (23:23):
Yeah. That's very astute observation. Let's talk about your business model a little bit. You're fee free. How are you keeping the lights on?

Craig (23:38):
Basically, we generate a bit of revenue in the creation of the tokens themselves. We have some costs there too, but basically do generate a bit of revenue there. Aside from that, what we focusing on in the beginning is much more about the user acquisition side of things. Down the line, we plan to add some subscription services, so users can opt into get additional features and the like, and basically pay for that.

Craig (24:11):
Our focus in the beginning is on building a strong product, strong user base, and then like a lot of FinTech companies, especially, basically it's quite prevalent in finance, figure out bit more and focus more on the revenue generation side of things down the line. That's our strategy.

Tyler (24:32):
Yep. Very common, solid strategy, particularly as you get adoption from all the work that you've already been doing. It's exciting.

Craig (24:42):
Yeah. We really thought about this super long and hard on the business model side and on the fees side of things. I just think it makes so much more sense to end users, and it's such a strong value proposition to say, okay, "We're not charging you any commissions." It's just so compelling to users that I also think you gain their trust in doing things like that. We've seen that in a few examples of other companies how that can be successful, and it can be sustainable. It doesn't have to always be...

Craig (25:21):
I think it is sustainable. If you can be more efficient and have a significantly lower cost base than some other competitors than it is possible to do interesting things like that. That's what we're really excited to explore.

Tyler (25:35):
Yeah. Fantastic. When the show goes out, your application is live. It's running right now on the testnet, but in June you'll be transitioning over or at least opening up access to the production public network. Right now the wallets in testnet, how can people get involved? They can download the app. You've also got these educational resources, maybe talk a little bit about that. What's your call out to the community for getting involved in this groundbreaking application and product that you've built?

Craig (26:09):
Yeah, sure. Users can go to DSTOQ.com. That's D-S-T-O-Q dot com, and you can download our app directly from our website. You can also access our boot camp, the learning courses that you were talking about. You can access that from the website, and what we want to do as much as possible is actually get feedback from the community, see how we can improve the products, see what suggestions people might have. We would be very, very open to that.

Craig (26:40):
If anyone is using the app and decides they want to give us some feedback, you can also go to DSTOQ.com/feedback. There's a form there that you can fill out, which will come through to us. Feature requests or bugs, things like that, feel free to put all of that into feedback. You can also engage with us on Twitter. That's our most active social media platform, and that's just twitter.com/DSTOQ. We'd be happy to also talk to people there.

Craig (27:11):
Then going on from where we stand, like you mentioned on the testnet to the main net, anyone downloading the app right now will be set up for our full production service. We're going to be migrating it and making it easy for users. If you download the app now when the full... And you go through the account creation process, when the full app comes out, you just have to do KYC and then you're good to go. We do encourage people to get started now.

Craig (27:40):
We'll also be running a few community programs around things like which assets should we think to add to the platform down the line. Obviously, always happy to hear from users around suggestions that they have there. We'll also be doing a bit more deeper feedback with the most active users on our platform. That's something we'll be announcing in a week or so, where we're going to try and basically incentivize some people that are very actively using our app to do some video [inaudible 00:28:10] with us, where we can really get their feedback hands on.

Craig (28:14):
If anyone listening to the podcast is interested in that, then also feel free to reach out to us. They could do so, like I mentioned, either via Twitter, so just @DSTOQ or could also email us at info@DSTOQ.com and ask us about that program, and we'd be happy to talk about it.

Tyler (28:32):
Super, yeah. I would strongly encourage the community to download this app and provide feedback. This is a really unique and fantastic opportunity to get your hands dirty, actually shaping a very legitimate and exciting crypto project building on Stellar. It's actually not that often, everybody says they want feedback, but these guys are actually chasing people down to give them feedback, which is fantastic and very important. Be sure and provide that as you're able, because they are, they're acting on it and making their product better.

Craig (29:07):
Yeah. Now I actually want to say thanks to do the Stellar community for exactly that point. We have been receiving really good feedback and a lot of positive encouragement, and we of course appreciate it. We're a small team trying to change the world. It's a big task that we have at hand, and it's motivating for us to be getting this positive feedback and also suggestions on features and things.

Craig (29:32):
We really do take it seriously. I think it's super crucial, and it's a 100% in the ethos of our company to take that seriously. Thanks to the community for the feedback we've had thus far and looking forward to more in the future.

Tyler (29:46):
All right, super duper. Well, thanks again so much, Craig, for jumping on. This was a very insightful conversation, really appreciate you taking the time and super excited. Cannot wait to see how things progress for you guys down the road.

Craig (29:58):
Thanks a lot, Tyler, and likewise, good to be on.

Tyler (30:02):
For more information about Stellar and the future of decentralized finance, visit stellar.org, and get involved in the discussion in one of our active communities on Keybase at stellar.public or Stellar Stock Exchange.

Tyler (30:22):
Until next time, I'm your host Tyler van der Hoeven. Catch y'all later.