"Volumes Have Almost Tripled; Crypto Was Made for This," MEW's Kosala Hemachandra Says
Hello Defiers! This week’s interview is with MyEtherWallet founder and CEO Kosala Hemachandra. As the head of one of the most popular Ethereum interfaces, Kosala has a unique perspective on how the global pandemic has impacted activity. He also shared how ...
Hello Defiers! This week’s interview is with MyEtherWallet founder and CEO Kosala Hemachandra. As the head of one of the most popular Ethereum interfaces, Kosala has a unique perspective on how the global pandemic has impacted activity. He also shared how coronavirus has disrupted his own life, and talks about what it’s like to run a company from his bedroom at his family’s home in Sri Lanka, on opposite timezones as the rest of his team. He also talks about how crypto was built for crises, about the importance of building a decentralized product —if it’s custodial, it’s not worth it— and what he believes the future of digital wallets will look like. Lastly, he told me about MEW’s next big project: a DEX.
Apologies for sending this week’s interview and podcast on a Saturday (I usually send earlier in the week) —that was bad planning on my part.
🎙Listen to the interview first hand on this week’s podcast. You’re a paid subscriber (thank you!) which means you also get a full transcript.
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Kosala Hemachandra: MyEtherWallet is an Ethereum interface for transacting and doing actions that are related to decentralized finance on Ethereum. We also have an educational platform and a mobile app available for everyone, that's meant for normal uses and newcomers to onboard into area.
Camila Russo: I want to get into how coronavirus pandemic had affected you. Where are you taking this call?
KH: I'm currently in Sri Lanka. That's where I'm originally from. In 2009, I migrated to the US and ever since then I was coming back and forth once a year. This time it has been pretty interesting.
Since the last week of December is usually off or you have to work remotely because it’s Christmas and then New Year’s we decided to make the whole MEW team work from home and take days off on the holidays. I decided to visit Sri Lanka and spend the New Year there with my mom. My plan was to come back after two weeks but as we got into mid January this whole situation started to get worse. So I thought, maybe it's time for me to wait another week and see how it goes and hopefully they'll have it under control. And then I waited one more week and then it only got worse. At that point onwards, it got worse and worse. And now I'm in complete lockdown.
So it has been like almost a month when Sri Lanka was suddenly like, in two days, the day after tomorrow, we are going to go to full lockdown. So no more businesses, people cannot leave their house, airports are closed, no postal services and for like a week after the lockdown, we didn't even have any delivery services. We had to buy everything in two days.
My whole team is in US, so they're working remotely as well. But yeah, I am handling and managing the whole team from Sri Lanka and don't even get me started on the time zone issues.
Kosala Hemachandra. Image source: The Merkle
CR: So how has that been like, managing a team remotely and on different time zones and all the other constraints that a lockdown has? Like are you like working through the night and sleeping during the day?
KH: Yeah, pretty much. The team is based in LA, so between LA time and Sri Lankan time, the time difference is 30 minutes. And then you have to change the AM to PM. So it's almost completely opposite. So I was initially, when it first started, I thought this is only going to continue for a couple of days, so I'm just going to stay up until like midnight every day so that I'm up until like 11:30 am LA time and make sure everything gets done that needs to be done. And then during the day I'll work as much as I can. But then slowly that time started going into the morning. Yesterday I went to sleep around 7:30 am Sri Lankan time.
CR: So you were up all night.
KH: Yeah, that's the situation and but hey, it works and the good thing is I'm a night owl, so it's actually, okay.
CR: Would you consider having a more distributed and remote based team after this this crisis is over?
KH: So one big thing that everyone, or at least in our situation, that we are missing is physical contact. So yes, we can have video conferencing or virtual activities but I don't think humans were made to not have the physical presence of another human being for this long. Being in the same area or same location, you get to connect with your team in more emotional level. You get to know about them and they get to know about you. So that's what I'm missing and our team is missing. We try to be in touch with everyone every day, have calls or video. But to answer your question, as long as there's a day or a month that the whole team can get together and work in one place, I think that working remotely or virtually can work out in long run.
CR: Have you seen any change in how people are using Ethereum applications or if they're transacting in different ways during this time. Have you seen any interesting trend in how people are using MEW?
KH: Yeah, that's definitely something that we noticed. Our volume has doubled or tripled over the last two to three weeks. Volume in transactions and swaps. So that means that people are using Ethereum and actually doing things on Ethereum. Yesterday or today I read that Ethereum transaction volume, the USD equivalent amount is actually going above Bitcoin. It only took 4.5 years for them to overtake the transaction volume in Bitcoin. That's a good sign that people are getting into DeFi and Ethereum. The DeFi ecosystem grew by 800% over the past year, which is amazing.
CR: Can you go into more detail on those volume metrics? Where is it concentrating, and what are people doing the most?
KH: We don't have individual analytics. We don't track any of our users or any specific activities that our users do. We have aggregate results on number of visitors that go into MEW and what countries they come from and what kind of transactions they're doing. We can detect from our commission that we get from swaps how many transactions were done and what was the volume. So I cannot give you any specific data because I honestly don't have it. But the volume of exchanging from ERC20 tokens, swapping from one token to another or coming from Bitcoin to ETH or going from ETH to Bitcoin, this volume almost tripled over the past month or so. That just means people are using Ethereum in this difficult time.
Crypto Was Made for This
CR: Why do you think this is happening?
KH: When you think about it —and not just talking just about Ethereum, but crypto in general —crypto is made for situations like this. Crypto is not controlled by governments, so if you compare crypto against the stock market, the stock market is fluctuating and volatile, maybe even more than crypto right now, and it's hard to predict whether it will be best to invest or take your money out. For the stock market, most of the businesses are closed and productivity is going down. Also, for the US dollar, the US just created 4 trillion dollars out of nowhere.
And that doesn't happen in crypto. In crypto, you know exactly how much the inflation rate is going to be. No one can just come up and be like, okay let's just create 100,000 more ETH. That's never going to happen. Right now fiat money is losing its value, especially in this situation, while crypto is holding it. We don't see a huge increase in crypto prices but it's been stable for the past month or two in general compared to what's happening.
CR: Even if crypto has seen huge drops and crashes especially last month, at least like you say, it's a completely separate system from fiat currencies and government-backed currencies and you get an asset that's uncorrelated with traditional financial securities. Whether it goes up and down, at least you know, that it's not being affected by all these central banks, monetary policies and government bailouts and the stock market going down because people are staying in doors and not buying stuff.
It's interesting that right now is when you can really get that value of a completely uncorrelated asset class. So you think that's what's impacting that increase in volumes?
KH: Yeah I totally agree and believe that's affecting volume in Ethereum and other cryptos.
Dapps Still Too Complex
CR: And what are your thoughts on DeFi specifically and how it can be leveraged in this situation. We talked about bitcoin and ether, but what about these financial applications on Ethereum and other blockchains. How do you think people can leverage these dapps?
KH: People who have the knowledge to use DeFi are already using it. Getting new users to these platforms is the key, which is a little bit difficult because right now it's not easy for most people or newcomers to understand exactly how these DeFi systems works, or especially understand things like owning your own keys or owning your own wallet, the security side of things. And most of them require you to have some sort of basic, minimal knowledge in trading. Most of these platforms are related to trading and if you are not familiar with that, you'll be like, what am I doing here?
It's just too complicated. I don't think this situation is actually going to force people to learn about DeFi. It's something that will happen gradually because we still have a lot to do, from understanding the user experience and creating proper UI to facilitate that experience or facilitate these DeFi dapps in a way that it's easy for the newcomers who have dollars right now to enter into Ethereum and invest in Maker and get a stablecoin like Dai. We still have to get to that point. MyEtherWallet is doing a lot of things in this area, trying to make the user experience better. We've integrated multiple dapps in the past. We have a MakerDAO integration and we recently integrated the Aave lending protocol. Hopefully that'll be helpful to facilitate or increase the amount of people coming in and who can use DeFi systems on Ethereum.
CR: That's a great point. People who are already using Ethereum will be prompted to use DeFi apps, but it's hard to get new people in because the barrier is pretty high. You have to learn all these new concepts and all these new things which, look pretty strange for someone who has never seen MetaMask to have all these pop-ups suddenly or pay for gas. It is kind of weird.
So what are the main things you think still need to change to get to that mainstream user and how is MyEtherWallet trying to implement these changes?
KH: In order to get mainstream users, we have to get rid of a lot of these new terms and trying to force the users with these new concepts. We have to understand it from a perspective of what they're already used to. So that's something that we did recently with our mobile app, which we released three weeks ago, and already we are about to hit 100,000 downloads. It's something that we understood and wanted to work on is just the simplicity. People are already used to using their bank account or transacting using their phone in apps like Venmo and every bank has their own app and PayPal has their own app.
So people are used to using these apps. We use that concept and 98% of developing countries already have smartphones. So we want it to get to that. We want to get new users to use Ethereum and onboard users so simplifying or making them understand this complicated process in their terms is the key.
Making it Easy
CR: So the main thing for you is to bring Ethereum and dapps to users in terms that they're already used to seeing and using. In your case, is it still a non-custodial wallet, are people holding their own keys or do you store that for them?
KH: No, we strongly believe in the non-custodial aspect. I think that's the key. If someone is controlling it, it's just another fintech app. It's just another bank. We never want to be in that position. We're trying to bring the knowledge and make sure the user understands, that it's important that they save their keys and that they need them in order to access their wallet. So we tried to do our best to make them understand that and then after that everything just flows. They can transact, they can send transactions. It looks like your phone book app so you can just select whoever you want to send money to. And so it's just the simplicity and I'm hoping we can keep improving and make it even better.
CR: So, no long Ethereum addresses, but readable names...
KH: Readable names, ENS integration is another good example that we already have on MyEtherWallet web and we'll roll it out on the app as well. Everything in Ethereum is heading towards a simpler way of doing things. So we want to facilitate every single feature that Ethereum can offer.
CR: And besides teaching people to store their own private keys, do you have a good recovery mechanism for people who lose their password and key phrase?
KH: Yeah. So there are definitely new concepts out there, like social recovery that you can give partial keys to your friends or have part of your private key on a server and then have the rest of your private keys with you. But none of them are field tested or used by enough people. So that's why we thought of sticking with the standard that's been tested by thousands of projects. We're sticking with the mnemonic phrase that a lot of people are already used to, it's just 12 different words or 24 different words that you have to write down and that's all you have to write down. It's words that are readable to anyone and anyone can understand, write these words down and recover their wallet in case if they lose it or if they lose their phone or anything.
On top of that, we also have direct integration with WEW Web. So people can always connect their wallet with MEW web, which creates a peer to peer connection so that the website won't even ask you for any of the keys. So it's a super simple login system that anyone can use as long as they have the app and then they can use every single feature that MEW web can offer.
CR: And what do you think of of insurance mechanisms for people's funds that maybe can be integrated with wallets? Like Nexus Mutual is one example. They insure smart contract funds. Wanted to get your thoughts on that because I think that would make maybe a mainstream user feel safer when they're using crypto, which can be scary.
KH: Yeah, no, I totally agree. It is scary. I'm not familiar with Nexus Mutual, but that's definitely something I'll be looking up. We have to do everything, not just me, but in crypto, anyone who is a developer, we have to do everything possible to make sure users' funds are safe. If there's an insurance that's the best case scenario. Something can go wrong, people make mistakes. We are all human beings. So if there was a mistake we don't want people to lose their funds, so anything that can help the users, we are always ready to implement that.
Non-Custodial or Bust
CR: I wanted to go back to what you said about private keys and how for you kind of the most important thing about Ethereum apps and blockchain apps is to have users hold their own their own keys. And I agree. I think what's so important about this technology is it puts users and individuals in control.
But the question I have is, will the mainstream use or think it's important? Will it be important for mainstream users that they control their own funds? Will it take maybe a major economic meltdown for people to care? Do you think it's just a matter of making it easier for them to use these applications? That's a big overarching question I have for the longterm potential of blockchain technology adoption. Do people even care?
KH: I have to go back to the point that I made before. People are going to use what they are already familiar and we have to create apps that make it simple. But unfortunately this is one point that we cannot change especially because people are already used to, if they cannot access their account, they're used to calling their bank and having someone who can help them out, or reset your password. This whole idea of, I can call customer support and ask them how I can recall my account is engraved in their heads because that's what they've been taught since they were kids.
But unfortunately, that's not the same situation in crypto because we are trying to change the mindset of the people or the users and make them understand, you own your private keys and you own your wallet. There might be a subsection of the users who might still be okay with like a crypto project handling their funds for them. As long as they can trust that project, because they know more about crypto so they're able to hold their keys or make their funds safe. I see that happening. It happens now as well, some of the central centralized exchanges do that, but it just breaks the whole purpose of blockchain, crypto or decentralization, which I am not okay with.
There are also projects that claim they're decentralized, but they're not. They hold the keys for you. They have the control of your funds and they can stop all your transactions. So the moment that happens, I don't know how they can call themselves decentralized. So it's a line. It's not something that will be easy. That's why I say we are still probably on step one of this big staircase and it'll be gradual growth. We cannot expect people to just jump in and be like, this is the best thing ever. And I don't think that'll happen unless there's a big economic crisis and this is the only solution, you know? But I don't want that to happen at the same time because that'll make a lot of people lose a lot of money.
Future of Wallets
CR: Yeah, it's always kind of appalling to me when, especially on crypto Twitter you see people almost hoping for any economic collapse so that Bitcoin can go to the moon. I agree with you that it will require a more gradual approach where there's just like a mindset change and people realize, if I want to be in control of my information, my data and my funds, then I need to take responsibility of my account. I can't call my bank and tell them to solve things because like I'm in control and that's a good thing.
I want to ask you about your view more longterm for a digital wallet in DeFi, Ethereum and just blockchain in general. One interesting theory that I've seen is that wallets will become kind of like the browsers of the internet of value where they’ll be kind of the gateways where people access all the different DeFi apps. I don't know if you agree with that or if you have like another view of what the place for digital wallets will be.
KH: That's an interesting question because I can see that already happening. Projects like Brave already have a wallet integrated with the browser itself. And people can go to these different dapps and automatically connect and use them. But my question is, is that going to be enough? Do we have to do more than that to make people use these dapps? We don't want to have a browser or like a wallet service that will let you browse through different apps but if the user doesn't know what they're supposed to do then it's not going to go anywhere. And so it's a fine line that we have to figure out. Where do we have to have the wallet service?
I totally agree with you that there will be a connection protocol, whether it's a browser, or a phone. Many phone companies are already integrating blockchain wallets into their phone. HTC's done that, Samsung did that. There will be a connection like a digital wallet, but it just might be part of your phone or it might be part of like your fingerprint or like something that's biometric. So we have to wait it out. We have to see what people will be used to or be more familiar with it and then figure out where we should integrate this wallet service. At the same time, I think education is one major obstacle and that's what we also have to overcome as we grow on the wallets service side. That said, I think mobile will be the future. A lot of people will get into Ethereum and browse through dapps and use these dapps in the future using their phone, which might already have a hardware wallet integrated.
CR: So you don't think it will necessarily be through to the wallet itself that people access these dapps, but the wallet will just be part of the infrastructure of the phone and it's just maybe in the background and people use it to like make payments or maybe trade tokens or whatever.
KH: Exactly. It'll definitely be a separate part that can talk directly to all these different dapps, or browsers, it can be can be just as simple as sending transactions. So it will be a universal wallet that can talk directly to these different types of services.
CR: Is there space for many wallets or do you think it'll be more like winner takes all situation?
KH: MyEtherWallet is like in an interesting position because we are a wallet interface. We create the interface on how to access it, how to use it, how sign using private keys and all that. So it really doesn't matter what kind of wallet they'll use. We'll always be there as the interface for the wallet. Similar to what Samsung did. They came up with their blockchain wallet, inside their phone and then we partnered with them. And then our wallet also supports the MEW wallet app.
So we don't have to know your private keys. We can talk with any of them. That's why I think like the wallet service or the actual wallet generation will be something universal. But I don't think that there will be one wallet generation service or one wallet interface because it's totally up to the users to pick whatever they want. Same as the banking structure. There's no just one bank. Different banks can provide different services or different interest rates and different advantages for the users. There should not be one service, there should always be multiple services because people should have the choice of whatever the platform they want.
CR: Agree. Competition is better and keeps people innovating. What should users expect from you in the coming months? Anything exciting that you're working on? New features, integrations?
KH: A really good, new feature will be coming to our mobile app is a Dex platform. So you'll be able to swap directly inside your phone so you can trade and swap between different ERC20 tokens which will be coming up pretty soon. And from our other projects, I would like to say if you would like to know more about Ethereum we have our blog platform, which is mewtopia.com and we updated it on a daily basis or at least there will be a couple of posts every week. And for MEW web there will be a new feature release every week. So we have a release every Wednesday and then we try to come up with a new feature every week.
The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money.
About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.