How did cryptocurrency exchange Backpack find its way to success after the death of major investor FTX?

Image credits: Backpack

The founders of Backpack are building a cryptocurrency exchange and wallet that has seen strong growth since its launch in 2022. However, the path was not easy.

FTX co-led Backpack's $20 million strategic investment round in September 2022. Less than two months later, in November 2022, FTX went bankrupt.

“We lost 80% of our working capital on FTX. We spent all our time building this protocol and it was just like a knockout on the ground. [we] Armani Ferrante, co-founder of the backpack and NFT collection Mad Lads, told TechCrunch.

Not only did they lose investment capital and key partners, but the collapse of FTX ushered in a bear market in cryptocurrencies, which has only recently begun to recover.

The backpack was a success mainly thanks to its supporters. “This is a combination of product, community, social goodwill and timing that brought together an incredible group of people,” Ferrante said. “Since then, it has taken on a life of its own.”

On Monday, the exchange's “preseason phase 1,” also known as its beta phase, ended after a month and a few days. According to the company's post on X, it had more than $27.5 billion in total transactions during that period and processed 259 million orders at a rate of about 5,000 per minute. Additionally, 252,000 KYC users were added, bringing the total number of users to 560,000.

The exchange's trading volume reached $3.66 billion at its peak on Sunday, with 24-hour trading volume of about $2.8 billion, according to CoinGecko data.

Image credits: CoinGecko (Opens in new window)

“We caught lightning in a bottle in a strange way, where people started talking about backpacks as this new up-and-coming exchange and the next generation of exchanges where we can learn from a lot of lessons and mistakes. We're starting to see promises, built on previous interactions,” Ferrante said.

Ferrante said there are many lessons to be learned from FTX. He added that one of his basic design goals for the backpack was to solve the problems revealed by FTX.

Unlike FTX, Backpack has designed its system of exchanges to ensure that balances are managed by independent entities, or nodes, and each node can collectively verify each other, so all orders, cancellations, etc. , deposits, withdrawals, etc. are checked. This is done in the hopes that there will be no single point of failure and that the operations of the Backpack Crypto exchange can be split across multiple entities. “The industry is being forced to mature for the better,” Ferrante said.

“The collapse of FTX was terrible, but the glass is half full, and it's like a phoenix rising from the ashes. We need to redouble our efforts to solve the difficult problems that remain unresolved. “There is,” Ferrante said. “We are taking this product in its own direction,” he adds, and that extends beyond just an exchange to other products.

Backpack is also building a cryptocurrency wallet and platform for xNFTs. It is a new token standard on the Solana blockchain, similar to NFTs, but also a platform for Web3 applications itself. This shows the origin of the name backpack. Backpacks are inspired by MMO games like World of Warcraft and Runescape, which provide users with backpacks to hold their inventory. “be [normal] “Wallets hold cards, cash and coins, but backpacks can hold everything, not just money, so we think of it as a more dynamic version of a wallet,” Ferrante said. Ta.

Mad Lads, one of the largest Solana NFT collections created by Backpack, is also an xNFT, with a minimum trading price of approximately 172 SOL, or $34,400 at the time of publication. “We are fortunate that the community complements our business,” Ferrante said. “We wanted to build a product for them and make their crypto lives better.”

But Mad Lads aren't the only xNFT, Ferrante said. For example, the NFT collection Solana Monkey Business has an xNFT with a newsletter called Banana Split that is updated regularly, so if someone has an NFT in their backpack, they can access the newsletter directly in their wallet. he pointed out.

As for replacing FTX as an investor, that worked too. At the end of February, Backpack raised $17 million in a Series A round led by Placeholder VC at a valuation of $120 million. Backpack recently expanded to the UK and has a presence in 11 states in the US, Dubai, and across the Asia-Pacific region. But Ferrante said this is just the beginning. Ferrante said Backpack wants to reach 95% of global GDP by the end of 2024 “to serve our customers in compliance” and the team's new capital will be used for global expansion. Stated.

From now on, it's all about running your backpack on multiple fronts. But for exchanges that want to reach every country in the world, product distribution is a top priority.

“It's one of those crazy things where the winner takes all the market,” Ferrante said. “We want to seize this moment. Given everything we've talked about, that opportunity exists this year, so we're going to make the most of everything.”