eToro’s Yoni Assia: How digital finance could bridge the next big wealth gap

Could the next big wealth gap be in digital finance?

Though cryptocurrency has been hailed as the promise of fairer and more equal financial system, recent research has shown that crypto could be developing its own wealth gaps.

In fact, a recent study from the National Bureau for Economic Research found that bitcoin ownership was “very skewed” toward a few top players. According to that analysis of 2020 data, the top 10,000 owned around five million bitcoins, or approximately a quarter of all outstanding bitcoins then owned.

Other researchers have found that gaps in education or wealth can be wider in digital finance than in traditional finance since digital finance favors those who live in areas with the infrastructure to support it.

Fintech entrepreneur Yoni Assia has a plan to turn this tide. In 2020, his startup eToro launched the initiative the GoodDollar Project, a non-profit riff on UBI, or Universal Basic Income that gives out small amounts of digital currency - GoodDollars - to anyone who wants it. Anyone with a cell phone can receive real crypto free straight to their mobile phones.

These users save their GoodDollars to wallets based on the blockchain, a public, transparent database. It's been just a few years, but since launch, more than 450,000 people had opened a GoodDollar Wallet with around 50,000 to 80,000 daily active claimers putting that money to good use, paying for food or even putting monies toward education.

Assia talked to Meet The Leader about how digital finance could evolve - and how it could eliminate even more barriers to opportunity for the 2 billion unbanked all around the world, locked out of credit and the global economy. Read the transcript of the conversation below.

Meet The Leader / Linda Lacina: How does the GoodDollar Project work and how did it get started?

Yoni Assia: We founded eToro with a vision of opening the global markets for everyone to trade invest in a simple and transparent way in 2007.

I was a FinTech entrepreneur when the 2008 global financial crisis happened. And as a FinTech entrepreneur, we really saw the systems freeze to a point, as a FinTech entrepreneur, that was like a very interesting and challenging moment in time where you realize you don't know whether your money in the bank is going to be your money in the bank the next day. And when you try to trade the markets, because on eToro we trade the global markets, nothing really worked. Because I've always been passionate about capital markets and money markets and technology, it led me to realize that something is broken within the financial services system.

And I started reading a lot and writing about a concept that, I called the GoodDollar back then in 2008, about the need for a transparent money system, open for everybody around the world, where people can actually automatically receive interest rates if they have the least amount of money. Right? So, you can actually get more money if you have less money, versus the opposite, ealizing that interest rates are one of the reasons in my view, at least leading to what I consider the biggest problem in today's world, which is the increase in world inequality. And that was very early stages of my thinking around the GoodDollar and how can you create an economic framework that could be fair and open for everyone.

What we've built now and we launched it in 2020 - we started building the technology in 2018 - it's a series of smart contracts. It's all basically decentralized blockchain-based smart contracts, or a decentralized autonomous organization, that creates the ability for every person in the world to go to GoodDollar.org, open in a very simple way, a blockchain-based wallet, and then every day claim GoodDollars. So, every day you go and you claim GoodDollars and the same amount of GoodDollars are being distributed to all of the daily claimers of the GoodDollar wallet.

Now, the way the claim works is in the smart contract there's a reserve where eToro has both donated money into the reserve, as well as lent money or staked money into the reserve. That reserve generates interest rates by going into third-party protocols. And that interest rate is translated into the amount of GoodDollars that can be created every day.

So it's really all about code that enables companies or people to donate or stake crypto money into the smart contract and that for the smart contract to distribute GoodDollars evenly to everyone who basically claimed every day

Meet the Leader / Linda Lacina: A lot happened between that first idea and now. Can you tell us about that?

Yoni Assia: So, you know, 2008, trying to think of a digital currency, of a framework for a digital currency, that potentially could reach hundreds of millions or billions was science fiction. And I wrote articles in my blog that sounded to most people I talked to as science fiction. Luckily enough, in 2010 because of my writing, I actually discovered Bitcoin, because my brother who knew that I was passionate about trying to form digital money and currency for the Internet that's fairer, we started talking about Bitcoin and back then we actually started at eToro buying Bitcoin at $5 and $10, realizing that Bitcoin as a technology is a mind-blowing technology that enables that open finance, open economic framework that could be open for everybody around the world.

My passion for Internet technology and my passion for financial technology led us at eToro to adopt Bitcoin in a very early stage. But as we adopted Bitcoin and eventually launched Bitcoin for trading on the eToro platform, it was still considered by many crazy.

That was still very, very early stages for us to be able to think of let's do something like the GoodDollar. We started writing about colored coins, which was sort of the initial beginning of, you know, how can you use Blockchain to tokenize financial assets. We thought of how do we build a decentralized exchange to tokenize euros and dollars and gold on top of the Bitcoin network.

Very proud to have been working back then with Vitalik Buterin who joined the coloured coins protocol and later on came up with the concept of smart contracts. So, because of being close also to the foundations of Ethereum, we were very early on to launching Ethereum on the eToro platform and very close to see the first crypto rally, during the first crypto rally, where I think Ethereum went from $4 to $1,400 in a very short period of time.

We also see have seen a mass influx of customers into the eToro platform, really maturing the company because we've grown from $60 million revenues in 2016 to $390 million revenues in 2018.

And during that period of time where the company's grown significantly, two things happened that led us to build the team that eventually launched the GoodDollar. One is eToro was already a grownup start-up generating significant profits. That enabled us to invest in a non-profit initiative significant, sufficient amount of money to actually build it.

And at the same time, the first crypto rally and all of the ICO's - so the amount of people creating new tokens, new currencies - made it possible to talk to people about the concept of GoodDollar and about creating a new digital currency that just has embedded in it a better economic framework that's fairer and that is similar to Universal Basic Income on the blockchain.

Now that process of building the white paper and thinking about fairness theory, reading about Universal Basic Income research, explaining to people how the model would work and modelling it financially and economically, that took a while to build something that we said: “Okay, this could scale. Here's a code. Here's a concept that could actually scale to millions of people, to maybe billions of people.”

So, we had to wait both for us to be able to fund it as a non-profit — we committed more than $5 million back in 2018 to fund the project — and now we've committed even more, and also we had to wait for the world to understand that crypto is here, digital assets are here, blockchain is real for people really be able to participate in this -- originally, we called this experiment -- in building this movement, this community of people around the GoodDollar.

Meet the Leader / Linda Lacina: What are the types of challenges you faced being so early?

Yoni Assia: We established as a non-profit as a social impact project. So at least it didn't have the, let's say the, the stress of also having very hard KPIs and financial performance, because we had to bring in people that we're passionate about what we're trying to build.

Meet the Leader / Linda Lacina: Can you give us some examples of the ways that the good dollar project has already been transforming lives?

Yoni Assia: We have examples of people paying with GoodDollars to buy food and fruits and vegetables from food trucks. We have examples of someone who raised money in GoodDollar to actually pay for his tuition in Nigeria. So, people gradually are finding ways to work with GoodDollar to do good for themselves or others. And that's really the process here is building something that distributes new digital currency, but it's up to eventually the community and us to cement value into that new digital currency.

Meet the Leader / Linda Lacina: How much does it currently distribute per day?

Yoni Assia: Up until now we distributed about $70,000 in value and we put in about a million dollars. eToro staked a million dollars into the contract and then basically every day it distributes the equivalent roughly of $500.

Meet the Leader / Linda Lacina: How do you make sure that that value is in place and to make sure that it's strong for the community?

Yoni Assia: It's for us to engage people around how to use GoodDollar or we're calling it internally 'how do you hack value?' That's part of what's leading this complete rise of retail investors and the interest in cryptocurrencies in general, is the question of what is the value of money, right? And everybody's talking about inflation, what is the value of fiat money? What is the value of cryptocurrencies?

So, the fact that people are questioning that brings basically the real point — which is money is whatever we do with money, right? It's a trust between people and what is the value of that money for the purpose of exchange. And in the GoodDollar, it's really up to people who buy goods and services in GoodDollar and sell goods and services in GoodDollar to cement that value into the GoodDollar ecosystem. In addition to the framework of philanthropy or people who want to, or are willing to, give up interest rate in order to basically put in the money without interest rate for that money to generate interest rate for the people claiming GoodDollars and converting it to other cryptocurrencies.

Meet the Leader / Linda Lacina: Can you talk a little bit about the wealth gap and how that will play out with cryptocurrencies?

Yoni Assia: So, I think a lot of tech entrepreneurs today in the world understand that the wealth gap is a big problem and while technology -- in, obviously, the view of tech entrepreneurs -- improves the world, it also creates more inequality to some extent and that it's really our responsibility to figure out how to bridge that gap and how to reduce inequality in society so people have more access, more financial inclusion, more financial opportunities to participate in the financial world.

And I think a lot of people are talking about the underbanked. I think it's about almost 2 billion people who don't have access to traditional financial services. A lot of the digital assets community, the cryptocurrency community, view this as one of those opportunities to onboard potentially billions of people into digital assets, into blockchain technology. So, sort of jumping beyond the banks.

Once you create an ecosystem like in the GoodDollar, where you don't need to risk money, right? So, you don't need to go and buy Bitcoin or Ethereum and actually risk money, which also means you don't need access to financial institutions, because you can just go into the GoodDollar.org and claim every day GoodDollars, that means we're basically removing barriers to entry from becoming a participant in the digital financial ecosystem.

Meet the Leader / Linda Lacina: And what would be the impact of that as this grows, say in 10 years to say by 2032?

Yoni Assia: This is a very sort of big and audacious project, right? So, to that extent, we're looking at three different layers to make it sort of a bit more humble.

1. The first stage is really about financial literacy. I think that we want more people around the world to understand how does digital assets work. How can I use the digital assets. So that the first stage is bringing people, onboarding people, into GoodDollar.org. It enables people to experience digital money without any risk, without the need to have a bank account or buy anything. And I think that's the first purpose here is let's build an ecosystem that can really educate people around digital money. I'm a true believer, both around money and capital markets. Financial education is very important. You have to work out to be fit. So, you have to learn and educate yourself about money, about capital markets, if you want to be financially independent and successful. I think that's the first pillar.

2. The second pillar is financial inclusion, and that is really a bigger part, right? So, we've built a system that is decentralized, that can enable people from all around the world, and we're seeing that in our statistics, most of the users who open accounts and start claiming GoodDollars come from developing countries, where really financial innovation is needed the most, but it's the hardest places for FinTech companies coming from developed markets to actually operate in. So that's a very big gap that we need to innovate for developing countries where actually the current financial services infrastructure is maybe not suitable for a lot of the FinTech companies who can operate there. So beyond financial education and literacy, there's financial inclusion.

3. And then the big, hairy audacious goal here is improving financial equality. To improve financial equality, we really need this to scale not only in the amount of people that join the GoodDollar, but also in the amount of people who use GoodDollar to buy and sell goods and services. We need a scale of people who are willing to stake digital money inside the smart contracts. Now that scale could suddenly be, you know, Elon Musk deciding to put a billion dollars into the smart contract of the GoodDollar. So, if our million dollars is generating $500 a day, a billion dollars would generate $500,000 a day and actually, even more than that. So as more people are willing to, and I believe as this project matures that — we were talking about the next 10 years, but potentially maybe even longer — as the project matures and you have more people participating, you will have also more people who are willing to stake money into the smart contract to increase their value.

If you have somebody like Google saying or Apple saying: “We're willing to accept GoodDollars that's equivalent to a dollar to buy our services,” then that creates value as well to the GoodDollar. So it's really about scaling the ecosystem and our theory and our white paper shows that just several billions of dollars, which is not a lot of money, can actually create a lot of prosperity and a lot of UBI [Universal Basic Income] in a decentralized way.

That's the beautiful thing here — it scales algorithmically and the infrastructure is already there. It's really about building now the community and scaling the concept of UBI on the blockchain.

Meet the Leader / Linda Lacina: Are there any impacts from crypto that you think people aren't talking about enough? Something people aren't realizing the real potential for changing lives, changing communities?

Yoni Assia: If you can create Universal Basic Income, if just a few of the world's wealthiest people decide to create Universal Basic Income by just deciding to stake money into smart contracts, where they can always withdraw their money, so practically no risk, just waiving interest rates. That could generate UBI, that can generate an ecosystem where you have suddenly hundreds of millions of people claiming GoodDollars that have a monetary value that they can spend every day. That would bring us by definition to much higher financial equality in the world and more people participating in the digital economy.

I think that is the real opportunity of everything we're seeing in the blockchain space and crypto space — it is how do we build a fairer economic framework for the metaverse for the global citizens of everywhere?

Meet the Leader / Linda Lacina: What stands in the way of that?

Yoni Assia: It's about technology maturing to a point. It's about people learning and trusting you know, either GoodDollar or a project that eventually is inspired by the GoodDollar. I do think that the framework we laid does have infinite potential scale. And I do believe that there are a lot of people who have the wealth to move that needle, but I think it requires significant scale to happen. Sometimes that scale happens as a hockey stick and sometimes it needs time for people to understand that it could happen.

If you look at the crypto industry right now, it's actually increasing inequality. It's not decreasing inequality. Maybe it's also decreasing it by creating wealth in pockets that didn't have wealth before, but people are still looking at generating their own wealth. They're not looking at this as something that's purely you know, an economic framework that's fair for everyone. But if you look at all the top crypto entrepreneurs, they all have the foundations, they all are looking at how to create an open financial system, how to create more financial inclusion. Even in Universal Basic Income on the blockchain, we started this project a while back, but we're already talking to, I think, about five new projects of various ways of implementation of Universal Basic Income on the blockchain. So, I really think this is just the beginning of something that eventually is inevitable.

Meet the Leader / Linda Lacina: During the SARS and other pandemics mobile payments became more and more widespread because people needed to use them. Ukraine had some crypto adoption but already but did the conflict create an accelerant for crypto adoption amongst regular folk that maybe wouldn't have happened otherwise?

Yoni Assia: A hundred percent. There is no doubt that COVID-19 accelerated digital transformation. It accelerated digital transformation in many, many industries, but it also has accelerated the digital transformation of money and the adoption of digital assets in general, of cryptocurrency in general. And that came from a variety of reasons. It's not only about lockdowns. It's about the widest discussion in human history on the value of money due to the printing of money that happened. So, people were asking themselves, wait, if governments can print trillions of dollars of money, why can't also people print trillions of dollars of money, which actually is what happened. That $2 trillion of crypto market cap is money printed by the people.

Meet the Leader / Linda Lacina: What other change could we see?

Yoni Assia: I think still very few people understand the opportunities of smart contracts. I'll just give a couple of examples. If you think of ICO's [Initial Coin Offerings] and again, I don't know how much the people listening to the podcast understand cast, how much do I need to sort of explain things around crypto.

You know, what is ICO? People constantly ask me what are these 20,000 cryptocurrencies? Why do we need 20,000 cryptocurrencies? And I tell people there's 55 million small, medium businesses in Europe and the U.S., cryptocurrency is just a way for people to unite around a concept that they want to execute, they raise money for it.

So, it's not about creating a currency, it's just a different way of capital formation. What are DAOs? Decentralized Autonomous Organizations. That's just the way for those people together to decide on the corporate governance and decision-making on how to potentially spend the money. So, you can raise money on the internet today to an entity that's completely based on the blockchain, that the money stays in the smart contract so nobody has access to it or can take it out alone, but they need to agree how to take money out of that basically corporate structure, right?

So, what I described now is a set of several smart contracts. What are in NFTs? It's another set of smart contracts, right? A way to create art, digital art, potentially, to create capital formation for someone from a developing country or a group in a developing country and raise funds from people from all around the world towards their art.

These are just basic examples of how smart contracts work. And they're being replicated continuously. I think the opportunity and the amount of innovation that we are going to see in the next 10 years around people who understand how blockchain works, how smart contract works, and are able to constantly create these new creations, that form capital, that unite communities around capital, around potential profits, potential opportunities, I think we're really just at the infancy of that.

Also, from the point of view that, when I look at crypto markets and today it’s a $2 trillion of market capital for all of the cryptocurrencies out there. I think over the next 10, or maybe it'll take longer, maybe it's 15 or 20. I think we're going to eventually see this market grow from $2 trillion to $200 trillion.

We're looking at the by far largest transformation of wealth in human history, both on a technology point of view, moving from analogue to digital, on a cross-border point of view, moving from local to global, and on a generational point of view, moving from older generations to crypto native and digital asset native generations.

Meet the Leader / Linda Lacina: You got started trading at 13. Tell me a little bit about that and what caught your attention?

Yoni Assia: I always say that I fell in love in two technologies very early on. One was the internet connecting with people from all around the world, right? So, I'm the oldest of Generation Y. We grew up in a very, very local community. You knew whoever you knew physically. And then when the Internet came in and suddenly, you know, I could speak or write to people from all around the world, and I realized that the world has no more boundaries because I can write something and suddenly people from around the world can read it, I can read things that people from around the world are writing, and that the infrastructure for that technology created that global freedom of information that sort of sparked my enthusiasm into technology.

And at the same time when I made my first trade and learned how capital markets work and I had my father who was a founder of a NASDAQ listed company. So, I sort of had him as a mentor to explain to me how our markets work. I remember when I did my first trade, and then I think I went into Yahoo Finance and I saw the price change and I realized I just bought something at an Israeli bank and the stock price changed for all of the people who work in that company, who own that company, I just changed something for their lives. Very, very small thing.

But understanding how capital markets sort of connect, again, everyone around the world into the same system, enabling a person or investor in one place to impact the value of so many people owning that share in another place. I think that that really sparked my enthusiasm about capital markets and money markets.

It took 27 years for us to see the same spark happening in so many people around the world, leading into some things that are beautiful and romantic, some things that seem crazy - from the meme stock rally, to people realizing that they can save their favourite GameStop, or their favourite cinema chain AMC. Because they believe we’ll be out of the pandemic and they want to know that the cinema is going to be there and they don't want people getting fired. A very romantic notion of retail investors participating in capital formation.

It's all about suddenly people realizing that they’re a part of capital formation. Historically capital formation was reserved for very institutionalized players. Very few could feel that they're a part of capital formation, of enabling companies to raise money, to survive. And suddenly that spread, because in crypto again, it's the same: capital formation. People raising money for a Decentralized Autonomous Organization over the Internet from people that they don't know from 200 different countries. That's another form of capital formation and capital formation enables people to foster innovation, to build things, to create things, whether it's technology companies or whether now it's art with NFTs. Suddenly artists from Africa can create a project and raise money from 10,000 people, from maybe a hundred different countries and raise money for what they're doing in Africa. And that creates again a borderless community and a transformation of wealth.

Meet the Leader / Linda Lacina: What lessons did you take from being raised around your father, who founded a successful start-up? How did that shape you, watching your father launch a company?

Yoni Assia: I knew from a very young age, that's what I want to do as well. I knew at a very young age I wanted to be an entrepreneur. I knew I wanted to build a big company. And later on, I knew that I wanted to build a big company in the FinTech space before the term FinTech was actually coined.

So, for me, it really helped me sort of guide me and where my passion is and eventually where my career became.

Meet the Leader / Linda Lacina: You started a company before you started eToro, you started one with your army buddies. Can you tell me a little bit about that?

Yoni Assia: When I left the army I joined a group of friends and we developed cameras systems to be deployed on rollercoasters. So, you could actually get off the rollercoaster and buy a DVD of your entire ride. Back then, it was based on very advanced technology for those days, using Wi-Fi to compress videos of cameras on a rollercoaster.

And as the companies grew- by the way, the only similarity between that and currently eToro is capital markets are a roller coaster, and that was a roller coaster as well. But you know, this was me at the age of 22, 23 jumping from park to park, from theme park to theme park, installing it, testing it in various parks around the world.

Meet the Leader / Linda Lacina: Was there ever that moment with eToro in the very, very beginning where you had to make a really, really important pivot or change?

Yoni Assia: The market changes constantly and you need to adapt yourself. One of those pivotal points we had in eToro - so, eToro today has 27 million registered users from 150 countries who can trade commission free stock trading, cryptocurrencies, and more assets, it is our understanding that we need to really build tools to help customers become successful investors.

That has to be a part of what we do, to help our customers understand the risks and opportunities in the markets and adjust it to what they're willing to risk and how can they become educated and become more successful over time.

Originally, we thought, you know, it's enough to just build it and they will come. But as we saw more and more people coming into the platform, we realized we have to build more educational tools, more social tools to enable our customers to learn from each other. Copy trading enables our customers to simply automatically copy the most successful investors in the platform. So how do you continuously evolve to not only create access to the financial services system into capital markets, but also to help people become more successful investors.

Meet the Leader / Linda Lacina: You mentioned that a key tenet of eToro is to learn by experience. How have you learned from experience? If you were going to go talk to that that guy at 22, who was starting that camera company, what would you tell him?

Yoni Assia: First talk to people about your ideas. The more people you talk to, the more information and thoughts you gather of different opinions. Don't be afraid to talk about your idea, not because somebody would steal it, and not because somebody would tell you it's stupid. The best way to sort of form a better concept, a better company is the more information you share and therefore also receive feedback on.

I think the second is think thoroughly about how you raise money, from who you raise money. Try to make sure you align with people on your long-term vision. Make sure you have a long-term vision that you're passionate about, and then try to make sure people that partner with you invest in that long-term vision, that they're also passionate about it and not only on financials and financial return.

Meet the Leader / Linda Lacina: How do you do that? How do you suss out that someone is aligned with you and you both are on the same page for where you want to be going in the long term?

Yoni Assia: It's always a discussion. It's also, by the way, non-trivial, right, because investors invest across multiple concepts and ideas and industries.

So you can have a board member that sits on 20 other companies. He has attention for you once a month. You know your business. You're always significantly down in the rabbit hole versus your partners and investors. And it's your responsibility as an entrepreneur to constantly bridge that gap and remember, okay: “I need to go macro again on what we’re trying to achieve long-term. Do we still agree on that? Are we still passionate about that? Is the market still there?”

Make that zoom in-zoom out for people who are less involved, but you want to keep them engaged and involved.

Meet the Leader / Linda Lacina: Are there particular questions you ask or even tells that you look for to get that sense?

Yoni Assia: Different investors can provide different value sets for the company.

You don't need all investors to be the same and agree with you on everything. You need to be able to learn from your investors and partners. I had investors that were amazing product people and were very, very product-oriented and didn't necessarily like the concept of sales. I had other investors who were extremely financially oriented, and just wanted to look at the KPIs.

So again, you have that high level of what's the vision of the company, what's the mission of the company. And then each investor, each partner, each advisor or mentor would provide his own view of the world that relates to your vision and the mission.

Meet the Leader / Linda Lacina: How have you changed as a leader?

Yoni Assia: I grew older and had five kids, so that's a big change. And I think I learned to appreciate time or maybe am even still learning to appreciate time, that some things take time and you need to let people have that time to get to where you want, both mentally and sort of from a work process point of view. I think patience is something that you learn over time.

Another thing is how do you harness people into a process? How do you make sure that people around you understand where you are trying to get, and try not to break that down into 'here are the things that we want to do', but 'here's where we want to go' and get them to help me understand how do we get there. I think that's a process also growing as a company. We have now almost 2,000 employees in eToro. I can no longer know what everybody does every day. But I need to make sure that all of our managers know where we want to go.

Meet the Leader / Linda Lacina: Is there a book that you recommend?

Yoni Assia: Intelligent Investor, by Benjamin Graham is a very important book if you want to think about capital markets. I can throw in a couple of more, like 1984 is a very good book to understand perspective, and how important it is to remember the perspective of two sides of the coin. I think Atlas Shrugged of Ayn Rand is a great book that has helped me when I was young to sort of understand a bit of objectivism and how important it is to make sure that creators create and have that freedom to create.

Meet the Leader / Linda Lacina: You have five children. What do you think that they'll learn from you, what do you hope they learn from you?

Yoni Assia: I think the power to create and innovate. And you know, I'm trying as much as possible to help them understand that there's no limit to creativity and the limits that people always put in place for them are just thoughts. And I think that, you know, that's my role in the house maybe, but I think sometimes I see a lot of people that it takes a long time to understand how flexible and infinite the world of thinking is.

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