In anticipation of the run from toilet paper into crypto, a San Francisco-based crypto company is looking to Portugal. Anchorage, a digital asset platform for institutional investors, announced today that it has hired 13 new software engineers in Porto, Portugal. The company plans to open a physical office for their new employees once conditions are safe.
“For us, Portugal is an amazing engineering pool,” says Diogo Mónica, President and cofounder of Anchorage, who says his product team has grown by 50% since March. “In Portugal, everyone’s excited about deep tech. Portugal has some of the world’s best distributed systems research groups, and so anything that has to do with blockchain is pretty exciting there.”
The company wanted to leverage the talent in Portugal, added João Peixoto, a lead Software Engineer at Anchorage who led the new office opening virtually due to social distancing measures.
“It’s amazing to see the amount of good talent you can find in Portugal – not only within the crypto world, but the security world,” he said.
Peixoto notes the expertise in Portugal, not only when it comes to crypto, but security, too. “That is, for sure, something that we want to leverage, when we’re talking about Europe and Portugal,” he said.
Beyond its talent pool, Portugal has other benefits, too. All types of cryptocurrency transactions are exempt from taxes. That means that payments for goods and services are not taxed, buying cryptocurrencies for fiat is not taxed, and trading digital assets is not taxed.
“We’ve seen a couple of data points, where traders are actually thinking of moving to Portugal or starting funds in Portugal, because of the massive advantage of not having capital gains versus the United States,” said Mónica. “It’s not just the Portuguese talent that is world class, and obviously has a pool of talent that is very different from the one we’ve been tapping in San Francisco, but, it’s also that, as a country, Portugal is very progressive towards crypto assets, and therefore, it makes it a very safe place to do business in crypto.” The move into Portugal, however, is about the engineering pool.
“That’s why we’ve chosen to expand into Portugal in a very meaningful way, and why it’s so exciting that we’ve been able to open an office with 13 people,” said Monica.
When it comes to its product, Anchorage goes beyond cold and hot storage. “Other custodians that use this normal process of cold storage, storing private keys and assets in safety deposit boxes, can’t really access them in the Covid world, or they would be putting their employees at risk, if they did so,” claims Mónica, who says his company’s design does not rely on human operations like other custodial services. “There is a narrative that has been in the space for quite a long time of this cold storage and hot storage narrative. People try to use temperature––hot and cold––as a proxy measure for security.” That is overly simplistic, says Mónica.
The space is moving away from the cold storage narrative, he says. “If you think at a high level, if you want any DeFi protocols to succeed, you need institutions to participate and heavily engage with them. Institutions are the ones who are bringing liquidity to the space, they’re the ones that actually are on the bleeding edge of taking advantage of things like perpetual swaps or wanting to generate yield. If we don’t have institutions participating, DeFi will always be something that won’t be as mainstream as it could be. If there were better mechanisms, and more solutions for participating in it to having better price discovery, better yields, percentage discovery, and so on and so forth.”
While DeFi protocols are decentralized in nature, Anchorage, a crypto agnostic platform whose investors include Andreessen Horowitz, Visa, and Blockchain Capital, enables active participation into these protocols by allowing clients to make governance decisions in a safe manner. For instance, since they hold their own private keys, clients could use their Maker tokens, the governance token for the Maker stablecoin system, to decide on the future of that protocol.
Anchorage, which enables clients to not only invest in, but also stake projects like Cosmos and Tezos, is also a part of the Libra foundation. Three years ago, when the Libra team was comprised of just a few people, Anchorage became one of the first institutions to participate, alongside companies like Shopify, Uber, Lyft, and others. “It was very much just an idea more than a real project,” said Mónica, who is on the technical steering committee of Libra, which directs the project’s roadmap.
Mónica notes the Libra foundation’s participants, hailing from different parts of industry, including merchant companies, venture capital firms, and venture funds. Anchorage was invited to be among the founding members of Libra due to their expertise in cryptography, security, and distributed systems.
“Libra is popular in both good ways and bad ways in the sense that, when you’re involving such big players, and you have the ability of having such impact in the world, obviously people are, justifiably so, concerned about the outcome, but also incredibly excited about the outcome,” he said.
Anchorage believes Libra has the potential to make a difference in the world for the better. “This can have a huge impact in the world for the underbanked,” said Mónica, noting Libra’s mission of helping people who don’t have access to the financial system at present.
Libra features a diversity of opinion among Libra participants regarding the direction of the project, says Mónica. “Libra has done a terrific job at making sure that we have a lot of social impact partners, and a lot of people that actually care deeply and know deeply the target audience that we’re going after.” One downside to such a structure is there’s a lot more process involved.
“We want to make sure that this organization is an independent organization, and every single member has one vote,” said Mónica, no matter if you’re Anchorage or Facebook. “That is very important for us to have as a core foundational property of the Libra Association itself. Therefore, that means that decisions have to be made through consensus, and through a democratic process.”
Anchorage has been brought into various meetings with Libra participants due to their understanding of the ethos of blockchain and cryptocurrency technology, as well as how institutions are adopting the technology. In its own pursuits, it sees increasing corporate interest in blockchain.
“They are making allocations that are directly in the space,” said Mónica. “There is an influx of corporate people are getting excited about CBDC, even though that is five years in the future. Corporates are seeing companies like Square offering buy and sell options, and they are wanting to come into space and offer the same. Those trends are good for crypto.”
From a developer and engineering perspective there is, first of all, a lot of education involved, when we’re talking about old school finance, said Peixoto. “Certain institutions that have been around a long time expect things to work a certain way,” he said. “We could talk about how old finance works versus how digital assets work, but, from a developer perspective on top of a fast moving and fast changing set of protocols like the blockchain provides, we still have to provide white glove service that traditional finance expects.” The industry has to develop the proper set of services that traditional finance is used to in order to bridge the gap between traditional finance and blockchain.
“This set of services, the way our clients interact with these services from a traditional perspective, and these new asset classes, is one of the most interesting challenges I’ve faced lately,” said Peixoto. “The ability to have trust and provide confidence over products we offer, and communicate our security principals and robustness, when they are not necessary as familiar with the technical details of it.”
Mónica says it has been educational to see companies struggling with smart contract risk. “Not only how do we deploy money on DeFi, but also other assets, like ERC20 tokens that are dependent on solidity smart contracts on Ethereum,” he said. “How do you think about risk, audits or a bug that might wipe away your assets. There are not a lot of analogs in the traditional world.”
It’s very clear that crypto assets are entering the mainstream, said Mónica. “The fact that you can transact in an instant manner, and be your own bank, is very empowering,” he said. “Especially in a pandemic, when people start hoarding toilet paper. The next thing is to hoard something that is actually valuable.”