E165: Backpack CEO: How I Survived Crypto's Biggest Collapse, Then Built a $420B Exchange

**Armani Ferrante** (0:00)
So, FTX collapsed, right? We had $14.5 million on FTX. That was about 90% of our balance sheet. The company is basically dead for all intents and purposes if everything that we were learning was true. And as all that was happening, I basically asked myself the question, okay, what's the type of person are you?

**Kevin Follonier** (0:14)
What's your answer to that question? Armani Ferrante, the founder and CEO of Backpack.

**SPEAKER_3** (0:22)
A regulated global crypto exchange with over $420 billion trading volume.

**Armani Ferrante** (0:28)
He's a leading Solana builder behind Backpack and Mad Labs.

**Kevin Follonier** (0:32)
What's your take on the Solana ecosystem today?

**Armani Ferrante** (0:34)
I mean, I think there's Solana and then there's the crypto industry. It's just a wonder of modern computing. It's an incredible feat of engineering that is creating novel market structure for the future of the world's economy.

**Kevin Follonier** (0:46)
Explain to us your core product, unified margin accounts.

**Armani Ferrante** (0:49)
The ability to borrow. You never actually have to incur the taxable events if you just borrow against your retirement account. Now, when you're talking about more sophisticated user bases, professional traders, for example, then the unified margin account starts becoming a lot more interesting.

**Kevin Follonier** (1:03)
Why did you decide in early 2022 to build your own exchange?

**Armani Ferrante** (1:07)
I'm an engineer. I like the program and build stuff and smart contract movement really offered the ability to have the maximum amount of impact with the most amount of autonomy and the freedom to just build really great things.

**Kevin Follonier** (1:17)
You mentioned before FTX collapse, you said you got affected personally, but also the company. Tell me what happened and tell me why you didn't quit. Hi, everyone. This is the little bit that I know none of you like that can help us make a huge difference for this show, and we want to take it next. 71% of the people who regularly watch When Shift Happens have not subscribed. And so all I'd ask you if you want to make a huge difference is the following. If you've seen this show before and you like it, help me, help my team, hit the subscribe button, and we'll continue to build this show for you. Thank you. The who are you question is always the one that's like, who am I?

**Armani Ferrante** (2:01)
It's like, God, I haven't done any self-reflection on, you know, the existential questions like that since, I guess.

**Kevin Follonier** (2:13)
Since?

**Armani Ferrante** (2:14)
I don't know, since you read your first philosopher in university or something, I don't know.

**Kevin Follonier** (2:21)
Tell me more about this first philosopher that you read and remember.

**Armani Ferrante** (2:27)
There's no one philosopher that sticks out. I guess every book you read comes up with different kind of ideas and things that you have never really thought about before. The one that comes to my mind given we're in a crypto context is Michelle Fuko and the Panopticon metaphor. If you're familiar with that.
Basically, the idea is, I forgot what the exact historical timeline was, but this guy Jeremy Bentham constructed this idea of the perfect prison where it was this interesting architecture, where it was a circular building with the prison cells around the diameter of the building, and there was a tower in the middle. And all the prison cells, you can... From the middle of the circle, you kind of have this tower with the watch guard sitting, where the watch guard can see the prison cells, but the folks in the prison cells cannot see the watch guard that is sitting inside of the tower. And panopticon is this metaphor for the surveillance regime that modern society has created across kind of every level of culture, society, and law enforcement. And the idea is that with this mechanism, you have this perfect prison where somebody is watching you at all times, but you can't see them watching you. And so, it's an asymmetric dynamic where you actually don't know if anybody is actually in the tower watching you. And so, you start policing yourself.
And so, there's a lot of, I guess, connections to kind of the surveillance states and, you know, whether it's governments monitoring your text messages or saving your data or public ledgers that track an immutable, unforgeable database, every kind of movement of money around the world. And so, you know, there's always this question of, you know, are we living in a panopticon and are you building for a panopticon or are you pushing against kind of that, you know, perfect prison cell that is being constructed by, you know, the powers that might be. So, yeah, I think that's maybe a very interesting read for, you know, folks that are interested to dive in the philosophy and are working in the industry.