Israel’s ZenGo Aims to Capitalize on Crypto’s Post-Coronavirus Rally by Being the go-to Platform for Newbs

One sector that appears to have benefited from the coronavirus (Covid-19) pandemic more than most is the cryptocurrency industry. A huge upturn in trading volume and an increase of over 20% in the price of leading cryptocurrency Bitcoin since the start of the year are testaments to the growing interest in the sphere of digital money. The launch of Facebook's Libra digital currency project set for later this year will undoubtedly turn an even greater focus to the space that continues to battle reputation issues, especially in relation to Bitcoin and its use in illicit transactions.

One startup aiming to help in the quest to mainstream crypto is Tel Aviv-based ZenGo. The company, led by CEO Ouriel Ohayon, believes it has solved one of the biggest issues preventing crypto's breakthrough, the complexity of buying and owning the assets and keeping them safe from hacks.

ZenGo CEO Ouriel Ohayon. Photo: Courtesy

"Our project is for anyone intimidated by crypto, anyone that has an interest, but is intimidated, afraid or frustrated by all the other options in the market, because they are overwhelming and complicated and tedious and scary," Ohayon told CTech earlier this week. "We have taken crypto and removed all the complexity. We leave you with what makes it super interesting and super fun to invest in. Everyone claims that they made crypto simple but the reality is that when you try their product it is either not true or it is very limited to a very narrow use case, like one blockchain or one subset of products like DeFi. What we do is completely remove the complexity about public and private keys (a randomly generated string of numbers and letters related the bitcoin wallet address), we have a 24/7 human chat support for any problem with an average answer time of two minutes and we have a super strong focus on user experience that makes it look familiar and simple and easy."

What makes ZenGo different to other wallets is that it secures its service with a biometric 3D face authentication system, powered by FaceTec’ ZoOm technology. The FaceTec solution is specifically tailored for the consensting user authentication and was never involved in the ethically questionable mass surveillance domain.

"The security is based on two very strong advancements. The first one is that you don't rely anymore on private keys. So no one has your private keys and there is not a single secret that can compromise your funds, which is something that you find in every other wallet in the world," Ohayon explained. "The second innovation is about the authentication mechanism. We are the only wallet in the world, not just in crypto, where there is no password. It relies exclusively on who you are and not what you know, which typically is a password. In any other wallet if someone knows your password they can use your account and that is why there are so many hacks. The combination of both makes it really unique at the security level because we have reduced dramatically the cases of hacks and human errors."

Ohayon said ZenGo has experienced dramatic growth during the coronavirus pandemic, with the number of users growing by double digits and revenue multiplying several times.

"Things have been really accelerated over the past two or three months at every level," he said. "With the number of new users we are attracting, it is clear that there are a lot of new people coming to crypto in a significant way. It isn't just us either. We are hearing other people in crypto confirming it. Coinbase (one of the biggest crypto exchanges in the U.S.) had a record number of sign-ups in the past three months. The question is why now? Is it because people were bored at home and had more time and had to spend it somehow? Or is it because it was a natural evolution that would have happened even without Covid-19? Or a combination of both?

"We weren’t expecting the financial numbers we are seeing today at least until next year," Ohayon added. "We are way ahead of where we thought we would be. It is crazy. I don't think we could have anticipated that. So now the challenge is to handle all this influx and the pressure at the customer support level and the many urgent fixes. So we had a very tough period and also had to work from home, which added a point of friction, but the big problems are behind us, most of the bugs have been resolved and customer support is now in place."

Earlier this week, ZenGo also launched swapping features, allowing users to exchange crypto assets for one another. In March, it introduced a savings feature with which you can set aside and earn interest on your crypto assets. The company also announced last week that Balaji Srinivasan has joined its team as an advisor. Srinivasan is one of the most respected and well-known voices in the crypto industry. He was a partner at the prestigious VC firm Andreessen Horowitz and is the former CTO at Coinbase. Ohayon had been in touch with Srinivasan for several years, but only met him in person for the first time when Balaji visited Israel last year. Srinivasen then promoted ZenGo's convenience in a twitter post about the ideal crypto wallet unsolicited back in Janaury, prompting Ouriel to get back in touch and offer him an advisory role. "Balaji joining as an advisor is extremely valuable and is a strong signal to what we are doing," said Ohayon. "Now we have more challenges and we have to grow as there are a lot more things we have to release to reach market dominance and not just be competitive. But these are good challenges and we are in the right direction."

ZenGo currently employs 22 people, mostly in Israel. The company announced in September 2018 a seed round of $4 million led by Benson Oak Ventures, and also participated by Elron, Samsung NEXT, FJ Labs, Collider VC and BlockNation. It has recently received a substantial grant from the Israel Innovation Authority and Ohayon said there is no intention or need to raise any additional funds at this time despite interest from investors.

Despite all the progress being made, Ohayon admits that the crypto space is still not a place for the faint-hearted. "One thing is certain, investing in this space, in blockchain and crypto, is a risky investment. If you are afraid of risks you shouldn't do it. It is still a very volatile market and there are undoubtedly still a lot of people trying to scam other people. It is still happening and if you are not very cautious with how you make decisions and don't know how to manage your risks then it is not a good space to be in," said Ohayon before explaining that for many people in developing countries crypto is far more than just a fun investment vehicle. "Another thing we need to remember is that at least two-thirds of the world are in dangerous economies, or dictatorial countries, suffering oppressive regimes, or failing banking systems. These people want access to financial freedom like everyone else. So crypto for them isn't something cute to invest in. It is very important. It is something that is central and sometimes even primary to their lives. There are countries where sending crypto is the only way to send money to your kids. In some regimes, the country will decide that you can't have a bank account because of your religion or because you are gay so it is the only way for you to have something that allows you to pay. This is the reality today and not something we have to wait 10 years for. We live in a world where there are two realities: one in developed countries where crypto is mostly a tool of speculation and an investment vehicle and the other in countries where their economy makes it a priority for them. This is one of the reasons crypto is developing because there is a natural demand for it and there is an urgency to that demand."

Facebook has also often highlighted the needs of the developing world as one of the main reasons it is launching Libra. Ohayon said that Facebook was always going to face difficulties with regulators due to its size and track record and believes it is remarkable that they are actually set to launch the project, unlike the likes of Telegram, which recently abandoned its blockchain project due to a clash with the U.S. Securities and Exchange Commission.

"Facebook is very close to receiving regulatory clearance to go ahead. There is a fully working association and governance and they applied to FINMA to have a license so it is going to happen," Ohayon noted. "If you are very big and you are getting into the money business and you are doing it on the back of the regulators, then you have no chance. The reason why Bitcoin has survived is because there is no company behind it. If there was, it would be crushed and they would have suffered the same thing, but there is no one to call and no one to stop. The remarkable thing about Facebook is that they are going to launch despite all the hate. I think that when it launches it will be one of the most important events in the industry since the launch of Bitcoin. It will be the first time a very large scale company put a digital currency in the hands of billions of users. and it doesn't matter if it is centralized or decentralized. It is a digital currency and people will have a new form of money in their hands available anywhere, that can be used anywhere."

ZenGo doesn't have to worry about any such regulatory issues, not only because it is a relatively small startup, but also because it doesn't control any funds and doesn't act as a money transmitter.

With coronavirus advancing ZenGo's timeline by a year, the company is well on course to achieve its big goals and to ultimately become an all-in-one crypto tool box.

"We are not a tool for experts and we are not a tool for geeks. If you are a high-frequency trader or if you are a privacy freak, we are not the tool for you. But we are built for a billion-plus mobile devices and if you don't build for mobile first you are not in the right ballpark," said Ohayon. "The plan is to continue building the product. We are not done yet. There are a lot of functions that we are hoping to add so that it is truly an all-in-one. For now, we are serving mostly beginners and casual investors, which is our core audience but at some point, we will start to serve more professional audiences so for them you have to have specific products and services and assets and additional security when you are making more serious investments. We want to first serve our core usership very well and then begin serving the next tier of clients."