illiam Quigley, co-founder of WAX (Worldwide Asset eXchange) loves scuba diving. In particular, he likes to venture into murky waters at night. The reason?
“I love mystery. The worst thing for me is to know how the book ends. Things which have many possibilities are much more interesting than things that are deterministic.”
Quigley grew up in murky economic times during the 1970’s. Living in a rough neighborhood in Oakland, California, with his eleven siblings and single mother, the family persevered through economic stagflation and financial collapse.
“Very early on in my life, I was learning about all of these big problems. Of course, I didn’t really understand them, but I just knew, we don’t have a lot of control over whether or not we have jobs. I think that probably stuck with me.”
The Quigleys were never deterred from pursuing better lives for themselves. “I had a very strong interest in entrepreneurship from a very early age, because I paid for everything. Clothes… food… I had crooked teeth. So, I found an orthodontist who I could pay $35 a month to get braces and headgear.”
His first job at age nine involved helping people with piecemeal jobs around the neighborhood. He worked for his elderly neighbors, charging 25 cents to take out their garbage. Like many kids, he worked a paper route — usually a job that requires a lot of work for only a little money — but Quigley found a way to make it pay a much greater return.
“Really, the rule of law did not exist to a great extent in Oakland… Everyday rules and regulations, people just didn’t follow. So as a ten-year-old, I could ride a motorcycle at five-thirty, six in the morning, without a driver’s license, to deliver papers. So I could deliver 220 papers, not 30.” Quigley would help out at local laundromats, earning a monthly wage by opening the establishments in the morning.
Like the rest of his family, he had hustle. The entrepreneurial spirit — and the accompanying strong work ethic — was in their blood, most clearly displayed by his mother.
Land of opportunity
“My mom got into business. There were a lot of people who needed dialysis, who needed non-emergency medical transportation. She happened into it by helping somebody and realized, ‘Wow there’s good money in that.’ So she bought a van, and another van, and another van, and she eventually had the largest non-emergency medical transportation company in California.”
“This is a woman who came to America at age fifteen with not much education. She taught us to really love America, because we’re able to do this. That really stuck with me.”
Quigley explains that his mother was always hustling, working long hours to grow her business. She tried to get her employees to clean the vans properly, but when they didn’t do a good job, she and the kids would step in. “At the end of the day, me and my brothers would be scrubbing the vans with her.” Her work ethic earned the respect of her workers and motivated them, Quigley says. If she scrubbed the vans at the end of a long work day, the job must not be beneath them either.
Hard work goes hand-in-hand with Quigley’s affinity for Libertarian ideals. “A lot of us in crypto came from backgrounds where you have to be scrappy and were able to turn perseverance and hard work into something.” This ethos lends itself to a strong appreciation for Bitcoin and crypto in general, he says. It’s a grassroots entrepreneurial-inspired environment, very similar to the growth of the Internet in its early days.
“If you’re poor, it’s very demotivating when you don’t see any way out of your lot. The most inspiring thing is when you yourself figure out a way to make money: I can move up from this!”
The language of business
As high-school aged entrepreneurs, Quigley and his brothers stood outside concerts running booths that sold “bootlegged” goods — unlicensed printed t-shirts of rock groups like Van Halen, Foreigner and Journey. Some people would slow down and glance at the shirts, but most would pass by. The trick, Quigley says, was to get them to peruse the goods. So the group invested in a greater variety of items in order to give people choices, which caused them to stop and shop. “I really understood; consumers have to be curious. You have to tantalize them a bit.”
“Insight is the rarest of all commodities.”
Quigley’s entrepreneurial bent moved him to pursue a better understanding of finance. Accounting, he said, is the “language of business.” Following his post-secondary studies, he became an auditor in the banking industry, where he began by auditing Japanese bank agencies.
He describes what he saw as “appalling practices,” whereby many of the agencies were concealing numbers. “All of those banks were really insolvent.”
“In 1989, the value of real estate in Tokyo was worth more than all the real estate in the United States. The productive output in Tokyo could not possibly be as much as the entire U.S. — and it wasn’t.” Japanese banks were busily lending into an enormous bubble that has since resulted in 25 years of semi-permanent recession, he says.
Quigley focused on examining failed Savings and Loans in the late 80’s, during a time that was considered to be a “once in a century” financial crisis. The thousands of failed S&L’s were just too easy to set up and abuse, he explains, with government-guaranteed deposits. “Think about the mischief you can get into if you’re not ethical or smart. You had thousands of S&L’s that decided real estate speculation was a great thing to do with customer-insured deposits.”
“Customers didn’t care. That’s called moral hazard. They didn’t care because their deposits were insured.”
“It was a once in a century financial crisis… until seven years later.” A repeated cycle of booms and busts caused Quigley to realize the cycle takes place far more often. “Every seven or eight years, there’s some calamity. And when those calamities happen, the knee-jerk response by policy-makers and regulators is to do bad things.”
“I’m a huge believer in humility when it comes to thinking you understand what the problem is. What I find is, with the passage of time, sometimes a year, things are clearer.” He feels that it takes time to gain perspective, and regulators often react haphazardly in a moment of panic.
From Disney to Harvard and PayPal
Quigley shifted his career into the realm of entertainment in 1990, working for the Walt Disney company in a variety of roles, from consumer products and parks like Euro Disney to the Disney Store retail chain. “I worked with very talented, demanding people. I also learned that brand matters. My phone was always ringing. I didn’t have to call people for it to ring. People wanted to talk to Disney.”
During this stint, he would ask licensees how they managed to get their jobs. The common reply was business school training. Quigley recognized that he needed an MBA to qualify for jobs in private equity or venture capital, so he “went and got one at Harvard”.
It was around this time that the Internet and all of its entrepreneurial possibilities began to look very interesting to Quigley, who compares it to where crypto was in 2012. “I knew that large companies were not going to touch this stuff for a while. That’s just not how they work. They acquire stuff, they don’t actually try to figure it out. So I figured it was a good time to get into that.”
Quigley and his partners started a fund for a new concept at the time, a business incubator. Working with Bill Gross, Quigley formed IdeaLab Capital Partners, teaming up with founders to help fund Internet start-ups. The team would fund and work with young companies early in the development process. “It was unusual for venture capitalists to be so hands-on so early at the time.” They worked on e-commerce, launching sites and marketing platforms. The approach was narrowly focused and vertically segmented, Quigley explains, with highly specialized services including the likes of cooking.com, tickets.com, emusic.com and etoys.com.
The biggest problem with all of these new businesses emerging on the Internet was the issue of payments. It was a huge pain to become an authorized credit card merchant, he explains, and the Internet was considered “kind of shady”.
“You’re going to give your credit card to an internet company?” It just wasn’t something people were comfortable doing at the time, he says. “Then, someone introduced us to PayPal.”
It took the group very little time to conclude that PayPal was a viable solution to the problem. “We were the first institutional investor in PayPal and that was a real example of what we would now call explosive viral growth.” Even though the Internet was still in its infancy, PayPal enjoyed 25,000 new registrations per day during this growth period. “Even today, that would be impressive. This was in 2000.”
Magic Internet Money
One of Quigley’s partners, Jonathan Yantis, invented the concept of trading in-game virtual items for fiat money, resulting in the creation of a business called Internet Gaming Entertainment. The company turned digital assets into a money-making enterprise, eventually building a billion dollar marketplace. It was the largest in the world for buying and selling in-game virtual items.
A while after selling the business in 2009, Yantis became enamored of Bitcoin. Quigley, on the other hand, was deeply skeptical. “I had tinkered around with magic internet money… things like beenz — these were a kernel of the ideas of blockchain.”
The problem continued to be how to handle payments, Quigley says. The rails are slow and costly, and micro-payments are impossible. “What if we just create a basket of things we’ll call “beenz” and you can just pay in beenz? Of course, people in crypto would say, ‘Well, who is making the beenz?’ It was one company making the beenz, and there wasn’t a lot of transparency.”
“But I understood how powerful the concept of micropayments was. There was no way to do micropayments. Even to this day, you can’t just charge people 50 cents as a merchant, it’s just too expensive. So I was skeptical.”
Unleashing Bitcoin with Tether
Yantis continued exploring Bitcoin and kept pushing Quigley to dig into it. In 2012 he listened. “He finally explained the blockchain component to it. Serves me right for being close-minded.”
“That was it. Within a few months, we had an incubator up. We were funding our companies, funding other people’s ideas.”
As Quigley became more deeply involved in cryptocurrency, the notion that Bitcoin was not a panacea began to trend in his circles. An intelligent layer, built on Bitcoin, could offer some solutions to its limitations. Quigley and his partners backed a group working on a project called MasterCoin, now known as Omni. The fork of Bitcoin acted as an intelligent layer, he says, capable of executing smart contracts.
This drew a great deal of skepticism from Bitcoin developers at the time. They were wondering, Quigley says, “Why on Earth would you need an intelligent layer on a blockchain? What would you do with that?”
Casting aside the doubts, Quigley saw a huge potential application for the new innovation.
“I know one thing we will do with it. We will tokenize the U.S dollar. And we did. We created Tether.”
Tether fulfilled an important and unforeseen role in the cryptocurrency industry. Transferring between Bitcoin, altcoins, and fiat could be simplified by offering a much easier trading rail pegged to the U.S. dollar. It served as a safe harbor, where users could get in and out of volatile currencies instantly rather than waiting days for transactions to settle in the legacy system.
Quigley points out that this continues to be a problem. “The dollar isn’t digitized. You think the dollar is digitized. There’s these little ledgers that banks and payment processors have… there is no way on Earth to send a dollar instantly from, say, the U.S. to Korea. There’s literally no way to do that.”
“We understood this was unique.” Yet, it took months of talking to exchanges to convince them to implement Tether as a stablecoin offering, he says.
“The greatest minds of the world, Einstein, Oppenheimer, virtually all of humanity… for decades, we carried big heavy bags in the airport. And none of us ever thought to put wheels on suitcases! I remember when I first saw wheels on suitcases and was like, ‘Of course!’”
“Obvious ideas are obvious after the fact.”
OPSkins: From Ethereum to EOS
Quigley and his partners decided to back a new venture. “When Ethereum launched, we were really curious about it… I thought it was more of a science project than a platform to be used on a commercial scale.”
“But my excitement got the best of me anyway and we tried to use it on a commercial scale. It almost killed us.”
Quigley and his partners got back into trading virtual items in 2014. They saw the potential for gigantic growth in skins; in-game items with no utility other than cosmetic value. The group set out to build an exchange for trading them. Quigley says they looked around at competitors and found a “magnificent company that was already doing it.” They promptly acquired the company with a plan to take the concept and launch it on a blockchain.
In 2018, the company tried to put trading skins on the Ethereum blockchain with the OPSkins marketplace, but the limitations of the technology brought the experiment to a halt. “It was a disaster simply because Ethereum was a Proof of Work chain. The way it deals with congestion is, it implements surge pricing. That doesn’t work for businesses.”
“So here we are, paying 25 cents to create an NFT, 20 cents to trade it… and it went from that to $40 to create a virtual item. And instead of settling in five to ten minutes, 17 hours. After a couple days, it was going to go out of business.”
Quigley and the crew had to make a bold move, in short order, to save the company. Dan Larimer had launched EOS, and over the course of about ten days they migrated the marketplace from Ethereum to an “alpha-esque version of WAX”; a fork of the EOS chain with Delegated Proof of Stake consensus.
“You didn’t deal with congestion the same way and that remains of course, the Achilles’ heel, for Ethereum.”
“Bitcoin has its use. Ethereum has its use. EOS has its use. I am quite puzzled by the jingoistic aspect of crypto. You get this nationalism among the chain owners. One is not taking away from the other. They do different things.”
“When I hear the Bitcoin maximalists try to tell me that you can do smart contracts on Bitcoin, my answer is always, you know guys, that’s true. You know what’s also true? You can create a 747 out of toothpicks and glue!”
“You can do it, but that’s not what they’re for.”
Convenience is king
Today, Quigley says, convenience is the biggest challenge for crypto adoption. “Consumers pray to the god of convenience. If it’s inconvenient, they won’t take it.” He is surprised at the lack of consumer-friendly innovation in the industry. Most innovation, he says, is deep in the bowels of governance and smart contract design, not directly touching the consumer experience. But if it’s not convenient, he insists, the mass market will not adopt it.
He points out that this is a big part of the inspiration for WAX, making trading virtual in-game items easy and intuitive for consumers. Some video game companies don’t like the trading aspect, he says. They think of it as taking profits away from them: but when you create a secondary market, he explains, the greatest beneficiary is the primary market.
Quigley explains that secondary markets lower the risk to buyers in the primary market, who might otherwise fear being stuck with something they can’t do anything with in the future. “How many cars would you buy if you were never allowed to sell them? What if you could never re-sell your house? You might not buy one.” Secondary market trading fee profits remain much smaller than what primary markets stand to gain “making an item out of thin air and selling it”, he argues.
The thought process led to one conclusion: the best way to allow people to trade safely and securely would be to use a blockchain. Until 2018, however, blockchain technology hadn’t caught up to make this possible. Now, WAX is available to a giant existing market. Even if companies are slow to migrate to blockchain, independent developers can flourish by offering this new angle to consumers. But inconvenience, he says, is still a barrier.
Quigley explains that it’s not enough to have a low-cost way to trade. It also has to be very easy to trade. The WAX cloud wallet operates similarly to Ethereum’s MetaMask, but with more user-friendly features that allow the transfer of items without a need to understand all the ins and outs of the technology.
“We basically took all the things that are inhibitors to people getting used to blockchains for gaming, and we are building those simple tools. That’s the vision of WAX.”
Don’t judge in the moment
As the conversation wraps up, Quigley returns to the inspiration he draws from his mother. “Sometimes I’ll be feeling sorry for myself, like when the dot.com bubble burst and all my great Internet companies went to hell. I called her up and said, ‘It’s so bad,’ and she was like, ‘You young kids. You’re American citizens. You’re college-educated. You’re healthy. You’re smart. You have this world of unimaginable innovation and you’re feeling sorry for yourselves.’”
He talks about the set of family rules he learned during his childhood, “The Quigley Rules.” One of them is this:
“No matter what the news, good or bad, I don’t believe you are in a position, when that news hits, to judge if it’s good or bad for you.”
This has been made clear to Quigley through reflections he has written over the course of time in a personal journal. He looks back and revisits certain moments: “Wow, this was a catastrophic event in my life, but it turned out to be the best thing that ever happened. Some of the best news wound up being kind of a shitty thing but at the time I interpreted it as good news.”
“You are simply unable to judge whether something is exceptionally great, bad or benign until after the fact. It causes me to not be highly reactive.”
Knowing this, Quigley’s affinity for scuba diving in murky waters at night makes more sense. You might be surprised by what you find.
Which is, after all, what makes the adventure exciting.