Naman Sehgal elaborates on ZKX’s Cutting-Edge Strategies to Boost User Engagement and Foster Decentralization.

In a conversation with Naman Sehgal, the co-founder of a decentralized exchange, the notion of Web2.5 is analyzed in relation to Web3's dynamic evolution. Sehgal delves into the complexities of moving users from Web2 environments to those of Web3, highlighting the need for designs that prioritize simplicity, accessibility, and user-focused experiences. He shares thoughts on liquid governance, the merits of Layer 2 solutions, and the future trajectory of decentralized finance, providing valuable insights into ZKX’s forward-thinking vision for blockchain innovation. ZKX , conducted within the scope of TOKEN2049 A recent tweet from ZKX highlights: 'The Future of Web3 is Web2.5'. But what exactly does Web2.5 signify? 

Web3 still relies heavily on existing structures; the user base is relatively small. We need the full infrastructure, support systems, and various channels present in Web2 to thrive. 

While decentralization is a core facet of Web3, allowing for self-custody and privacy, it's important to note that scaling a massive operation akin to a Web2 company still necessitates traditional components. Funding, pathways for new users, and resources from Web2 environments remain integral. Hence, we maintain that the evolution of Web3 will owe a great deal to the framework of Web2.5. 

The crucial takeaway here is that in order to attract everyday users to Web3, all obstacles to entry must be eliminated. It’s essential to operate with the mindset of a Web2 company, emphasizing user-friendliness.

Our approach essentially mimics that of centralized exchanges, offering a familiar user experience—like logging in with a password. We simplify the process considerably by incorporating features such as regional language support and dedicated customer service. If we don’t address these aspects, we risk limiting our reach to a niche group of 15,000 to 20,000 DeFi traders globally. Yet, by enhancing the user experience, we can aim to attract millions akin to users of centralized platforms.

Are there elements from Web2 that could be adapted for use in Web3?

There remains a necessity for certain verification systems to ensure that users are not associated with criminal activities. While many of these systems are still in their infancy, I anticipate that on-chain KYC solutions will emerge soon, allowing users to maintain a degree of anonymity while verifying their legitimacy. This could be an exciting development.

What strategies could draw more everyday users to decentralized exchanges?

To capture the average user’s interest, your platform needs to provide a seamless, hassle-free experience. For instance, the concept of staking might seem overly complex, as does poring over white papers. The real challenge is to distill these concepts into relatable, user-friendly experiences.

We’ve crafted a rewards system that’s straightforward. It resembles real-world shareholding—when the company profits, the shareholders receive dividends.

To truly engage retail users, we must offer regional language support, excellent customer service, and a user-friendly interface. All these elements are indispensable for our growth. 

How do you intend to maintain the recent surge in user engagement, especially with new features like Pro Trade’s 24-hour Leaderboard and visible trading fees? 

Many individuals are attracted to the idea of trading but lack a clear understanding of it. That’s why we introduced OG Trade, which simplifies the experience to just market orders, allowing users to take positions and earn rewards for being daring. We also reward for top volumes, profits, and losses, ensuring there’s a playful learning atmosphere, giving users that valuable experience without the fear of losing.

Once they’re comfortable with this, they can transition to ProTrade, which offers a more advanced trading experience. We understood the need to incentivize users in ProTrade as well.

Transparency regarding trading fees is crucial, particularly for attracting institutional clients who require confidence that they won’t be incurring excess costs. Those engaged in professional trading are acutely aware of how fees can significantly influence their decisions.

Could you elaborate on the liquid governance model for the ZKX token and its implications for token holders?

The concept is straightforward. By staking ZKX tokens or engaging in trading on the ZKX platform, you accumulate ZKX digital shares, akin to soulbound tokens. These shares are not transferable; they're a representation of your earned stake.

Importantly, these soulbound tokens come with a decay feature. This means that if you withdraw your stake or cease trading, your shares diminish over time. Only as long as you hold these soulbound tokens—your ZKX digital shares—will you have a say in the governance of the protocol and be eligible for staking rewards. 

The essence of liquid governance is that it empowers active users—those consistently engaging with the protocol—rather than merely large token holders who may not interact with the platform.

How do you facilitate a smooth transition for traders moving from L1 to L2, and what benefits does L2 offer them?

We boast a proprietary bridging infrastructure designed to ease the liquidity transition from L1 to L2. With the unique ZKX account, users will discover a tailored experience. Our decision to build on L2 and Starknet was guided by their proven technology.

The advantages are evident—not just in terms of the increased safety and security that L2 systems provide. A significant factor for us is the knowledge that as a derivatives DEX, we will process considerable volumes that must be settled systematically. Each settlement incurs costs, and we noted that Ethereum's recent updates substantially lowered L2 transaction expenses. This made it a financially sound choice to develop on L2 given the stable business outlook.

Are there still unresolved challenges within DeFi that need attention?

DeFi currently represents an expansive landscape ripe for innovation. There’s a range of developments, including pre-launch perpetual contracts creating speculative markets for tokens that haven’t yet hit the market. Although it’s an exhilarating environment, it could also lead to economic instability.

The volatility is palpable, and many may end up losing significant sums, which can attract scrutiny from regulatory bodies such as the SEC. It’s vital to approach this space with caution; we must create solutions that are equitable and innovative while remaining vigilant.

What are your impressions of Token2049 and the potential advantages it brings?

At the Token2049 event in Dubai, we encountered some truly outstanding individuals. It was a fantastic opportunity to meet our partners face-to-face. We have collaborated with many for an extended period without ever meeting them in person, and these direct interactions can yield significant differences compared to virtual meetings.

In the coming month or two, we plan to make an announcement regarding an upcoming listing; we are finalizing details regarding dates and venues. Although we have some frameworks in mind, we aim to share the latest and most precise information shortly.

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Victoria writes on various technological subjects, including Web3.0, AI, and cryptocurrencies. Her extensive background enables her to create compelling articles that resonate with a broad audience.

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