Thank you all for your contributions to the community forum - this is gathering lots of momentum… and it’s a great way to publicly and transparently clarify any outstanding doubts on anything Darwinex for everyone’s benefit.
Now, on to Darwinia - why we do it, how it works, and what are the results so far… etc. But before we take a step forward, we need to take a step back!
As you hopefully know by now, Darwinex’s mission is to empower independent traders and investors who take their own decisions - on no other consideration than merit. To get this vision off the ground, we pivoted from our early Tradeslide days to today’s two sided end-to-end marketplace model, with required FCA regulation.
Marketplaces are great models - supply and demand re-inforce each other leveraging network externalities. They are, however, notoriously hard to get started: to get them going, you have to beat the chicken-egg Challenge.
Darwinex’s lifeblood is investable traders (our chicken). The more and better traders list their DARWINs, the more investors (eggs) join the marketplace, the more assets under management (AuM) they commit, and the more assets under management they attract. This of course is the best incentive for new traders to join the platform, and for existing traders to raise their investable game.
Back in the summer of 2015, our investor technology was “ready” to open to the first beta testers. In addition to the technical challenge (powering a new 24/5 asset class is no small feat), we faced our chicken-egg. The ranks of investable traders trading with us back then were too thin for comfort - and we needed a way to significantly speed up investable trader acquisition.
At that point, we faced, broadly speaking, two marketing options:
Outbound marketing: advertising to source average traders is awfully expensive. Advertising for investable traders is awfully ineffective as well - the more experienced the trader, the less attention they pay to banners. Too much BS in ads.
Inbound marketing: we needed a story that lent credibility to our “make a living off your trading ethos” - one powerful enough to attract the very banner blind investable traders we badly want.
That’s when it dawned on us.
What better way to kick-start the marketplace (and stand out from dealers that trade against customers) than backing our best customers. Thus the original Darwinia cash-price (Darwinia 1.0) was born: every month we paid the customers with the highest grades and best monthly results for trading consistently. It was a good start: it attracted several investable traders per month for less than it costs Plus500 to attract 10 customers.
Then again, the cash for trading message was too close to “cash for demo contests” for effective marketing differentiation, and it did not train emerging traders in managing capital for a success fee - another thing we badly needed. This was the reason why Darwinia 1.0 (cash-prizes) evolved into the experimental Darwinia 2.0 EUR notional 320.000 6 monthly capital allocation.
How does it work?
As a start-up, deploying 9 MM is beyond our current financial needs but we leverage technology to achieve more bang for the buck:
Instead of investing the full nominal 9 MM, we use a margin-based model that leverages credit and settles the P&L difference for the trader group. This allows us to efficiently pay investable traders as if the full 9 MM were deployed.
We know that some users have tracked the nominal losses and might fear for our solvency - rest assured that we haven’t lost anywhere near that amount, because
There’s an algorithm that gradually withdraws the allocation to losing traders - we don’t want e.g. a loony or a competitor bribing Darwinia winners into deliberately busting their accounts to bring us down :-), and
9MM of nominal investment generate an awful lot of trading commissions to offset any trading losses
Most importantly: it’s working. Better and better traders keep joining Darwinex - which reduces trading losses or generates actual profits for Darwinia, but more importantly, has kick-started the world’s first Exchange listing traders as a new financial asset.
To date, Darwinex has made good progress in attracting (some of) the cream of independent traders - but things can obviously be improved.
How about this thread turns into a constructive debate where investable traders contribute on how to improve Darwinia’s impact? We’d love to hear your opinion: what could make Darwinia even more attractive to you?