Frequently Asked Questions

 

About Lykke

 

What is Lykke?

Lykke is a movement to build one global marketplace that is a level playing field where everyone has access. We start with foreign exchange and expand to equities, fixed income, commodities and other asset classes. Lykke Corp is incorporated in Switzerland and issued it's shares on the blockchain (Lykke Coins).

What kind of company is Lykke?

Lykke Corp (Lykke AG) is a Swiss registered corporation with subsidiaries in Vanuatu, Cyprus, and London. For more corporate information please refer to http://lykke.world.

How does operate Lykke structurally, as an intermediary? as a gateway, a Oanda or fx between cryptocurrency and forex?

Lykke Corp first of all is FinTech company that develops a trading platform (see our Github). The company has subsidiaries that are licensed as financial companies and that are providing broker and trading services for the clients. All possible asset pairs types will be traded: fiat fx <> fiat fx, fiat fx <> crypto, crypto <> crypto. Lykke is not related to Oanda.

How Lykke intersects with the banking system to make its own function?

Lykke is supposed to bridge the conventional finance with the digital assets on the public blockchains. To ensure this we plan to be fully compliant with the regulatory regimes in all jurisdictions where Lykke operates. In the grand schema banks may act like a digital assets issuers, liquidity providers, payments facilities.

We are talking of a securities firm in cryptocurrency?

Lykke is much more than a traditional securities business. We believe that in future many assets will be digitized, from real estate to freelance time, to music IP rights, to rent, not to say about SME private equity, project financing, bonds, community coins, and many more.

What is the business-model?

Commissions & fees at Lykke Wallet are essentially zero. Lykke will make money on providing liquidity, issuance services and consulting.

Why UK for licensing MTF?

We think that UK provides best-in-class regulatory environment for such kind of trading facility for institutional clients. The compliance is hard, but it let us streamline the processes and operations to provide high-end service to our clients.

What are the regulatory requirements to acquire this license?

Minimum regulatory capital according to MiFID is 730k EUR. The application paperwork is also huge: 50+ documents with heavy focus on IT processes. A lot of work has already been done.

If Lykke is open sourced won't some competing company just come in and copy and replicate?

Sure, why not, the space has to be competitive. However the software code is only one of the ingredients of the dish.

Blockchain tech

 

Does Lykke build a blockchain?

No. It uses Colored Coins / tokens of other blockchains, such as Bitcoin and Ethereum.

Could Lykke use theoretically any other Blockchain?

Blockchains that support issued coins, yes. In practice not all implementations make sense.

How dependent is Lykke on Bitcoin?

Currently we use Open Assets protocol and blockchain of Bitcoin for settlement. We plan to expand to Ethereum.

Could the blocksize limit become a problem for Lykke?

Since Lykke settles all the transactions on the blockchain, block size limit put constraints on the number of transactions that may be processed. We are developing off-chain protocols, that will allow scaling up the capacity. See our Whitepaper for details.

Lykke wallet

 

Where can I download a Lykke wallet?

What if my coins are stolen?

Technically it is not possible to steel the colored coins from Lykke Wallet unless your private key is compromised (for example someone has access to your paper backup). The wallet has similar security to the bitcoin itself. The private key is not to leave the device. If nevertheless something like this happen please let us know immediately support@lykke.com so that we may take measures to lock your trading account.

Can I store my coins in any Bitcoin wallet?

No. The special code that makes your colored coins yours is in the OP_RETURN field of the Bitcoin transaction. (We use Open Asset protocol to encode the digital asset metadata). We have designed the wallet so it won’t transfer to a normal Bitcoin address. For the moment, the only wallets that accept our colored coins are the Lykke wallet and the Coinprism wallet.

Can I send the coins from my Lykke mobile wallet to my Coinprism wallet?

Yes. At the moment, you can transfer Lykke coins to another Lykke wallet or a Coinprism wallet.

Is it safe to keep my Lykke coins in my Lykke wallet long-term?

We think so. While Apple phones have very good security preventing any malware from recovering data from an app, you should keep a lock code on your phone and take other measures to prevent people from accessing your wallet. It is very important to create paper backup of your wallet - just write down 12 words seed. This seed will help you to recover your private key in case your device is lost or stolen.

Is it possible to use the wallet to do an offline cold storage?

Assuming there is no malware already on your computer or phone, there are two ways to do that:

  1. Be sure to save the twelve-word password of your wallet in a few different places, then delete the wallet from your phone. You can always re-download it and recover your coins using the password.
  2. Send your coins to a Coinprism wallet and back up your private key there to an offline device.

ICO

 

What is ICO?

ICO stands for Initial Coin Offering. Lykke offered 30 million Lykke coins (LKK) from September 13 to October 11, 2016, at a price of .05 Swiss francs per coin. The offered coins represented around 2.33% of the Lykke equity.

What are these coins, exactly — Bitcoins?

They are colored coins — very small amounts of bitcoin (imagine a penny’s worth of Bitcoin) with codes attached that specify the value of the asset. Learn more at https://github.com/OpenAssets/open-assets-protocol

Is LKK a currency or a stock?

Lykke coins (LKK) are cryptographic tokens that represent ownership of Lykke, a Swiss registered corporation. It is not a currency. There is no mining, and there are no other exchanges that accept it (though that may change). One hundred Lykke coins represent a single share of Lykke Corp. Read more at our Information Memorandum

Are there two classes of stock?

No. In a traditional fundraise, early investors get prefered stock in exchange for cash. In this kind of early-public arrangement, investors instead get liquidity. All coins have exactly the same rights.

Are Lykke coins divisible?

Yes. They are divisible to six decimal places. This is probably overkill, but it lets people buy Lykke coins with an even amount of any currency. In most cases, it doesn’t make sense to divide a Lykke coin, but you could if you wanted to.

How did you arrive at the ICO valuation?

We priced our ICO in reference to other fintech companies that have raised and are raising money. The fintech market is active with many different startups at various stages of development, so we had a number of companies that we could compare with. We also used standard present value calculations based on the revenue forecasts for the next three years. The valuation of Lykke was derived from these two valuation methods and then validated with professionals, who have extensive experience with startup and growth companies.

Can I still purchase Lykke coins after the ICO?

Yes, the coins are traded on the open market of Lykke Exchange. You can download the Lykke wallet, deposit Bitcoins, send a SWIFT bank transfer or make a credit-card payment, and buy Lykke coins on the Exchange page.

Can I use my existing Bitcoin wallet?

Lykke coins must be purchased using a wallet that can hold colored coins on the Bitcoin blockchain. At the moment, this includes the Lykke wallet for iOS and Android, and the Coinprism wallet.

Are there any fees?

Yes. Using any other colored coin wallet, you will need to provide a small amount of Bitcoin to pay for the transaction. When you use the Lykke wallet, Lykke pays those fees for you.

Owning Lykke Coins

 

What is the exchange rate of 1 LKK as of now?

It is around 0.05 CHF per LKK, which is roughly 0.051$ per LKK or 0.0000837 BTC per LKK. The price varies with the market demand and supply.

Do my coins have voting rights?

Yes. The shareholders exercise their voting right in proportion to the overall amount of the Lykke Coins in their possession. The voting results will be rounded to full votes. The calculation of the necessary quorum is based on the amount of existing Lykke coins. Lykke is working on building a in-app voting tool that will let all Lykke shareholders vote using their tokens. Votes will be held on major topics that the board deems appropriate or are required in the bylaws. The goal is to give Lykke shareholders a say in all major decisions of the company.

If I have Lykke coins am I considered to be a shareholder of Lykke Corp?

Yes. All coinholders are entitled to become shareholders of Lykke Corp. The minimum KYC would be required for it. The shareholders have additional rights such as voting and receiving dividends.

Why is the KYC process required?

The KYC process is a standard AML/CFT measure required by all financial companies and banks. This includes the verification of the ID and Proof of Residence. An additional biometrics factor (selfie) is added to secure your account.

Would my personal information be safe after KYC process? I don’t want my passport to become available in the internet one day

The personal data is stored protected on a standalone server. Strictly our Compliance officers have access to it.

If I own 100 or more coins, will I receive share certificates?

No. All share certificates are being held by the secretary. The coins represent the value of the company, though the share certificates are legally required to be maintained.

Will the coins pay dividends?

Yes. They will when the company decides to pay profits to investors, rather than re-invest to fuel growth. As with most startups, dividends may be some time away.

Can the value of the coins be diluted?

Yes. At the moment, there are 12,856,900 shares of stock. The company issues new shares on occasion, usually to bring on new investors. Now that the company’s shares are publicly traded, the company will, in the future, set up a voting mechanism for existing coin holders to vote on matters like this. Be sure to see the Shareholder Memorandum for details.

Could there be a problem with liquidity?

Potentially, but unlikely. As with any stock, instant liquidity is not guaranteed. Lykke has reserved ten percent of the funds raised for a liquidity pool and will be raising more outside funds for an investment pool that will purchase Lykke coins. In general, the company aims to help provide as much liquidity as possible. As more people own and want the coins, liquidity will increase. If, for some reason, fewer people want the coins, liquidity will decrease.

Will the company publish reports?

Yes. We plan to report annually via our web site. You may find our 2015 Annual report there as well.

Will there be an annual shareholder meeting?

The shareholder’s meeting will be held electronically. The reference date for the access to the shareholder’s meeting will be at least 20 days prior to the event, based on the respective coin holdings. The respective shareholders will be invited at least 20 days prior to the shareholder’s meeting, if Lykke Corp is in possession of the email address of the respective Shareholder and the shareholder is referenced in the share ledger of Lykke Corp. It is also planned to have onsite events, which we hope will be an opportunity for learning, meeting people, creating new opportunities, and extending our community.

How can I best keep up with Lykke developments?

There is News tab on MyLykke page, also everyone who registered a Lykke Wallet will receive a newsletter (of course you if you haven't unsubscribed from it).

How do I sell my coins?

Just put in a sell order using an Exchange page at your Lykke Wallet.

What's the total supply of Lykke coins?

Total number of Lykke Coins issued is 1,285,690,000. The ownership structure is stored on the blockchain: https://www.coinprism.info/asset/AXkedGbAH1XGDpAypVzA5eyjegX4FaCnvM/owners

In which situations can the number of Lykke Coins increase again?

This may only occur if the decision is made by a Shareholders voting.

Other questions

 

How does Lykke earn money?

Comissions are zero. Lykke will earn its revenue from the value add services such as liquidity provision, issuance services, whitelabeling and B2B consulting.

When will Lykke become profitable?

We will first focus on FX, where the daily volume is 4 trillion USD. Lykke will be a profitable company with a market share of 0.025%.

What is the unique selling proposition of Lykke?

Our marketplace is highly efficient and seamless. We provide immediate delivery and settlement; there is no secondary risk as is typical for the traditional banking system. The spreads on our marketplace and transaction costs are low thanks to our efficient corporate structure and new technology.

How does Lykke differ from the other crypto-ventures?

Lykke is building a trading venue, where buy and sell orders are crossed with a matching engine. The accounting, delivery and settlement of the traded assets use the distributed ledger technology. Our initial focus is the foreign exchange market with a daily transaction volume of 4 trillion USD, the biggest financial market of the world. Lykke is not a crypto-currency or distributed ledger technology venture; we are building a marketplace that integrates seamlessly with the existing financial system.

What is the history of Lykke?

Lykke traces its history to 1985, when Richard Olsen founded Olsen & Associates. O&A collected tick-by-tick foreign exchange data and built an online information system with real time forecasts and trading recommendations. In 1995, O&A organized the first high frequency finance conference making a large tick-by-tick data set available to academia. In 1996, Richard co-founded OANDA, a spin-off of O&A. First, OANDA introduced a currency converter that was an instant success and in 2001 launched a foreign exchange trading platform with second-by-second interest payments and uniform spreads for all ticket sizes. There was no price discrimination for small traders. Richard is passionate about reforming the financial industry and creating a seamless marketplace, where any asset can be exchanged against any other asset at minimal cost.

Why is our matching engine price, spread and time based?

We reward market makers quoting narrow spreads with priority in the queuing system. This improves the quality of our flow and enhances price discovery resulting in lower spreads, reduced micro volatility and higher volume throughput. Traditional matching engines queue on the basis of price and time which creates an unfair advantage for high frequency traders.

Why does the Lykke marketplace have an intraday yield curve?

A financial market has to provide liquidity and ensure that there is a buyer, whenever someone wants to sell. Interest rate payments are a core mechanism to incentivize market participants to buy or sell a risky asset. A major innovation of the Lykke marketplace is intraday interest payments. The batch-based system of the existing market infrastructure has been an obstacle to intraday interest rate payments and has been a major reason for the disjointed price movements in periods of crisis.

Why does Lykke rely on open source software?

Open source software nurtures transparency, enables people from around the world to contribute and, last but not least, makes it easy to integrate our services with other applications.

Why does Lykke operate as a crowd-based company?

Our corporate organization is inspired by the mechanisms of nature and its unmatched efficiency. The crowd-based approach opens our organization to contributors from around the world and provides us with speed and versatility.

How can I participate in the Lykke movement?

We dream of transforming the world into an Amazon rain forest, so there is no lack of work. We invite you to become a Lykke citizen and contribute in any way that you think is relevant. There is work at all ends, which needs to be done; just take the initiative. We want to emulate the success of Wikipedia, where people from around the world started to contribute. You are invited to initiate new projects. We have a budget of Lykke coins for new projects, and there is also a scheme of rewards at daily, weekly and monthly intervals to show appreciation for voluntary work.

Why is KYC information required to become a citizen?

Regulations require the Know Your Customer procedure. We have another reason as well. Citizens are citizens; they shape the future of Lykke. We want to know the identity of the people involved. To thank you for the hassle, we transfer 10 Lykke coins to your wallet on completion of the acceptance procedure. Thank you.

Why do we have honorary citizens?

We invite people to become honorary citizens, because we admire their kindness, innovative work and/or wisdom.

Why is Lykke a commercial enterprise?

A commercial enterprise has equity with shares that can be traded in the market, our Lykke coins. The market value of our coins mirrors the efficiency and success of Lykke. This is a clear-cut metric and aligns interests.

What are the long-term plans of Richard, the major shareholder?

Richard has pledged his shares to a social cause after fulfilling his other responsibilities.

What is a Lykke coin?

A Lykke coin is a colored coin that is issued by Lykke Corp. One Lykke colored coin is 0.01 (one one-hundredth) of one share of Lykke Corp. 100 Lykke colored coins are one share of Lykke Corp. Lykke Corp has committed 2.5 Mio Lykke Corp shares (20% of Lykke's capital) for issuance as Lykke colored coins, which means that a total of 250 Mio Lykke colored coins will be outstanding. Lykke Corp makes a market for its coins so that citizens can sell their coins and cash out.

See Lykke Coinprism Metadata

Why do we make our payments with Lykke coins?

We use Lykke coins to reduce our dependence on external funding. If a holder of Lykke coins wants to convert his Lykke coins into CHF, EUR or USD or BTC, Lykke will make the conversion and transfer the money to the designated address.

Will the price of Lykke coins change over time?

The price of Lykke coins will depend on market conditions and the success of the products of Lykke. Lykke guarantees for the first year of operations to buy back the Lykke coins at a minimum price of 0.004 CHF.

Why did we choose the name Lykke?

Lykke was the surname of Richard's grandmother on his father's side. The word means luck and happiness. His father explained to them that they are Lykke.

What is the distributed ledger technology?

The distributed ledger technology is the protocol of decentralized data storage in the chain of blocks, where the consistency of data is guaranteed by the cryptography and consensus of multiple nodes. The pioneer and the most popular implementation of the DLT is the Blockchain of Bitcoin.

The distributed ledger technology offers immediate settlement in a non-centralized framework at ultra-low costs. This will pave the way for the emergence of a global marketplace for all asset classes and instruments that uses this system.

The distributed ledger technology facilitates step-by-step transactions. If contracting parties A and B decide to exchange assets X and Y, the transfer occurs synchronous and step-by-step; it cannot happen that just one side of the transaction is executed. The distributed ledger technology operates on a global scale and is a notary service. The technology is highly efficient and dramatically reduces risks associated with any type of transactions.

Why is the distributed ledger technology so disruptive?

The distributed ledger technology is one of the most profound innovations of humankind, because contracting parties can execute transactions step by step independent of location and have direct ownership. The step-by-step procedure is a safeguard against any misbehavior or fraud between transacting parties and dramatically reduces the risk associated with transactions. Direct ownership reduces complexity.

The distributed ledger technology may be used to record ownership of literally all types of financial assets. A new global marketplace will evolve, where all types of assets and instruments will be traded. Literally everyone will have direct access to this market as is the case for the Internet itself. The market will be a level playing field, where any financial asset can be traded directly for any other asset and instrument. The operational efficiency of the marketplace will foster liquidity. The marketplace will be universal and ubiquitous, similar to the Internet itself, and any asset and instrument will be exchangeable into any other asset or instrument.

Why is direct ownership so important?

In the history of humankind, step-by-step transactions were only possible, when individuals had face-to-face contact. A shopping experience at the local bakery illustrates this point: the buyer points to the bread that he wants to buy. The shop assistant places the bread on the counter and when the customer has put the money on the counter, he can take the bread and leave. At any time, the shop assistant or customer can interrupt the process.

If transactions take place between individuals at different locations, a step-by-step procedure is not feasible. An online shopping experience illustrates the issue; the merchant, who sells a product online for 50 EUR, can book the receipt of a 50 EUR credit card payment, but actual settlement of this transaction occurs days or weeks later, when he receives the money. During this period, the merchant is at risk that the payment might not occur for any reason. Delivery and settlement of financial transactions, be they stock purchases, buying or selling of currencies or other financial assets, suffer from the same deficiency. Today, delivery and settlement of financial transactions is batch-based and occurs with a delay of two or more business days. This leads to exponential accumulation of risk with specific counterparties, who are intermediaries and stand in the way of direct ownership.

How will the financial industry change?

Today, banks spend massive resources on inhouse operations. The adoption of the distributed ledger technology will lead to massive cost reductions and enable banks to focus on their core expertise of managing risk.

What are colored coins?

Colored coins issued by banks are money market instruments. For example: Bank AAA will pay X USD in n days from the time point, when the holder of the colored coin notifies the bank that he is cashing in. Banks will issue colored coins for any currency and any maturity. Initially, the Lykke marketplace will trade so-called spot colored coins that can be cashed in according to the terms and conditions as a regular foreign exchange spot transaction. In the medium-term, there will be colored coins for any maturity from ultra-short time periods of 10 minutes to one hour, 6 hours and 24 hours to days, weeks and months. There will be a market for colored coins with different maturities. We will have a yield curve that starts intraday and extends to months and years.

What is the difference between Colored Coin and Bitcoin?

Colored coin protocol (www.coloredcoins.org) makes it easy to use the distributed ledger technology for any type of financial instrument. A financial institution can for example buy one Bitcoin on the market and then divide this one Bitcoin into million increments. It can then use each one of those increments as a so-called colored coin and specify with the colored coin protocol the terms and conditions of that particular financial instrument.

A colored coin issued by the financial institution may represent a share of the company itself, or represent any type of ‘IOU’, such as the commitment to make a payment of X EUR in n days to the holder of the colored coin, if so requested. The colored coin protocol makes it possible to use the distributed ledger technology to deliver and settle any type of financial transaction of any asset within minutes. Colored coins can have International Securities Identification Numbers (ISINs) to map them into the existing back office and risk management systems of banks making the system compatible with the existing financial architecture.

Issuers of colored coins will buy virtual currencies to securitize financial assets, but they can use a small fraction of a Bitcoin to issue a colored coin. One Bitcoin can be sliced into one million increments; so in theory a colored coin needs to only include ‘1 millionth of a Bitcoin’ (1 Satoshi); if Bitcoins trade at a price of 300 USD per Bitcoin, the intrinsic value of the virtual currency per colored coin will be 0.0003 USD, a negligible amount compared to the market value of the colored coin. The price volatility of Bitcoin will therefore not impact the market price of colored coins.

How does the Lykke marketplace function?

The colored coin protocol allows any issuer to use a Satoshi (1 millionth of Bitcoin) as a piece of paper and specify the terms and conditions of the ‘IOU’ that he intends to issue.

Bank AAA for example can specify the following: holder of this color coin is entitled to receive 1 million USD, if he hands it over.

If someone has a bank account with Bank AAA, he can request that his assets (1 million USD) be converted into a Bank’s colored coin for 1 million USD. He can then use his Bank’s colored coin to buy and sell other colored coins of this Bank or of other issuers, for that matter.

Settlement with the real world is straight forward - the holder of Bank’s colored coins of USD converts the colored coin into a regular balance of USD account at Bank AAA.

It is obvious that such a system only works well, if the marketplace offers efficient price discovery. Lykke plans to implement a new type of matching engine (price, time and spread queuing), which is more efficient than the traditional approach (only price and time queuing) in preventing price spikes.

See Price-Spread-Time priority White Paper.

How is the Lykke development process organized?

Lykke is crowd-based. Design competitions are announced and the winner leads the scrum process of the actual development with developers that are sourced among the participants of the competition and also other places.

How to use Lykke Wiki Engine?

See Welcome to Lykke Wiki.

What is the bitcoin Refund Transaction?

Refund transaction guarantees refunding Bitcoins in case of emergency or loosing private keys. Refund transaction can be broadcasted after specified refund delay. Read more

What means semi-centrlized exchange

Lykke is a semi-centralized exchange. This means that the exchange does not take possession of the traded coins, but needs to be trusted to match trades correctly. Lykke has a centralized matching engine and decentralized coins settlement. Matched trades are settled on a blockchain in atomic way. Each atomic transaction must be signed both by parites and exchange. Still to be able to trade, one should deposit his coins into Lykke exchange. Depositing coins is not equal to trusting coins. How can it be? Lykke uses multisignatures mechanism to hold client's funds. Lykke can not spend coins without client's private key. Even if the exchange is compromised and the Lykke's key is stolen, the client will not lose his coins. The second key is required to spend deposited coins. Lykke exchange also provides refund mechanism to guarantee funds recovery in case of emergency.