Can the world of sports betting break free from geographical boundaries and local regulations? Setoros Protocol says 'yes'.
Welcome to the third episode of Web3 Mavericks, where we share insights from the innovative minds shaping the frontiers of Web3 gaming, phygital experiences, betting protocols, and more. In this episode, we had the pleasure of chatting with Tsuigeo, the visionary behind Setoros Protocol, a decentralized sports betting platform built on Base.
Sports betting is big business; revenues in the U.S. hit a record $60B in 2022 — the second consecutive year for record-breaking growth, with Statista estimating the world market to be worth over $235B. However, fragmentation due to a mishmash of legislation around the world may be holding would-be sports bettors back — and worse, making it hard for some bettors to collect their winnings.
Setoros Protocol aims to tackle this problem by building a decentralized platform that offers unrestricted sports betting access to people from all corners of the globe, 24/7. Watch the recording of our conversation with Tsuigeo, or read the transcript to see how Setoros is leading efforts to reshape the sports betting world.
Web3 Mavericks: Setoros Protocol. Source: Esprezzo's Twitter
Transcript has been edited for clarity.
Quionie: Hello, everyone, and welcome to this special live Spaces session. It's a special one because it's our first, so we're happy to have you guys on with us today. It's also special because we have a really cool opportunity to dive deep into the world of Setoros, which is a decentralized crypto sports protocol on the Base network.
They're here today to answer our questions and provide insights into what they're building, their vision, and what decentralized crypto betting looks like from their lens.
Remy: Hey, guys. I'm Remy, Co-Founder of Esprezzo. We're excited to have the Setoros team with us today. We've been excited to integrate Base as a new blockchain into our latest Dispatch update. We had the pleasure of meeting this team pretty early on, and I really enjoyed chatting with them and am excited to dig deeper into their story here.
Tsuigeo: Hey guys, Tsuigeo here from the Setoros protocol. Thanks a lot for having me. I'm super excited to speak to you guys.
Remy Carpinito: Cool. So we'd like to kick things off at a pretty high level. What are the core concepts and ideas behind Setoros Protocol?
Tsuigeo: Sure. Setoros is a fully on-chain, decentralized sports betting platform.
To get into why we need something like this, let's look at how sports betting works in the Web2 world. Traditionally, sports betting is a huge global market. It was recently legalized in the United States just a couple of years ago, and you can see the industry has really started booming, not just in the U.S., but globally as well.
The problem, though, is that while it's a huge market, sports betting is hugely fragmented due to local regulations, and local jurisdictions. If you are a U.S. citizen, you can play on a U.S.-based sportsbook, almost depending on where you live. If you're in the EU, you can only access an EU-based sportsbook, the same as in Asia, etcetera.
This is because of regulations that the key stakeholders in the Web3 space have control over. You can really only flourish if you have the right licenses. In Web3, we are hoping to combat that by having a global, unstoppable platform that can be accessed by anyone anywhere in the world at any time 24 hours a day.
So Setoros – what does it do?
It allows users to basically bet on sports directly from their wallet, whether that's MetaMask or whatever. You don't need to create any accounts. You don't need to sign in. All the funds are held yourselves. It's fully self-custodial, and withdrawals are instant and guaranteed by the blockchain. This is in stark contrast to a lot of sportsbooks today, both in the Web2 space, but also even the incumbents in Web3, like Rollbit and Stake.com.
Anybody is able to deposit crypto into these crypto sportsbooks quite instantly, but a lot of users have found in the past that when it comes to withdrawing — suddenly that's when these platforms start “asking for KYC”, which is basically kind of an excuse for some of these sportsbooks to withhold user payments, which is a big no. So that's one of the big things we're trying to solve: basically offering sports betting with openness and transparency for all our users.
Remy: Awesome. My first startup was in Boston, and I was starting that up alongside some of the bigger players like DraftKings and just seeing the regulatory hurdles, to say the least, that they had to jump through... Even when they thought they had been two steps forward, they had to take two steps back. So a universal system like this on-chain makes a ton of sense.
Just to take a quick step back, I think it's always interesting when you think through your experience in Web3 so far, like, what drove you here? I can connect the dots of the value between the sportsbook and leveraging Web3 technology. But in general, what got you into Web3? Was it kind of a similar impetus to come in and leverage some of that open-ended tech?
Tsuigeo: I'm sort of semi-anonymous for this project, but I'll share some details about my background. This is my second major foray into Web3 startups. The first project was in the DeFi space and before that, I was working in traditional finance (TradFi).
One of the big problems I'm seeing in Web3 is whether the project actually has a product market fit. In 2021 — which is when a lot of today's dApps or protocols started — everything was all shiny and roses, and everybody thought that every protocol was going to do great. Now in the bear market, you start to see if your product does really have a compelling use case for blockchain in particular, like, why it needs to be a Web3 decentralized project. If it doesn't have that real fundamental need, It's going to have a hard time in these market conditions.
With my first project in the DeFi space, it was a bit hard to find traction, especially in the bear market. So I went back to the drawing board and started really hyperfocusing on what product really has the best product market fit.
That landed me squarely in the gambling play sector — specifically in the sports betting sector. For me, I have a personal interest in sports; I love watching sports as well too. So why not combine all my interests together into doing something that I love?
And now we're building something that we know the users really want, so that's really exciting.
Remy: I know you guys have been exploring Base. What are some of the key things that you were thinking through when evaluating networks, or where you wanted to launch Setoros?
Tsuigeo: There are so many L2s out there right now, but realistically, there are only a couple of choices to go with. The way I see it, there are 2 routes. There are the smaller, but very well-funded VC-backed L2s that try to attract developers with grants and funding, and then there are the larger L2s.
The larger ones also have some grant funding, but for us, it was really deciding between either Arbitrum or Base since these had the largest user bases in crypto.
So, what are we looking to do? We can either hunt for grants and try to enrich our team or go for the place with the largest amount of users. We decided to go for the latter because we're here to build a business, and we're here to try to get mindshare with users. So it makes sense for us to build where the users are.
That being said, we do have plans to open up so that any user from any chain can use Setoros. This is made possible because, number one, the suite of smart contracts for Setoros is simplified so that endpoints can be made pretty easily from any chain. And number two, we are using Chainlink CCIP (Cross-Chain Interoperability Protocol), which is a really powerful, decentralized bridge. We’re planning to use their technology and hopefully get that out for everyone by the end of the year. This will allow anybody from any chain, whether that's Polygon, BSC, or Arbitrum, to interact with Setoros from their network and ping us on our home network here in Base.
Quionie: That's really cool! From your perspective, what are some current trends or significant shifts that you've seen in the broader Web3 ecosystem, and have these influenced your project or the strategy and development decisions?
Tsuigeo: Yeah, so in 2021, teams raised a bunch of money, scaled out their in-house team, and started building. The problem is that there’s a huge burn rate. That’s fine to do when you're in an environment that is flush with cash, but in today's environment where we're not anymore, teams have to operate a lot. And when teams operate leaner, that means that we can't build everything in-house anymore. There’s just no resources to be able to do that. So I think one of the big things for us to do today as projects is to really find integrations and find synergies with other teams that help build the building blocks that help support our core infrastructure.
That way, the devs on our team could really focus on the core sports betting business, rather than focusing on staking, referral links, or even alerting. So by being able to integrate with third-party teams that help build these things better, we can build faster ourselves.
Quionie: Got it. What are some of the most difficult challenges, in general, that you've encountered?
Tsuigeo: Difficult challenges I've encountered in general: there are still a lot of misconceptions about Web3. There are still a lot of scammers or grifters in this space that make things a bit harder for legitimate projects to differentiate themselves.
It's a tough problem, and I think the only way to tackle it is to continue building as a team and continue shipping as a team and let the Lindy effect take over and basically prove your project’s worth over time.
Quionie: There's a lot of that (scams and grifters) right now, so totally understand. Looking back, what are the most profound lessons or insights that you've gained from building in this space?
Tsuigeo: I would say one is learning how to manage cash flow. Huge night and day difference from when we were building in 2021 versus building now. Back then, money was so flush, and you felt like you could always just raise more money by selling more tokens, which I think today doesn't fly anymore — at least not at application layer projects like we are. I think that VCs are still a little bit behind sometimes. I think now it's learning about doing more with less, that we see that our team has gotten far more knowledgeable on operating in the Web3 space, and we're really much more capable of executing now.
But paradoxically, we have a little bit less money to throw around today than we did back then, but what we're making up for with the cash flow from 2021 makes up for that with knowledge in 2023.
A good project that doesn't have funding but has a really strong product, a really strong customer base, and a community base is always going to succeed much more than a very well-funded project that has no community and no product-market fit.
TSUIGEOFounder, Setoros Protocol
I think users are starting to see that already now in the L1 or L2 landscape, where there are some pretty big-name projects out there. We all know that some of these might be able to stand the test of time, but some might not.
Quionie: Totally. I definitely agree with that.
Remy: Yeah, I totally agree. Even from our side, you can definitely see a significant shift as we talk to many different teams across protocols. The focus on product-market fit is higher than ever and, as it always should be as a startup, that's the core goal. Additionally, nurturing your community and your users, and trying to find a way to drive value to whoever you're serving are essential.
If there's one thing you could change in the current state of Web3, what would that be? Pretty lofty question, but would love to hear your thoughts.
Tsuigeo: I don't know that there is much that comes to mind on what we would change. I want to say not necessarily something we’d change about it, but something I think that would help a lot more is standardization in the industry.
I think it's natural that when we're in such a fast-paced industry that is innovating every single day, there isn't really much of a standard. For example, staking in one project is completely different than staking in a different project. Then it also means different things whether you're on a Layer 1 or a Layer 2 or an application layer project like us. There's a lot of conflation in this term because every project has custom implementations of staking for their own project and custom definitions for staking.
There isn't much of a convention yet for Web3, and I'd like to see more conventions and more building blocks that people can agree upon, which will make education and understanding in the industry a lot easier and, therefore, adoption. But that's a tough thing to do. So it's definitely far bigger than our personal team to be able to make that happen.
Remy: It has been super interesting to see. And I would definitely agree on the core infrastructure being consistent.
What would be a piece of advice you could give to another founder or another team based on the experience throughout the last few years?
Tsuigeo: Well, they always say that first-time founders focus on the product. Second-time founders focus on distribution. And I know I've been talking about the product here so far, but now I absolutely agree with that. You can build the greatest product that you can, but if you don't have a way to tell people about it, then it's not really going to go anywhere.
Speaking along with the changes from 2021 to 2023 in this industry — I remember back then you could just start a project and just have a whitepaper and a Medium blog, and you would get ridiculous engagement on Twitter. The VCs would be knocking at your door to give you money just because. Now, when all you have is really just a pitch deck, that doesn't fly anymore.
Today, you really have to focus a lot more on distribution and think about marketing and how you're going to get people to know about your product. At Setoros, we have a couple of go-to-market strategies. Thankfully, being in the sports betting industry, we have a lot that we can take away from Web2 sportsbooks that are doing things the right way. For example, number 1 is affiliate referral links. That's one. Number 2 is free bet vouchers. For us, we can give these away as rewards for users in our marketing campaigns or just as user loyalty. These are the kinds of things that help us build ourselves on the marketing side.
So it's really not just about the product; focus on distribution too.
Remy: That's a phenomenal point. I think when we first got going, I mean — we're dating ourselves back in 2017 during the ICO era and white papers galore — people were throwing as much money into a smart contract that would accept it as much as possible, hoping to get tokens in return, and mostly retail at that point in time. Obviously, the shift in 2021 was more venture capital moving into this space, but the hype I feel was just as palpable. Now, the tides come and go.
I think the reality is that you need the product, but you also need to get it in front of the right people and understand the value you're driving. What you're saying about looking at the Web2 sportsbooks of the world makes sense. In all reality, they're all still pretty early, but there are some things they've done to gain some of that early traction, and being able to follow that playbook to some capacity on your end makes a ton of sense to me.
Let’s shift gears a little bit. I’d love to get your general thoughts on what we're doing at Esprezzo. We've built out this no-code platform called Dispatch. We rolled out some new functionality recently for projects like Setoros that can monitor your smart contract events. You can monitor any type of different activity on-chain. What do you think so far?
Tsuigeo: Dispatch has been really helpful to us so far. Our team is three devs right now. We have the capability to write our own alerting for various events, but one of the biggest bottlenecks for us is manpower.
Being able to save our team time and use services like Dispatch to handle the alerting for us is a huge time saver for the team, allowing us to continue working on our core focus, which is sports betting.
TSUIGEOFounder, Setoros Protocol
We're using Dispatch right now primarily to let us know whenever users have placed a bet on the platform. This is great for both the public community and internally because we're also constantly monitoring the risks. In the long run, the protocol makes money in sports betting, but in the short term, there’s still a potential that the protocol can lose money on events if bets are too one-sided.
Dispatch lets us monitor our risks and make sure everything is looking okay on the platform, so it's super useful. On top of just the product, I also want to give a shout-out to you guys as a team. I was actually speaking about you guys on a call with the rest of our team just a couple of hours ago and talked about teams that were good at executing the marketing strategy.
I think you have a really good strategy for onboarding teams, which is basically number 1, give away your product for free, which, unfortunately, is valid as the baseline of things, which is to give it away for free at first. But on top of that, you guys have provided so much value. You guys have written a blog about us and also hosted this AMA, giving without even asking for anything in return.
I think that's a really good mindset for teams to have when they want to first get the initial traction. So I think you guys are really on the right track there, and we're hoping that we can take some lessons from you guys on that.
Users can log in with social login, and a smart contract account abstraction wallet gets created underneath the hood for these users, and they can load up this wallet using something like MoonPay or whatever fiat on-ramp. Basically, they can start interacting with Setoros from their mobile without ever having to go through something like MetaMask, which, if anyone has tried using it on their mobile before, is a really clunky system. We're really excited to onboard this more native and clean UX for users to interact with protocols.
So that's something I'm really excited for us to onboard, hopefully in Q1 next year.
Remy: That's awesome. I definitely agree with that. That initial onboarding experience will ideally be an unlock for a lot of these next-gen Web3 apps that are coming online now and going to continue to come online by just reducing any upfront friction. It's just traditional SaaS stuff. Even SaaS platforms that don't need to use your crypto wallets or anything still have different levels of friction that would have user drop-off.
Not needing to set up your wallet, look at passwords, or manage private keys is just a whole different ballgame. In this next wave of onboarding — whether it be through abstraction or some of these new systems coming online — it'll be really interesting to see how fast adoption takes.
Quionie: Before we wrap things up, are there any upcoming announcements or anything else about Setoros that we missed, or something that you would like everyone to know?
Tsuigeo: I think that about covers it: a high-level overview of the roadmap, as I mentioned, bridging via Chainlink CCIP, and social login through account abstraction. I know our users have been asking for this for a long time — we're also going to finally start supporting football, or “soccer”, for Americans, in the upcoming one to two weeks.
We encountered a slightly larger dev speed bump than initially anticipated, but we'll be able to provide support for soccer and also scale effectively. We're launching our Setoros v1.1. I won't bore you with the details, but there's a lot happening in the background, on the development side. This will enable us to offer many more matches and much broader coverage for your favorite sports and teams.
So, keep an eye out.
Quionie: Awesome. Well, that was a super insightful Spaces. I really loved learning a bit more about Setoros Protocol. I hope everyone here enjoyed it as much as I did. Once again, thank you to Setoros for joining this Spaces with us. And for the audience — if you want to see more Spaces like this, discussing some of the up-and-coming Web3 projects, be sure to follow us and also give Setoros a follow.