Original author: Shenyu, co-founder and CEO of Cobo
Recently, Shenyu, co-founder and CEO of Cobo, accepted an exclusive interview with DeThings, a new media platform for blockchain in Singapore. In the interview, Shenyu shared his views and underlying thinking on multiple topics such as the current market, the impact of FTX events, DeFi innovation, and the future of DEX from the perspective of an old leek who has experienced multiple rounds of cryptocurrency cycles, and explained The reason why he can always remain curious about the Crypto industry.
How to view the current bear market cycle
Compared with previous bear markets, this bear market in 2022 is not desperate enough-it is incomparable to the previous level of despair.
The industry has been in the industry for more than 10 years, with a lot of accumulation and trial and error. We have almost tested what the existing blockchain technology can and cannot do.
Around the expansion schemes such as the modular blockchain and the two-layer network, some early schemes have also begun to appear. Although there are still two or three years before the final landing, the dawn can already be vaguely seen.
I think the confidence in the future of the industry and the direction of the industry are much clearer than in the previous cycles.
God fish:There will be three black swans in 2022. However, compared with the previous bear markets in this bear market in 2022, I personally feel that the degree of despair is not enough-it is incomparable with the previous degree of despair.
In the bear market round in 2015, for nearly half a year, it fluctuated at a very low level. There were no hot spots in the entire market, and there was basically no narrative logic. The narrative logic at the time was still Bitcoin. At the beginning of 2015, Ethereum had not yet formed a large-scale industry consensus, and it was still in the early stage—maybe it was still in V God’s mind, the Ethereum white paper had not yet been released, and there were no hot spots in the entire market. Everyone has questioned whether Bitcoin can survive the challenge.
Looking at the industry today, it has been more than 10 years, with a lot of accumulation and trial and error. We have almost tested what the existing blockchain technology can and cannot do. The form of coinless blockchain and alliance chain that we are familiar with has been tested in the previous cycle and is not feasible. What is the current performance boundary of the blockchain, which applications can match the current performance, and which application forms may be able to run (but most of them cannot), we have tried them all.
Everyone is very clear about what the industry can and cannot do. In addition, we can also vaguely see that even things that cannot be done now can be done in the future - for example, these applications that we rely on large-scale TPS have already run some demos, just talking about how TPS can solve them. Since 2015, we have been arguing about expansion for so many years, and now the route is basically clear.
Around the expansion schemes such as the modular blockchain and the two-layer network, some early schemes have also begun to appear. Although there are still two or three years before the final landing, the dawn can already be vaguely seen. Therefore, in terms of the future of the industry and confidence in the industry, this round of the market has not caused as many people to quit as before.
There have been a lot of black swans in this round, and many people have lost their personal assets to zero because they are not used to the violent shocks in the industry, or most of their assets have been implicated by events like FTX. relatively large loss. But the confidence in the future of the industry and the direction of the industry in the future, I think it is much clearer than in the previous cycles.
How to treat FTX Thunderbolt
Sam is a person who cant be idle - he is a person who wants to extremely increase the utilization rate of funds and dig deep into profits. He does not allow a sum of money to be idle in the account for a long time.
In the early days, we saw that Sam transferred some assets from the exchange to make some low-risk investments. Slowly, he trusted himself more and more, and he felt that his ability was getting stronger and stronger, and his risk appetite began to increase. big.
Centralized exchanges have assumed too many responsibilities, including the responsibility of transaction matching, the responsibility of brokers, and the responsibility of custody. For entrepreneurs and Founders, it is difficult to resist the temptation of human nature.
A large number of similar stories happened in the past ten years. Essentially speaking, it is still a problem of human nature. This kind of problem will always exist, but it is only a matter of scale and whether it is exposed.
God fish:We have more contact with Sam on the chain. After DeFi becomes popular in 2021, there will be a lot of DeFi investment opportunities on the chain. I personally participated in a lot of early DeFi on-chain investments. In the process of investing in DeFi, there are some points that need to be paid attention to. You need to know who the people who invest in these projects with you, what they are doing, what they think, when they run, and whether they will affect liquidity, etc. Therefore, we have done a lot of on-chain data analysis and tracked the addresses of more traceable whales. We often find that some of the addresses we track are related to FTX and Sam, and we have also seen various operations on many of his chains. Through Sams investments and transactions in these DeFi, we have some understanding of him.
Essentially speaking, it may have something to do with personal personality. Sam is a person who can’t sit still—he is a person who wants to extremely increase the utilization rate of funds and dig deep into profits. He did this in his early arbitrage, as did a large number of investments on the DeFi chain. He doesnt allow a sum of money to sit idle in the account for a long time.
The exchange has a large number of users. In the early days, we saw Sam transfer some assets from the exchange to make some low-risk investments. Gradually, he trusted himself more and more, felt more and more inflated, felt that his ability was getting stronger and stronger, and he began to have a greater appetite for risk. This is human nature, but to a certain extent, this risk may not be controllable, and finally there will be an extreme situation like FTX.
The Crypto industry is still relatively early, and many infrastructures are not perfect. Coupled with imperfect supervision, the centralized exchange has taken on too many responsibilities. Managed Responsibilities. For entrepreneurs and Founders, it is difficult to resist the temptation of human nature. They have helped users manage large-scale assets, and in the process of allowing these assets to flow a little bit, it is easy to generate good cash flow, especially in the bull market cycle of the past two or three years. At the regulatory level, there are no clear rules. Therefore, these two pieces jointly led to the sudden occurrence of a big thunder like FTX.
From a historical point of view, this kind of story emerges endlessly, and there are a large number of similar stories, such as the relatively early piggy bank in China, and the Mt. Gox incident. A large number of similar stories happened in the past ten years. Essentially speaking, it is still a problem of human nature. This kind of problem will always exist, but it is only a matter of scale and whether it is exposed.
In the future, similar incidents may be avoided through technical means. The essence of the blockchain is to allow everyone to have the freedom to manage their own assets by managing their own private keys. But now the industry has not developed to that stage. Everyone has some compromises on the necessity and security of managing their own assets, as well as the ease of use. Many people think that they will lose their private keys sooner or later, so it is better to put them on the exchange. Therefore, a large amount of assets are still deposited on the exchange. However, with the development of technology, the improvement of infrastructure, and the prosperity of on-chain applications, this problem will gradually improve.
About Cobos Mission
Cobo has focused on how to securely manage private keys since the beginning of its business, as well as supporting security and risk control around the management of private keys.
In the future, the experience accumulated at the DeFi asset management level and internal tools will be commercialized and provided for everyone to use.
Instead of becoming a centralized black box, we hope to provide you with a more convenient, safe, and easy-to-use solution for interacting with the blockchain.
Shenyu: The FTX incident has a very big wake-up call for us. Cobo, a company since its inception, has focused on how to securely manage private keys, as well as supporting security and risk control around the management of private keys. We have been more restrained and try to do as little as possible.
In the cycle of the past five years, we have seen many opportunities to make money, whether it is doing lending or doing some derivatives, and a large number of customers (like groups of miners) have found us. After doing some simple tests, we felt that there were a lot of long-tail risks and uncertainties, so we did not expand the scale.
For a long time, we have been focusing on how to safely store private keys, how to manage the risks of related contract states, and how to use related systems for private keys.
In the future, we will commercialize the experience accumulated at the DeFi asset management level and internal tools for everyone to use. We dont want to become a centralized black box, we hope to provide you with a more convenient, safe, and easy-to-use solution for interacting with the blockchain—whether it is managing assets on the chain or managing the contract status in DeFi , and then it is possible to manage more complex and various on-chain applications. Therefore, we will focus our vision more and do long-term iterations.
Is there any innovation in DeFi?
The underlying financial framework of the entire DeFi is mature, and there may be a large number of composable financial innovations on it.
God fish:In the past 20 months, DeFi has moved the basically successful financial products that have been seen in the history of traditional finance for more than 200 years to the chain. Currently, DeFi has four major modules.
The first is the stable currency, which is still relatively early, and may only have completed 30 to 40 percent of the progress. Now the mainstream is the USD-collateralized stablecoin model, plus the model of over-collateralization of a single asset or multiple assets like DAI. Stablecoins have made some explorations in the past two years, but because there are a lot of bubbles and Ponzis, there are a lot of failure cases, such as Luna. We are still exploring in this area, whether there are some more mature and feasible technical solutions.
The second is the DEX exchange, which is mainly a spot exchange. The current AMM mechanism solves most of the long-tail requirements, and requires higher chain performance for order books and derivatives, which requires the development of the future two-layer network to be implemented. This basically has a ratio of sixty to seventy, and we can basically see the future product form clearly.
The third is borrowing. DeFis over-borrowing and over-pledged lending are currently quite mature, and there have been a large number of security incidents and attacks, especially when the liquidity is relatively low recently, there have been a large number of price manipulation incidents targeting the lending market. Everyone explored the boundary conditions in lending more clearly. We can basically see the future direction clearly, how to isolate assets, and how to do risk control. There may be seventy to eighty progress in this piece.
The fourth is derivatives and risk management on the chain. At present, it is relatively early, and the amount of insurance options is not too large.
The underlying financial framework of the entire DeFi is mature, and there may still be a large number of composable financial innovations on it. It is not yet mature, and there are only a few attempts. I think that in the future, the core modules of DeFi will degenerate into typical protocols on the chain, and other applications such as NFT and GameFi can directly use these protocols.
There is still room for some cutting-edge applications and risk-balanced innovations. I dont think its reached a very mature stage.
The Future of Centralized Exchanges
Crypto has been a global thing from the first day, and it should not become a regional thing because of the skin color and place of birth of the founder.
This incident of FTX basically marks the arrival of the twilight of centralized exchanges.
God fish:Crypto has been a global thing from the first day, and it should not become a regional thing because of the skin color and place of birth of the founder. Our behaviors and interactions on the chain have been globalized from the first day, and we can use them even when we go to Mars. We shouldnt add a lot of regional assumptions.
From today’s point of view, this matter of FTX basically marks the arrival of the twilight of centralized exchanges. Although everyones emotions will not last long, and the market cycle will soon be forgotten by everyone, this round has made many institutional users, such as traditional family offices and traditional financial institutions that came in after 2017, deeply aware of this industry problems.
We have also seen the transfer of a large amount of assets from various large and small exchanges to on-chain wallets during the FTX storm. From this perspective, most of the things that centralized exchanges can do can be started to be done on decentralized exchanges, and may be done better. Even if you cant do a part, you can use the MPC solution, for example, to make the whole transaction process happen, not a unilateral uncontrollable black box state.
In the future, there will be some ways of combining decentralization and centralization to avoid these risks. Even for some long-tail requirements, we can directly solve them in decentralization, which may be more efficient.
What else is possible in mining
The future of mining should not be the present state.
The ideal final state of the mining industry is that a large number of small and medium-sized mining farms are connected to the global power grid, and some of them are used to deploy the state of the entire power grid.
It may reach another stage of decentralization again, and the income of mining at home is higher, and even connected to the grid to help the grid adjust the peak
In the trough, there will be some additional income, not just the money for mining.
Shenyu: First sort out the history of the mining industry. The earliest was home miners, mining at home with one vote for one CPU and one vote for one GPU. ASICs began to appear in 2013, and the transition from graphics cards to ASICs began. However, in the bear market of 2015, the market was very cold, and everyone could not dig out electricity bills, so small-scale miners began to become factory-style miners to optimize the cost of electricity bills. In 2015, large-scale industrialization, containerization, and modularization of mines began.
At present, in the entire crypto mining industry, most of the computing power is still concentrated in North America. Especially after the Russia-Uzbekistan conflict, the global energy structure has changed significantly. The cost of energy in Europe is very high, and the rest may mainly be in North America, large-scale natural gas energy and some hydropower energy. There are also some power sources in Southeast Asia, and some power sources in South America and a few parts of Africa. Therefore, it is still in an end state of scale.
I think the future of the mining industry should not be the current state. Now, in order to optimize costs and improve efficiency, a large number of machines are placed in a single mine, similar to the form of IDC in the Internet era, and may be a more cost-effective IDC .
The ideal final state of the mining industry is that a large number of small and medium-sized mining farms are connected to the global power grid, and some of them are used to adjust the state of the entire power grid. Because electricity is difficult to store, a lot of electricity is actually wasted, and we can eliminate it. Peak filling and valley filling; part of the heat exchange in energy, power supply and heating for industry or life; some large financial institutions will turn mining into a traditional fixed-income product, and then make some investment .
The trend of decentralization may gradually become prominent in the future, because at present, the iteration space of the entire mining chip is not so large, and the power consumption is already relatively low. Under such circumstances, the life cycle of the mining machine will be very long, and it can play a better role in other aspects.
There are no more mature surpluses in the world. Except for China, there are not so many large-scale and rapidly available energy sources in the world. So it may go to another stage where it will be decentralized again. Mining at home will yield higher returns, and even connect to the power grid to help the power grid adjust its peaks and troughs. There will be some additional benefits, not just mining. money.
New things I tried recently
This industry is a spiral development, there are a lot of similar or repeated things, so it is very important to be curious, observe and think.
God fish:If its fun, Ill take a look and try it out. For example, I have played some NFTs in the past year or so. Everyone jokes that I am an NFT counterpointer, and what I buy will fall. GameFi also gave it a try.
I will think about and look forward to the future development direction of the industry, and take a look at several directions in the future, and what are the core inflection points in these directions. In the early days, I would try and make mistakes and explore. If I find that the inflection point of the subdivision field or the subdivision track is mature, and his iconic inflection point event occurs, I will spend some time on research. Study why there is an inflection point and where it can go in the future. Then invest some time to try and make mistakes, basically in a state of trying to be at the forefront of the industry.
If I find its fun but not for me, or its interesting now but I dont find a good opportunity to capture his rapid growth, I may let it go first and set him the next observation turning point what is it. If the inflection point is reached, I will spend time to study it again.
There are a lot of opportunities for trial and error in each round of bear market. In stories like DeFi, during the bear market in 2018, the EOS chain has developed a wave, and then everyone has played a wave. Soon in 2020 and 2021, DeFi made those iterations again, and then launched them very successfully.
This industry is a spiral development, there are a lot of similar or repeated things, so it is very important to be curious, observe and think.
When to retire?
If you read history and look at what happened in the past 200 years of financial history, it is difficult to empathize. But, in this business, history is what happens to you every day.
God fish:When I left school, I set a goal to retire at the age of 30, and now I have exceeded it. The Crypto industry is more fun, and the iteration speed is very fast. As we mentioned just now, it has a strong cycle, and the bubble bursts quickly. There are a lot of innovations and all kinds of interesting and fun things, forcing you to learn and grow. This is why this industry is very attractive to me. point.
I have been able to spend a lot of time learning in the relatively early days of this industry, or in cutting-edge fields, because these things are very interesting. If you read history and look at what happened in the past 200 years of financial history, it is difficult to empathize. But, in this business, history is what happens to you every day. Then think again, learn again, grow up very fast, it is also very interesting, and the secretion of dopamine is also very strong. So, I think its hard to leave the industry, and if you really understand the industry, its hard to retire after youve invested.
