On the afternoon of October 23, ViaBTC Capital’s round-table session was held online. Six professionals in the investment industry were invited, i.e. Ray from IOSG Ventures, Yida from Shima Capital, Matt from Blofin, Ran from WOO Network, Captain from Arkstream Capital, and Haipo Yang from ViaBTC. Their insights into "investment opportunities" have pushed the forum to a high level.
The launch of Layer 2, the arrival of Web3.0, the extensive popularity of DeFi, and the advent of DeFi 2.0 have all introduced many emerging tracks to the crypto industry. In the blockchain industry where new tracks are flourishing, how to spot the investment opportunities and tracks that suit the brand among the endless flow of new projects? The six insiders of the investment industry have shared their insights.
You can also watch the full round-table discussion videos here:
Part1/2: https://youtu.be/vYI_sHxA9ww
Part2/2: https://youtu.be/ekF5ZalzW58
Haipo Yang from ViaBTC said, “ViaBTC Capital’s investments mainly go to DeFi applications for the infrastructure, including the public chain. Personally, I’m confident about the future development of GameFi because the gaming industry is already fully-fledged. GameFi integrates the game with finance. Traditional games, like online games, are closely related to finance, and also feature NFT-related characteristics. However, they failed to be financial. Blockchain comes as a good solution of decentralized finance.”
Matt from Blofin suggested his concentration on finance and derivatives, in light of Blofin’s investment model: “The combination of blockchain and finance is the most native one. Blofin may focus on Solana and Ethereum to find good projects. We still believe that Ethereum is an original chain and ecosystem. At the same time, Solana has a low cost and seem to have many American financial institutions behind it. There is a good chance that it may become a significant financial infrastructure one day, bridging the gap between the traditional market and the crypto community.”
Yida from Shima Capital suggested they were interested in the privacy-centered chain and DAO: “The privacy-centered chain is an area that the government and regulatory agencies will attach great importance to in the future, and the diversified development of DAO has shown investment opportunities and potentials.”
Ran from WOO Network said their investment has long focused on “liquidity”, be it DeFi infrastructure, DeFi applications, or DEXes of various kinds and even liquidity providers, “all about liquidity.” Speaking of the investment model, Ran emphasized that “we will go deep into and empower these projects.”
In the end, Ray from IOSG Ventures expressed his great interest in the advent of DeFi 2.0, and preferred derivatives and tools as investment targets: “the focus this year lies in social products and game products, as well as games, including the recent hit metaverse.”
Arkstream Capital’s Warren: The future pattern between DEX and CEX
“Coexistence, I think.” said Ran from WOO Network, “But DeFi will have an increasing market share. We also trade on DYDX. It narrows the gap with centralized exchanges. I believe centralized exchanges will be more like an entrance since the interoperability of DeFi leads to the sharing of liquidity and yields. That is powerful, especially when it bridges the gap between liquidity and business, which is impossible for centralized exchanges. CeFi will gradually become a sort of entrance. As users move to DeFi, many centralized exchanges turn into a channel of DeFi.”
Matt from Blofin also mentioned two major trends worth public attention: “The first is about centralized exchanges. At the moment, many exchanges are undergoing regulatory impact. Such regulation will not get loose. On the other hand, you may find that many compliant exchanges are trying to provide crypto services. As you may see, many companies engaging in big business and trading in the United States are providing crypto services for their retail users. It is a double sword in the United States. On one hand, the existing exchanges will find it hard to do business. On the other, many existing compliant financial service institutions can provide crypto services for their customers.” These two trends are changing the pattern between DEX and DEX, and the market keeps evolving. “DEX is still in its infancy. In the traditional market, from spot trading through futures trading to derivatives, the trading scale keeps growing with the capital size. Amid all the trading on DEX, spot trading boasts the best user experience. Some futures trading DEXs (e.g.perpetual) are on the early stage. It is fair to say that DEX is far from fully developed. Everything follows its rule. In finance, things always develop from a simple product to a complicated one.”
Arkstream Capital’s Warren: Now the various ecosystems are in full bloom. In fact, in addition to Ethereum and its sidechains and Layer 2 networks, the past year has seen a large number of high-quality applications and developer teams emerging in many Layer 1 networks, such as Polkadot, Solana, Avalanche and Terra.
What are the ecosystems of public chains you’re optimistic about? Will the future ecosystem of public chains embrace numerous players or be dominated by Ethereum or a certain public chain?
Ray from IOSG Ventures mentioned the two mainstream voices in the market: “Some believe EVM will dominate the trend or set the industry standard, leaving little space for others. Some are confident that heterogeneous multi-chains will be the future. Most people believe Ethereum or EVM-compatible chains have set a golden standard for the industry, yet the latter remains possible. Amid the growing market, it is difficult to predict if such an industry norm will sustain for long. Looking back on all such tech-driven industries, few have had an industry norm unchanged since day one. That’s why we believe in the future of heterogeneous multi-chains like Solana and Polkadot. Polkadot is preparing for the parachain auction, aiming to set an industry standard for heterogeneous multi-chains. It’s rather tough, and it’s hard to say whether the effort will pay off. Yet prior to Parachain, this ecosystem has more than 400 such projects, which suggests considerable natural growth in the number of developers. So I’m confident in the future of heterogeneous multi-chains.”
Haipo Yang held a different view: “In the long run, the infrastructure ecosystem of all the public chains will be a winner-take-all market.” He referred to Linux for example. “The blockchain industry has been developed based on open-source communities. Linux is arguably the biggest project in all the open-source communities. The time of its birth was also extraordinary, and then a lot of infrastructure applications were developed based on Linux. Gradually, a very large ecosystem has been formed. Most important is the decentralization of the Ethereum and openness of its community. It resembles open-source communities. Moreover, Ethereum's innovation capability is rooted in the consensus among the developer community. Developers of all the new, innovative projects will generally focus on the projects themselves. Such a barrier is hard to break down.” Haipo Yang also talked about the drawbacks of Ethereum’s TPS, and held that to accommodate such a large market, Ethereum needs to do more. “Therefore, speaking of whether there are public chains to replace Ethereum in the future, or, what kind of public chains will replace Ethereum, I think it will be a public chain with the following attributes: first of all, it has to be able to carry higher capacity in the future. And it can host a larger number of developers, including users and so on. Furthermore, its scaling upgrade will be carried out not only on the technical level but also on the ideological level. On the other hand, I think decentralization is very important, in particular the openness it has brought. The openness of blockchain has attracted more and more participants and developers. In fact, a lot of public chains have manifested high centralization in performance. It may hinder the formation of developer consensus. In the short run, Ethereum is still going to hold a solid market position.”
“Ethereum will be like an aircraft carrier. Yet still, there are other ships,” suggested Matt from Blofin. “Many public chains suffer from performance issues that remain unsolved for quite a long time. Secondly, I believe in many cases user choice plays an incredible role in technology and products, which is also a consensus. As you can see that Terra has a market in South Korea, and Solana is well-received in the United States. From the perspective of the user choice, there will be more chains as the market enjoys a boom. That is good news, as it offers users more alternatives.”
When sharing his speculation on this issue, Yida from Shima Capital mentioned his investment focus: “As early as 2017 or 2018, we invested in many Layer 1 solutions. Now we’ve been looking into Cardano. After it had its smart contract, many developers and communities will go there. We’re more interested in those low-key and we will go deeper into them.”
Ran from WOO Network spoke from a user's point of view, “We do a lot of DeFi trades. And currently, it’s hard for us to get on the non-EVM compatible chains. The reason is that their programming languages are completely different. On EVM-compatible protocols such as Polygon, Fantom, Avalanche, we can make transactions quickly or develop a DeFi product easily just with code already built on Ethereum or Layer 2. So, in that sense, I feel, basically, Ethereum has won the game. The switching cost has been too high for the players. Solana is an exception. It has spent a great fortune on ecosystem development, achieving success regardless of the cost. We really want to trade on Serum. However, the cost of development is pretty high, including potential risks and pitfalls. It will cost lots of capital and manpower. So at this point, we only do business on EVM-compatible chains. And on DYDX, we are the largest market maker. However, non-EVM-compatible chains could cost us great efforts. It's both a difficult errand and of low cost-efficiency, from a practical point of view. Many users will think about one question: applications vs. the user base, it’s a “chicken and the egg” puzzle. Such chains will cost you a lot of money building your ecosystem. FTX’s Sam pumped large sums into Solana and has made it. About whether other chains are willing to do that, we are holding a skeptical view.”
Arkstream Capital’s Warren: Will there be any exchanges in the market value between Ethereum and BTC in the era of Web 3.0? What shifts in business patterns do you think there will be?
“For this question, I think, first of all, Ethereum's value comes from a different source from that of Bitcoin.” Haipo Yang elaborated his views based on the value source of the two. “Bitcoin's value is entirely based on consensus, an expectation of a better currency, which brings about common belief, whereas Ethereum’s value comes from a thriving ecosystem full of application potential. Such are very different origins of value. Therefore, the contrastive analysis of their market value, from my point of view, can hardly yield reasonable results. Whether Ethereum will or will not surpass Bitcoin in the future, temperately or permanent, doesn't really mean anything. It’s like comparing the market value of dollars with that of gold. I think the future development of Bitcoin will still focus on such an asset similar to gold, or, as we put it, the native currency of the Internet or such an ideal for a better currency. It will keep evolving on the basis of such a consensus. It will be a new type of commodity asset. On the other hand, Ethereum’s development will focus on its value – the ecosystem of decentralized finance. Its value is derived from its use by more. In the short term, I think that the market value of Ethereum in the next few years will exceed that of Bitcoin, at least for a short period of time, which is very likely to happen. Nevertheless, I don’t think it will mean anything. From the perspective of Bitcoin's current community composition, including developers, etc., and from the perception of some markets, I think Bitcoin will hardly change much in the future. It will become a new type of asset similar to gold or precious metals, which will exist for a long time, and its market position will hardly be challenged.”
Arkstream Capital’s Warren: As far as we are concerned, the crypto industry tends to be more specialized as it grows. So in such an environment, how can investment institutions become more professional and more globally influential?
ViaBTC has just established ViaBTC Capital. In terms of investment, Haipo Yang proposed three viewpoints: “I think an investment institution should be equipped with three major capabilities. The first and the foremost is the research ability. An investment institution needs to look at the whole picture, and take a macro perspective over the whole industry. The second is the insights in specific projects in some market segments or the investigation ability, so we can gain deeper insights into the whole market and the specific targets and make well-informed investment decisions. That’s why I give the research ability the top priority. In this regard, for the past half year, we have set up a professional, powerful investment and research team which I think is quite essential.”
“The second is the ability to bring resources together. An investment institution cannot sustain
if all it can do is invest. Many projects, especially blockchain projects, need not only money but also market consensus. So apart from the capital, whether an investment institution can provide more resources, say, connections from other investment institutions from all walks of life or resources in media coverage, education platforms, etc., or whether it can endorse the project to some extent is quite critical. Such support could stimulate the project to grow. This ability depends on the investment institution’s connections in the industry and is vital for its brand image building.”
“The last is about value orientation. An investment institution, especially an early-stage investor in the primary market, should be self-possessed in the face of short-term benefits, and commit itself to long-term development or promising projects, instead of searching for investment opportunities that promise quick returns. That matters too.”
Ray from IOSG Ventures, a well-established crypto institution set up in 2017, agreed with Haipo Yang on this issue, and also shared how his company did: “Over the past three years, we have repeatedly communicated with start-ups to share our insights. We want them to feel that we know them. We understand them. Entrepreneurs would like to choose an investor who can grow up with them. If they just need funds, nothing is different among whomever they are raising money from. So they are looking for a partner, a collaborator. We will concentrate much effort on this issue.”
Yida from Shima Capital, a VC based in North America, believed it difficult to compete with large funds in terms of investment size. “If your fund is small, and you want to invest in the crypto industry, you may need to turn to an angel round investment or seeds round investment and ask them to co-lead or lead the early seeds rounds. And if you want to lead these rounds, you need to find your differentiated competitiveness. In the cryptocurrency circle, capital is what every investor can offer. So you have to think about what your differentiation is. Can you offer advice or connections? Can you help with head-hunting, say, help them hire competent engineers? Or, can you help them with branding, narrative, content, PR, or anything else?”
Matt from Blofin highly recognized IOSG Ventures’ practice. “IOSG Ventures is doing one thing, which we should learn from. They are sharing many insights on a daily basis. They publish articles to elaborate their understanding of a specific business or direction. Then they spread such knowledge to the entire market. When some promising founders or projects in certain businesses emerge, they will reach out to these investment firms naturally. We try to do more in this aspect, as we start from research. By writing more articles and sharing opinions, you are expected to attract more good projects. Secondly, I identify with Haipo’s views on values. It is super difficult to find a good investment institution and a good project. They don’t come easily. But to get great projects, I think institutions need to do more research, be more patient, and do more to help these projects, rather than thinking about how to make a quick buck. I also see many excellent institutions doing lots of work after the investment, not only before the investment. Project owners need resources of all kinds today. This is a virtuous cycle for the community.”
Ran from WOO Network considered this issue from the perspective of the company’s advantages: “Our only advantage is liquidity. Generally, projects need liquidity, so it has been big competitiveness for us. Also, we tend to invest for the long term because we're more strategic. Our strategy is to build a booming ecosystem. So we won’t rush to sell project tokens and so on. We will do our best to empower our project partners and grow together.”
Arkstream Capital’s Warren: This round-table forum covered discussions on the development of the public chain and the role of investment institutions in the progress of the entire industry, including an analysis of some investment opportunities in each track. Every guest put forward distinctive, inspiring views, and ViaBTC Capital, in particular, has offered impressive insights into the industry and put forward unique goals. Its future growth in the investment industry is thus worth expecting.
(The above remarks do not constitute any investment advice)
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