Crypto Investment AMA on 8btc | Which Mode is Better?
Cryptocurrency, because of its price volatility, has become the first choice of many investors: individual investors buy and sell a cryptocurrency, while analysts provide advice. More crypto investors are looking for new opportunities as the definition of cryptocurrency investment is no longer limited to spot trading after over ten years of development. Therefore, groups of hodlers, DeFi users, Stakers, and VC investment have emerged. So which investment mode is better?
On April 23, 8btc, the earliest bitcoin social media in China, invited Antonio Juliano, the founder of dYdX, Mati Greenspan, the founder of Quantum Economics, Ryan Lackey, board member of Tezos Foundation, Kyle Samani, co-founder of Multicoin Capital, together with 洒脱喜, technology IP of 8btc to hold an online AMA (Ask Me Anything) with the Chinese crypto community.
Q1. We’ve seen so many different investment methods. How do you define the best way to invest?
Mati Greenspan: Whatever makes you money consistently. There are as many ways to trade as there are traders. Each person has a different style and it usually takes a bit of trial and error before you find what works best for you.
洒脱喜: Although I love bitcoin, rational participation is also important. Bitcoin will not replace fiat money. Fixed investment and hodl are anti-human. When we see the price rising, we can’t help but want to trade. Then when the price dumps, we can’t help trading. To be a good hodler, great patience is required. Second, the process is very anti-human, which I really want to achieve.
As for DFI, although I have been paying attention to some projects and progress, I dare not participate in them for a long time. The main reason is that I am too timid and worry about the security. Another reason is that I am not rich enough to test at will. In theory, more bitcoin can be obtained by using these integrated methods.
Q2. Uniswap and Lendf.me were hacked last week. This is not the first time that DeFi shows its vulnerability. Do you worry about a trust issue? Why can’t code audits avoid security problems? Also, can you share dYdX’s latest plan with us?
Building a secure complex smart contract system is a challenging engineering task, and must be done by top professional engineers. Audits alone are not enough. Lendf.me was built by copying the code from Compound Finance, and the operators did not have a good enough understanding of the code to understand known limitations.
dYdX is built by a team of engineers with experience building secure systems at top technology companies like Coinbase and Google. dYdX has transacted over $1.5 billion without any vulnerabilities. dYdX has never even had a security vulnerability discovered by auditors.
All DeFi platforms are not created equal. It is critical that users only use reputable and battle tested DeFi products.
Earlier this week, dYdX launched its BTC Perpetual product. We’re excited about this launch for a few reasons:
1. Perpetual markets are by far the most popular way to trade crypto, and we think are a natural fit for trading on DeFi
2. Users will be able to trade BTC on dYdX for the first time! BTC is obviously the most widely traded asset in crypto, but still has not been able to be traded liquidly in DeFi up until now
3. Perpetual markets allow us to offer higher leverage, better liquidation ratios, and more liquid trading
After the BTC Perpetual, we plan to add Perpetuals for other assets. In the longer term we are interested in building decentralized versions of other types of financial derivatives.
Q3. dForce was hacked for 25 million dollars, but the hacker returned the stolen funds. Why did he do that? How can we avoid such problems in the future? As one of the leading VCs, what suggestions will Multicoin give considering investment? Can you share your portfolios with us?
Kyle Samani : We’re grateful that the funds were successfully recovered. The situation is still active, so untofuantely I can expand more on the events that transpired at this time.
However, I can say that Mindao, the founder of dForce, has written some great explainers and shown tremendous leadership throughout this entire ordeal.He took swift action and coordinated several parties within hours of the attack, communicated clearly, on time, and with transparency at every step of the process. And, most importantly, his actions led to a swift recovery of the funds. All things considered, that’s a tremendous outcome. He exemplifies the exact type of founder that we look to invest in. Defi is still extremely nascent, and fragile. Long term, we believe Open Finance is a massive market opportunity but there’s still many problems that need to be solved. I’m an advocate for rigorous, third-party security audits, regular checkups, and strong risk management protocols. Defi should be governed with the same principles that large custodians use to manage their assets.
We invest across three major themes. We call these themes our Crypto Mega Thesis. I wrote a blog post about this last year and have spoken at several events since. At a high level, the three categories are Open finance, as I mentioned above, Web3, and Non-Sovereign Money. The goal of Open Fiance is to make all units of value—stocks, bonds, real estate, currencies, etc.—interoperable, programmable, and composable on open ledgers. Open finance will make capital markets more efficient and accessible to everyone on the planet.
The vision of Web3 is about empowering consumers to control their own and manage their own data. Right now, all of the data in the world largely resides in massive data lakes controlled by large companies like Google, Facebook, Amazon, Alibaba, Tencent, and so forth. Web3 wants to flip this paradigm. Lastly, the largest and most well-known thesis amongst the three is Non-Sovereign Money. When people talk about bitcoin as “digital gold” they are often directly or indirectly addressing this thesis; however, I find this framing to be far too narrow. As I’ve written before, I think the opportunity for non-sovereign money is actually much larger than that of digital gold; it’s on the order of $100 trillion.
Q3. Actually being an analyst is hard but interesting. Some crypto analysts’ predictions went against the market almost every time. So can you tell us what is it like to be a crypto analyst?
Mati Greenspan: Thanks a lot for asking. You’re absolutely right, it’s not easy but I love it!!
It’s not possible to predict or time the markets. That’s why I refrain from making public buy/sell calls. Rather, I will do my best to inform people of the factors that might send the price up or down and they can choose for themself.
Even though my license allows me to give people trading advice, I will only ever tell people what/when to buy and sell if they are my personal client and I understand their personal portfolio and appetite for risk.
Q4.Tezos is the most staked coin. In your view, why did users choose you? We barely saw Tezos team show up in China. Does this AMA mean you have a plan for Chinese market?
Ryan Lackey: Tezos has been very successful at building a global community of bakers (we call validation “baking” within the Tezos ecosystem, due to the French origins of the project) and token delegators. One thing we are very thankful for is the community of users in the Tezos ecosystem — they are very diverse in location, background, technical expertise, etc., but deeply care about the mission of Tezos — building a digital commonwealth with both technical and policy tooling supporting broad decentralization and meaningful applications.
I think everyone worldwide knows China is very important and unique market, and we would love to have more users in China. China has many great developers, and if there is any way we can help those developers work on Tezos projects (inside China or globally) that is very interesting to us. We do have a Tezos China organization which is growing and includes some technology and business resources to support developers, education, and projects using Tezos in China already, but it is still early in the introduction of Tezos to China. At Tezos Foundation in Switzerland, we are continuing to learn more about the Chinese market, but what we have learned so far is very positive.
Q5. We’ve seen several DeFi protocols being attacked recently. Have people in DeFi area learnt about the problems? Is there anything we can do to avoid being attacked or it’s just a growing pain of DeFi?
Ryan Lackey: I think people in DeFi are (now) very aware of the problems, but it’s technically difficult to build secure applications on many platforms — it’s like building secure applications in C/C++ in the 1990s on platforms without memory protection, in that it can be done, but it’s not the “default” way to build applications, and thus requires a lot of expertise and effort to be safe. It’s a period of growing pains, and I think the way forward is better platforms, better tools, and re-use of secure, audited components — there’s no need for each DeFi application to build everything from the ground up uniquely each time. I think the industry will get past this period, but there are some fundamental challenges to building secure and robust DeFi applications generally — a combination of economic and technical vulnerabilities which can be exploited by anonymous adversaries anywhere in the world is a very challenging threat model. I hope we continue to see great people working on DeFi to move the industry forward.
Antonio Juliano: The issue is not that people haven’t learnt about the problems, the issue is that users are using DeFi products that are being built by non-top tier engineering teams. The hacks of Lendf.me and the imBTC, Uniswap pool were due to a reentrancy issue that has been publicly known by top developers for over a year. The hack of BZX a few months ago was due an oracle issue that had been publicly known by top developers for over a year.
Q6. Chinese KOL Li Xiaolai said bitcoin was outdated and he has sold them all. Do you think bitcoin is outdated? What is bitcoin’s core competitiveness?
Ryan Lackey: Bitcoin’s community is very resistant to change, and in particular, resistant to change which involves any sacrifices. I can understand this – it’s an asset which is largely defined by this principle, but I can also understand why people who value innovation over stability would be against that. (The irony of a revolutionary protocol created only 10 years ago now being the incumbent unchanging legacy system is there, of course.)
洒脱喜：Even if CBDC, such as Libra, DC/EP, is launched, they are not competitor to bitcoin as their attributes are totally different. That is to say, bitcoin will hardly meet competitors in this field, so I don’t think bitcoin will be out of date.
Q7. If there’s one crypto that can replace bitcoin in the future, what will that crypto look like?
洒脱喜： To replace bitcoin, the conditions are extremely harsh. First, it must be initiated by countries with high credit. Second, it is necessary to have properties similar to bitcoin. The most important thing is decentralization and total amount limitation. But these conditions can hardly be met at the same time. Another possibility is that a cryptocurrency’s market value exceeds that of bitcoin. For example, a public chain that is really safe and available and used by many people is available. At present, there is a slight possibility, maybe Ethereum, and then there will be some opportunities for stablecoins.
Q8. Which techs can push for more decentralization?
Mati Greenspan: Every tradable asset on the planet has some level of price manipulation. However, nobody can consistantly manipulate the price of anything in an open market for very long. In economics, this concept is known as ‘the invisible hand’. Trading anything on the short term can be very difficult and does leave individual traders exposed. However, bitcoin is designed to be deflationary in the long term and that’s what I like to focus on for this unique asset.
Q9. DeFi was attacked. Are there any comprehensive solutions to keep DeFi safe?
Mati Greenspan:The entire world of DeFi is still very new but extremely exciting. New economic models are being tested as we speak. It’s encouraging to imagine a world without the traditional banking system taking advantage of retail investors but there is a lot of danger as well, especially in the experimental phase. Hopefully we’ll be able to punch through that at some point but it’s still very early days.
Ryan Lackey: DeFi is really interesting and I think it will be successful, but we’ve definitely seen some serious security issues. Some of this is just due to being early in the evolution of DeFi, part is due to the state of tooling, but some of it is fundamental to the economic and technical security challenges of DeFi applications — lots of value at risk and a large attack surface area.
The industry is still learning how to do DeFi securely. I think having a secure foundation underneath the DeFi application, such as languages designed for formal verification, well-audited and re-usable components software, and sophisticated monitoring and testing frameworks are essential. In general simplicity is also a virtue in doing anything securely — it is easier to secure applications which only do a few functions and don’t have complicated dependencies on external resources.
One of the big challenges of security in crypto (and computing generally), but especially DeFi, is that these are inherently inter-disciplinary applications — you need a team with economics knowledge, trading strategy experience, platform knowledge, deep knowledge of the programming language and libraries and tools used, and familiarity with how similar platforms have been exploited.
Antonio Juliano: There are secure DeFi platforms that exist today. dYdX is built by a team of engineers with experience building secure systems at top technology companies like Coinbase and Google. dYdX has transacted over $1.5 billion without any vulnerabilities. dYdX has never even had a security vulnerability discovered by auditors.
In the same way, many early centralized exchanges were hacked (Mt. Gox, Bitfinex, etc.) which led to users moving to more secure centralized exchanges, now many early insecure DeFi products are being hacked. DeFi itself isn’t insecure, users just need to more highly prioritize security when determining which DeFi product to use.
Q10. WTI May futures collapsed to -37 dollars. Will it have any influence on crypto market?
Mati Greenspan: Probably not but it will be difficult to tell. As far as I can see, it hasn’t had much of an impact on global energy prices as of yet. But also the task of parsing what influences are happening will be made even more difficult by the upcoming halving event. Overall, I don’ t see any real impact of the oil crash on crypto as of yet.
Ryan Lackey: To me, what was very interesting about the WTI May futures price collapse was that it could go negative at all — in fact, prices were just above $0 until there was regulatory clarification that price can in fact go negative, and then it proceeded to drop. I’m not a futures trader myself, but what is interesting to me is when extreme market conditions lead to clarification of the rules or limits of the system. I don’t know what direct influence this futures movement will have on crypto as a market — what I focused on was that people building systems need to make risks and boundary conditions explicit to the users. This is one of the underlying sources of computer security problems, and we’ve seen similar things affect DeFi applications as well, so lessons from traditional financial markets can be useful.
洒脱喜：The entire economic environment will be impacted, which is the consensus. Cryptocurrencies perform badly in the liquidity crisis, but they may benefit greatly in the inflation crisis. Recently, so it’s hard for most people to judge the short-term market. At least I don’t have the ability, so my choice is ‘hodling’.
Then the negative price of oil does not mean that the value of oil itself is negative, but the impact of the epidemic, which leads to the imbalance of market supply and demand, the saturation of storage capacity, and the futures trading rules and other factors. It can only be said that the market is too complex, ordinary people are not suitable to participate in this futures trading. But bitcoin has the lowest threshold as it do not need storage space or break down.
Q11. What do you think of blockchain keep swelling? Can blockchain really support business applications?
Kyle Samani: All the web3 applications like our portfolio Helium, Livepeer and Arweave is what we feel optimistic about.Helium is creating a new global network for billions of IoT devices. The network is powered by Helium Hotspots, which provide wireless coverage and generate Helium tokens. Within minutes, anyone can set up a Hotspot and provide connectivity for low power, IoT devices using LongFi, Helium’s new open wireless protocol.
Arweave’s mission is to become the new Library of Alexandria, but invulnerable to the pitfalls of centralised points of failure, ensuring that humanity’s shared knowledge and history is available to all future generations. Livepeer is creating a scalable Platform-as-a-Service for developers who want to add live or on-demand video to their project. They aim to increase the reliability of video workflows while reducing the costs to scale them. To achieve this, they are building a p2p infrastructure that interacts through a marketplace secured by the Ethereum blockchain.
Q12. Global economy is hit by COVID-019, unemployment rate keeps increasing. What do you think bitcoin price will be in the future? Will it follow the global economy? Or will it be an unrelated market?
Kyle Samani: Long term wise we are very bullish about Bitcoin. I was indeed concerned about the global economy and people’s ability to buy any asset in the near term, but ourselves had to also bear in mind that we are not experts in macro so we don’t try to predict how the macro impacts crypto. We make decisions based on long term fundamentals rather than speculating the S&P500 and Bitcoin coupling and decoupling relationship.
Q13. Staking was a hot topic like one or two years ago. We can see high yield rate back them. However, the yield rate of many Staking projects went down a lot now. What do you think of the future of Staking? We saw lendf.me being hacked. There has been a lot of criticism of DeFi in crypto community. Some people think that DeFi is a lie. Now that the bubble of lies is about to burst, what do you think about the present and future of DeFi?
Ryan Lackey: I think Proof of Stake will continue to be the preferred option for new platforms, as well as migration of existing platforms (probably not BTC, but most other projects). The benefits (energy consumption, alignment of incentives, scaling) are strong, and the challenges (especially how to recover from degraded or partitioned state) are technical and are solved or being solved, so that’s a bet I’m quite happy to make.
DeFi is probably a separate question — it’s an application on top of crypto. It has a lot of technical and inherent reasons why it is hard to do safely and securely, but the big question for me is demand: is there a commercial demand for DeFi? If there is, there are enough smart people that the technical challenges will be solved — either through careful use of existing tools, or creation of better and safer tools to build DeFi applications. I’m optimistic, but don’t have a crystal ball, and I think both DeFi and more regulated/traditional tokenized assets are likely to coexist for a while (and possibly forever). DeFi is technically more challenging, but potentially is open to a lot more users worldwide, but traditional institutions control many of the high-quality assets now, so it will be interesting to see how the market develops.
Q14. How can we choose a reliable DeFi platform?
Antonio Juliano: The most important thing to look at when choosing which DeFi platform to use is the quality of the engineering team that has built it. Does the team have a history of building world-class products at other top technology companies? Does the team have extensive experience working in the cryptocurrency space building secure products?
Next, look at how battle tested the platform is. How much value has flown through it? Have there been any previous security vulnerabilities?
Finally, make sure the platform has been audited by top smart contract auditors (in my opinion the best are Open Zeppelin and Trail of Bits). Audits are important, but are not a substitute for a strong engineering team.
Q15. If an analyst can accurately predict price, why did he or she didn’t quietly make a fortune? Why will they analyze the market for others?
Mati Greenspan : Very interesting point. Personally, I try not to predict prices. My job is more about educating people on how to view the markets so they can make their own decisions.
In my role as a money manager, I usually try to take a more broad approach and diversify as much as possible. Diversification and long term trading, in my view, are the only real path to consistent gains. If a person can make 15% every year consistently then they are in a very good position.
Q16. Bitshares had stablecoins pegged to USD and RMB, but both lost the peg eventually. Why do you think it failed?
洒脱喜: It seems that the DeFi project didn’t answer this question, but in fact, it’s very important. In fact, MakerDao is also developed according to the pattern of Bitshares. In itself, the connection with bitcoin, Ethereum and Bitshares, which are unstable cryptocurrencies, will lead to systemic risks. Recently, Dai has been seriously out of anchor due to 3.12 dump, which is the question of system design, we need to add a new mechanism. Maker added centralized stablecoins like USDC to prevent this problem. Now there is a design of reflective securities, which can reduce the volatility of stablecoin mortgage assets. This is also a solution.
Q17. How can dYdX’s oracles accurately and swiftly show coins’ price? If there’s any problem with oracles, the pricing of DeFi will be wrong. So how to make sure oracles’security? What do you think of oracles being centralized.
Antonio Juliano: dYdX integrates with MakerDAO’ s V2 price oracles, which are the most advanced and battle tested oracles in the space. The way the Maker V2 oracles operate is by a large network of reporters (one of which is dYdX) cryptographically signing price data pulled from the largest & most reputable centralized exchanges. Anyone can send these signed messages in a transaction to the blockchain to cause the oracle price to update. dYdX is one of the multiple parties that sends these update transactions.
By distributing all of these functions across multiple parties (multiple centralized price feeds, multiple reporters, multiple price update transaction senders) the entire network becomes both more decentralized and more reliable. Even if some of the parties are offline or malicious, the system will still function.
Q18.How to choose a hardware wallet?
洒脱喜：Hardware wallet is a good way to keep the private key. It depends on whether you need it. Keeping the private key doesn’t mean that I take a small notebook and copy it correctly. Although it’s OK, you don’t consider some possible risks, such as losing the notebook.
So it’s necessary to back up private keys, many investors will choose to buy hardware wallets, which is also a way to keep private keys, but we should pay attention to that we should not buy second-hand ones, even if they are cheap, choose those with good reputation in the market, and buy them from official channels.
However, just these may not be enough, because there may be acquainted ones who steal mnemonics from you. At that time, the mnemonics steel plate is not reliable. We need to divide them into several pieces, and use a logic you can master to distribute them to some places as more Backups.
Q19. How do we allocate our money to DeFi, Staking, coin trading and hodl? Like what’s the percentage of money we should put in each investment methods?
Kyle Samani ：This really depends on everyone’s risk appetite. For people with low risk appetite just buy the assets that you truly understand the fundamentals. There would always new derivatives products coming out, and the only advice I could possibly give here is to make sure you understand the rule and design of the product before trading it.