Translation: The leader of the currency circle
Shenyu: I am an old leek and old miner. In 2011, I officially participated in the early construction of China's blockchain. In 2013, I launched the first Chinese world mining pool, which once became the largest Bitcoin in the world. , Ethereum mining pool. At the peak, there was more than one-third of Bitcoin’s computing power, and we were the only team in the world to successfully conduct a double-spending attack on Bitcoin.
After 2017, it was discovered that blockchain began to have a large number of applications, but a lot of risk exposures were exposed around security and private key management. As a company that is better at infrastructure, we established Cobo, a company that specializes in private key management. Companies that deal with key management and its derived risks. The company has been working on it for more than six years, mainly focusing on underlying security and wallet custody, ranging from fully centralized and semi-centralized MPC co-management to fully decentralized on-chain smart contract multi-signature product forms. .
Colin Wu: Shenyu is the person who is most willing to share in the Chinese Crypto community. You can also search for some of his past opinions online. To some extent, he should be the early leader in the Chinese industry who is most willing to share with everyone.
The currency circle can be divided into several stages. In the early stage, those who joined the industry before 2015 were mainly miners in China. Please share with Shenyu what kind of opportunity you had when you first entered the industry, and what the atmosphere of the circle was like at that time. Sample.
Shenyu: I entered this circle by chance. I was in college at the time. One boring afternoon, I was reading and surfing the Internet in the library when I suddenly saw two news articles about Bitcoin, probably about Bitcoin breaking through $1. Out of curiosity, I searched for "Bitcoin" and found the white paper by Satoshi Nakamoto. After reading the white paper, I was deeply shocked. For the next three months, I almost lay in bed, concentrating on browsing Bitcoin forums and community discussions. Apart from this, I basically did not leave my bed. Even the meals were brought back to me by my roommates.
After browsing the forums for more than three months, I found that the crypto world at that time was still a group of crypto geeks. Everyone had all kinds of wild ideas. At the time, they seemed unlikely to work, but the underlying logic seemed to be logical. The core issue of cryptocurrency is that after the currency is digitized, it can circulate freely around the world without being double-spent. Although these are all very mature technologies, they are combined very well.
As an engineering student, I was deeply attracted by these technologies and discussions, so I didn’t go to school properly after college, and I focused on building and exploring in the Bitcoin community. I first translated foreign technical articles into China and made many domestic friends. The earliest domestic communities revolved around QQ groups as a means of communication. For example, some groups that everyone can still see and hear, such as "Peace" Hotel" and some very mysterious groups. In my impression, there are about 40,000 to 50,000 people. On the one hand, there is a group of encryption geeks, and on the other hand, there is a group of people who coincidentally have a lot of graphics card resources. This group of people first cracked Nokia parallel-imported mobile phones, but suddenly the iPhone became popular, and there was no market for these parallel-imported phones. , they had a large number of idle graphics cards in their hands, and they happened to discover Bitcoin, so they switched in and used the graphics cards to mine. Basically, from 2011 to 2013, China’s encryption ecosystem consisted of two groups of people. One group was cryptopunks full of ideals, and the other group was down-to-earth miners who secretly mined with graphics cards.
Fortunately, China got involved in the very core mining field in the crypto track very early. At that time, there were not many things to do in the crypto ecosystem, only two things: trading and mining. After 2013, many exchanges with Chinese backgrounds began to emerge. After everyone experienced a round of group buying wars in the Web2 world, some companies switched to the Crypto exchange track and became the predecessors of the well-known crypto exchanges. At that time, it was basically like this. Everyone discussed various exciting ideas and thoughts every day. But more than ten years have passed, and many ideas and thoughts have now become reality, such as the idea of stablecoins discussed at that time and the idea of early decentralized exchanges have now been realized.
Looking back from now, it seemed that many incredible innovations and ideas could be realized at that time. Today, we have reached a better stage and have a large number of on-chain infrastructure and applications, so the future is becoming clearer and clearer.
Colin Wu: Thank you Shenyu for sharing his earliest state, including the QQ group of "Peace Hotel" he mentioned. If you are interested, you can search on Baidu and Google. There are many interesting things about how the early Chinese Bitcoin world community was formed. There are also many video interviews, including the familiar Bao Erye, the president of the bank, etc. You can see a lot of information in the search engine.
2017 ushered in the industry’s biggest bull market. Many well-known figures became more prominent at that time, such as Brother Sun who has been very popular these days, CZ (Changpeng Zhao), and many China-related public chains, whether it is NEO or Quantum Chain. However, many people also feel that 2017 was more filled with the chaos of ICO.
Looking back at 2017, is there anything that you find most memorable or worth recalling and sharing?
Shenyu: This wave of ICO craze in 2017 is of great significance and has been ignored by everyone. Although there were many ICO bubbles in 2017, many speculative and even direct fraud projects emerged, but looking back in 2020 and 2021, it has brought a large number of on-chain asset types to the Ethereum ecosystem. This has also been the case in the past two years. One of the reasons why DeFi explodes is because there are enough assets. According to incomplete statistics, there were 200,000 to 300,000 ICO projects born in 2017. By analogy with ICOs and IPOs, it is unimaginable in the real world that such a large number of IPOs have occurred, and it is impossible to have such a large number of IPOs even in ten years. Large order of magnitude. Although there were a large number of fraud incidents at that time, after a cycle of precipitation, good projects and good protocols still survived, and they were constantly iterating, and new innovations emerged among the ruins. The entire industry is basically a process of bubbles, bursts and reconstructions. The bottom layer is a process in which the public chain infrastructure and application layer scenarios drive each other. Once there is a large number of bubbles and a large number of application explosions, the underlying blockchain infrastructure will be forced to improve itself. But at the peak of the bubble, it was discovered that the underlying infrastructure of the blockchain could not support the technological development of applications. At this time, the bubble burst and entered a settling period. There are many and various geeks who will iterate on the underlying infrastructure to prepare for the next outbreak in the future. Laying the groundwork for infrastructure is also the intrinsic driving factor behind the rapid and continuous iteration of the industry. Bubbles are a good thing, but every individual in the bubble needs to stay calm and do logical things. In the long-term industry cycle, it is a good thing.
Colin Wu: Ordinary people may think that 2017 was full of bubbles and the entire ICO industry was in a very chaotic state, but now it seems that the projects that emerged in 2020 and 2021 were also started in 2017 and 2018, whether it is Uniswap or DeFi-related protocols, as well as some public chains such as Polkadot and Filecoin, which were all started at that time. Because the protocol level itself is not as efficient as centralized institutions, it still takes some time to do things better. Some people have found that the 1,000-fold and 10,000-fold coins that appeared in 2020 and 2021 were originally so-called high-quality projects invested in 2017 and 2018.
You just mentioned DeFi. The most important thing in 2020 and 2021 is the rise of DeFi. You were also the most famous DeFi miner at the time. When did you become interested in DeFi? After several years of development, what new views do you have on the DeFi industry?
Shenyu: I personally came into contact with DeFi at the end of the bull market and the beginning of the bear market in 2018 and 2019. At that time, some DeFi protocols began to emerge, and there were early protocols on UIS and Ethereum. At that time, DeFi was not widely used due to lack of driving factors. I spent some time exploring it, but found that I had lost almost all my money, so I didn't continue. DeFi has clearly reached a turning point since 2020 and 2021, and a new wave of liquidity incentives represented by Compound has emerged.
I have a good habit. I am willing to spend some time, energy, and cost on trial and error at the forefront of the industry, observe, and set an indicator. When the turning point of the indicator arrives, I will spend time and money again. energy for further research. In 2020 and 2021, I found that there was an improvement in DeFi data and an influx of users. I spent some time. After watching it for two or three days, the market was completely different and grew spontaneously. Later, I invested a lot of energy and put a lot of assets in it. After doing a series of operations in DeFi, I called on my friends and people in the group to take a look at the qualitative changes that have taken place in DeFi. I was lucky enough to catch this wave of DeFi and make the transition for miners.
From miners in the original physical world to miners in DeFi on the chain, there are fewer constraints on the real world, because for a long time in the past, I struggled to find electricity, mine, and deal with various physical problems. Dealing with the world is quite stressful for students who are more technical. Afterwards, DeFi discovered that the entire industry has experienced a lot of early technology accumulation and has many advantages. The ultimate pursuit of private key management and underlying security can be better displayed in the on-chain world, so it will be built in DeFi all the way. Various internal infrastructure to improve efficiency. In the near future, internal self-use tools will be gradually opened up for everyone to use. Everyone is welcome to experience it.
Colin Wu: 2020 is the "Summer of DeFi", and 2021 has entered the era of NFT explosion, centered around NFT, various small pictures, and games. To some extent, its momentum is better than DeFi, because DeFi faces various regulatory factors, especially the problems after the Terra explosion, but NFT seems to be more clearly integrated with the mainstream.
I remember Vitalik said that what surprised him most was the explosion of NFT. He had never imagined that NFT would have such a big explosion, especially the completion of the title confirmation, transaction, and circulation of digital collectibles, which actually changed the demand for this rigid demand.
Shenyu has a characteristic that he loves to play with everything. There is basically nothing he doesn’t play with, and he also plays a lot with NFTs. From the current perspective, does NFT have a very good prospect? There are many entrepreneurs here. Do you have any suggestions or ideas for them?
Shenyu: Although I personally play a lot with NFT, I also lose a lot. I am a famous anti-pointer in the NFT world. This is a very interesting and fun market. It has very big characteristics and is relatively decentralized. It is different from other tracks in the blockchain. For example, the head effect of DeFi is very strong, and the chain carries high-value transactions. After all, the space of the blockchain is very valuable. But the NFT market is different. There are a large number of fragmented communities, each with its own original characteristics and cultural characteristics. It is easy to find a sense of identity in such a community.
When NFT first emerged in 2021, many friends who couldn't sleep at 3 or 5 o'clock in the middle of the night called us to talk about NFT. They said how good this agreement was, how relevant it was, and what kind of cultural value it had. We just talked about it. An all-nighter. We have seen the emergence of many values that can meet the inner emotional needs of various cultural groups, including social capital and other values. From this dimension, the success and existence of NFT have certain value and significance.
For the majority of young friends, the entry barrier to the NFT field is very low compared to the Crypto world. You do not need to know a lot of cryptography knowledge, nor do you need to have a lot of funds. As long as you have a certain art appreciation ability and humanistic spirit, you can see are different scenarios and experiments. There are a lot of post-2000s people entering the NFT world. In the early stages of NFT, in order to build IP and build a community, the cost of entry was basically very low. We have also seen that the NFT market is filled with a lot of stories of getting rich overnight, bringing a lot of new blood.
Looking at it now, the NFT cycle may be very short, that is, an emotional cycle of about 3 months, and may have experienced 3 or 4 rounds of rapid cycles. Looking at today's relatively bear market, NFT is combined with a lot of IP and traffic. It is particularly important to make the Crypto world more diverse, because the future still belongs to the younger generation. Under such conditions, NFT has brought many new forces to the industry. Although I personally lost a lot of money, I am still very optimistic about the fresh blood that the NFT market will bring to Crypto's future.
In addition, you can see that many assets in the real world are non-standardized. These assets are difficult to express on the chain through standardized tokens. NFT is a good asset category and can carry many real-world assets. Let’s look at it from this perspective If so, the NFT market still has great potential in the future. It is not only the collection value of PFP that we see now, but there may also be many values that can be combined with the real world. However, more efforts are needed behind the scenes to promote better integration between the industry and the real world. The road will be long. A little, but it should become a reality in the not too distant future.
Colin Wu: Let’s continue to talk along the history. 2022 will be a very painful year for the Crypto industry, and even the year with the largest amount of thunder in history. From the beginning of small Chinese exchanges, such as Hufu, AEX to Terra, it caused After a huge shock, Terra detonated Three Arrows Capital, the best-ranked capital in Crypto venture capital, and then Three Arrows Capital detonated DCG, the largest group giant in the industry. Only then did everyone realize that such a glamorous giant was so fragile. Just when everyone thought this matter was about to end, SBF, the founder of FTX who was at the top and most glittering in the industry, donated money to politicians, donated money to religious leaders, and attended various excellent conferences every day, actually misappropriated users' assets and was unable to fund them. Pay off debts and make a lot of ridiculous deals. With a simple news report and a tweet from Changpeng Zhao, an empire worth tens of billions can collapse in a blink of an eye.
2022 must be a very painful but exciting year in the history of cryptocurrency, and it has also left a lot of lessons for everyone. Many companies that are familiar to everyone including the mining circle have closed down, and many problems have not even been dealt with. Of course, God Fish will be relatively stable in 2022. From your perspective, are there any impressive lessons learned in 2022, or do you think the industry needs to learn any lessons?
Shenyu: 2022 is indeed very cruel. Many old friends around me can't have dinner together because of various reasons. In the past year, the industry as a whole has fluctuated greatly, and various accidents have emerged one after another. But looking back, the underlying logic of various security accidents in the history of Bitcoin for more than 10 years since its birth is the same, and the essence is a problem of human nature. Although the industry is widely criticized for its high volatility and various uncertainties, the industry has been very certain in the past two years, because a large number of friends with very glamorous resumes have come, and a lot of Wall Street capital has come. The industry has begun to have native applications, DeFi, NFT, and GameFi, which are no longer air. In such a thriving environment, a big pit suddenly fell, the bubble burst, and many things were disillusioned.
We also experienced rounds of this kind of thing a long time ago. The bottom line is that everyone has become more and more inflated about themselves, individuals, and companies. After reaching a certain psychological state, many decisions are no longer so rational, and they firmly believe that prices may not be the same. It will fall below a certain range, the leverage can be higher, and the income can be higher, which deviates from the original intention of the blockchain. Blockchain gives us a lot of freedom and gives us the technical means and tools to provide a more transparent and open world.
But on the contrary, because power is transferred from end users to centralized institutional owners, although it looks very bright and bright on the surface and participates in various political events, in the process, every user has not mastered the technology given to us by the bottom layer of the industry. We have transferred the strongest sword to a third party to keep it for us. This is a very big challenge that the industry is currently facing. It is difficult for the person who helps us manage this key to resist his inner greed.
Thinking about it from another perspective, as a manager, he can easily use everyone's keys. When many people don't know it, the volatility of the industry is very high, and there is a lot of high-quality information, it is easy to make a lot of money. When the industry In a state of rapid expansion and prosperity, there is a more or less certain probability that someone will be unable to resist the temptation of his heart and secretly use this key. If he uses it once, he may make a profit, and his heart will further expand and he will use it more and more. , the final state is an extreme black swan, where an unexpected accident causes assets to be wiped out.
So I think 2022 is a year of demystification. We have learned a very important lesson. We must deeply realize that any company can go bankrupt. What can we believe in? We should not believe in human nature, but in mathematics and the underlying technical principles. We must master the technical means that blockchain has given us in the new era and master the key in our hands.
After the industry experienced extreme events last year, everyone is also discussing and actively thinking about how to enable everyone to better use blockchain technology in the future, increase industry transparency, and avoid those things that are against humanity. Now we see that the private keyless technology based on MPC multi-party computation is developing rapidly. I believe that in the future, everyone can have a key out of the box, but your counterparties and service providers may only have one. A key to help you manage, all transaction processes and assets will not be in the hands of any party, they are all open, transparent and visible, and can fully use the underlying characteristics and mathematics of the blockchain as a basic guarantee. Although we may have learned a very painful lesson in 2022, basically 40% or 50% of the centralized institutions in the industry have been wiped out due to various reasons and have been affected, but this has also made our determination on the decentralization side Taking a more determined approach, it can be clearly felt that the industry has basically reached a consensus. The private keyless solution based on MPC has gone a long way towards decentralized transparency.
We can see a more obvious example. Large hedge fund teams have actively requested to use MPC technology to assist in asset management, rather than placing assets in centralized exchanges with confidence. We have also seen that the trading volume of decentralized and transparent DEXs and derivatives trading volumes on the chain are also developing rapidly. From this dimension, we have learned a lot in 2022, but industry practitioners and crypto geeks have already learned the lesson. We are coming out of the trough, and the next 2-5 years will inevitably bring us more technical means and give us more freedom.
Colin Wu: To add, 2022 is indeed very miserable, but the industry has made many improvements. For example, centralized exchanges have begun to have on-chain reserves to prove POR. Although everyone has a lot of criticism, it also has many problems, but this Still a very important thing. To put it simply, if there is a novice user and the exchange where your currency is located has not published the POR certificate, please decisively withdraw your currency. If an exchange does not even dare to publish the POR certificate, why should it be an exchange? Where did the users’ money go? It has become a very simple choice.
Let's take a brief look at the future. Next year is the next Bitcoin halving. Generally, there will be changes in the market with the halving. Now many people believe that the price of Bitcoin may have a deeper relationship with the Federal Reserve and will no longer be affected by the Bitcoin halving cycle. Please reiterate your opinion on the Bitcoin halving next year and its impact on the price and market. Of course, this is your personal judgment and not a financial investment advice.
Shenyu: First of all, I would like to state that I am not suitable for secondary investment. I discovered this three months before I entered the industry, so I embarked on the path of mining, otherwise I would have gone into cryptocurrency trading. After 2017, the correlation between cryptocurrencies and macroeconomics has been very high, especially since the interest rate hike this year, the correlation has been even higher, although there may be some event-driven results brought about by some industry-native factors.
From this year's short-term perspective, there are two big core driving factors: First, macro. We are a small pond. One factor that depends on the water level of the pond is whether the macro will release water. At present, it seems that the macro is likely to improve. Coupled with the explosion of a large number of U.S. banks in March, everyone regards Bitcoin as a safe-haven asset. From this perspective, the macro is improving, which is at least a neutral factor.
Second, the endogenous driving factors of the industry. From an economic perspective, halving does not play a big role at present, but it is a good narrative logic, and everyone believes that in this narrative framework, there is a high probability that there will be another round of halving from Q4 this year to next year. A simple calculation shows that the mainstream mining machines in the world are still S19 mining machines. If the price of the currency cannot stabilize above 30,000 US dollars after the halving next year, these mining machines will have to be shut down. This situation rarely happens in history, and even if it happens, it is very short-lived. So I personally think that the halving from Q4 to next year is still worth looking forward to.
Colin Wu: Shenyu is the founder of Cobo, which is mainly engaged in hosting business. The custody business is a business with a very large investment and a long term. I would like to ask Shenyu to introduce the future development direction of Cobo and how to compete with mainstream Western custody institutions. How can it become more advantageous?
Shenyu: I just talked about the development path of many industries in the early stage. I can see that there are two major problems at the core of this industry: one is TPS problem and performance problem. Every round of industry development is application-driven, and finally brings applications. If you can't keep up, the bubble bursts, and you continue to iterate the infrastructure. The core is the problem of TPS; the second is to provide a set of solutions for end users. This set of solutions can make users very simple and easy to use, while ensuring user security. Under such circumstances, allowing users to access the blockchain and preventing users from transferring their rights to hold keys to a third party are two major problems in the industry. The current performance problems should be solved in the near future. After 7 or 8 years of exploration, the industry has solved them around the two-layer network and the three-layer network.
The next issue is the security of the underlying private keys. Cobo has discovered that there have been endless security incidents in the crypto world since 2017. People have started to interact with the chain more and more, exposing many helpless people and those who do not master the technology to hackers. We are trying to build a set of solutions around the security of underlying assets, private keys and their private key risk management. The underlying logic is to find its core application scenarios around different stages of the industry, and provide a set of solutions around private keys in the application scenarios.
The first stage is represented by Bitcoin. The core blockchain applications are sending and receiving, storage, and transfer, plus transactions. At this stage, Cobo Custody, a purely centralized custody solution, was created to combine blockchain wallets. As a SaaS product, Wallet as a service allows users with sending, receiving, storage, and transfer needs to adjust the API and use it. It is very suitable for the current situation in Hong Kong. There are a large number of compliance funds and emerging transactions that need to find compliance, security, and A set of products that are easy to use and offer Web2 experience, this is Cobo Custody and Wallet as a service.
In the second stage, we found that everyone began to interact a lot with the chain. At this time, we need to have on-chain interaction capabilities and contract status management capabilities, and encapsulate a large number of capabilities accumulated in the DeFi field into Cobo Argus products. The bottom layer is multi-signature on the chain, and there are many Various blockchain DeFi protocols have the ability to interact, and at the same time have a series of risk management modules and automated procedures to better support 7×24-hour response on the chain and handle extreme situations.
In the third stage, the post-FTX era, everyone is becoming more and more aware of the importance of mastering Key. Many large institutions are beginning to ask whether we can have a transparent and isolated asset pool. All assets require my authorization and consent before they can be used. Therefore, on the basis of the earliest centralized hosting, the underlying technology is iterated to MPC technology. The end user has the key, and we have the key to assist in asset management. Our key is mainly used for risk control, and there is also a key. Cold storage is placed in a third party, which may be managed by a security company or an insurance company. Later, many companies found that this solution was very good. They iterated on our solution and provided products to end users. When end users only have their account and password, they can quickly enter the blockchain. There are a large number of Game companies use our solutions to allow end users to enter the Crypto world using Web2 experience. When end users grow to a certain level, they may have high-priced assets on the chain. For example, scarce NFTs are suddenly obtained in the game. At this time, the account can be upgraded and the third key is granted to the user. The user already has the intention. Motivated to learn and understand some basic concepts, so that you can use it better after getting this key.
We basically provide three different products around these three stages, a purely centralized encryption machine-based hosting solution, a multi-signature solution for on-chain smart contracts, and an MPC solution for decentralized coordination. plan. Basically, these three solutions are aimed at different scenarios. The core is to solve everyone's asset security and private keys, as well as risk management around the use of private keys in various scenarios. We also hope that through the company's efforts and iterations, more users can pour into the blockchain more safely, easily, and with confidence, and explore the wonderful on-chain ecology on the chain.