Hello everyone, this is Cointime's live broadcast column "Cointime Talk", I am Laura, the co-founder of Cointime. In this column, we will invite industry leaders in various segments of web3.0 as guests to discuss various propositions about web3.0, including the current development status, policy trends, technological breakthroughs and some hot topics at home and abroad.
In this issue, we are very honored to invite Elven CEO Guo Junxiu to discuss with us why the Web3 industry needs a professional financial system?
Cointime：
First, please allow Mr. Guo to give a brief self-introduction.
Guo Junxiu:
Hello everyone, my name is Guo Junxiu. I am the founder and CEO of Elven. I graduated from Tsinghua University with a degree in accounting. After graduating with a master's degree, I started my own business. Later, my company was acquired by Baidu, so I joined Baidu and was responsible for the product manager of intelligent creative products. After that, I left Baidu and joined an investment institution. It took me three years to be responsible for the digitization of the entire organization from 0 to 1, and to build the entire asset management and operation system. This work experience also laid the groundwork for me to create Elven.
Because Bman, the co-founder of ABCDE Capital, and I were classmates and good friends, I came into contact with blockchain in 2018. As I studied more, especially after I left the investment institution, I felt more and more resonant, because I found that blockchain is very disruptive. For example, when I was doing digitalization in the investment institution, I found that the business and finance were separated at that time, but when we did digitalization, we needed to integrate the two together, and at this time we could only integrate them very rigidly. However, the use of blockchain smart contract technology can achieve this goal very well, and push the digitalization of finance to a new height, because all blockchain data is on the chain, and it is both the contract signing of the business and the performance of the financial contract. All transactions and contract behaviors are on the chain to form a very good data governance foundation. Business and finance truly realize the integration of contract signing and performance from the moment of Day 1 transaction, which has established a very good foundation for the integration of business and finance.
On the other hand, the threshold for business and financial personnel to use blockchain technology is too high. Although the threshold has been lowered, it is still difficult to understand the entire technology and actually implement it. So I think we still lack a product that is truly oriented to business and financial perspectives and can be used by both business and financial personnel. Therefore, we created Elven.
Our original intention was to build Elven into a professional digital asset financial management software. We are committed to providing one-stop accounting, financial auditing and on-chain asset reserve proof solutions for crypto-native projects, accounting firms, centralized exchanges and DAOs. We hope to help 100,000 companies and 10 million individuals manage their on-chain finances more clearly and with less worry.
Cointime：
Based on your rich experience in the industry, can you first tell us which companies you have observed to be the most profitable? Are there any surprising data that are beyond the ordinary people's cognition?
Guo Junxiu:
First of all, because the entire industry has a very strong cyclicality, especially in a bearish market environment, we have observed that the current commission-based platforms, such as exchanges or OTC platforms, are very profitable and can generate stable income regardless of drought or flood; the other is the DeFi project, but a very obvious phenomenon in the DeFi project is the head-to-head trend. The head projects are often very profitable, and the others are much worse.
In addition, when we were analyzing or paying attention to these projects, we found some very interesting things from a financial perspective. For example, when we were making the product, we used Compound to prototype the financial report. Then, we found that everyone only paid attention to how much revenue Compound had, but few people actually restored its expenses in full. They didn't calculate how much money it actually spent to make this money. We seemed to have calculated a ratio at the time, that is, for every one dollar of revenue he had, he had to achieve it through an incentive of five dollars.
Therefore, although there are some products on the market that view financial indicators, these products often only provide some indicators, such as income, loss or rate of return. They do not restore the entire financial logic from a financial perspective. However, Elven can fully analyze how much money you have earned, how much money you have spent, and how much money you actually earned from a very strict financial perspective.
Cointime：
Traditional financial management seems to be unfamiliar to ordinary users, and is implemented by a third party. Elven has made financial management a platform product. So what kind of users is it targeting? What problems does it solve?
Guo Junxiu:
Currently, our target customers are mainly divided into three categories. The first category is project owners, who use Elven to detect the impact of account balances, income, and token price fluctuations on their projects.
The second category is institutional clients, such as exchanges, OTC platforms, etc. They have many accounts, and the types are also very complex, such as trader accounts, fiat currency accounts, financial accounts, etc. Transfers between these accounts are very frequent, and the amount of funds is often large, so the demand for finance is very high. At the same time, a sound financial system can also help ensure the control of corporate content and ensure the safety of funds. In addition, compliance supervision policies are becoming more and more stringent. Many exchanges need to apply for licenses, cooperate with some traditional institutions, and disclose financial statements, etc., which are inseparable from a sound financial system, and we can provide all of these.
The third category is cooperative customers. Elven has launched the POR (Proof of Reserve) product. Through our product, project parties can prove the authenticity of assets. For example, for stablecoin and RWA projects, they hold some assets in the real world or in virtual accounts. How do they prove the authenticity of assets? At this time, a third-party neutral professional organization is needed for certification. We, Elven, can play this third-party role.
The above are some of our main target customers. Of course, there are other customers as well. We at Elven provide corresponding products and services based on different customer needs to solve their actual problems.
Cointime：
We often say that to analyze a business entity, the three dimensions of people, finance, and materials are enough. So what are the accounting standards that financial management presents to the outside world? What innovations does Elven have in these dimensions?
Guo Junxiu:
Elven's accounting standards are mainly divided into two categories. The first category is US GAAP (Generally Accepted Accounting Principles) and IAS (International Accounting Standards). We strictly follow these standards to meet internal management demands and external reporting and auditing needs. Moreover, Elven, as the only representative agency in Asia, participated in the formulation of US crypto accounting standards.
As for innovation, first of all, Elven is a financial management software designed for encrypted assets. Therefore, we have reduced the overall understanding of encrypted digital asset business by financial personnel from a technical perspective, including reducing the processing, labeling, and standardization of on-chain data. Because we found in actual applications that many financial personnel do not know much about the cryptocurrency industry and are unable to organize on-chain data. At the same time, they do not know much about some business in the industry, such as DeFi, NFT, tokens, etc. Therefore, based on this, we have created a completely automated and integrated financial engine for digital assets.
In addition, we are also the first financial software that supports the latest crypto accounting standards at the standards level. Through some simple and automated annotations, we can generate a balance sheet, income statement, and cash flow statement with one click. Through these three statements, we can have a very clear control over the financial situation. For example, through the balance sheet, I can clearly see how much money I have in my account, how much of it is my own, and how much is others', especially the users'. I can see it very clearly; the income statement can show how much money I earned, how much money I spent, and how much money I actually earned in the end; and the final cash flow statement can fully display the process of the increase, decrease, and price fluctuations of tokens leading to changes in balances.
Therefore, through our Elven platform, we can reduce the various tedious manual entry processes of financial work and lower the threshold for financial work in the Web3 industry.