Cobo: History is your daily experience

原文标题：《 Cobo 神鱼：历史就是你每天的经历 》

Shen Yu, co-founder and CEO of Cobo

Original source: Cobo Global

Recently, Cobo co-founder and CEO Shen Yu was interviewed by DeThings, a new media platform of blockchain in Singapore. In the interview, from the perspective of an "old leek" who has experienced many cryptocurrency cycles, he shared his thoughts and bottom-level thoughts on the current market, the impact of the FTX event, DeFi innovation, the future of DEX and many other topics. He also explained why he remains curious about the Crypto industry.

How to view the current bear market cycle

The 2022 bear market isn't nearly as desperate as previous bear markets -- nothing compared to the desperation that preceded them.

Industry has been more than 10 years, there is a lot of accumulation and trial and error. We've done a pretty good job of testing what we can and can't do with existing blockchain technology.

Early solutions are emerging around modular blockchains and layer 2 networks. Although the final landing is still two or three years away, but already can faintly see the dawn.

The confidence in the future of the industry, the future direction of the industry, I think is much clearer than the last few cycles.

Magic Fish: Three Black swans in 2022. Eg. However, Compared to previous bear markets, my personal sense is that the level of despair in this 2022 bear market is not enough -- not comparable to the level of despair in the past.

In the bear market in 2015, it fluctuated at a very low position for nearly half a year. There were no hot spots in the whole market, and basically no narrative logic could be found. The narrative was still Bitcoin. At the start of 2015, Ethereum was still in the early stages -- probably still in God's head, Ethereum white papers hadn't come out, and there was no buzz in the market. Doubts abound about whether Bitcoin will survive the challenge.

Today, the industry has been more than 10 years, there is a lot of accumulation and trial and error. We've done a pretty good job of testing what we can and can't do with existing blockchain technology. We are familiar with the form of coin-free blockchain, alliance chain, has been tested in the last cycle is not very feasible. We tried out what the current performance boundaries of the blockchain are, which applications match the current performance, and which applications are likely to run (but most of them won't).

People are very clear about what the industry can and cannot do. In addition, we can see vaguely that even if we can't do things now, we can do things in the future -- for example, we rely on large-scale TPS for these applications, and now we have run some demos, just to say how to solve TPS. After years of wrangling over expansion since 2015, the path is now almost clear.

Early solutions are emerging around modular blockchains and layer 2 networks. Although the final landing is still two or three years away, but already can faintly see the dawn. So, in terms of the future of the industry and industry confidence, this round of the market has not caused as many people to quit as before.

There were a lot of black swans in this round, which caused many people to return to zero their personal assets because they did not adapt to the violent shocks of the industry, or most of their assets were involved in FTX events, so they suffered a relatively large loss in this aspect. But the confidence in the future of the industry, the future direction of the industry, I think is much clearer than the last few cycles.

What do you think of FTX Thunder

Sam is a man who can't sit back - he's a man who wants to maximize his utilization of funds and dig deep for profits, and he's not very comfortable with having money sitting in his account for any length of time.

In the early stage, we saw that Sam transferred some assets from the trading platform to make some low-risk investments. Gradually, he became more and more confident in himself and became more and more inflated. He felt that his ability was becoming stronger and stronger, and he began to have more and more risk preference.

Centralized trading platforms have taken on too much responsibility, both for dealmaking, brokerage and custodian responsibilities. For entrepreneurs and founders, it is hard to resist the temptation of human nature.

A large number of similar stories have happened in the past decade, which is essentially a matter of human nature, and there will always be such problems, just a matter of scale and exposure.

Magic Fish: We have a lot of contact with Sam on the chain. After the popularity of DeFi in 2021, there are a lot of DeFi investment opportunities on the chain. I personally participated in a lot of early DeFi investment on the chain. In the process of DeFi, there are some points to pay attention to, you need to know who you are with these projects, what they are doing, how they think, when they run, will have an impact on the liquidity, etc. So, we did a lot of on-chain data analysis, and we tracked a lot of whales that we could track. Often we find links to FTX and Sam in the addresses we trace, and we see all sorts of tricks on his chain. Through Sam's investments and trades in these defis, we know a little about him.

In essence, perhaps because of his personality, Sam is a man who can't sit still - he is a man who wants to maximize the utilization of capital and dig deep for profits. He did so early on in arbitrage, as did a large number of DeFi chain investments. He doesn't tend to allow money to sit idle for long periods of time.

The trading platform has a large user base. Early on, we saw Sam transfer some assets from the trading platform to make some low-risk investments. Gradually, he became more and more confident in himself, more and more inflated, and felt that his ability was becoming stronger and stronger. He began to have more and more risk appetite. That is human nature, but at some point the risk becomes unmanageable and you end up with extremes like FTX.

Crypto industry is still relatively early, a lot of infrastructure is not perfect, coupled with imperfect supervision, resulting in the centralized trading platform to take on too much responsibility, not only do the responsibility of deal making, but also do the responsibility of brokerages, and do the responsibility of custody. For entrepreneurs and founders, it is hard to resist the temptation of human nature. They help their users manage large amounts of assets, and by moving them around a bit in the process, it's easy to generate good cash flow, especially during the bull market of the past two or three years. At the regulatory level, there are no clear rules. So, these two pieces together cause FTX to happen all of a sudden.

Historically, there are many similar stories, such as the early piggy bank in China, and the Mt.Gox incident. A lot of similar stories have happened in the past decade. It is essentially a matter of human nature, and there will always be such problems. It is just a matter of scale and whether it is exposed.

It may be possible to avoid similar incidents in the future through technological means. Blockchain is essentially about giving everyone the freedom to manage their own assets by managing their own private keys. But now the industry has not developed to that stage, everyone in the management of their assets on the necessity and security, as well as ease of use there are some compromises, many people think their private key sooner or later lost, it is better to put the trading platform, so a large number of assets or precipitate in the trading platform. However, as technology develops, infrastructure improves, and on-chain applications flourish, this problem will gradually improve.

About Cobo's mission

From the very beginning, Cobo has focused on how to manage private keys securely and the security and risk controls that go with managing private keys.

In the future, the experience accumulated at the asset management level of DeFi and internal tools will be productized for everyone to use.

We don't want to become a centralized black box. We want to provide you with more convenient, secure and easy-to-use solutions to interact with blockchain.

The FTX incident is a big wake-up call. From the very beginning, Cobo focused on how to manage private keys securely and the security and risk controls that go with managing private keys. We've been more restrained, trying to do as little as possible.

Over the last five years, we've seen a lot of opportunities to make money, whether it's in lending or derivatives, and a lot of customers (like miners) have come to us. After doing some simple testing, we decided there was a lot of long-tail risk and uncertainty involved, so we didn't scale it up.

For a long time, we have also focused on how to securely store the private key and how to manage the risks associated with the contract state of the private key used by the associated system.

In the future, we will provide the experience accumulated at DeFi management level and internal tools for everyone to use after productization. We don't want to become a centralized black box, we want to provide a more convenient, secure, and easy-to-use solution for interacting with blockchain -- whether it's managing assets on the chain, managing contract status in the DeFi, and then potentially managing a variety of more complex on-chain applications. So, we will also focus our vision a little bit more and do long-term iterations.

Is there any more innovation at DeFi?

The entire DeFi underlying financial framework is mature, and there may be a lot of composable financial innovation above it.

Divine Fish: In a few decades, DeFi has brought to the chain basically successful financial products that have been seen in more than 200 years of traditional financial history. Currently DeFi has four large modules.

The first is stablecoins, which are still in the early stages, maybe 30 or 40 percent of the way through. Now the dominant model is the stablecoin model with dollar collateral, plus the DAI model with a single asset or multiple assets overcollateral. Stablecoin has made some explorations in the past two years, but due to the large number of bubbles and Pond's, there have been a large number of failures, such as Luna. In this area, we are still exploring whether there are more mature and feasible technical solutions.

The second is the DEX trading platform, which is mainly a spot trading platform. The current AMM mechanism solves most of the long-tail demand. For thin orders and derivatives, higher chain performance is needed, which requires the development of the future layer network to be implemented. It's basically a 60 to 70 ratio, and we can basically see what the future product will look like.

The third is borrowing. At present, the excess loan and excess pledge loan of DeFi have been quite mature, and there have been a large number of security incidents and attacks, especially when the liquidity is relatively low recently, there are a large number of price manipulation incidents targeting the loan market. Let's explore the boundary conditions in lending a little bit more clearly. We can basically see the big direction of the future, how to isolate assets, how to do risk control. This is probably 70 or 80 years in progress.

The fourth is on-chain derivatives and risk management. At this early stage, the amount of things like insurance options is not that big.

The financial framework at the bottom of DeFi is mature, and there may be a large number of composable financial innovations above. At present, it is not mature, but there are some small attempts. I think in the future, DeFi's core modules will degenerate into the typical protocols on the chain, and other applications like NFT and GameFi will be able to use these protocols directly.

There is room for more cutting-edge applications and risk-balanced innovations. I don't think it's a mature stage yet.

Future of centralized trading platform

Crypto is a global thing from the very first day, he should not become a regional thing because of the founder's skin color, birthplace.

This event at FTX basically marks the dawn of centralised trading platforms.

Divine fish: Crypto from the first day is a global thing, he should not be because of the founder's skin color, birthplace, into a regional thing. These behaviors and interactions that we have on the chain, they're global from day one, and we'll be able to use them even when we get to Mars. We shouldn't make too many regional assumptions.

As it stands today, the FTX story basically marks the dawn of centralised trading platforms. Although people's emotions will not last long and the market cycle will soon be forgotten, this round has made many institutional users, such as traditional home offices and traditional financial institutions, deeply aware of the problems in this industry after 2017.

We also saw a massive transfer of assets from various trading platforms, large and small, to wallets on the chain during the FTX boom. From this perspective, most of the things that centralized trading platforms can do can start to be done on decentralized trading platforms, and may be done better. Even if you can't do part of it, you can make the whole process happen through, say, an MPC, rather than a unilateral, uncontrollable black box.

In the future, there will be some decentralized and centralized ways to avoid these risks. Even for some long-tail requirements, we can directly solve them through decentralization, which may be more efficient.

What else is possible with mining

The future of mining should not be what it is.

The ideal end state for mining is a state in which a large number of small and medium sized mines are connected to the global grid, some of them to deploy the entire grid.

There may be another stage where you decentralize again, where it's more profitable to mine at home, or even plug into the grid to help adjust the crest of the grid

Trough, there will be some additional revenue, not just the mining money.

Magic Fish: Let's start with the mining industry history. The earliest were family miners, one CPU one vote, one GPU one vote mining at home. In 2013, ASics began to appear, and the graphics card began to transition to ASics. But then, in the 2015 bear market, the market was cold, nobody could dig out electricity, and they started to turn from small-scale miners to factory miners to optimize electricity costs. In 2015, large-scale industrialization, containerization and modular mining began.

At present, most of the computing power of the entire crypto mining landscape is still concentrated in North America. Especially after the conflict between Russia and Ukraine, the change of the global energy pattern is also relatively obvious. The cost of energy in Europe is very high, and the rest may be mainly in North America, large-scale natural gas energy and some hydropower energy, as well as some electricity in Southeast Asia, South America and a small part of Africa. So, we're still at the end of a scale.

In my opinion, the future of mining industry should not be the current state. In order to optimize costs and improve efficiency, a large number of machines should be placed in a single mine, which is similar to the form of IDC in the Internet era, which may be a more cost-efficient IDC.

The ideal final state of the mining industry is to have a large number of small and medium-sized mines connected to the global grid, and some of them to deploy the entire grid. Because electricity is difficult to store, a lot of it is actually wasted, so we can reduce the peak and fill the valley. Part of the energy for the exchange of heat energy, industrial or life power supply, heating; And then you have some of the big financial institutions that have turned mining into a traditional fixed income product and have made some investments.

The trend of decentralization may be gradually highlighted in the future, because at present, the iteration space of the whole mining chip is not so large, and the power consumption is relatively low. In this case, the mining machine will have a long life cycle and can be better used in other ways.

The world has no more mature surplus energy sources. Outside of China, there is not that much energy available for quick use on a large scale. So there might be another stage where you diversify again, where it's more profitable to mine at home, or even connect to the grid to help adjust the peaks and troughs of the grid, and there might be some additional benefits, not just the money from the mining.

Something new to try recently

This industry is a spiral, with lots of similar or repetitive things, so it's important to be curious, to observe, and to think.

God Fish: I'm just going to have a look and give it a try. Let's say I've played some NFT over the last year or so. People joke that I'm the inverse of NFT, whatever you buy, whatever goes down. GameFi gave it a try.

I will think about and look forward to the future development direction of the industry. I will take a look at several directions in the future and what core inflection points these directions have. In the early days I would try it out and explore. If I find a niche or a niche track turning point ripe, its signature turning point event happens, I go and spend some more time on it. Study why there has been an inflection point and where it can go in the future. And then to invest some time in trial and error, basically in a state of trying to be on the cutting edge of the industry.

If it's fun, but it's not for me, or if it's fun right now, but I don't see a good opportunity to capture his rapid growth, I might just put it on hold and decide what the next inflection point is. If the inflection point is reached, I will take the time to study it again.

There's a lot of trial and error in every bear market, and stories like DeFi, in the 2018 bear market, have developed a wave on the EOS chain, and then everyone played a wave. Soon it's 2020. In 2021, DeFi did another iteration of those and launched them very successfully.

This industry is a spiral, with lots of similar or repetitive things, so it's important to be curious, to observe, and to think.

When will you retire?

If you read history and look at what's happened in the last 200 years of financial history, it's hard to relate. But, in this business, history is in the things that happen and you experience every day.

God Fish: The year I got out of school, I set a goal. He retired at 30, and now he's over it. Crypto this industry is more interesting, iteration speed is very fast. As we mentioned earlier, it's very cyclical, and bubbles burst very quickly, and there's a lot of innovation and all kinds of interesting, interesting things that force you to learn and grow, and that's what really attracts me about this industry.

I was able to spend a lot of time learning relatively early in the industry, or at the cutting edge, because it was so interesting. If you read history and look at what's happened in the last 200 years of financial history, it's hard to relate. But, in this business, history is in the things that happen and you experience every day. And then to think, and then to learn, and it's really fast, and it's really fun, and the dopamine is really high. So, I think it's hard to leave the industry, if you really know the industry, it's hard to retire after you've invested.

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