From Skeptic to Supporter: How Blockchain Revolutionises Asset Creation - TOKEN2049 Singapore 2022

hey everyone uh thanks for being here with me today um my name is John I am the co-founder and CEO of alpha lab we are a high frequency uh proprietary trading company focused in the crypto and blockchain space uh we're also a market maker and do Venture investments in this space today I wanted to share with you a little bit about my journey in blockchain and how I was initially a skeptic but then have come to really believe in the technology and become a supporter of this space so my journey starts about a decade ago at that time I was working for a company called Tower research also a high frequency trading firm and I had a colleague that started on his own doing some Market making on Mount Cox he told me hey here's this thing called Bitcoin it moves around a lot but it's really expensive to trade it was E-liquid and the exchange API really sucked so I was like okay interesting um the next time I heard about Bitcoin was in late 2013 when I read about Silk Road and how the takedown Silk Road had really caused the 20 25 drop in Bitcoin and there again I sort of looked at Bitcoin and thought hey this is really interesting it's kind of a intellectual curiosity and it enables a very Niche use case and didn't really think more of it fast forward to 2017 I had left Tower at that time and was looking for another challenge uh my co-founder and friend at the Time Michael sent me a lot of data showing me hey did you hear about ethereum you could create all these assets and tokens on that and look their prices differ so much across so many exchanges one primary example that I pulled up is this thing called the kimchi premium where you're seeing 20 30 40 price differences of an asset at different exchanges coming from a traditional background I was used to two three basis points I know it's great so we're talking about a thousand times the usual inefficiencies that we see in traditional financial markets so we work together put up some code over a weekend and started trading these inefficiencies and that became an organic basis for Alpha lab however on the fundamental side I was really looking at crypto as a nice trading opportunity I saw a lot of speculative fervor but I didn't really see much fundamentals and when I talked to other people in the space what I saw didn't really gender engender a lot of confidence I saw people trying to effectively undermine regulation trying to characterize what basically was a security token as utility um I saw a lot of shortcut thinking and how people characterize what the blockchain enabled and of course a lot and a lot of speculation so in the early days I would actually say you know Alpha lab we're not really a crypto company instead we're a trading technology company that happens to focus on crypto because it's very inefficient today I've changed my mind so uh as The Economist Paul Samuelson likes to say when the facts change I change my mind so what are the facts that have changed well if you take a step back and look at what I'm capable of achieving today I can at very low marginal cost create a token and then have immediate access to this 24 7 Financial infrastructure that just exists this token I can swap I can loan I can borrow and that's pretty amazing I think it's Amazing Leap Forward in terms of what it means to create assets so when I look back on my conception of crypto and the blockchain I think what happened was that I was too focused on the irrational speculative behaviors of many of the players and I didn't really dig deeper to find out what was the really revolutionary change that was happening and so I want to help take you on that journey of mine to look at what actually happened with blockchain and what it fundamentally enables so it turns out that Financial speculation comes along quite often with revolutionary technology we probably all know about the um the internet bubble of the late 1990s but this has happened before and it turns out that there was the railroad Mania of the 1830s and 40s in Great Britain so back then the steam engine and railroads were a new invention and it created a lot of excitement new companies were formed prices shot through the roof uh far far outstripping any fundamentals a lot of investors and speculators poured money in and lo and behold lost a lot of money however the same speculation really financed the building of about six thousand plus miles of railroad and really allowed Britain to be at the Forefront of the Industrial Revolution so the question then is when we look at the blockchain is it just a financial speculation is it just a speculative bubble or is there some really underlying revolutionary change that's going on so to answer that question we have to take a look at what a revolutionary technology is and to me it's something that lowers the cost of some input across a wide swath of an economy an example um so so with this uh with this change with this Catalyst event this revolutionary technology you then have what is basically following a technological Revolution where a lot of infrastructure is built to take advantage of this lower cost followed by substitution with the infrastructure having been built a lot of people start doing things they did before but faster cheaper more easily and lastly new behaviors start emerging that didn't exist before uh that's enabled by the infrastructure and the substitution that has taken place example of this is the printing press so in the 1440s uh before the 1440s it used to be that you had scribes that would copy text and they could do about 40 pages a day um with some mistakes and with the invention of the printing press this dramatically increased to about thousands of pages a day and with perfect accuracy so what followed after is a period where a huge distribution network was built of printing shops and of booksellers you also had basically the extinction of the scribes as a I guess as a profession uh and instead of replacement of print shops and printers and booksellers but more importantly it really because books were so easy to make and so widely distributed it really led to a boom in literacy and they allowed science to become a much more collaborative Affair where scientists can now share their findings share their thoughts in a much more accurate and cost-efficient way to other colleagues so it really drove forward the Scientific Revolution so for the blockchain to actually be a revolutionary technology we need to think about what key input into the economy does it actually alter does it make more efficient and to me the blockchain lowers the cost of creating and working with assets so what is an asset well we intuitively know about assets we think about gold we think about diamonds maybe art stocks and bonds assets usually have a few properties assets are durable they can't easily be destroyed they're available in limited Supply and they have some utility or Community agreement of value and the last time that a new liquid asset tradable asset was created was actually 400 years ago with the invention of the stock so the fact that uh we now have this new liquid tradable asset called tokens is quite something creating assets used to be very difficult for example if you wanted to list equity in an IPO and Company you need an army of lawyers accountants investment bankers you need a listing fee on the exchange whereas as I mentioned today to create a new token is Trivial right it costs less than fifty dollars probably a lot less now that um gas fees are lower and with it you already have a built-in Financial infrastructure that you can leverage um yes it takes more to build the community agreement but nevertheless you have a lot of the operational infrastructure in place so with our theory that the key enabling aspect of a blockchain is creation of assets we can then try to pattern match against what has happened and try to make predictions about the future and what will happen so one of the big implications of this is of course you have a huge proliferation of assets and this is what we saw in the Ico boom of 2017 that people took advantage of this and created lots and lots of assets they weren't necessarily high quality assets all of them but there were a lot of them and associated with with that you saw a creation of an ecosystem of players that help people make sense of these assets for example research and publication companies that would write about new tokens you have VCS that would invest in these tokens and you have influencers and shillers who would try to promote these new tokens um over time I think what we're seeing is the quality of the assets that come to Market are increasing over time on average and a lot of these ecosystem players are really helping in that effort the second uh implication of this is that assets move with a lot less friction unfortunately not all friction is bad friction there's some really good frictions that are in place in traditional Financial systems and the blockchain has really dealt away with a lot of them so given how easy it is to move assets um you can also imagine that a lot of mistakes occur right now people now the blockchain is susceptible to a lot of phishing attacks and hacks and even the most Savvy players Among Us are susceptible to them as evidenced by wintermute's recent hack so the key then is that we want to reintroduce uh the good frictions into blockchain and a lot of this comes in the form of usability and safety and introducing the good friction we call the slide problem you kind of want to have the right incline and the right material if it's too steep and too fast when you go down it you get hurt and that's where we are now but if you adjust the pitch you would Justice steepness and you have the right material then you go down it at the right speed and that's kind of an ideal situation the third uh the third implication I see is essentially faster reflexivity and learning so when I was a kid I really loved comic books and I would collect comic books and comic books had this guide called The Wizard price guide it would tell you how much a comic book was worth and what people were selling it for those are always quite curious how they came up with a price so I asked my local comic book store they said well what wizard actually does is they call up all the comic book stores and they say hey how much are you selling this for and then they take an average and they publish it and then the comic book stores look at Wizard and they take that price and they adjust it a little bit and they set up their price so how does that work well that's actually reflectivity at play and we see that a lot a lot faster in crypto so in crypto because you're issuing these assets that are very early uh they're not really backed by any traditional valuation metrics like price earnings or Price sales instead it's really governed by consensus and this consensus is influenced quite a bit by marketing and storytelling and the the interesting thing though is that once you put a price on a token people start behaving as if that price is what it is and that enables asset issuers to really run a lot of experiments so for example what you see the experiments that you've seen is things like liquidity mining right or airdrops how do you incentivize the bootstrapping of a network how do you incentivize a bootstrapping of liquidity in marketplaces um you also see ways of trying to organize behavior and coordinate Behavior across a much greater distribution of people in the form of Dao's um so what we're seeing then is essentially the ability for us to have a pretty interesting self-contained experimental setup where you're dealing with real people and real money and and sort of running a lot of economic incentive design experiments so going back to the stages of a technological Revolution this is where I think we are we're still in the early stages of infrastructure building you've had the Catalyst event and we're starting to see early stages of substitution for example institutional asset managers are already talking about making a small allocation into um into cryptocurrencies into crypto assets and you're starting to see early stages of really people talking about tokenizing real world assets like real estate uh or shares onto the blockchain to take advantage of its lower transaction costs so in summary I now really firmly believe that the blockchain is not just a speculation it's not just a financial speculation although there's still a lot of that around but that it really is a revolutionary technology and that is it so thanks for coming um so yeah so sorry today today sort of I say uh whereas before I told everyone we're not at crypto company today we're very much a crypto company and a technology company uh but that's just to say that I'm repeating myself okay and uh just wanted to say thanks to uh Julia our head of Ventures and Stephanie our head of marketing for helping me get together the slide it's all their work um but thanks for your time and thanks for coming