Web3: Where is the Opportunity in 2023 | European Blockchain Convention

foreign lovely to see so many people for the 9 20 talk this morning I salute you our respect you I raise my coffee to you as well so thank you very much for joining us on what's gonna be a lovely panel about web3 and the opportunity in 2023. my name is Joe Hall I'm really excited to be here today to sat next to my panel I'm going to do the usual thing allow them to introduce themselves and then we're going to sort of set the talk in a maybe three-part series we're going to Define what web theory is hopefully we're going to come to some sort of agreement we're going to talk about some of the successes that have been in web3 and then some of the challenges they've been in web3 and have a little discussion about that as well um so yeah my name is Joe Hall and I'd like to start from left to right could you introduce yourself and could you answer me one very simple question have you made an investment your company not you personally actually yeah let's do both have you made an investment in web3 this year and has your company made an investment in web 3 this year no thanks Joseph and hi everyone this is Jin Wei from Fidelity Avengers so Fidelity is one of the largest Asset Management firms globally with just undertone thrilling a um so what we do is that we deploy balance sheet Capital into early stage fintech companies so we do everything from Capital Market investment wealth management Tech and what I cover is the web 3 extension of that so I'm not a pure play web3 investor per se but because we I come from attractive backgrounds I can share some of the frustrations on why there aren't many investment opportunities in web 3 as of today now to answer the first question yes we have made but that was towards the end of November to a crypto custodian and we can get into that later but personally I'm somehow restricts this due to the connectivity to the traffic space so and there's a bunch of compliance reasons why I cannot deploy into web 3 personally cool thank you very much anyway over to you hi everyone my name is Kathy and I work for NGC Ventures um a little bit about myself I used to work in tradvi but I converted to crypto native about two years ago and the fun that I work for it's based off Singapore but we consider ourselves a global fund and we're Pure Play crypto web 3 native and to answer to your question we have made many Investments this year um and we're still deploying actively looking on projects fantastic and that's what I really like about this panel today is you've got a new Fidelity which gives you more conservative in the webproof space I can say that um we actually have an amazing paper about how Fidelity you're gonna have to correct me in the singing way but Fidelity digital assets is Bitcoin only in the US whereas Fidelity Global has an interest in web3 but do correct me on this in in a second um or now actually yeah why don't you make it clear now yeah so Fidelity is the first asset manager to launch a digital asset offering so we've created a Bitcoin mining operation as early as 2016 and then a custody solution is 2017 so yes they Manuel was on the panel so he's in charge of the custody solution in Europe and so we launched a bunch of products so Bitcoin ETF Bitcoin ATA in Germany in Canada in Hong Kong and we are in the process of launching a few ETFs as well but you know we all know how SEC is like and and separately we've launched a crypto trading app in the US as well as institutional liquidity Hub alongside Sequoia and three sigma and others so yeah we hear everything um around web3 but our current product offering is only on bitcoin and ethereum fantastic whereas Kathy of course is crypto native and they've made many Investments so far in 2023 so you're in good hands everyone um so I'm gonna try my definition of web3 here um obviously I use chat GPT to help me like any good journalist should um at least this is my argument from now on um so imagine the internet is like a big city say Barcelona it's got all kinds of cool places to go and things to see but it's kind of like a wild west town there are good guys and there are bad guys and sometimes it's really hard to tell who's who now web 3 is like the new hipster part of town you know there's new coffee shops there's all sort of smoothie places cool bars it's where all the cool kids hang out it's like a high-tech hipster neighborhood where everyone knows each other and they all have this like super secret handshake okay so according to chat gbt you can trust that everyone in web3 is there for a good time and they won't try to rob you this is where I had a bit of an issue with the definition and the best part is in web3 you get to be your own bank you can buy and sell stuff just like you do in the rest of town but instead of having to go through a bank or a middleman you can do it all by yourself it's like being a superhero except instead of saving the city you're saving yourself from all the hassles and fees of traditional Finance so come on over to web3 and join the party we've got nfts crypto and decentralized apps Galore it's the future of the internet and it's a whole lot of fun this was the point that I'd check to see who owns chat GPT and what web3 investments they're making this year and had an argument at like eight o'clock this morning with chat gbt saying like why are there no negatives to this web 3 thing why are you so Pro web3 either way that's the um the definition that I've somewhat doctor to make it a bit more usable today what do you think is this a fair summation or a fair analogy for web 3 is this something you can get on board with do you sort of um laughing a bit there throughout what do you think well my definition is very down to earth in terms of web3 I what I want to see personally is just interconnected digital economy where applications and platforms can talk to each other and can transact right so that applies in the world of blockchain metaverse iot virtual reality right that's pretty that's pretty much the universe of web3 so three building blocks everybody know you know blockchain for data smart contract for the application logic and then they should ask it to store virtually any asset fungible or not lunchable but I what I want to stress is that I think web3 is an evolving concept and I always quote a sort of quotes by um Brian Amsterdam so CEO at coinbase so he says that he thinks crypto will go through three different phases phase one is crypto as a purely as asset class second one is blockchain as a technology for financial service and the third step is blockchain as a quart tag for Consumer facing applications so now I think we passed step one so when we step into step phase two now naturally the definition for web 3 will change so that's my personal view okay very interesting um how about yourself Kathy I think I might add a little bit um flavor of the crypto nativeness that I come from here so I think um web3 is an evolve evolving concept from web 2 like I definitely agree with that um that is definitely it's changing every day um what we see web3 is really developing around is this idea of decentralization that I think is super powerful you mentioned that there is no middleman in the chat GPT answer I also gave an answer in the past few days to another investor I think back in the days you had maybe without the banks you would have to keep your money under your pillow if you have to store anything safely to safeguard it is your own responsibility and then Banks invented and now you have a place that really can Safeguard your assets for you and with the involvement of fintech as well as technology now imagine you can do that with technology alone so we invested in a company called consensus and they are the Builders of a com a product called metamask that I think a lot of us in this room um use today and with this concept of self-custodianship um you're able to safeguard your funds without a bank and able to do everything and anything just like you have a bank so yeah I think that's the idea that we really support and I think it's super powerful in terms of technology I mean that's a good point let's get a sense of how many people in the room have used metamask um can I get a sense of how many's used it and then how many have used metamask in the past say week uh anyone use metamask this morning yeah says the Degen is nice okay great we're in good hands okay um I mean I actually wanted to get on to concrete examples because we get a lot of buzzwords and acronyms and you know Ico nft Dao D5 web3 you know you name the buzzword it sort of encapsulates a trend or a movement but it's very hard to find the specific examples you bring up um rightly so Kathy you bring up metamask it's obviously a web 3 tool that's one of the earlier examples have there been any other successes that make it very clear or evident what the web 3 thing is and maybe jingue his Fidelity made investments into into these sorts of fields yeah so well unfortunately I cannot disclose the name just yet because they're in the middle of a found race um but also just to react to what Kathy just says that's very interesting so one of our core thesis this year for that issue for any Asset Management firms or Banks is that we want to invest at the very bottom of the tech stock that powers the next wave of financial service firm entering to digital asset in D5 the bottom of the tech stock is consensus or Alchemy right it's a developer ecosystem where you can build the apps is where you can deploy nodes and everything around it for institutional use cases that's custody right so the more than functional banking system is built on Cassidy as a co-offering so stage three B and why they started the century go by being a custodian and from there you cross sales other places and by creating that market on the demand side and supply side now that's why if there is he launched custody as the first offering and that's why the major chunk of what we call G sips so Global systemically important banks are now also doing self-custody so City BMP HSBC JPMorgan Barclay you name it everybody is in the process of launching digital asset custodian solution so imagine a future now this is quite different to what Kathy says instead of custody with metamask you can custody with your Barclay HSBC account and so we invested in a Swiss based Cassidy orchestration platform that's powering self-custody for the lack of City BNP and subject and others and so that's I think it's not it's a future winner in my opinion that makes me kind of a little bit uncomfortable with the idea that you know we can now custody with banks when the whole like thesis of crypto is that you be your own bank you hold your own keys I know that you know it's unrealistic to think of a future where we all become you know self-custodial kings and queens but it still makes me a bit like oh why do we have to have these Banks um still part of the the solution another point to that is that um right now we're in a bubble within a bubble you know the guys that hang around here are you know very passionate about the movements they're ideologically driven as well as you know financially driven um but when we think about this on a global level you know you bring up massive Banks here do these Solutions genuinely scale up to millions or billions of people especially with blockchains which as we know are quite slow you know uh inefficient Technologies um you know the way the more you scale up the more you have to compromise on one of the other of the two uh scalability trilemmas um what do you think what do you say to that Kathy you're smiling away You're the crypto native in the room I think there are so many exciting things that's happening in the blockchain space in terms of the technology front that um I I just want to highlight one that we see that really can actually probably solve some of these scaling Solutions so I think this year we're really looking into that concept of modular blockchain and I think in the past a lot of the the um the argument against blockchain adoption is saying that it's not performance it's not scalable it's not able to transact as fast as cheap as a centralized power of computation and I think now we actually have some technology on hand that could change this and we're super excited about this this idea of something that is faster cheaper and also at the same time as the centralized so really pushing the boundaries of private llama that you mentioned there um I think the idea of the modular blockchain for us is not only just an opportunity but it's also a representative of adoption um we will have different players like the traditional Banks like the traditional web 2 players that have their own blockchain with the security of something like an ethereum or some other ones that they choose and they will be completely on a service-based choice whether they adopt any sort of blockchain in the space so I think from a technology standpoint it's super exact exciting from a capital Point um you know we mentioned just about having a lot of this these traditional players considering the technology as an option to grow and I think this ideology with the next generation is absolutely crucial to get the Next Generation investors on board and as well as retail users so from a capital standpoint I think and we're super interested in looking at what are the next type of user applications that the next generation will like to use so I think there are these are the kind of two points I just want to highlight here yeah what do you say oh dare I say it even Modular blockchains One of the opportunities for web 3 in 2023 absolutely I I think it's already pretty much taking off at the moment a lot of good teams are being funded at the moment and we're welcoming any Builders to build on top of this idea and we've seen very interesting byproduct of modular blockchain be that zero knowledge proves and these are all technologies that I think a lot of times people in the crypto trading side don't talk about enough but I think it's worth mentioning that the technology itself has grown and has so many different sides to it now interesting and whatever subjecting way is this realistically a solution that we're all going to be using in two three maybe even five years time or will web 3 be a fad that goes away like icos did yeah so I think because well we are a strategic investors so we take a shorter Horizon than Kathy's team so my Horizon is more three to five years where I suppose Your Horizon is you know the order exciting things yeah way down the line 10 years yeah the English version is one very interesting opportunities I think everybody sort of heard of is sort of bring real world's asset on chain right so we're talking about tokenization so that's something that is truly strategic to us and it's one of my core Focus as well um but this marking needs to evolve a lot for tokenization to be in play right so organization is about reducing the cost for asset managers right so once we can automate when it comes to transfer agency funds Administration use onboarding we can sort of move the post-trades Intensive instruments like a derivative bonds ETFs own chain this sort of less relevance for the accuracy Market because the current state is quite efficient so it is about a 10 trillion dollar opportunity to bring some of that post-trade incentive instruments on chain and we are seeing KKR tokenize one of the healthcare funds Hamilton Lane that with the buy-out funds wisdom 3 is planning something and all the other Asset Management firms are planning something but one interesting interesting thought experiment is that if 10 trillion were to be tokenized the current market cap for crypto is only one trillion and the current market cap for stablecoin is 150 billion right so there's mismatch between the buying power versus asset that can be bought its own chain so I think there will be the the stable quiet industry will be very much under well it's under scrutiny right now and I think we are not that far away from a Bank issued stablecoin under SEC sort of guidance and that will disrupt the entire sector in the next two to five years so watch out for that yeah you heard it here first okay um we're being too optimistic we're being too positive um what are you worried about what what are you losing sleepover in the in the web 3 space what's really like concerning you in 2023 Kathy it's not nice to be the the bad person delivering bad news first so a little bit nervous you've got to be honest um I think the type of scrutiny we're seeing in the market from Regulators is something that obviously is not good to see in this bear Market in the short term but I think in terms of regulation in the long term it will actually create such a much better environment for everybody for liquidity for a lot of the new ideas to form safely and for talent right you want your best talents to work in the very compliant environment so they don't get caught and get go to jail or any of that so I think um I think regulation wise in the long term is going to be super helpful and I actually see Europe as a good fertile ground for that we have the Mika coming in this region and I think this region has actually been super open to more growth in this industry compared to let's say the U.S counterparts and I think that's because people do understand there is something here there is technology here there is opportunity here and hence I think I would actually be very kind of not it doesn't really answer your question but uh yeah I'm actually very optimistic about Europe as a region to grow I'm not so I'll be the Debbie Downer here doing how about yourself what's your we've got 30 seconds left sorry and sure what worries me is the fund's inflow into web3 so there's one kpi I track very closely and that's the net deposit into digital asset funds products wrapped in ETF Bond ETF and index or mutual funds so last year there were only and this figure shocked me 500 million of net deposit into fund products out of which 100s were short Bitcoin so technically 400 million this year we're off to a good start so far as 250 million net deposit into ethereum Bitcoin products in in January alone yeah but how much is short I guess time will tell sorry I cut you off though do finish your point so that's what I'm worried about but there's sort of short-term optimism as to that sort of institutional resale flow is coming back again but then let's see if we just if there's a hard Landing coming in front of us in the wider economy that's something I'm quite worried about which will you know Ripple to the crypto sector okay thank you appreciate the honesty um thank you so much anyway thank you so much Kathy and this has been the talk on web3 where is the opportunity in 2023 thank you so much for tuning in and yeah have a lovely day at the conference thank you