Earn cryptos playing video games? Okcoin CEO on $100k Bitcoin, GameFi, Ethereum

Thank you, David. Great to be back.

Yeah, so I'll give you what I think. I think this again is going back to the fundamentals. There are two sides of the story. On the one side, from a Bitcoin evolution perspective, we see that over the last six months it has been in a pullback or consolidation mode from a price perspective. But if you look deeper into the ecosystem, there are actually a lot of positive things going on for Bitcoin. There is further derisking for the network. If you think about the miner exodus from China, which sent a huge wave of shock through the Bitcoin ecosystem and further through the whole crypto world earlier this year around May, that seems to have been over. The Bitcoin network has recovered from that; hash rate actually got back to almost the all-time high without any third party intervening. It just naturally went back, which shows the resilience of the network. And then also, you see recently there are a lot of regulatory uncertainties around the crypto space, but Bitcoin is the only coin out there that is almost the only coin with not much regulatory concern or uncertainty, at least in the US. Both the Fed and the SEC came out recently saying that they're not going to ban Bitcoin, and it's truly decentralized. So from that perspective, I think that level of derisking for Bitcoin continues over the last five months very quietly in the background, which is playing to its strength. The other side of the story for Bitcoin is that there is further development of its value proposition as well. In the background, we talked about Bitcoin as a store of value playing out in 2020, and that continues to play out this year. When you see the monetary policy continues with various jurisdictions, you see the macro economy and the price actually increases in the US as well; people start to feel it, so that still holds. At the same time, there's also a money proposition developing for Bitcoin when you see the first sovereign adoption by El Salvador, followed by a couple of other countries, most recently including Cuba. That is interesting because that basically opens the door for the much anticipated usage of Bitcoin as real money, as the unit of account and as a medium of exchange. And then on the technological side, in that same sense, Lightning Network is actually scaling very nicely over the last year since starting in 2021. So there are a couple of technical KPIs you want to look at for Lightning: you look at the number of nodes, you look at the number of channels, and you also look at the capacity in the channels. Of all those three metrics, the number of nodes almost doubled since January 2021, the number of channels also almost doubled, actually more than doubled this year, and then the capacity in the channels reaches about 3,000 BTC most recently. That is, I think, a three times increase this year. That speaks to the exponential growth of the Lightning Network as a potential competitor or alternative to Visa, Mastercard, all the legacy payment systems that are being built on top of the settlement network, which is Bitcoin. The platform could compete with Visa, but we'll still need higher adoption rates of Bitcoin; not everybody has Bitcoin ready to use for their credit purchases. But we're seeing that playing out for Bitcoin, and that's why we're seeing it recovering most recently. Then on the other side, when we look at Ethereum to Bitcoin, the trading unit generally has been between 0.012 and 0.03 BTC from the end of 2013 to March this year. After March this year, Ethereum started to pick up in its exchange rate to Bitcoin. Over the last six months, it's been between 0.05 and 0.07, and that was mostly driven by the DeFi and NFT rise, which a lot happens on Ethereum. But to back to your point of why over the last month Ethereum seemed to be underperforming Bitcoin: on the one hand, you see Bitcoin coming out of that consolidation period because of all the fundamental positive trends. On the other hand, for Ethereum, Ethereum in 2017, 2018, and even 2019 up to summer of 2020 has been the only smart contract platform out there. But starting from the end of last year to this year, there have been a couple of emerging alternatives to Ethereum, including Avalanche, including Polygon, including Solana, which is kind of new, and even including Stacks, which is a smart contract built on top of Bitcoin. So there are alternatives now, and there are actually solid alternatives. And then also, regulatory uncertainty is a little bit higher for Ethereum compared to Bitcoin. So I think there is that playing out as well. So that competitive landscape and the regulatory uncertainty is playing out. When you think about Bitcoin, there's really no alternative that's the global money network out there, and it's a huge network. Ethereum faces more competition than Bitcoin in their use cases.

I don't think that's totally impossible, but over the long term, my personal view is that I have a clearer path forward for Bitcoin as a whole. Ethereum has a lot of upside too, and for all the other alternatives to Ethereum, particularly when you see GameFi coming up as a real interesting use case and the metaverse, I think it's going to be really interesting to see how that plays out. So I think there are possibilities out there, but we'll see.

I hold my position, yeah. By the way, I'm a boring hodler, so I don't trade. I don't target a specific time for exit, but I'm long-term positive forward for Bitcoin.

Yeah, so I do think people are complicated. People probably have different portfolios. Some allocation is probably for hodling, some are for trading, some are for investing, and different people have different mixes. Now on our platform, you can do anything you want. You can trade, you can hodl, you can invest, you can also participate in the future. Hopefully we can offer more optionality for that. But on the Earn side, our Earn is directly connected to protocols out there. We don't touch your money. It's basically offering different protocol pools that you can go through us and go directly into them and yield whatever market yield is out there. Some of the popular offerings are Stacks and recently listed MiamiCoin. We also have AVAX, we have a couple of others including Compound and UST. So that product is quite popular. People like it. It's always good to give people optionality.

It's very market driven. We don't know what the APR would be. It's really very much per protocol, and within each protocol, within each product, it varies on a daily basis.

I tend to think that there are cycles for Bitcoin too, just because it's naturally designed as a four-year halving cycle. So I think that plays into the supply and demand story. The other side of things is I think the adoption, mainstream adoption of Bitcoin either as a store of value or as money or as a cheap exchange, takes time. It comes in waves. And people, mentally and psychologically, we are not rational animals; we are emotional. So we tend to get overexcited about some things, and then once we see that we are overexcited, we tend to pull back and pull down a little bit. So there are just natural cycles. So yeah, I tend to believe that there are cycles. And Bitcoin probably, if you zoom out a little bit more, if history tells us anything closer to truth, then it's probably a four-year cycle. But $100,000 first before it collapses, right?

MiamiCoin is a project built on Stacks. It's driven by a community who really believes in an experiment like this that can give the citizens in a city a tool for participating in policy making. It's a civic exchange alternative. We really like it because we think that it's very much reflecting the ethos of crypto, the ethos of Bitcoin, letting the community decide and different participants in the ecosystem act on their own interest, but somehow hopefully can help the policy maker make the right policy because that gets reflected in how many people will be following the coin, which will be reflected in the market price of the coin. And also on the side, the city actually gets a portion of the reserve of MiamiCoin in the pool that they can use as income to fund their activities. So I think it's a very interesting community-driven project, very much crypto ethos driven. And it's very early stage, to be honest. Just like in the early days of Bitcoin, probably very few people knew whether this was a success or not. Similarly here, we don't know whether it will succeed or not. It's very much depending on how the community will evolve around it and how much more mechanism will be built into that, driven by all the developers in the community.

Yeah, we do have our own policy process, and that is in compliance with the general requirement of a listing process, i.e., we don't want to list a security, obviously. So we have a team that would look at all the kinds of projects out there, make decisions on where to start based on how we see the use case of a certain project, where we see the community, both the user community and the developer community, how valid it is, how active people are, how genuinely people are feeling about the decentralized application of that, and also how decentralized that project is or where it is heading toward. Then we'll put it through a legal and compliance review that would look at all kinds of aspects of that risk. Part of it is to manage the legal and compliance risk, make sure that it's not a security, but part of it is also to make sure that we feel we are supporting an asset or a crypto community that is truly decentralized in its nature. And then the committee will make a decision based on different inputs. Some tokens pass, some tokens don't.

We are. I think this is something that is very interesting and new in 2021, and we are keeping a very close eye on it. I think we talked about this briefly when we talk about the overall crypto space. I always see this as developed by stages. First, you see the monetary layer forming its own shape, which is Bitcoin. Then right on top of it, you see a decentralized financial system taking shape, which is DeFi, that we started to see at the end of last year. And then what is the critical next step is really developing use cases, developing real utility on top of those two fundamental layers. Only in that way we don't end up having a financial system playing with itself; you actually have real use cases. And I think for NFT, it started as almost like an art collectible, a digital art collectible where artists can actually get their own value ascribed and that can be easily transmitted peer-to-peer digitally globally. But I think that's only a starting point, and I think that just like real life collectibles, it's going to be a very niche market, that's my personal understanding. However, when it comes to GameFi and NFT applications in GameFi, that brings up a whole new world of possibility where you actually can have a virtual reality and there are native governance tokens that people can use and can carry from game to game. In an original game, one of the challenges is that distribution of a game is not controlled by game creators, and some of those tokens in different games cannot be carried between games. But in GameFi, now the crypto-enabled GameFi, that is possible. So I think that is going to be really interesting. We started to see real use cases being developed now on different smart contract platforms, Solana, Ethereum, and others.

Yeah, maybe my parents would finally be proud of me.

Yeah, look, we actually have Axie Infinity listed on our platform, and that is the first one. And I know that it's actually pretty pricey to enter. I think it's a kind of a hundred bucks or a thousand bucks to get into the game. But once you are in the game, you can actually use that as a governance token to make votes for the game and also use it to buy different pieces in the game. And there are different pieces of different value, and that can be actually sold to another individual. So I think that definitely increases the fungibility of the token, and also the token itself becomes its own distribution channel. It's amazing how quickly Axie Infinity has been able to grow its user base. It's only two years old, and now it's like two million users. It recently had a valuation round as well, I think at 3.2 to 3 billion by 16z. So that tells you the ability for token economics to actually disrupt the original business model of the gaming industry. Basically, the token itself, because of its price, carries as a distribution mechanism.

That is the direction we are exploring. We are a huge fan of interoperability, and we believe that yes, we are historically an exchange, but we'd like to think of ourselves as a platform, as a place where people come. They can either buy and hold crypto assets, earn crypto assets, or use it to participate in what they want. And there is a possibility of working with different game projects to allow them to use the token they buy on our platform and easily get into the games to do those activities. That is something we are actively exploring.

I think it can be different things. I think either you call it NFTs or game currencies or other digital currencies, it's really a token that you use in a certain economy to interact with other people. Historically, when we talk about economy, that economy is politically defined. I think what we're seeing as a possibility is that with crypto, that economy is no longer confined by political realms, but more by people's interest, by people's activities. And I am a firm believer in interoperability. I think ultimately, all these different smart contract platforms where all the different use cases are going to be built, we need to have interoperability between these chains and also between these chains and Bitcoin, so that everything ultimately can anchor to the only global internet native money, which is Bitcoin. But in those economies, the money of that economy is probably enough.

Sure, yeah. No, we are not getting into the media business, David. We don't have that. It's more a way for us to interact with our community, with our customers. And one thing that we realized is that in the crypto space, it's very important to keep that educational piece and fun element there, and that level of community interaction is very important. So we have a recent initiative to start a live stream show called OKCoin Live that comes on every Friday at noon Pacific Time. We are actually going to have some very prominent guests on, including Mayor Suarez from Miami, including the founder of Doge, and including Professor Saifedean Ammous, who I believe you have met before. Yes, you've been on the panel with him on Keiko.

Thank you, bye.