Interview with Polychain founder Olaf: We only hoard coins, never short
Produced | Odaily (ID: o-daily)
Produced | Odaily (ID: o-daily)
Today, the pace of entrepreneurship in the encryption market is slowing down. After the plunge, the market panic continues. What kind of judgment will Polychian, which is still actively deploying the market through the cycle, make and what strategy will it adopt?
Polychain can be described as the originator of encryption funds, founded in 2016 by former Coinbase No. 1 employee Olaf Carlson-Wee. In December of the same year, Polychain Capital received US$10 million in financing. LPs include well-known venture capital firms Andreessen Horowitz (A16z), Boost VC, and Union Square Ventures.
Olaf is a very legendary entrepreneur born in the 1990s. Olaf became very interested in cryptocurrency because of an article on the "Silk Road" that introduced Bitcoin technology when he was in college, and his graduation thesis also took this as the theme. After graduating, Olaf took an unusual path. He worked as a lumberjack for wild cranes for a long time, and then joined Coinbase in the early days of its establishment. From an early user to a number one employee, he started his career in encryption.
In 2016, Olaf, who has accumulated rich experience, saw that high-quality projects continued to sprout and there was great potential for investment in the primary market. He resigned from Coinbase and established Polychain Capital with an initial capital of 4 million US dollars. After that, he not only received capital injections from mainstream capital, but also successfully Betting on star projects such as Cosmos and Tezos, and taking a heavy stake in Ethereum has achieved huge returns. At its peak, the management scale reached nearly 1 billion US dollars. In 2017, the return on investment of Polychain was as high as 2303%.
However, the high returns in the encryption market are also accompanied by high risks, and the subsequent bear market in 2018 also caused a certain scale of asset shrinkage for Polychain.
Today, the pace of entrepreneurship in the encryption market is slowing down. After the plunge, the market panic continues. What kind of judgment will Polychian, which is still actively deploying the market through the cycle, make and what strategy will it adopt?
secondary title
"We are a hoarding party that focuses on the primary market and never shorts"
Odaily: What do you think of the recent trend of Bitcoin? What do you think caused the "3.12" cryptocurrency market to plummet?
Olaf: When looking at the K-line of Bitcoin, I prefer to look at the price of Bitcoin from a longer timeline. When you zoom out the K-line of Bitcoin, you will find that in the past ten years The price of Bitcoin has been going up. Moreover, the blockchain has also experienced unprecedented development in terms of technology and underlying infrastructure, and many valuable new technologies and protocols have emerged.
Cryptoassets have always been known for their high volatility, because they are still in a very early stage of development, but I think that over time, the volatility of cryptoassets will become more and more stable. So for me, the "3.12" crash is a regular price fluctuation throughout the history of cryptocurrency development, but to a certain extent it also promotes cryptocurrency to become a global financial asset one day.
Odaily: Bitcoin will complete its third halving in May this year. Can you make a rough prediction on the price of Bitcoin before and after the halving?
Olaf: Broadly speaking, I think that the halving of the Bitcoin block reward is a very important booster in the history of Bitcoin's price breaking to new highs. If Bitcoin does not have this setting, Bitcoin will not There will be deflationary properties, which will make the price of Bitcoin even worse.
So I think "halving" is very practical for the Bitcoin protocol. I don't like to make price predictions, because I am a hoarder and generally don't do short-term operations.
Odaily: What is the investment logic of Polychain in the primary market and the secondary market?
Olaf: We have been committed to investing in emerging technologies and novel business models. In the primary market, we focus on investing in the underlying infrastructure and protocols that can support a variety of novel business models.
We are mainly interested in two types of projects, the first to mention is DeFi. So far, there have been many successful cases in this field, such as MakerDAO, Compound and dYdX.
In addition, we also invested in some promising new technology public chains in the early stage, such as Tezos, Cosmos, Polkadot, Filecoin and Dfinity. We believe that these projects have great market prospects because they all propose novel underlying infrastructure solutions Solutions for developers to build a variety of business models and business scenarios on it.
Odaily: How does Polychain hedge risks in the secondary market? Will you do some strategies such as quantitative investment?
Olaf: We don't do any arbitrage and quantitative investment, we don't go short, and we don't use leverage. We only hold encrypted assets for a long time, so we can't talk about doing any risk hedging in the secondary market.
secondary title
The logic behind the heavy warehouse DeFi track, and the summary of the stress test of DeFi
Odaily: You just mentioned that Polychain has a special liking for investing in the DeFi field. You split Polychain’s investment portfolio. We also found that you also invested in many DeFi platforms in the early stage, such as Dharma, dYdX, MakerDAO, merklex.io, etc., you Can you expand on why Polychain is heavy on the DeFi track? Will Polychain continue to invest in the DeFi track in the future?
Olaf: First of all, I want to say that we will definitely continue to invest in the DeFi field in the future. The reason why we hold a heavy position in DeFi is because DeFi can smoothly transplant traditional financial services to the Internet, support users to participate in many financial products, lower the threshold for users to participate in more complex custody and lending financial products, and help users conveniently To participate in more complex derivatives transactions such as futures, DeFi lowers the barriers to entry for ordinary users of these complex financial products. As long as you have a mobile phone and a network, you can obtain high returns by investing in these financial products.
In the long run, DeFi can enable anyone in the world to create complex smart contracts with others on any asset of any asset class, lowering the investment threshold for users of financial products, and promoting the progress of global democratized finance and inclusive finance.
Odaily: In the "3.12 market crash", the sharp drop in ETH prices caused a series of problems in DeFi: the DeFi platform was liquidated on a large scale, the serious congestion of the Ethereum network caused the gas fee to be too high, and the delay of DEX transactions... Do you think DeFi has changed from What have you learned from this market crash?
Olaf: I think the main reason for the problems you mentioned above in DeFi is due to the performance problems of Ethereum. The development of DeFi platforms is limited by the scalability and liquidity of Ethereum. This is why we We are optimistic about the underlying infrastructure platform that focuses on improving scalability. In this direction, we believe that Dfinity is better than the current Ethereum 1.0. Dfinity has made great improvements in scalability and can make the infrastructure built on it The performance of the application has been greatly improved.
However, it is quite expected that these problems can appear in the early stage of market development, and it can also motivate DeFi developers to design safer and more efficient DeFi products.
As for MakerDAO, the "0 DAI" liquidation incident just proved the necessity of the existence of MKR. When DAI has a liquidity crisis, MKR can act as a backup asset for the MakerDAO system and can maintain the stability of DAI under special circumstances. Although ETH The sharp drop in prices led to a $4 million debt "crisis" in MakerDAO, but in the end, the solvency of the entire system was maintained through the auction of MKR, making the entire system develop in a predictable direction.
Odaily: So what do you think about MakerDAO adding USDC as MakerDAO's collateral asset? Some people think that centralized USDC will weaken MakerDAO's decentralization feature. How do you think about this issue?
Olaf: In my opinion, it is an interesting question for MakerDAO whether to choose purely decentralized encrypted assets like BTC and ETH as new collateral, or to choose centralized USDC as new collateral. philosophical questions.
As far as I know, the idea of the MakerDAO community is to expand purely decentralized encrypted assets like BTC and ETH as collateral. Therefore, from the perspective of the MakerDAO community, expanding USDC as new collateral does not seem to be a very good idea. Appropriate decision.
To some extent, I also think that expanding USDC to add collateral to MakerDAO is not without any risks. However, regardless of ideology, from a probabilistic point of view, when developers design a mortgage mechanism for MakerDAO, no matter which assets they choose as new collateral for the system, there are actually risks. Reasons for MKR holders to participate in MakerDAO ecological governance.
Odaily: Has Polychain participated in MakerDAO's MKR auction?
Olaf: We are one of the largest holders of MKR. In order to maintain the decentralized nature of MakerDAO's governance mechanism, we did not participate in this MKR auction.
Odaily: Polychain is an early investor in Tezos. Some time ago, Tezos performed very well in the secondary market, and its market value has also increased rapidly. Do you think this is the governance mechanism of Tezos that has reflected its value?
Olaf: We did a simple survey on XTZ holders before, and found that most XTZ holders would give priority to Staking XTZ. Currently, the pledged market value of Tezos has surpassed most PoS projects, and 80% of these pledged XTZ Participating in on-chain governance, this data is still amazing. Moreover, the community has a high degree of participation in the Tezos upgrade governance. Recently, Tezos has just completed the latest upgrade governance. It has only been about 18 months since the Tezos mainnet was launched, but since its launch, Tezos has successfully upgraded governance many times.
Odaily: Just now you mentioned that Polychain is very interested in protocol layer projects, so how does Polychain view application layer projects?
Olaf: At the application layer, we also have projects that we are very interested in, such as Celo. Celo is a mobile blockchain financial platform for payment scenarios, providing financial services to those who own assets on the Internet, rather than those who store assets in traditional banks. Celo makes it possible to send the dollars on the user's mobile phone to anyone instantly and free of charge, without the need to open a bank account.
In addition to Celo, we are also interested in an application layer project, which is Juno. We are early supporters of decentralized finance and stablecoin systems, both of which have gained high user attention in the market over the past two years, and Juno is a combination of the two.
Juno is not only a lending platform based on Ethereum, Juno is also a digital bank, which can provide users with financial services to purchase DeFi agreements, and use decentralized digital assets to provide customers with high returns. Juno's target customers are not only currency circle users, including those traditional customers who want to obtain high returns through mobile payments, we believe that Juno has the favorable conditions to bring decentralized finance into the mainstream through the new banking platform of digital assets.
Odaily: But now there is a problem. The user scale of DeFi is still very small. Because of the threshold of over-collateralization, many people are reluctant to use DeFi. They will think that some wealth management and lending products launched by Alipay and WeChat are more convenient. What do you think of this? question?
Olaf: Compared with these traditional payment tools, DeFi has three main advantages.
The first is to lower the barriers to entry. DeFi can provide financial services to users who have no assets in traditional financial institutions such as banks. This is something that traditional payment tools cannot do. Encrypted assets do not need to be linked with traditional banks. They only need to get through The relationship with the mobile Internet does not need to be linked with the assets of traditional banks. This is the first advantage of DeFi and traditional payment tools.
The second point is to save costs, because all DeFi products are based on the underlying protocol of the blockchain, and do not require middlemen and third-party intermediaries, so a large amount of intermediary fees is saved.
secondary title
2020 Blockchain Outlook: ETH2.0, DAO, Public Chain, Derivatives Trading
Odaily: What are your expectations for Ethereum 2.0?
Olaf: I have been looking forward to Ethereum 2.0 since 2016. Although the progress may be a bit slow, it is still very exciting. The consensus mechanism in the Ethereum 2.0 era will change from PoW to PoS. In addition, 2.0 has done a lot in terms of expansion Improvements, such as expansion through sharding technology. I very much agree that sharding technology is one of the most effective ways to help the expansion of the public chain. At the same time, I personally think that there are still some methods that can replace sharding to help the expansion of the public chain, such as zero-knowledge proofs and Bulletproofs. Fragmentation technology may be the most suitable expansion solution for Ethereum 2.0.
Odaily: What do you think of the concept of DAO (Decentralized Autonomous Organization)? Do you think DAO will explode in 2020?
Olaf: First of all, I am very optimistic about the application of blockchain technology to human and capital organization activities. DAO is an important step in this process. In my opinion, DAO may move forward slowly and steadily, but in the short term There may not be much progress, and it may not be possible to see the progress of DAO in the next ten years. But I think that in a very long-term future, DAO may become a corporate structure-like entity in order to organize and manage itself with people and capital.
Odaily: In 2019, the development of the public chain track encountered bottlenecks. Many public chains on the market failed to find landing scenarios related to real life. There are still many public chains whose mainnet launch time has been pushed back and forth, and many people have started In your opinion, will the public chain track tell new stories in 2020?
Olaf: I think the market has too high expectations for the launch time of the mainnet of many new star public chains, and pays too much attention to their mainnet launch time, but ignores their technical characteristics.
In fact, the development of these new technologies in the blockchain field is a particularly complicated matter. It is not just a simple matter of mobile application development. To some extent, the progress of these new technologies depends on technologies such as computer science and cryptography. new breakthrough. Like Filecoin, what it has to do is very complicated.
For traditional Internet developers, it may only take 6 months to design a robust mobile application, but for a complex decentralized system like Filecoin, it may take 3 years to do this. matter. Therefore, I can understand why these star public chains have repeatedly delayed the launch of the mainnet. I think investors should also give these projects more time to overcome technical difficulties.
Odaily Sunday Daily: What do you think of the crypto derivatives market this year?
Olaf: In the traditional securities market, the trading volume of derivatives markets such as futures and options is much higher than that of the spot market. In the cryptocurrency market, the current trading volume of derivatives is almost the same as the spot trading volume, but we are very much looking forward to derivatives The transaction volume far exceeds the spot transaction volume.
We have also invested in several derivatives trading platforms, such as CoinFLEX. Because we are very optimistic about the market of derivatives trading, and we will also be optimistic about this market for a long time in the future. When you look back at the changes in the trading volume of the cryptocurrency market in the past two years, you will find that spot trading has increased by nearly 10 times, and the growth rate of derivatives trading volume is faster than that of spot trading.
Odaily: When you look back on your investment career, can you name a few investment cases that you think are particularly successful?
Olaf: Tezos and Cosmos are very successful cases that we have invested in. In the secondary market, BTC and ETH are also good investment targets. Of course, we have also invested in many other good projects, so I will not give examples here up.
Odaily: Are there any high-quality projects that you missed?
secondary title
There will still be more and more investment opportunities in the encrypted world
Odaily: Now let's talk about your own story. You have been interested in crypto-assets since you were in college. Can you tell us what attracts you most about crypto-assets?
Olaf: I think what attracts me the most is that anyone in this field can issue their own tokens to create original ecological financial products and services on the Internet that do not require the supervision of third-party centralized institutions such as the government. It breaks the shackles of human history and the development of existing society.
Because "money" is a very important production tool in people's daily life, its issuance and destruction rights have always been controlled by centralized institutions. With blockchain technology, people can issue their own tokens without being restricted by centralized institutions. I think this is where the greatest value of encrypted assets lies.
Odaily: Why did you choose to quit your job at Coinbase in 2016 to create the first crypto fund?
Olaf: I enjoyed my time working at Coinbase very much, but when I was thinking about the idea of an encrypted fund, I found that this market has great opportunities, so I left Coinbase to start something that I think is right. The thing - creating Polychain, I had a lot of support from Brain Armstrong and others at Coinbase along the way.
And whether it was during the time I worked at Coinbase or after I founded Polychain, we have been supporting Coinbase in different ways. We also participated in Coinbase's E-round financing in 2018.
Odaily: As you know, encrypted assets are inherently highly volatile. In 2017, the cryptocurrency market was booming. Bitcoin’s growth rate was 1196%, and Ethereum’s growth rate was 8796%. Polychain’s return on investment in 2017 also followed The skyrocketing price of the currency has reached 2303%. However, with the slump of ICO and the halving of the market value of Bitcoin in 2018, the return on investment of Polychain has also dropped sharply. Therefore, in your opinion, whether the investment opportunities in the field of encrypted assets in the future will be Will it become less and less?
Olaf: No, in my opinion, there will only be more and more investment opportunities in this field, especially investment opportunities for high-quality projects.
The most beautiful thing about encrypted assets is that it is open source. Anyone can design and build any application on it. Now many people are not used to this kind of development environment. They may feel that this open source method may be a little confusing. sequence, but in my opinion this is a huge step forward in technological innovation.
Odaily: Are you familiar with China's blockchain market? Are you interested in investing in high-quality blockchain projects in China in the future? Can you name a few local blockchain projects in China that impress you?
Olaf: Of course, we think that China's local blockchain projects are very innovative, and we are happy to invest in China's local blockchain projects. We are very optimistic about the two blockchain projects Nervos and Matrixport.
I'm a big fan of Nervos myself, I like their tiered scaling technology, and their team is great. Polychain was an early investor in Nervos.
