2023 Review and Outlook: What else should we pay attention to after the BTC ETF is passed?

Source: Cobo Global

In the just-released "Cobo Argus 2023 Annual Review", we reviewed Cobo Argus's achievements in the past year, especially the data-level achievements - from 2023 to 2024 In 2017, Cobo Argus's TVL increased from US$24.42 million to US$240 million, with an annual TVL growth of 874%.

This time, we set our sights on the divine fish. As the co-founder and CEO of Cobo, we reviewed the development process of Cobo’s product Cobo Argus. Different from the previously released annual review, this is a more focused Review from an internal perspective. As an institutional-level DeFi asset management tool, Cobo Argus was originally born to meet the internal needs of the team. How does Shenyu, both a user and a product initiator, view Cobo over the past year or so? ;The development history of Argus; how Cobo Argus continues to iterate as the DeFi market continues to mature; and Cobo Argus The next development direction must be accompanied by the development needs of DeFi, that is As the number of users who make markets, provide liquidity and arbitrage in DeFi begins to grow, Cobo Argus will also focus on providing them with more sophisticated permission management tools.

As someone who has experienced many rounds of bull and bear markets, Shenyu also reviewed the last cycle: What are the differences between the last cycle and this one? What are the different market characteristics? How should we respond?

In addition to the review, there is also Shenyu’s outlook for the future, including: What are the tracks and trends he is optimistic about recently? What is his expected scenario for the encryption industry in the longer term 5 to 10 years?

As a secure and compliant custodial wallet solution provider specifically built for institutions, Cobo has always placed a high priority on regulation and compliance, and believes that this will also impact What are the key events in the next stage of the entire crypto industry? In terms of supervision and compliance, what other events in the future deserve our focus?

Finally, Shenyu also shared an impressive book he read in the past year, an encrypted media he often reads, and how to manage time amidst the encryption noise and only focus on important information. One of the most used tools when investing.

Interview Highlights:

• US Financial Accounting Standards The Commission’s Cryptocurrency Accounting Rulesare expected to take effect by the end of 2024, which will strengthen the willingness of companies and businesses to hold digital assets and expand OTC leverage capabilities.
  

• Once the much-watched BTC ETF is passed, we also need to pay attention to:

• Other ETF derivatives other than BTC;

• Digital asset reserve trends in some small countries;

• Third world countries and high inflation areas and the country’s daily usage of cryptocurrencies.

• In the last cycle, the crypto industry encountered a counter-cyclical for the first time, and affected by the "eternal bull market" mentality, the bubble was eliminated faster .
  

• From the birth of Bitcoin to last year, there was an inflationary cycle. This is the first time we have encountered a countercyclical cycle, and it is also the first time we have encountered it. Experience the impact of macro interest rate hikes on the industry.

• The development of the Ethereum ecosystem is expected. Solona’s popularity is more of a transaction-side behavior and a bottom-up innovation of the Bitcoin ecosystem. Surprising.

• The DePIN track is currently in its early stages. In the long run, its implementation will face at least two major challenges: network effects and supervision.
  

• The development of AI and the Internet of Things relies on the development of the middle layer and underlying infrastructure of the blockchain.
  

• A scenario that may arise in the crypto industry in the future is that AI, robots, and IoT devices are granted limited authorization to perform operations on digital assets. For transactions and operations, this stage takes about 1 to 2 cycles to arrive.

The following is the full text of the interview:

What else should we pay attention to after the BTC ETF is passed?

In the direction of supervision and compliance, what events are worthy of our focus in the future?

The first focus is the passage of the  BTC ETF.

In March 2023, a large number of North American banks were cut off from Crypto. In early 2024, the main focus will be on the passage of ETFs, which will bring new channels for traditional financial funds to enter the crypto industry in compliance with regulations.

What we need to pay attention to in 2024 is what changes will happen to the asset size after the adoption of ETFs; what derivatives based on ETFs will appear after the adoption; and the asset management side of each country after the adoption of ETFs. implementation and development.

In addition, we also need to pay attention to whether after the ETF is passed, it will expand from Bitcoin ETF to other currencies such as Ethereum. The occurrence of this situation has released an obvious positive signal, which means that blockchain assets such as Bitcoin and Ethereum have been accepted as well as traditional assets and have begun to enter the balance sheet.

In addition, there are several key events to watch in 2024:

1) The entry into force of the US Financial Accounting Standards Board’s cryptocurrency accounting rules, is expected to Will occur at the end of 2024, which will have a significant impact on banks and companies, meaning that crypto assets can be included in the balance sheet.

Once the encryption financial standards take effect, the encryption assets held by enterprises can be included in the liability balance sheet according to the real-time value, which can better reflect the true value of the encryption assets. This will strengthen the willingness of companies and businesses to hold digital assets.

In fact, in the 2021 round, some traditional companies have begun to purchase Bitcoin and Ethereum as holdings of their own funds, but digital assets cannot yet be included in the balance sheet and can only Calculated in some other ways, it is difficult to reflect the company's revenue and changes in real time.

If this trend continues to expand, we will see the impact on the bank side, which means that banks can also hold digital assets as alternative assets, or support mortgage lending - lending legal currency against crypto assets In this form, it is better to provide an off-site leverage function instead of the current large amount of on-site leverage.

2)Focus on the digital asset reserve trends of some small countries. Especially whether the central banks of small countries start to reserve digital assets (as a substitute for gold), I think this may be a very big trend in the next period of time.

3)Pay attention to the daily cryptocurrency usage status of ordinary people in third world countries and high-inflation areas and countries. Ordinary people, especially the new generation born after 2000, have actually begun to use digital assets for daily use. Will this trend further strengthen, and if it develops, will it face new regulatory risks and challenges? All are very important.

Economic Cycle

How is this one different from the last cycle?

There is no essential difference from the previous cycle, but there are still differences in specific manifestations:

1) This cycle , the bubble disappeared faster, leading to the rapid bankruptcy of a large number of companies and institutions.

Although a large number of U.S. companies have gone bankrupt in every bear market, the 2022 bear market will go bankrupt faster, and the way to eliminate bubbles will be different from usual. The reason is that many companies were overly optimistic in the last bull market (the so-called eternal bull market), resulting in a more aggressive mentality, which caused the bubble to burst much faster than before. It will have an impact on institutions or businesses, causing many institutions to quickly go bankrupt. Of course, the past year or so has not been easy for practitioners.

2) In addition, this is the first time that the crypto world has encountered an interest rate hike cycle. From the beginning of Bitcoin’s birth to last year, it was an inflation cycle. This is the first time that we have encountered a counter-cyclical cycle, and it is also our first time. Experience the impact of macro interest rate hikes on the industry at once.

3) From a personal perspective, the last bear market was not as cold and disappointing as previous bear markets.

As a co-founder of Cobo, what are your thoughts on how to survive the long bear market winter?

The focus of a bear market is primarily on risk management and control. Specifically, it is the management of cash flow and full preparation for black swan events, and it cannot be an eternal bull market mentality.

DeFi vs Traditional Finance

As a brand new financial model, is decentralized finance exactly replicating the development of traditional finance? cycle?

Basically.

DeFi is a decentralized way of quickly replicating products that have developed relatively maturely in the traditional financial market over the past 200 years. It uses this cryptographic native composability to quickly trial and error and Iterated over again.

What is different from traditional finance?

Compared with traditional finance, DeFi is much more efficient and purely transparent.

High efficiency means fast iteration speed, which is almost 50 to 100 times that of traditional finance. The past 200 years of modern financial history are mapped to the encryption industry, and it can basically be completed quickly through trial and error in two or three years.

In addition, since DeFi is based on the blockchain, all its codes are open source and are equivalent to a transparent box. In contrast, traditional finance is a black box, and it is a black box within each company. It is difficult for you to understand how the entire financial system operates. DeFi is completely transparent, and anyone who is interested in spending time can understand how it works.

So, if there is a bubble or problem in DeFi, it will be exposed faster, the bubble will burst faster, and you can try and make mistakes quickly.

Future Outlook: Promising Tracks and Trends

What tracks and trends are you optimistic about in the future?

First of all, the core is the second floor. How to make the second layer run better, whether it is the second layer of Ethereum or the second layer of Bitcoin, is a core problem that we need to solve in the long term. That is, let the chain better provide the underlying foundation. services while reducing costs.

Second point, based on solutions such as smart wallets, AA wallets and MPC wallets, users can use the blockchain with a lower threshold. technology asset agreement. In particular, the combination of AA wallet + PassKey may be a problem that must be solved in the future.

The third point is a little further away. It is a problem that needs to be solved in the next stage after the above two problems are solved.

I think that in the end the crypto industry may not see the scenario we expected: the use of a large number of on-chain wallets. It may be used by AI, robots, and Internet of Things devices. These devices will be associated with some addresses holding digital currencies and be authorized to use some assets. In this process, data exchange will occur and human authorization will be obtained. Make some trades. This stage is expected to be further ahead.The development of AI and the Internet of Things depends on the development of the middle layer and underlying infrastructure of the blockchain. This requires cycles and time. I estimate that it will take about 1~ 2 cycles.

In the next 5 to 10 years, the above three tracks are what I am most concerned about.

What challenges do you think there are in the future of cryptocurrency? Or what are the challenges in 2024?

There are two main challenges at this stage.

One is the explosion of applications, which highlights the performance bottlenecks of the chain, which will allow everyone to discover and solve problems.

This will be the main line of the next cycle - solving the scalability problem. The answer is obvious, which is to adopt a lower-cost scalability solution such as the second-layer network. Regarding Layer 2 scalability, I think it is already in the deliver state and is in the early verification stage. Then, market selection, route selection, and who will take over the entire market will become the most critical things at this stage.

In the next stage, when the infrastructure is ready and performance is optimized and improved, large-scale application scenarios will be ready.

What is certain is that large-scale application scenarios are bound to come. What is uncertain is, "In the next stage, among so many application scenarios, which one will be the killer application?" and the time when it will appear. "Can it start to emerge in the next one or two years?"

Although Solona has been greatly affected by the FTX incident, the Solona ecosystem has given me a very intuitive feeling in the past year. There is a group of people who continue to build on it. For the future development of the Solona ecosystem As for whether Ethereum can be flipped, I think we have to continue to observe whether this trend will continue and whether the Solona ecosystem can develop better.

Recently, the popularity of Solona ecology is mainly due to short-term price behavior, which is essentially normal market transaction side behavior, and there is no evaluation in this aspect.

I personally am not that optimistic about the DePIN track. Of course, if this thing can be done well, it will be valuable, but visually the current gameplay or stage is still in the early stages.

If it really wants to be implemented, I think DePIN will face at least two major challenges:

First of all, if it wants to be implemented, DePIN must form a network effect. At present, it is still in the early stage. The network effect It is difficult to form, and it remains to be seen whether a certain network effect can be formed in the future.

The second point is that if network effects occur and the scale expands, it will inevitably enter the regulatory field and create more complex regulatory issues.

To sum up, I think DePIN is now in a "meme" stage.

What is the possibility of multi-chain cooperation? In addition to Ethereum, are you optimistic about other public chains or ecosystems?

Ethereum mainly focuses on the second layer, including some subsequent iterations of application implementation scenarios, which is expected.

But the performance of the Bit Ecosystem in this round is a bit surprising to me, especially the bottom-up drive and innovation happening in this ecosystem, soI may pay attention to the Bit Ecosystem Some attempts and innovations are expected to produce some breakthroughs and developments in this round of the market.

Cobo Argus Product Review

Please summarize the development history of Cobo Argus in the past year or so.

Cobo Argus was originally a security tool used by the Cobo team. Later, it was discovered that everyone had the same needs, especially in the bear market when there were many hacking incidents and the use of DeFi exposed many risks, so We decided to bring this self-use product to the market, turning it from an internal tool into an enterprise-level tool, providing underlying decentralization capabilities - realizing secure asset management from the underlying framework, which is a more scalable solution. It is a relatively scarce ability in the industry.

In the bear market, we have commercialized some of the special skills accumulated in the last bull market and built an infrastructure that allows everyone to build on this "foundation" DeFi asset management continues to iterate. Cobo Argus is an underlying infrastructure that provides scalability for DeFi asset management.

So, what’s Cobo Argus’s specialty?

Simply put, Cobo Argus is a decentralized tool based on Safe multi-signature that enables efficient collaboration between multi-person teams. Specifically, some low-risk operations with high-frequency demand can be separated out and assigned to robot operations, which can greatly reduce manual operation costs, improve operational efficiency, andoverall increase the compound rate of return, which DeFi essentially earns is the compound rate of return.

Through the inspection and pre-authorization management of multi-signature tools, operational risks can be reduced, such as the risks of phishing attacks and fraudulent signatures that have been common in the past year or two. Cobo Argus essentially performs risk control at the on-chain contract level through pre-authorization.

In addition, the addition of the robot (single signature) function can enhance the ability to respond quickly to DeFi emergencies.

Unlike the stock market, DeFi operates 24/7 and does not respect national boundaries. Many emergencies happen in the middle of the night. In addition, DeFi is highly volatile, and its composability can easily create a domino-like impact, leading to the collapse of the entire market. This causes DeFi investors to lose a lot of energy and feel nervous all the time.

The layered architecture of Cobo Argus can authorize some events that affect the security of funds to the robot through event warning. Once an extreme event occurs (a predefined threshold is triggered), the robot will automatically remove funds from the smart Withdraw the contract to the multi-signature wallet.

Before this, the wallet only had one highest authority. Every time an emergency occurred, the person with the highest authority needed to operate it in real time, which meant that this role needed to monitor risks on the chain 24/7. At the same time, being in charge of the key with the highest authority is not only a heavy responsibility and high risk, but also very energy-consuming.

The underlying decentralization function of Cobo Argus can give the robot limited permissions to respond quickly to risk events, eliminating the need for manual intervention. It can allow DeFi practitioners to "sleep well"