Author: Joy Chen, Evan Lu
The third episode of DripEcho, a cryptocurrency and blockchain talk show produced by Waterdrip Capital, invited serial entrepreneur Aki Balogh, the founder of the dlcBTC project. Aki has achieved remarkable success in the AI-driven marketing company MarketMuse. In 2023, he started a business again and is committed to building a decentralized and secure DeFi solution based on Bitcoin - dlcBTC. Today, we will take a deep look at Aki's entrepreneurial journey, dlcBTC's technological innovation and future development.
At the pinnacle of technology, entrepreneurs also face the choice of transformation. For all technology entrepreneurs, there is a problem that must be faced - how to meet the challenges of the future? So, instead of choosing to stay in the familiar field, he plunged into the wave of cryptocurrency and started another journey. Aki's entrepreneurial journey stems from his scientific family background. Born in Hungary, his father is a nanotechnology expert. In 1991, his family moved to Boston. Aki said that his entrepreneurial spirit originated from his childhood when he sold bubble gum at school, which planted the seeds of entrepreneurship. In 2011, Aki joined OpenView Venture Capital in Boston and gradually became interested in big data, AI and machine learning. In 2013, he started his first business, combining AI with marketing to create Market News, a company that optimizes SEO content, which quickly gained market recognition. But Aki did not stop there. The moment he first came into contact with Bitcoin in 2011, he planted his curiosity about the crypto world. He clearly realized that cryptocurrency is not only a revolution in financial technology, but also a challenge to the traditional banking system. He believes that in the future, more and more people will be able to get opportunities through this technology.
AI or Crypto?
As AI becomes increasingly popular, Aki Balogh chose the field of cryptocurrency. For Aki, this seems to be a natural choice. He recalled: "I heard about Bitcoin as early as 2011, but I didn't study it in depth at that time. When I really entered the field of cryptocurrency, I realized that its combination with financial technology has great potential." As an early AI practitioner, Aki admitted that he has invested a lot of energy in the field of AI, but he gradually felt that the market of AI is becoming more and more concentrated and monopolized, especially the control of computing resources and data by large companies is becoming more and more strict.
Talking about the reason, Aki explained: "The threshold of the AI industry is getting higher and higher. Only those companies with huge computing resources and data can gain a foothold in this field, while small and medium-sized startups are increasingly difficult to compete." In contrast, the decentralized nature of Crypto attracted his attention. In his view, the cryptocurrency market provides more opportunities for entrepreneurs because it does not have resource monopoly like AI. In the world of Crypto, even a small company can find its place because it does not rely on centralized infrastructure.
DLCBTC, founded by Aki, is based on this decentralized concept. DLCBTC solves the centralized risks brought about by the use of a single custodian and bridging technology in the current market by using self-custody technology on the Bitcoin chain. Aki pointed out that this technology not only improves the security of Bitcoin in DeFi, but also provides institutional investors with a more reliable Bitcoin liquidity solution. He firmly believes that DLCBTC will pave the way for decentralized finance in the future.
Despite the explosive growth of AI in recent years, Aki does not regret turning to Crypto. He said: "Both have their own charms, but in my opinion, the decentralized nature of Crypto makes me more interested in exploring. I no longer need to rely on the computing resources provided by those large companies, but can innovate in a more open and fair environment." For young entrepreneurs, his advice is: "Keep an open mind, try different fields, and don't be too rigid in a certain path, because future opportunities are often unexpected."
Value Creation and Expectations
In the entrepreneurial journey, the acquisition of funds and resources is often seen as the key to success. However, Aki Balogh deeply understands that entrepreneurs think very differently from investors. He pointed out that some entrepreneurs regard the company as a business, while others regard it as a mission, which means that they are pursuing not only profit, but also pushing the boundaries of technology and the pace of innovation.
Simple imitation is meaningless, and the real value lies in creating unique products. Despite the emergence of countless similar companies and products in the market, Aki believes that he has always adhered to the belief of innovation. In the field of cryptocurrency, his product is the only Ramp Bitcoin product that adopts a self-custody mechanism.
It is easy for people to fall into some misunderstandings brought by inertial thinking. In the early stages of entrepreneurship, the acquisition of funds can easily overwhelm a project. Aki believes that the acquisition of funds is not the only factor. He shared that in the early stages of his first and second companies, he raised almost no funds, but relied on consulting projects and grants to support research and development. This approach allowed him to focus on verifying business ideas and customer needs without external pressure. Once there is initial product and market feedback, he recommends considering venture capital.
"In the early stages, you can choose to work part-time or arrange your time flexibly to start a business." Aki believes that finding a suitable venture capital partner can accelerate the growth of the company. Perhaps the help brought by venture capital is not limited to the funds themselves, and its positioning and value also need to be verified again. In his view, the initial success depends more on the in-depth understanding of ideas and the keen grasp of the market. Although the role of funds is important, it is not the only one.
The balance between founders and investors
We have to admit that in the relationship between entrepreneurship and investment, founders and investors often face different challenges and pressures. Aki Balogh shared his real experience as an entrepreneur, emphasizing that as a founder, the first task is to create value for customers. He knows that investors focus on financial returns, but he values customer success and long-term business sustainability more. In his view, customer repeat purchases are the cornerstone of the company's success, so when making decisions, he often prioritizes how to provide customers with better services, even if it means making some choices that may not be recognized by investors in the short term.
Aki talked candidly about the tension between investors and believed that as a founder, you must find a delicate balance between pursuing long-term value and meeting short-term financial goals.
When talking about the goals of his project DLCBTC, Aki expressed his desire to build a safer asset wrapping mechanism that enables Bitcoin users to participate in investment and lending without traditional risks. In this way, he hopes to make more Bitcoins safe for investment, and eventually bring about wider financial applications.
Aki also analyzed the existing Bitcoin packaging model, pointing out that the traditional way often relies on centralized custody, while his project adopts a novel self-packaging mechanism. This mechanism uses the security of the Bitcoin chain to enable users to lock Bitcoin autonomously, ensure the security of assets, and avoid the risks brought by centralized custody.
Excerpt from the interview:
JoyChen: Switching from artificial intelligence to the blockchain field seems to be a rather bold and innovative move. What made you decide to focus on Bitcoin? How did you first become interested in cryptocurrency?
Aki Balogh: I actually started trading stocks when I was a child. I heard about Bitcoin in 2011, but I didn't focus on it at the time. I heard about Ethereum in 2015 and still didn't focus on it. But I thought cryptocurrency would be interesting because it involves financial technology. As we all know, fintech has traditionally been hard to get into because banks are so heavily regulated, so I think it's a really interesting industry.
I also think it can really help a lot of people, especially in the United States. We're more privileged in the United States, but where I'm from, for example, Hungary, their banking system is not that strong. So my experience in some countries and many countries is that the financial system is not very good. If we can have something that runs on software, it will be better. And then the process of how I actually started building on Bitcoin was actually interesting. I was working with a Hungarian engineer to help him with some business development because I was new to the field at the time and didn't have any ideas. I introduced him to my friend, and he ended up hiring him to develop a wallet for El Salvador. So my friend developed this wallet, and now it's used by millions of Salvadorans. It's related to Bitcoin. And then I started thinking, if all Salvadorans can have Bitcoin, then everyone in the world can have Bitcoin. So what can you do when you have Bitcoin? Maybe you want to use it to take out a loan or invest. So I started to get involved in decentralized finance.
JoyChen: Why not continue in the field of artificial intelligence? Do you regret pivoting to crypto, especially given the explosive growth of AI in recent years?
Aki Balogh: Yeah, actually my timing was not very good, because I should have done Bitcoin first and then AI. I did hesitate a little bit, but you never know. We actually did an NLP project in 2018, a few years before OpenAI. I invested a few million dollars in this project, but it was not enough to make a good model. We did have our own model though. So I was probably premature, but I think AI has a lot of promise and is here to stay and there are a lot of projects.
But I don't regret it. There is a lot to build in both. One of the reasons I left AI, or was a little disappointed, was because it was also very centralized. If you are a big company, you can buy a lot of servers, train AI, and you have all the power, or all the data. So there is a natural tendency to lean towards centralization. And I actually think that opportunities are more accessible in the cryptocurrency space because the focus here is on decentralization. If you find something, there will always be a place for you to stand, and in contrast, the minimum requirements for starting an AI company will only get higher and higher.
JoyChen: As an investor, I will naturally focus more on the potential return on investment and evaluate most projects, but entrepreneurs and investors often have different mindsets. For many entrepreneurs, there are two ways to build a company: one is to treat it as a business, and the other is to treat it as a mission. So for you, DLCBTC is more important to make money or to push the boundaries of technology?
Aki Balogh: You can do both, and it may be related to your personality and expertise. I have always wanted to build companies that use new science because I want to build something that is differentiated, so it is not a simple copycat. I think the value of creating copycat products is very limited.
Some industries can indeed create copycat products and may still make money, for example, CRM systems, Salesforce is a big company, but there are many different CRM systems. For example, e-signatures with DocuSign, there are also areas where you can keep creating new things, but after a while, there will be consolidation. If you do exactly what others are doing, the probability of being swallowed up by a larger company is high. So I found that both of my company's products have some unique aspects that are rooted in basic science and basic research in universities, which makes the product better. That's my approach. You know, some people, their business type is different, can also do business process outsourcing companies and do well. And for me, I always think that adding a little bit of scientific angle makes the product more defensible. Even now with this product, there are many Bitcoin pull-up products today, and there are almost new ones every month, but we are the only one that uses self-custody and uses Bitcoin L1 to pull up Bitcoin products, and the others use centralized custodians or bridges, and Bitcoin enthusiasts know that neither of them is secure, so I feel very confident even now, we just saw Coinbase's CBBTC launch, Coinbase is a very large company. But we still have an advantage in front of CBBTC because we are more decentralized, and this is how we survived as a small venture capital company. JoyChen: Early financing is often one of the biggest problems in entrepreneurship, so for crypto projects like DLCBTC, do you think early capital is critical? In addition to funding, are the resources we bring important? Aki Balogh: In the first two years, we didn't raise any money. I didn't raise any money in the first year of my first company. In the second and third years, I raised one million. Then I raised venture capital for the second company. We only got some grants for the first year and a half, and then got some venture capital, and then we started to develop. So let's say in the first year and a half, actually, if you don't raise any venture capital, it doesn't matter. Doing consulting projects or getting some grants, or having some kind of income to research a field is good. I call it R&D income, when you get a grant, say, do a consulting project for someone, which is what we did in the beginning of both companies. Then once you start to have products, that's when you may want to raise venture capital. Actually, you can take a flexible approach at the beginning, you can work part-time between work and companies, or you can have different flexible arrangements.
I think venture capital is great, I was a venture capitalist in both projects, and I always want to use venture capital, and it's great to find some good venture partners because they will push you, make you move faster, have more resources, so I think it's great. But I think in the beginning, you just have an idea, you need to do research and validate it, talk to customers, build prototypes and things like that. You don't need venture capital. You can go and find some customers, go to some meetings, find ways to use your time. And then once you start to see a pattern and think "Wait, I have an idea, it's very concrete now, I have these people telling me they want this, I have this engineer", once these things start to come together, that's when I would recommend seeking pre-investment.
JoyChen: I want to dig a little deeper into your personal experience as an entrepreneur. When faced with challenges, investors are usually very focused on financial performance. As a founder, what are your returns and risks? I'm curious if you feel pressure to ensure that investors don't lose money?
Aki Balogh: Being an entrepreneur, especially a venture-backed software entrepreneur, it's really hard. It really sucks. I've been doing startups for over a decade, venture-backed, and there are still doubts, fears, and worries every day. I'm just more used to it. It's normal, most people don't want to start a business. You can guarantee that you're going to feel a lot of uncertainty, a lot of doubt, self-doubt, are we doing it right? Where should I spend my time? You know, but that's the downside. If you can make yourself comfortable with all of that and you're the kind of personality that doesn't get affected too much by that.
Then you get the benefit, which is learning. You get to have a great adventure, learn a lot quickly, have amazing experiences. You know, it's a learning, and like you said, you're measured by the amount of value you create, the amount of money you make for your investors, the results you get for your customers. The most important thing for us is getting good results for our customers and serving our customers well.
You see your team develop, and then you see your personality and personal development. I think that's really cool, and that's one of the reasons why I wanted to get into this space, personal development. If I get too focused on one thing, of course, we want investors to make money, but the most important thing is, I want customers to be successful, I want them to not just be one-time purchases, but to be repeat customers. Repeat customers are a business model that you can only be based on, so even in the short term, if we make decisions that seem, maybe not the right decisions, or are a little questionable, if we are optimizing for customer value, I think in the long run, that will always work out.
So, there's always a natural tension or dynamic between me as an investor and an entrepreneur, but I think my responsibility as a founder is to focus on creating the most value in the long run. Even in the short term, we're going to do something that maybe investors don't like or agree with, you know? But that's one of the rewards of doing this job.
JoyChen: In one sentence, what exactly is DLCBTC? What is the ultimate goal you want to achieve with this project?
Aki Balogh: We are building a more secure wrapper that uses the entire Bitcoin chain to protect the asset, secure the Bitcoin asset, and then wrap it into Ethereum and different chains for DeFi. What we want to achieve is that anyone who has Bitcoin should be able to invest, borrow or participate in finance without having to face bridge risk, custody risk or any traditional risk. So we want to make a trillion dollars of Bitcoin securely investable for yield. This is our long-term goal. We do this by launching in DeFi, getting into chains like Ethereum, Arbitrum, Solana, etc.
Brian
YouQuan
Hui Xin
Joy