Dialogue with Yang Haipo: Bull Market, Theft Incidents, and Reflections on Public Chains

This article is an original piece by Chain Catcher, authored by Wang Dashu.

Yang Haipo is an early investor in Bitcoin and a seasoned practitioner. He has independently led the code deployment for the ViaBTC mining pool and has a profound understanding of Bitcoin, Ethereum, and the entire cryptocurrency market.

At the same time, Yang Haipo is also the founder of CoinEx. From his early belief in Bitcoin to his involvement in the exchange industry, his rich experience is worth referencing for many practitioners. In this interview, Chain Catcher had an in-depth conversation with him about the current state of Bitcoin, Elon Musk and the cryptocurrency market, DeFi innovations, and the changing landscape of public chains, hoping to inspire you.

Chain Catcher: "After the '5.19' waterfall, the market is gradually stabilizing. As a seasoned practitioner, what stage do you think the cryptocurrency market is currently in? Has the bull market ended?"

Yang Haipo: I personally believe that the market is still in the first half of the bull market, gradually stabilizing and recovering. Especially in terms of overseas market enthusiasm, the number of new users entering, and funding, there has been no significant decline. From a timing perspective, it is still too early to say that the bull market has ended.

Chain Catcher: Elon Musk is the most controversial figure in this bull market. Some believe that the animal coin craze he sparked and his comments about Bitcoin's energy consumption are undoubtedly important factors in the market's volatility. What are your thoughts and judgments on this?

Yang Haipo: From Musk's entrepreneurial experience, it is clear that he is an idealist and has a keen perception of virtual things. His personal status and global influence undoubtedly play a strong role in popularizing the entire cryptocurrency market.

As for the animal coin craze, it is actually not closely related to Musk. He chose Dogecoin mainly because it is relatively more decentralized. While many people believe Bitcoin has value attributes but Dogecoin does not, this is a completely preconceived notion. The value of digital currency depends on market consensus. For early Bitcoin holders, they have certain biases against other cryptocurrencies, including biases against Musk himself.

However, for new entrants, Bitcoin is just one type of cryptocurrency, and everyone can study the cryptocurrencies they favor based on their preferences.

Chain Catcher: Recently, BitMEX founder Arthur Hayes stated that the chances of Ethereum surpassing Bitcoin are increasing. As an early Bitcoin believer, how do you view the future value of the two?

Yang Haipo: In the long run, it is inevitable that Ethereum will surpass Bitcoin.

On one hand, the positioning, vitality, and users of the two communities are completely different. The only source of Bitcoin's value is faith, and it has already evolved into a kind of religion. Although it brought a demographic dividend in its early days, it has almost no practical use; its only uses are hoarding and speculation, which can easily lead to being replaced over time. For example, Dogecoin has sparked the birth of a new religion, and Dogecoin users are far more active than Bitcoin users.

The value of Ethereum, on the other hand, comes from being used. Although Bitcoin once had such an opportunity, it unfortunately did not choose the path of scaling. If Bitcoin had chosen the path of scaling, it could have very likely become an important payment method in the world. In comparison, Ethereum is relatively open in its scaling solutions. Although Layer 2 and Ethereum 2.0 seem somewhat clumsy to me, at least they can solve some problems.

On the other hand, from some data, BSC has already surpassed Bitcoin in terms of usage value, user numbers, and transaction volume. If BSC continues to develop and optimize, a large number of users will likely migrate to other public chains on BSC, which will somewhat weaken Ethereum's competitiveness.

As Zhou Hongyi said about ten years ago, "whoever wins over the bottom-tier will win the world." The success of Pinduoduo has validated this point. Essentially, blockchain can also be considered an internet product, where the most important factor is scale effect. The core competitiveness must be built on a large user base. Currently, Ethereum can only meet the needs of tens of thousands or hundreds of thousands of users daily, which certainly has a large ceiling.

Overall, how to make trade-offs between scaling and decentralization has always been an important topic, and the landscape of public chains will still have significant changes in the future.

Chain Catcher: However, there are quite a few capital institutions heavily invested in Bitcoin, and the actions of this group have become a reference for general investors when making decisions. What do you think about the impact of large capital entering the market?

Yang Haipo: From the perspective of the entire market, these capitals are just one or two participants in the market and cannot fundamentally determine market trends. However, it is undeniable that during the rising phase of a bull market, they can bring greater influence and attract more people and funds to enter.

Chain Catcher: Binance and BSC are considered big winners in this bull market. However, their DeFi applications have frequently experienced theft incidents due to code issues. Do you think there are some unknown rules behind this?

Yang Haipo: First, I want to clarify that they were not stolen; they were just reasonably exploited by hackers. It is very likely that the hackers are actually the project parties themselves, reasonably exploiting the rules to take advantage.

Of course, the biggest problem comes from the developers. The rules they set are immature, they do not respect the market enough, and they have not fully considered market volatility. They only want to quickly increase TVL, leading to very low collateral rates. In such cases, once extreme market conditions or manipulation occur, it becomes very easy to be attacked.

Chain Catcher: In the past, you mentioned that CoinEx is not positioned as an exchange but as a brokerage investment bank. What thoughts are behind this definition?

Yang Haipo: In traditional financial markets, the role of traditional trading is very small, but in the cryptocurrency industry, exchanges play a significant role, conducting business across the upstream, midstream, and downstream of the industry themselves. In this case, they are comparable to traditional financial brokerages.

However, one of the characteristics of exchanges in the crypto space is that they can autonomously decide which coins to list, unlike traditional brokerages where the trading targets are all in stock exchanges and cannot be decided independently. In this situation, cryptocurrency exchanges are similar to investment banks, which is why we do not define ourselves as exchanges but as brokerages and investment banks.

However, there are significant differences between cryptocurrency exchanges. Based on CoinEx's positioning and understanding, we are clearer about what we want to do.

For example, in terms of asset differentiation, each exchange chooses different assets. The attributes of these assets determine the short-term and long-term development of the exchange. Some exchanges prefer coins that can bring trading volume in the short term, but these coins may cause nominal or user harm to the exchange in the long run, making it difficult to maximize long-term value, and may even lead to negative value.

Therefore, for CoinEx, we lean more towards long-termism. We prefer projects that can develop and thrive in the long term, which is also an important basis for us when screening projects.

Moreover, in terms of product and market differentiation, the products you provide to users determine the attributes of the market you focus on. Additionally, digital currencies are inherently a global market, with each country having its own policies, languages, and user habits. Therefore, it is necessary to focus on certain aspects within a limited time, which leads to market differentiation. Currently, CoinEx defines itself as a global exchange, and we still hope to serve global users, but this needs to be achieved step by step and requires a lot of work.

Chain Catcher: What are the goals and visions of CSC (CoinEx Smart Chain)?

Yang Haipo: CSC's business started two years ago, and we have made many attempts during this process. It was not until the beginning of this year that we decided to switch to the direction of smart contract chains. The development of DeFi over the past two years has shown us that the true direction of blockchain development is to build a decentralized general platform based on smart contract chains.

However, we also see many problems. For example, Ethereum has performance issues due to its extreme pursuit of decentralization, and its high transaction fees deter users. This has provided development space for other alternatives, such as BSC, but BSC uses a PoA consensus mechanism, which is overly centralized.

CoinEx hopes to sacrifice some decentralization to improve performance and block transaction processing capabilities while being compatible with Ethereum. Therefore, we adopt a POS consensus mechanism, balancing decentralization and efficiency as much as possible. You can simply understand that CSC is benchmarking against Binance Chain but will make many improvements and optimizations based on BSC to be more decentralized.

Chain Catcher: What are the ideas for CSC's ecological layout moving forward?

Yang Haipo: CSC hopes to build a focus on the entire DeFi infrastructure. Specifically, in ecological construction, we will focus on two aspects. First, we will provide corresponding incentives and policies for the ecosystem; second, CeFi and DeFi are two different things, so CSC hopes to see new projects grow from scratch, rather than taking over the ecological overflow from Ethereum and accepting the migration of old projects.

Of course, although these new projects rely on the CSC ecosystem, we will not overly reflect assets from Bitcoin or Ethereum in terms of funding or users, nor will we deliberately pursue so-called TVL.

In general, CSC will not be defined as a Layer 2 of Ethereum. It has not brought in Ethereum's ecosystem or asset projects; it is an independent, low-starting, open, and free ecosystem.

Chain Catcher: Developers have always been an important part of ecological construction. How does the CSC Foundation plan to attract and empower developers?

Yang Haipo: In terms of empowering developers, CSC has launched an ecological support fund to provide some support plans and financial assistance to developers. However, the official team will not overly participate in the projects themselves, including project development governance, decision-making, and code auditing.

Especially for new developers, we hope to create a fairer and more open competitive environment on CSC. Besides developers, we also believe that users are very important. The ability of a public chain ecosystem to develop fundamentally depends on users. Therefore, whether in mining pools, exchanges, or wallet services, we have already accumulated a large number of users.

Chain Catcher: In the entire cryptocurrency trading market, derivatives have always been a big cake that everyone wants to compete for. Although many derivative exchanges emerged in 2018, only a few have persisted until now. What do you think are the reasons behind this?

Yang Haipo: This can be viewed from several aspects.

First, derivatives are a product with a limited user base; the main users are still in spot trading.

Second, the user lifecycle of derivatives is relatively short, and high leverage leads to most users incurring losses.

Third, many derivatives have not innovated in their products; they are more focused on community operations, which determines that they cannot last long. Of course, some decent derivative exchanges have emerged in the past few years, but with the arrival of the bull market cycle, new users are more likely to go to spot exchanges. Therefore, we can see that derivative exchanges like FTX have started to focus on spot trading, which is a very good choice; otherwise, they may quickly be eliminated by the market.

Fourth, we also see some spot exchanges venturing into the derivatives trading field. Especially Binance, which can easily direct and convert users based on its spot trading flow, will inevitably encroach on the derivatives trading market.

Overall, the current derivatives market in the crypto space has become very mature. Whether it is futures or options or other products, it has basically aligned with traditional finance, so we rarely see more advanced product innovations.

Chain Catcher: However, the derivatives sector in the DeFi track has become a key focus for many investment institutions.

Yang Haipo: The core application of DeFi is DEX. The industry began discussing decentralized exchanges in 2013, and it was not until the birth of Uniswap that the AMM mechanism was popularized, allowing permissionless token listings and helping long-tail assets solve the problems of listing and circulation, thus achieving a true decentralized exchange.

In contrast, derivatives mainly target leading assets like Bitcoin and Ethereum, rather than long-tail assets. Essentially, there is no need for a permissionless access mechanism and decentralization. Therefore, decentralized derivatives cannot enjoy the benefits brought by decentralization; instead, they highlight their shortcomings, such as poor liquidity and slow trading speed. Thus, I personally believe that derivatives DEX is a pseudo-demand.

Chain Catcher: I agree. A recent interesting trend is that many exchanges are launching their own NFT platforms. Do you think this is just following the trend?

Yang Haipo: Undoubtedly, yes. Of course, this is my personal opinion. I have previously discussed this issue on Weibo. The biggest problem with NFTs is that they do not need blockchain; NFTs are merely recorded on the blockchain, and they still require centralized institutions to prove your ownership of the NFT, which is essentially still centralized.

Moreover, in practical applications today, many exchanges that launch NFT tokens are similar to previous postal currency and art platforms, and the outcomes for these platforms have not been good. However, narrowly speaking, NFTs do have value and can solve some niche problems, such as Uniswap V3 also using NFTs. But if you want to turn NFTs into a large industry, it actually has little to do with blockchain.

Chain Catcher: NFTs are often thought to be combined with DeFi. What stage do you think DeFi is currently in?

Yang Haipo: I personally believe that DeFi is currently in a bubble-blowing stage, but I highly recognize its value, as it is like a completely open and free experimental field that has generated many new play styles and projects, harboring enormous potential. Among them, the most revolutionary innovation is DEX, followed by lending. We can also see that many projects are launched on decentralized exchanges, while centralized exchanges seem to be losing initiative and are forced to follow the pace of DEX for token listings.

Chain Catcher: What do you think are the reasons for the bubble burst?

Yang Haipo: Any bubble or cycle is, in a sense, a Ponzi scheme. The bull market is largely driven by the influx of new users, so the only reason for the bubble burst is the lack of new users coming in.

Chain Catcher: The organizational form of DAO has been hotly debated in the prosperity brought by DeFi, and there are quite a few DAO organizations in China. How do you understand its value and innovation?

Yang Haipo: I am relatively skeptical about the organizational form of DAO, and complete decentralized governance is actually a manifestation of developers' irresponsibility. From my personal past experience, many DAO organizations have two obvious problems:

First, user participation is very low, and the willingness to participate is also very low; second, they cannot form effective decision-making and truly valuable decisions. In fact, the so-called deeper involvement of developers in governance and rule-making is not contradictory to decentralization, because decentralization does not mean that governance and development are decentralized, but rather that the entire blockchain operation is decentralized.