Dialogue with Temasek Web3 Fund Superscrypt Partner: Aside from the hype, what details of RWA development have we overlooked?

Original Title: Chain Venturer: Jacob Ko of Superscrypt

Original Author: Marco Manoppo

Compiled by: Qianwen, ChainCatcher

Jacob Ko is a founding member and partner of Superscrypt, an early Web3 venture capital fund established by Temasek. Superscrypt is dedicated to investing in and supporting innovative founders and projects throughout the ecosystem. According to the RootData page, the fund primarily focuses on infrastructure, identity and credentials, Web3 services, and emerging use cases, having invested in projects such as Aptos, Safe, LI.FI, OutDID, and Kaito.

Jacob Ko's career began at the American management consulting firm Kearney, where he worked as a strategy consultant, and then he joined Citigroup's investment banking division from 2010 to 2013. In 2013, he joined Temasek, helping to establish investment projects in Australia and New Zealand, and was responsible for deep tech and agri-tech investments.

In July 2022, he helped create Superscrypt. In addition to providing funding, Superscrypt closely collaborates with portfolio companies to support them in strategy, product, GTM, marketing, community tech/developer relations, and recruitment.

This interview covers the following topics:

• Superscrypt believes that blockchain technology is the backbone of the new internet. Good infrastructure "should just work" and fade from people's view.
• Many may not realize that the success of many RWA protocols today is largely due to their decentralized nature, which facilitates low-barrier, seamless transactions. However, platforms dealing with RWA must verify legal compliance requirements, which limits their direct growth in users, value, and liquidity.
• RWA tokenization makes more sense for asset classes that are not tied to physical counterparts, such as short-term government bonds and private credit.
• One area that Web3 needs to explore is identity, reputation, and credentials—this will provide users with greater control over their data.
• Most investors in cryptocurrency and venture capital do not fully understand whether a project needs a token; they are only focused on the short-term price fluctuations that liquid tokens can provide, rather than the long-term benefits of building something new.

Here are the highlights from the interview:

1. What was the decisive moment that attracted Jacob to the crypto world?

Jacob only started engaging with cryptocurrency in 2020. At that time, due to the global lockdown caused by the pandemic, there were limited entertainment options outside of work, and he decided it was time to explore and study Bitcoin and Ethereum.

Bitcoin changed his perception of the concept of money, while Ethereum and smart contracts opened up a whole new world of possibilities for anyone with an internet connection. He began actively participating in DeFi on Ethereum, Polygon, Binance Smart Chain, and Solana. On Solana, he further explored NFTs and engaged in various community and ecosystem activities.

2. Can you introduce Superscrypt? What is its relationship with Temasek?

After several years of accumulation in the field, Jacob transitioned to working full-time in crypto and helped establish Superscrypt, an early Web3 company funded by seed capital from Temasek.

Superscrypt is research-driven, focusing on investing in and supporting early Web3 builders developing protocols, tools, and emerging applications. The team believes that deep user and community engagement is at the core of success and provides practical support to the companies they invest in.

Superscrypt believes that blockchain technology is infrastructure and the backbone of the new internet. Blockchain can distribute ownership of almost any transaction through a distributed ledger, which is a key innovation. Like most great infrastructures, blockchain technology should "just work" and fade from people's view. Therefore, they invest in infrastructure solutions that make blockchain easier, faster, and more cost-effective to use. At the application layer, they are always looking for quality product teams that can create better lives or interesting experiences for users.

They believe a key area that needs to be explored is identity, reputation, and credentials. This underdeveloped area is a key unlocking point for Web3: solutions built using blockchain technology can give users better control over their data, drive product innovation, and create a better overall user experience.

3. What areas and types of projects are Jacob or Superscrypt currently interested in?

Superscrypt invests in Web3 infrastructure that helps scale blockchain, such as Rollups, sequencers, MEV, and interoperability solutions. They have also made strategic investments in wallets and developer tools, as they are the entry points for consumers and developers to interact with and build on blockchain technology.

As mentioned earlier, identity, reputation, and credential solutions are particularly worth focusing on. Identity solutions can provide users with context-rich identity identifiers based on their on-chain activities, allowing users to control the data they wish to share.

In terms of emerging use cases, the team has chosen to invest in the emerging fields of Web3 social and real-world asset tokenization. However, these are just preliminary plans, and the team will continue to conduct comprehensive research and monitoring before investing in these areas.

Superscrypt does not invest in the gaming sector. Although this field has great potential, it is not a primary focus for Superscrypt, as it may not be possible to identify successful companies, and creating successful projects requires substantial capital investment.

Regarding DeFi, Superscrypt tends to selectively evaluate projects with unique innovative angles (such as cross-chain DeFi).

4. What details do people sometimes overlook when engaging with real-world assets?

Jacob observes that as institutions slowly adopt cryptocurrency, real-world assets (RWA) are becoming popular again. However, he points out that the market crash may have hindered institutional participation, and the anticipated large-scale adoption of cryptocurrency by institutions has not materialized. Nevertheless, people have recognized that blockchain can bring efficiency to transactions and asset management.

Emerging models are often accompanied by hype, and Jacob warns that due to technological, regulatory, and practical considerations, currently only specific RWAs integrated with blockchain make practical sense. However, this also presents opportunities for assets like short-term government bonds and private credit, which are not tied to tangible counterparts and seem more suitable for tokenization.

Many may not realize that the success of many RWA protocols today is largely due to their decentralized nature, which facilitates low-barrier, seamless transactions. However, platforms dealing with RWA must verify legal compliance requirements, which limits their direct growth in users, value, and liquidity.

He believes that RWA should not be hyped as the latest category in the cryptocurrency space, but rather assessed within the fintech domain, as this asset class has inherent limitations and the opportunities it can bring are different.

5. What are Jacob's views on the future of RWA KYC systems?

Jacob anticipates that the future KYC systems for RWA will be quite complex. Currently, regulated RWAs seem unlikely to accept privacy-preserving crypto solutions like zkID as KYC standards. Ideally, regulators would understand and accept these technologies, believing they can verify individual identities without disclosing too many details.

However, winning government trust in these emerging zero-knowledge (zk) solutions will face significant hurdles, as authorities may think that if they can directly request personal information under existing systems, there is no need to adopt new technologies. Although many teams are researching zero-knowledge (ZK) solutions, they have not yet reached a level that would make governments consider them as standard requirements.

Jacob foresees that identity solutions will continue to evolve. This range may span from more ambiguous identity identifiers (such as proofs and profiles based on user on-chain activities) to more mathematically-based solutions (like zk technology), and finally to the most stringent identity solutions (traditional KYC and AML processes).

Depending on the relevant products, any identity solution can meet regulatory requirements, with the strictest solutions applicable to securities requiring KYC. If regulators begin to better understand technologies and solutions like zk, these technologies and solutions may be sufficient to meet regulatory requirements. However, given that these technologies are just starting, achieving this may take decades.

6. What are Jacob's views on the best fund structure model for crypto assets?

Jacob shared his insights on transitioning from traditional venture capital to crypto investment, emphasizing the unique liquidity of tokens as investment tools. Compared to the 5-10 year cycles of venture capital, the cycles for tokens are much shorter (within a year). This dynamic sometimes leads early investors to focus solely on short-term results, causing price volatility and affecting public perception of venture capital.

The currently popular investment structure combines SAFE (Simple Agreement for Future Equity) for initial seed rounds with token warrants. This structure aligns with Superscrypt's long-term investment approach. While the company acknowledges the early liquidity brought by token issuance, its primary focus is on supporting teams that can create long-term value, potentially leading to trade sales or even IPOs.

Regarding investment strategies, Jacob emphasized the distinction between venture capital and liquidity strategies. The former is a long-term supporter taking risks for eventual returns, while the latter requires different skills, focusing more on entry and exit points and liquidity management. Superscrypt primarily focuses on venture capital, but Jacob believes liquidity strategies are also worth considering, especially in bear markets, where significant price drops can create attractive valuation opportunities for top teams and tokens.

Some Quick Q&A

• What is a book that any aspiring investment professional should read?

Any content that helps build a solid foundation and framework (about Bitcoin and Ethereum) is worth reading.

• What is Jacob's biggest investment mistake?

It was NFTs, but it also gave Jacob new insights into cryptocurrency, Web3, and the impacts of digital ownership on various aspects and concepts.

• What is the most underrated use of cryptocurrency?

It is NFTs: due to rampant speculation, prices fluctuate, and NFTs are currently unpopular. However, this technology for allocating ownership rights to intangible assets is a mechanism that can unleash more value creation and new business models.

• Do you have a critical view of cryptocurrency now?

Most investors in cryptocurrency and venture capital do not fully understand whether a project needs a token; they are only focused on the short-term price fluctuations that liquid tokens can provide, rather than the long-term benefits of building something new.

• What is the biggest risk facing the cryptocurrency space?

Lack of regulation.

Note: The above text is not a verbatim quote but has been optimized in written form based on the dialogue. In this process, some context and nuances may not be adequately expressed.