Interview: Marco Manoppo

Compiled by: Deep Tide TechFlow

Guest Introduction:

Edward Tan conducts research and investment at Hashed, the largest crypto investment institution in South Korea. Edward studied accounting and finance at the London School of Economics (LSE) and entered the real estate private equity industry after two years at Fraser Property Limited.

Before joining Hashed in 2021, Edward held a fund management position at LOGOS, a rapidly expanding logistics company operating in 10 Asia-Pacific countries. Ultimately, Edward entered the cryptocurrency space in 2021.

Key Points Summary:

• Edward's growing interest in cryptocurrency is decisively influenced by the capital efficiency of DeFi;

• Hashed currently has 5 departments and over 250 employees;

• The cryptocurrency landscape in East Asia and Southeast Asia is markedly different, with retail operations in the former being significantly stronger than in the latter;

• It is necessary to refine the balance between equity and tokens to ensure both can serve broader business objectives and provide clear pathways for investor returns;

• Different perspective: Crypto gaming will not bring the next billion users.

What was the decisive moment that attracted you to the world of cryptocurrency?

Edward's journey into the world of cryptocurrency marks a departure from his traditional finance background, where he was accustomed to the stability and relatively moderate returns of real estate private equity.

In this field, a strong deal might yield a 15% internal rate of return (IRR), reflecting a balance of low risk and moderate returns.

However, at the end of 2020, when the high annual percentage yields (APY) of cryptocurrencies caught Edward's attention, his situation changed dramatically. This stood in stark contrast to the familiar low-risk real estate and high-risk stock domains. Cryptocurrency introduced a completely different range of risk and return, offering not only higher returns but also exponential growth potential, promising returns far exceeding traditional investments.

As Edward became ready to embrace greater risks, the asymmetric potential of cryptocurrency became increasingly attractive. This inclination towards cryptocurrency was further influenced by discussions with a classmate, an outstanding finance graduate working at JPMorgan, who was considering a shift to a cryptocurrency fund. Their conversations, once centered around traditional equities and investment analysis, began to cover topics like decentralized finance (DeFi) and liquidity mining.

The latter half of 2020, known as DeFi Summer, was a pivotal period. With the rise of new DeFi protocols like Uniswap, Curve, and SushiSwap, the crypto community was abuzz, with each protocol offering substantial liquidity incentives. Despite the field being in its infancy and constantly evolving, the allure of triple-digit APYs remained strong.

A decisive moment: Edward's growing interest in cryptocurrency was significantly influenced by the capital efficiency of DeFi. This involved using digital assets like Bitcoin and Ethereum quickly as collateral without having to sell them, a revolutionary concept for Edward that further drew him down the "rabbit hole."

What is Hashed?

Since its establishment in 2016, Hashed has undergone significant transformation, initially led by a compact team of three founders with engineering backgrounds who transitioned from successful Web2 startups to investing their profits in ETH, laying the foundation with their own capital.

Their early attempts included participating in ICOs with these funds, which were the primary fundraising method in 2017-2018, eventually evolving into venture capital.

By 2018 and 2019, Hashed began investing in some early protocols like Sky Mavis, becoming a seed round investor and participating in projects like Axie Infinity and Ronin Chain, acquiring equity and tokens. Their portfolio has continuously expanded to include well-known projects like Sandbox, Mythical Games, and dYdX.

Originally headquartered in South Korea, Hashed later recognized the importance of connecting with Western markets, prompting the establishment of teams in San Francisco and Los Angeles in 2019.

In 2021, Hashed expanded its operations to Singapore, with Edward joining as the first non-Korean member of the team. Through this expansion, Hashed is now focused on making Singapore the central hub for its Southeast Asian operations. Additionally, Hashed has portfolio companies in Vietnam, Thailand, and the Philippines.

Hashed initially had a team of only 30 people, which has now grown into a strong team of 250 professionals divided into five main business departments:

1. Investment Department: This department has teams in the U.S., Seoul, and other global locations, operating three entities: a proprietary capital tool for token trading, an LP fund for equity trading that initially had $100 million and was quickly invested, and a $200 million fund raised in 2021 targeting entertainment, NFTs, and the metaverse, of which 70% has already been deployed.

2. India Division: The India team, established in 2022, is a diverse team of fewer than 15 people responsible for various aspects of fund management, including research, investment, marketing, community management, human resources, and legal. This expansion was driven by India's rich talent pool and the demand for capital and scale support, leading to the establishment of Hashed Emergent in partnership with local partners with deep connections to the region.

3. Factomind: This is Hashed's asset management subsidiary, providing services ranging from consulting to data visualization and liquidity provision. This was established out of the need to actively manage Hashed's significant asset base, led by a team of former quantitative finance traders and engineers.

4. UNOPND Incubation Studio: As the largest part of Hashed, UNOPND is currently incubating three projects in the NFT, metaverse, and K-pop sectors. Notably, they are innovating a decentralized Korean pop music brand, Modhaus, which allows fans to participate in decision-making by voting on various aspects of music production, gamifying consumer engagement using NFTs.

5. Hashed Open Research: A unit dedicated to policy and framework research. This department serves as a liaison between the public and private sectors (including venture capitalists and investors) to align government initiatives with private initiatives in the crypto space.

What are the differences in the cryptocurrency landscape between East Asia and Southeast Asia?

In the East Asian retail market, taking South Korea as an example, the country exhibits a strong retail market, evidenced by the substantial trading volumes on centralized spot exchanges like Upbit and Bithumb.

• The South Korean market is very robust, with any new cryptocurrency listing potentially leading to significant price surges, reflecting strong retail demand for trading and ownership in the cryptocurrency space, supported by a large and active community.

In contrast, Southeast Asia presents a different picture.

For instance, in Singapore, retail participation is noticeably lower, and cryptocurrency is treated as a leisure topic, not as commonly discussed in social settings as in Korea, with investors exhibiting more risk-averse and disciplined investment behavior. However, in countries like Thailand and Vietnam, enthusiasm for cryptocurrency may rival that of Korea.

• Regarding institutional participation, Southeast Asia is seeing an increasing influx of capital into the cryptocurrency space, primarily through fund investments rather than direct involvement.

• Unlike South Korea, where conglomerates like Samsung and Kakao are actively involved in developing blockchain infrastructure, Southeast Asian institutions prefer to invest through funds, possibly due to limited capacity for direct engagement in the industry.

However, Thailand also has notable initiatives, such as SCBX, which is collaborating with Hashed to develop a venture capital model to test blockchain-based financial instruments in the local market.

Similarly, Vietnam's FPT Group (a significant tech conglomerate) launched Aura Network, a blockchain aimed at adoption in emerging markets.

Overall, compared to Korea's direct and enthusiastic participation, cryptocurrency adoption in Southeast Asia tends to be more structured and cautious.

What are your views on the new stablecoin models emerging with projects like Ethena Labs and Mountain Protocol?

Edward pointed out that while these concepts may not be new, success depends on the robustness of the infrastructure and the fundamental principles behind their creation.

• He studied Ethena's delta-neutral stablecoin model, where users provide ETH, and the protocol shorts on centralized exchanges (CEX) to maintain delta neutrality. This strategy issues receipt tokens to users for the ETH while aiming to provide a stablecoin that reduces risk and generates yield.

In evaluating Ethena's implementation, Edward emphasized the importance of having the right team and financial backing to realize this ambitious project.

Edward highlighted inherent risks, including smart contract vulnerabilities associated with ETH staking and the time lag between receiving and shorting to hedge ETH. He pointed out innovative solutions like using mirrored models with custodial wallets like Fireblocks to mitigate centralized trading risks and manage short-term funding rates.

Additionally, he discussed Mountain Protocol's on-chain treasury bond tokenization and the model for redistributing profits to holders, acknowledging that this is not a unique concept but emphasizing its potential for scalability when integrated into the DeFi ecosystem.

Overall, Edward is open to innovative stablecoin models. He believes that their integration and risk management strategies are crucial for the success of these stablecoins.

What are your views on value accumulation in the next cycle? What issues do we need to address?

Edward emphasized the importance of having clear investment strategies from the perspective of equity and tokens, stressing that investors and projects must align on long-term goals (such as growth, scale, and community development) to achieve successful exits, whether through token issuance or IPOs.

Edward stated that during the investment phase, it is crucial to discern the primary sources of value appreciation, whether through equity in traditional business models or through tokens that incentivize and track user engagement.

He used payment infrastructure projects as an example, illustrating that not every blockchain company needs a token to facilitate user transactions.

• For instance, projects focused on creating non-custodial debit cards and other on-chain payment solutions may not require tokens. Instead, the project should assess how equity can appreciate, potentially leading to acquisition or IPO.

However, Edward also recognizes the potential role of tokens in enhancing user experience and loyalty.

He suggested that rewards points obtained through blockchain-based payment cards could be equivalent to a token system, incentivizing high engagement and allowing for user activity tracking, similar to leaderboards in games or activity points in platforms like Friend Tech.

In discussing the next value appreciation cycle, Edward believes it is necessary to refine the balance between equity and token models to ensure each model achieves its purpose, aligns with broader business objectives, and provides clear pathways for investor returns.

Addressing this balance requires thoughtful integration of equity and tokens, recognizing when each is necessary and how they can complement each other in the ecosystem's growth and value distribution.

Quick Q&A

1. What content should any aspiring investment professional read/watch?

Finematics and Economic Design newsletters on YouTube.

2. What is your biggest investment mistake?

The inability to adjust biases in risk management when necessary.

3. What is the most underrated use case for cryptocurrency?

Payments or privacy.

4. What do you currently hold the most contrary view about in cryptocurrency?

Gaming will not bring the next billion users.

5. What is the biggest risk facing the cryptocurrency space?

Regulatory risk.