OKX President Hong: Leading Industry Transparency with Responsible Innovation

OKX President Hong was invited to attend the "2024 Hong Kong Web3 Carnival" main forum on April 6, 2024, where he delivered a keynote speech on "Responsible Innovation." Below is the full text of the speech:

Good afternoon, everyone. It is an honor to be invited again to participate in the Hong Kong Web3 Carnival event co-hosted by Wanxiang Blockchain Lab and HashKey Group, which provides us with a great opportunity to come together and discuss how to build a healthy and sustainable Web3 ecosystem.

The theme I want to share today is "Responsible Innovation," but before delving into this topic, I would like to discuss two interesting sets of data.

The first set is "2 years" and "7 weeks." In 2004, the first gold spot ETF took over two years to reach an asset management scale of $10 billion. In 2024, the first Bitcoin spot ETF approved by the U.S. Securities and Exchange Commission at the beginning of the year quickly surpassed $10 billion in asset management scale in just seven weeks, creating a fascinating comparison.

The second set is on-chain transaction data. For those who have experienced bull and bear markets in the capital markets, there are various signals present in the market, some of which are noise, while others are significant long-term trend signals. The second set of data shows that the number of on-chain transactions has been steadily increasing since 2019, regardless of whether it was a bear or bull market. Even if we look at earlier data, such as the past ten years, it shows a similar trend. Whether it is the Bitcoin network, Ethereum network, or others, the overall number of on-chain transactions has been steadily growing.

These two sets of data tell us that there is noise in the market that should be ignored, as well as long-term trends worth paying attention to, as reflected in price performance. I believe there is a long-term trend occurring, where technological development is driving more and more activities to move on-chain and gain more attention.

The first Bitcoin spot ETF accumulated the same asset management scale as the first gold ETF in a shorter time, indicating the importance people place on Bitcoin. As the first unique global digital currency network, Bitcoin provides the greatest transparency, control, and choice, all of which are values brought by the unique technology of blockchain.

Returning to today's theme, what does our industry represent? At the birth of Bitcoin and Web3, the true spirit of the industry has always revolved around transparency, responsibility, and rights. How can we provide more transparency, responsibility, and rights through the enablement of technology, products, and solutions? That is our purpose here. In the past two years of development, in addition to the best applications brought by innovators, entrepreneurs, and builders, we are also learning from regulated industries and enhancing transparency, responsibility, and rights by adopting best practices from these industries. Next, I am honored to share with you the development direction of OKX in these areas.

We first increase transparency and responsibility through technology. Since November 2022, we have led the industry in the widely adopted Proof of Reserves (POR) program, building it into an automated technical solution that operates monthly. Currently, we have published monthly reserve proof reports for 17 consecutive months, and this is not just a simple repetition. In fact, we have decided to update the POR program by accepting feedback and continuously improving it, providing more technical support for the program to enhance our POR solution. We have expanded the coverage of POR assets from 3 to 22 and publicly disclosed over 450K on-chain addresses for users to verify their ownership. Additionally, we are the first platform in the industry to adopt zkSTARK technology to ensure the integrity of the POR program through mathematics, cryptography, and technological guarantees, allowing users to trust the program without the involvement of third-party intermediaries. We believe this is an important step for self-regulation in the industry, utilizing technology to bring more transparency and meet users' expectations for centralized platforms to comply with traditional financial audit standards.

Secondly, we have invested significant resources in Web3 technology, launching a self-custody wallet—OKX Web3 Wallet—and building it into a powerful one-stop Web3 entry point. We believe that allowing users to control their private keys through self-custody wallets is the most important way to reduce the risk of platform malfeasance. Furthermore, through hard work, we are committed to making the OKX Web3 Wallet as accessible as possible to users, providing access to public chains, DApps, NFT platforms, DEX aggregators, and more. We have done the heavy lifting of integrating these options to provide users with the most comprehensive and free choices.

Like many other innovative technologies, in the early stages of technological development, the entry barrier is often high for new users who are not tech-savvy. Therefore, we are committed to technological solutions, believing that as a platform, it is crucial to make it simpler and more convenient for a broader audience to enjoy the benefits brought by new technologies. Thus, we are very pleased and proud to continue investing in convenient features such as account abstraction, MPC wallets, and social recovery, enabling more users to use self-custody wallets without having to remember and manage seed phrases, and in the event of losing their seed phrases, potentially regain access to their wallets through chosen social contacts.

As an industry-leading platform, the OKX Web3 Wallet has launched an AA smart contract wallet by adopting account abstraction technology, aimed at helping our users transact and transfer across different chains with a simpler experience, faster speed, and lower cost. All our product efforts are based on the belief that when providing customers with more choices in a simpler and safer manner, users will be more empowered to make informed decisions.

In addition, we believe that self-custody wallets are a purely technological solution that is important for ensuring transparency. Of course, more transparency means more responsibility. The OKX Web3 self-custody wallet contains multiple open-source and audited modules, which anyone can view on GitHub. If they are interested in security audits or wish to provide feedback on these modules, we welcome it. These modules include but are not limited to account generation, transaction creation, transaction signing, and MPS algorithms. We are very proud to open-source these modules and will continue to open-source more modules to the community for feedback. We believe that as a software and technology-driven platform, providing more transparency means more responsibility, which will bring more value to our customers and the community we serve.

As a technology platform, in addition to applying the latest technologies to platform construction, we also recognize that as a centralized platform involving user assets, we have a significant responsibility. Therefore, we believe it is very important to establish appropriate internal control systems. We have been applying for licenses in many important and strategically significant jurisdictions, not only because it is important for our global operations and business, but also because we believe that the licensing process is an important part of building internal checks and balances.

In the past 12 months, we have obtained conditional approval and licensing from Dubai VARA and have received in-principle approval for a Major Payment Institution (MPI) license in Singapore. These are important milestones we are proud of, but they are not the end. This is recognition of our efforts so far, and we are very confident that we are moving in the right direction. More importantly, as an organization, we will strengthen governance, improve operations, collaborate with relevant departments and judicial institutions, and use technology and tools to jointly combat financial crime.

As a centralized platform, we will continue to adopt advanced technological means to ensure transparency with users, partners, regulators, and key stakeholders, and regard it as our important responsibility. One of our key global strategies is to ensure that we are transparent, responsible, and provide relevant permissions to our customers and stakeholders, thereby better serving and building in the local area. Hong Kong is a strategically significant location for us, and we are honored to be part of the Hong Kong Web3 ecosystem. We are also honored to work with many partners, stakeholders, and legislators to build the Hong Kong Web3 ecosystem. We will adhere to localization to integrate into and contribute to the Hong Kong Web3 ecosystem so that we can invest long-term and remain compliant.

As an important participant in the industry, we are pleased to be part of it, and we will continue to strive towards building a healthy and sustainable ecosystem in the Web3 industry to create value. We look forward to bringing more transparency, responsibility, and rights to users and the industry through technology, working together to build a better future. I am very optimistic about this. Thank you for your attention.

Disclaimer

This article represents the author's personal views and does not represent the views of OKX. This article does not intend to provide any advice, including but not limited to: (i) investment advice or investment recommendations; (ii) offers or solicitations to buy, sell, or hold digital assets; or (iii) financial, accounting, legal, or tax advice. Holding digital assets (including stablecoins and NFTs) involves high risks and may fluctuate significantly or even become worthless. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. For questions regarding your specific situation, please consult your legal/tax/investment professionals.