We recently celebrated Gate Labs’ first anniversary. To commemorate the special occasion, several guests joined us in a series of Twitter Spaces, the first of which saw us discussing the crypto market in 2021, and what’s to come in the decade ahead.
Gate.io’s Mariela Tanchez and Tom Rodriquez hosted guests such as Hatu Sheikh from DAO Maker, Wesley Pryor from Acheron Trading, Scott Keto from Coinlist and more. Below is a transcript of the first round of our discussion:
Q1: Let’s get started by introducing yourself and sharing your crypto story.
Wesley Pryor: I’m Wesley Pryor, CEO of AcheronTrading. We are a Singapore-based market maker. I started in crypto as a hobby miner in 2013 when I was still in university. I got interested in trading crypto in 2016 and put all my bitcoin on Indian exchanges. Being able to capitalize on this opportunity got me all in on crypto.
Colin Li: I am Colin Li from TRON DAO. I entered this industry by accident. I started trading crypto because I was poor and had to pay off my student debt.
Mariela Tanchez: I’m Gate.io’s investment manager. I got into crypto trying to pay for credits for online games. I bought my first bitcoin 9 years ago. I fell in love with the ideas of decentralization and global connection. I started working in the crypto industry 5 years ago and joined Gate.io a little over 1 year ago. We are supporting a lot of projects and growing in a lot of ecosystems.
Hatu Sheikh: I got into crypto straight out of college and set up DAO Maker early on as part of a consulting firm called Block72. We first expanded but then went semi bankrupt. After that, I met and joined my partner Chris. The industry lacked infrastructure and we provided a base-layer solution for a lot of layer 1 projects, such as Avalanche, Elrond, Harmony, etc.
Q2: As we all know, the crypto industry went through huge growth in the year 2021. What is your general opinion on the current status of the industry? What do you think has drastically changed in 2021 versus 2020? What was the most unexpected change we had in 2021? You are free to talk on both the good side and the bad side.
Colin Li: In the first half of last year, we saw BSC, Avalanche, and Polygon rising in this industry. In the second half, there was Solana and others meeting the unfilled demand from Ethereum. The biggest difference that I noticed emerging in 2021 is the booming of NFTs.
Wesley Pryor: I wouldn’t look at 2020 vs. 2021 if I think about the last market cycle to this market cycle. The use cases for crypto projects actually have substance in this cycle. The underlying technology has enabled people to build real products and coordinate via on-chain incentives and governance. COVID19 is actually what surprised me the most in 2021. It is the black swan that propelled the shift in demand for virtual experiences, ownership, and collaboration. I think the crypto industry as a whole will continue to be a sandbox for innovation.
Mariela Tanchez: In the last market cycle, we did see a lot of applications, emerging markets, countries, and a lot of people entering the markets, which opens space for innovation. I was very excited to see people actually trying new ideas and having the support of the ecosystem. There was a lot more support for smaller projects from individual investors in 2021, where we had a bull market, which is a very good market to develop projects in.
Karim Quazzani: In my opinion, 2020 was about DeFi. 2021 was about NFT. 2022 is going to be about real-life use cases that actually reflect the average user that is not blockchain savvy. That’s our focus in the past 3.5 years. We have been trying to connect or gamify the pet industry using blockchain technologies. What we came up with was the first ever to-be-created blockchain dog tag where IDs can be NFTs.
Q3: It’s good to always reflect on the past, but we now want to talk about the future of the industry. What will you be particularly focusing on in the next 10 years? Your answers can focus on a certain sector if you specialize in a particular one.
Wesley Pryor: I think in the next 10 years, the crypto industry is going mainstream. Crypto would become a part of everyday life and be accepted as the norm — payment saving, investment, remittances, corporate balance sheet holdings, DAOs, gaming, guilds, traditional investment portfolios, etc. This shift or convergence we will have is already happening right now. And it’ll be here before you know it. Also, I think we will see security improving, thus giving a lot more confidence to cross-chain bridges, which are really susceptible to vulnerabilities. The integrity of centralized and decentralized exchanges will improve, and as a result, margins will compress. The market will be a lot more efficient and competitive as time goes on.
Colin Li: Following the rise of web3, GameFi, metaverse, etc. crypto is going to play a role in the future of finance, investing, entertainment, gaming, and so on. We will have more and more P2E games like Axie Infinity. YouTube is the first use case of “talk to earn”. Ordinary activities participating in the economic sphere, getting incentivized and financialized, is a trend that I’m starting to notice. This is an area where subjectivity and objectivity are coupled.
Mariela Tanchez: There are 2 phases. And we are currently living in the first phase — the discovery phase, where we fight with scams, mistakes, and the lack of knowledge to make the technology better. In the next phase, new technologies will be more secure and will be adopted by traditional industries, such as gaming, finance, and entertainment, which will open up many new innovations in the markets.
Hatu Sheikh: Building an environment where people can actually interact with fellow traders in metaverse makes a lot of sense. It is the entertainment layer that can make the industry a bit more exciting for people. This concept already exists in many open-world games, such as RuneSpace and WoW, where people can meet up and feel more involved. I haven’t seen anyone explore that yet. We are accelerating a startup that’s looking into that. I’m pretty excited and I think that would be diving into a new direction in the metaverse that isn’t just focused on gaming and doesn’t involve just a sense of sight.
Karim Quazzani: In my humble opinion, the future is mass adoption of blockchain. As long as people benefit out of it, sooner or later, they’ll find out why they benefit out of it. This is the educational process. Blockchain is all about incentives. Gamifying the blockchain industry is the future.
Q4: Please pick one sector from “metaverse” and “web3”, and talk about the most recent hot topic in this sector. What impact does the new concept have on the industry and beyond? When you hear “metaverse” and “web3”, what can you tell us about them?
Colin Li: I think the essence of web3 is modularity and composability. In web2, everything is integrated, but not composable. With lots of plugins/modules being built in web3, we are able to build our own media in web3, which will be more community-oriented, with features such as an upvote system. We can create an infinite amount of social positions and subcultures so that everyone can have her/his voice heard. As for metaverse, my definition for metaverse is a fully on-chain game. Dark Forest is the first attempt to make a blockchain game fully on-chain. If we have multiple fully on-chain games, we can bridge them all together and create something like an “infinite machine”, which is capable of producing new games. What has come to my notice is that the whole world is creating imagination. Every successful new project is creating a new space. Similar to SpaceX going to Mars, we enter a digital space when we go in a metaverse.
Wesley Pryor: When I hear the word “metaverse”, I just think that all experiences are moving digital, such as concerts, dating, workplace interaction. COVID was the catalyst that accelerated this trend. Companies didn’t start putting bitcoin on their balance sheet until recently, even though it has been out for several years. When it comes to metaverse, some of the largest companies in the world are already dipping into the sector. And part of the reason for that is the use case is so tangible. Even for ourselves, we’re a fully remote company with offices in Singapore, Europe, and the US. We bought a virtual headquarters in Bloktopia, one of the leading metaverse projects. When I think of metaverse, I think it’s something that is happening very quickly and the world is ready for.
Hatu Sheikh: As for the metaverse concept, I think that the focus of metaverse at the moment is mainly going towards bringing experiences that make primarily sense in the physical space. For Indians, we experience this world through 5 different senses. Far too many experiences do involve the factor of scent, touch, and others, and not purely just the sight factor. Things like concerts that Decentraland and others are trying to propose do not make a lot of sense in my view, because ironically they are the easiest and lowest hanging fruits. Social trading has not done so well, either. It doesn’t involve any senses besides sight.
Mariela Tanchez: I think it’s important to also divide how we see web3 versus the metaverse. Web3 is mainly the people building it, while the metaverse is actually how users will experience it. Metaverse is not anything new but something that has already existed. We’ve always played games where we interact with other people. We just don’t have the physical 3D experience that we currently have. It’s very interesting to see how people are actually not only interacting but making a lot of money by trading NFTs, land, territories, etc in the metaverse. What came to play with COVID is that we can no longer interact physically with people, but we’re not going to let that stop us as global citizens.
In our virtual metaverse, we can all continue to interact without the limitations of actually having to be physically present, which I think is beautiful. We’re also seeing all different sorts of ways to build a metaverse. Before we could only raise funds via traditional stock markets, but now we have VCs and DAOs. That’s amazing how anyone can get involved in building this new world. It’s very important that we all understand the terms and agree on what is going on because people see it as a new thing and think it is not going to work when it’s actually been there for a while and is already working.
Q5: How are DAOs challenging VCs in the race to fund web3 projects? What do you believe is the future of DAOs?
Hatu Sheikh: I think it’s still way too early for most DAOs to be true DAOs because the legal structure isn’t there yet. We’ve already had a great 2022 in terms of legal frames being established in India, Ukraine, Russia, etc. DAOs shouldn’t necessarily be just investing vehicles. There are ecosystems that are completely run by DAOs. There’s a lot of success with DAOs already on maintaining on-chain treasuries for the purpose of deciding how it should be spent and how the funds should be governed.
Wesley Pryor: I think DAOs are not that interesting for a lot of the bank population. But if you look at the 1.7 billion that are unbanked, and you think about DAOs, it becomes a lot more interesting. Just like crypto is a permissionless and trustless way to send payments, DAOs are a permissionless and trustless way to run a company and coordinate on-chain. I think for that population, the use case for coordinating, offering services and getting paid for those services, and remitting those to the holders poses a massive global opportunity that is just now being tapped to because the tooling is finally available and battle-tested to some extent. There are several DAOs that have dove into the waters and have emerged with something to show for it. We’re only scratching the surface as to what’s going to develop in that sector.
Mariela Tanchez: I think DAOs will never overrun VCs. While DAOs are very good, as Wesley mentioned, for the unbanked and decentralization, there are still many malicious sectors that could ruin DAOs. So I think in that sense, for people who value safety and want to make sure that things are running smoothly with compliance and regulation, VCs will be their preferred option. VCs are always going to be a good provider of funds and innovation for the projects that don’t have much experience or just simply don’t have the time to allocate to develop in the DAO’s structure, which requires a lot of effort and time. VCs like Gate Labs will always be open and continue to support new projects. VCs can actually invest in DAOs in the early stages to help them grow so that then those DAOs will become decentralized and autonomous, which is amazing. While some people might think that DAOs are going to overrun VCs, I disagree and I think in the future we will see collaboration and integration between both the centralized VC model and the DAO model to raise funds.
Karim Quazzani: DAOs is the future. Sooner or later, the world will realize that we don’t need middlemen. In the future, DAOs and VCs will interact for sure. VCs have no choice but to jump into our ecosystem. They are being very quiet and shy about it. They just don’t know how to come out of the “blockchain closet”. But the majority of people I know from that space are all in. The regulatory framework is not helping as much, but hopefully, this space gets regulated in the US. Then people like us would have a bigger opportunity.
Q6: I believe all of you have somehow been involved with project investments, incubations or collaborations, right? Can you share with the rest of us how you evaluate the potential of a project? What advice do you have for young projects and developers in the crypto industry?
Colin: The crypto market is inherently unpredictable. There are always new things coming out. When I try to determine if a project is worth investing in, I would first look at how many neologisms this project invents and second the quality of their neologism. I think if you are doing a crypto project, it’s very important to invent new concepts. It might sound counter-intuitive, but in this industry, we must invent maps before we can have territories.
Hatu Sheikh: It depends on what time scope I’m considering for that investment.
For a short one-year horizon, some of the best investments turn out to be those where you do not really finance anything innovative, but they’re just aligned with whatever that is the flavor of the season. However, in terms of long-term focus, I’ve really tried to see what kind of monetization functions the products can generate. In most cases, it ends up being either some sort of DeFi exchange. If not that, then it’s something that involves interoperability, or something I can plug into some sort of institutional play where we can help them expand their business.
Wesley Pryor: We get a tremendous amount of deal flow for market-making relationships and investment relationships. We have distilled the decision-making down to a process where we look at the community strength, the quality of the token economics, team competency, team ethics, the exchange partners that they’re working with, the use case of the digital asset and then the market narrative. We take each project that we’re considering working with through that process, which generates a ranking. We only proceed with the highest-rank projects. This is how we filter out the right opportunities to collaborate because in crypto, your attention is commanded in so many different directions and you need a process to filter down where you are going to spend your time.
Karim Quazzani: In my opinion, anybody that is going green in our industry. I’m all in. It’s also very important for the candidate project to provide a solution, have enough security and proof of stake.
Mariela Tanchez: Here at Gate Labs, the first thing we look at is innovation. Second, we look at the team and see if the team is capable, where the team comes from, the engagement of the team with the project and the experience of the team. We’re also going to see how far along they are invested in. Have they already created some specific alliances? Have they already started their marketing? Have they already created a community? Is there a market for their products? Obviously, we also cooperate with other big VCs to make sure that we’re all supporting good projects. We do very thorough research on the people behind the project and evaluate the chances of success of this project. The idea, the plan that they have come up and how they have structured all the planning, including their finances, are also factors within our consideration. This is our general selection process.
Tom Rodriguez [adds to Mariela Tanchez]: Obviously, the more we can verify the information given by a project, the more it helps us make a certain selection. Just to add one more thing, we also look at the project’s tokenomics. It’s very important to us. Just like an old saying in the stock world that goes “A good company doesn’t necessarily make a good stock”, I believe it’s also the case here in our industry that a good project doesn’t necessarily make a good token.