Crypto Assets Veterans' Perspective on 2022: Market Cycles, FTX Incident, and Industry Innovations

Recently, a co-founder and CEO of a certain crypto assets wallet company accepted an exclusive interview. As a "veteran" who has experienced multiple rounds of crypto assets cycles, he shared his views and thoughts on various topics including the current market, the impact of major events, and industry innovations.

Characteristics of the Current Bear Market Cycle

The bear market of 2022 is not as desperate compared to previous years. After more than a decade of development, the industry has accumulated a wealth of experience and has a clearer understanding of the boundaries of blockchain technology's capabilities. Although some black swan events occurred this year, the confidence and direction for the industry's future are more evident than in previous years.

Currently, the expansion solutions surrounding modular blockchain and Layer 2 networks are starting to take shape. Although it will take another two to three years for final implementation, we can already see the light. Compared to previous cycles, this round of the market has not caused too many people to lose their determination.

Reflection on the FTX Incident

The founder of FTX is a person who pursues capital efficiency to an extreme degree. As the business developed, his risk appetite gradually increased, ultimately leading to extreme situations. This reflects the inadequacies of the infrastructure and regulation in the crypto industry, which caused centralized exchanges to bear too much responsibility.

Historically, similar events have occurred repeatedly, fundamentally relating to human nature issues. In the future, technology may be used to prevent such incidents, allowing users to truly control their assets. However, the industry's current development stage is still immature, and many people still store their assets on exchanges for convenience.

The Innovation Space of DeFi

DeFi has replicated over 200 years of development in traditional finance in a short period of time, and has now formed several core modules such as stablecoins, DEX, lending, and derivatives. Among them, the stablecoin and derivatives sectors are still in the early stages and have significant room for innovation. DEX and lending, on the other hand, are relatively mature.

The core modules of DeFi in the future may become standard protocols on the chain for other applications to call directly. There is still room for innovation in more cutting-edge applications and risk management. Overall, the underlying financial framework of DeFi has matured, but there is still significant potential for development in terms of composability.

The Future of Centralized Exchanges

The FTX incident may mark the twilight of centralized exchanges. It has made many institutional users aware of the issues in the industry, prompting a significant amount of assets to be transferred from exchanges to on-chain wallets. Currently, decentralized exchanges can already take on most of the functions of centralized exchanges, and they are more transparent and secure.

In the future, a new model combining decentralization and centralization may emerge to mitigate risks. Some long-tail demands may be resolved more efficiently in a decentralized environment.

Development Trends of the Mining Industry

The mining industry has undergone a development process from home miners to industrialization and centralization. Currently, most of the computing power is concentrated in large mining farms in regions such as North America. However, in the future, it may move towards decentralization again, with more small mining farms connecting to the grid and playing multiple roles such as regulating the grid and providing heating.

As the iteration of chips slows down and the lifecycle of mining machines extends, there may be a resurgence of home mining in the future. Miners can not only earn mining profits but may also gain additional income by participating in grid regulation.

The Secret to Maintaining Curiosity in the Industry

The Crypto Assets industry develops in a spiral manner, often presenting similar or repetitive innovations. It is important to maintain curiosity, continue observing, and think deeply. Each bear market provides numerous trial-and-error opportunities to accumulate experience for the next bull market.

The iteration speed of this industry is fast, and innovation is constant, forcing practitioners to continuously learn and grow. Experiencing these changes firsthand is more interesting than reading history and resonates more easily. It is precisely this joy of continuous learning and thinking that makes it hard for people to leave this vibrant industry.