It has been over two years since I final noticed Sharlyn Wu, Huobi’s new Chief Investment Officer, throughout a bustling, pre-pandemic crypto convention in New York and in a while in Hong Kong. Wu, a quite low-key individual, has been recognized in China’s crypto scene because the brains behind China Merchant Bank International (CMBI)’s funding in Nervos, China’s home-grown, public blockchain, manner earlier than Nervos grew to become an internationally acknowledged public blockchain. Prior to that, she spent a decade at UBS.
For this week’s da bing, I sat down (just about after all) with Wu, to study her new function as Huobi Group’s DeFi-skipper.
Huobi, which launched in China in 2013 and have become an unlimited Bitcoin alternate, left in 2017 after the federal government banned crypto buying and selling. The Huobi Group, now based mostly in Singapore, operates one of many largest centralized alternate platforms on the earth, Huobi Global and has places of work all through Asia. Wu’s DeFi lab sits below the group.
So what prompted her to hitch Huobi after an illustrious profession on Wall Street? And how is she planning to steer the corporate by the roiling waters of DeFi?
DeFi 2.0 = CoFi ( Computable Finance)
“Finance is all about pricing risk, and risk management,” Wu informed me. One danger that Wu thinks is important however has not but been sufficiently tackled is worth oracles. “Price oracles are at the bottom of every transaction. If the price is not solid or not verified, no large transaction will ever happen in DeFi,” she stated.
This is exactly why Wu and Huobi’s DeFi lab’s first flagship deal is CoFiX, a decentralized alternate that sources its information from NEST, a decentralized oracle protocol constructed on Ethereum. (The identify is a mashup of “computed finance” and alternate.)
Unlike its competitor Chainlink, which offers worth reference factors from plenty of trusted nodes reminiscent of Coinmarketcap, NEST sources worth oracles by market validators. Similar to how miners validate every block, market validators quote and validate worth information in a decentralized style in actual time.
“It’s certainty that we are chasing,” Wu informed me. “If I were to trade billions of dollars on Ethereum, which is trustless and secure, why would I rely on a price oracle from a centralized entity with potential human intervention? What’s the point of decentralization in that case?”
To Wu, if DeFi desires to leapfrog from being a kind of on line casino, to being trusted on Wall Street, it must remove any uncertainty that could possibly be launched from centralization or human design errors. CoFi is a step towards a monetary system the place each monetary parameter might be certified and computed—to the acute.
And for these initiatives that don’t have any fundamentals however experience the rollercoaster anyway, Wu thinks they are going to quickly be uncovered, as we describe these initiatives as “滥竽充数.” (This is a reasonably difficult factor to translate because it actually makes use of four characters to inform a narrative. But the literal translation is “bad musicians among the good ones.” The analogy right here signifies that throughout the DeFi bubble, the unhealthy initiatives can disguise among the many good ones.)
DeFi’s Sweet Spot
A self-proclaimed nerd, Wu couldn’t disguise her pleasure over how DeFi will overhaul the fashionable monetary system. When she determined to depart CMBI and be part of Huobi, the plan was to seek out 10 DeFi protocols that may survive, as soon as the mud—or let’s assume bubble—settles.
“We are looking for a liquidity backbone for the next generation financial system,” Wu stated. “This new financial system will have users onramp through CeFi and then served by DeFi protocols. We can call it CeDeFi.”
CeDeFi is a type of phrases coined by centralized exchanges, however every alternate has a distinct definition of it. For occasion, Binance’s CeDeFi includes the alternate actively choosing, vetting, and occasionally shilling chosen initiatives, all on Binance’s newly-launched Binance Smart Chain.
Huobi doesn’t shrink back from shilling its personal DeFi investments. After all, that’s how initiatives get heard these days. But the important thing distinction is that Huobi acts extra like a treasure hunter, which means that it hunts good DeFi initiatives to put money into, but it surely doesn’t create new DeFi initiatives in-house, the way in which Binance does.
“It’s very clear to us that Huobi’s value add is to get users into the crypto gate and help them harvest the best DeFi yields on the chain,” Wu stated. The key right here is that customers don’t even have to know that their yields come from DeFi, which makes DeFi the yield infrastructure that faces no shoppers straight.
One huge query that continues to be, although, is the progress of Huobi Chain. Announced in November 2019, Huobi Chain is designed to be a high-performance public blockchain that can be “a regulator-friendly financial blockchain.” Now that just about a yr has handed, Huobi Chain stays largely dormant. Wu declined to touch upon it and stated solely that they are going to announce one thing new quickly.
This clear demarcation between what CeFi can do and what DeFi can do is the inspiration of Wu’s thesis. In her medium article in addition to in our dialog, she emphasised that, each CeFi and DeFi have their very own deserves. CeFi has the infrastructure for high-frequency transactions that require a trusted entity; DeFi is ideal for low-frequency transactions that carry no credit score danger and is basically trustless.
For Wu, every challenge wants to seek out its candy spot.
Perhaps that’s why Huobi’s DeFi focus has been on offering cross-chain property to Ethereum, reminiscent of its HBTC.
Huobi’s scorching DeFi Plan (huo = 火 = 🔥)
Another main facet that Wu spearheads at Huobi’s DeFi lab is to construct and lead DeFi communities. In August, Huobi launched a DeFi Consortium with business titans reminiscent of MakerDao, Compound and dYdX. But what does a consortium actually imply?
“Pre-DeFi, centralized exchanges such as Huobi worked in silos. We were here to provide liquidity as a CEX. Now, with DeFi, it’s not just Huobi ourselves any more. We work with the entire ecosystem,” Wu stated.
The phrase “ecosystem” is maybe essentially the most generally used time period within the crypto world. It’s true that consensus is constructed on an ecosystem, and it’s the final word defensibility of any product (consider Ethereum and Bitcoin).
But Huobi mainly has no ecosystem and has to work from floor zero. “CEX has always been disconnected from communities. But now, we want to build real financial products that benefit all,” Wu stated.
It’s most likely just a little disingenuous to say that Huobi has no communities. On the opposite, similar to the opposite centralized exchanges, Huobi has entry to numerous retail buyers. What it lacks is just not folks however a fame as a pro-DeFi place. By gathering the DeFi OGs in its DeFi Consortium and investing in upcoming initiatives, Huobi doesn’t disguise its ambition.
It’s an enormous leap for Wu to maneuver from the protection and traditional finance world of CMBI to Huobi. The former is one in all China’s largest banks, whereas the latter is an up and coming Fintech agency working in a grey space. But Wu’s optimism about Huobi is overflowing.
“I believe Huobi will become a super enterprise,” she stated. “Let’s imagine: If the Internet can be thought of as continental Europe, and the blockchain world is America, Huobi wants to be the boat that transports people from Europe to America. And even better, once they are transported, we will provide travel guidance and services so they have a good time.”
But there may be hazard in being a ferry. Storms are in all places and oftentimes come surprising, as with the recent arrests and prosecution of BitMex show. And even when an ocean crossing succeeds, those that arrive within the new land is perhaps dissatisfied as effectively (think about the latest burst of the most recent DeFi bubble.)
For now, Wu’s precedence is to determine the entrepreneurs who may help her climate the storm and present customers how nice the brand new land is. This journey is just not solely lengthy and onerous, but additionally stuffed with opponents and predators. Only with a star workforce and robust ecosystem can Wu and Huobi be the ferry it aspires to be.