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

Interview: Marco Manoppo

Translation: DeepTech TechFlow

Guest Introduction:

Edward Tan conducts research and investment at Hashed, the largest cryptocurrency investment firm 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 also held a fund management position at LOGOS, a rapidly expanding logistics company with operations in 10 Asia-Pacific countries. Ultimately, Edward entered the cryptocurrency field in 2021.

Key Points:

Edward's growing interest in cryptocurrency was 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 the former having a stronger retail presence than the latter;
It is necessary to strike a balance between equity and tokens to ensure that both serve broader business objectives and provide clear pathways for investor returns;
Different perspective: Cryptogaming will not bring the next billion users.

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

In this field, a strong trade could generate a 15% internal rate of return (IRR), reflecting a balance of low risk and moderate returns.

However, at the end of 2020, Edward's situation changed dramatically when he took notice of the high annual percentage yield (APY) of cryptocurrencies. This contrasted sharply with the familiar low-risk real estate and high-risk stock domains. Cryptocurrencies introduced a completely different risk-return spectrum, offering not only higher returns but also exponential growth potential, promising returns far exceeding traditional investments.

As Edward prepared to embrace greater risks, the asymmetric potential of cryptocurrencies became increasingly appealing. This inclination towards cryptocurrencies was further influenced by a discussion with a classmate, an outstanding finance graduate working at J.P. Morgan at the time and considering a switch to cryptocurrency funds. Their conversation transitioned from traditional equity and investment analysis to encompass topics such as decentralized finance (DeFi) and liquidity mining.

The latter half of 2020, known as DeFi Summer, was a pivotal period. With the emergence of new DeFi protocols like Uniswap, Curve, and SushiSwap, the cryptocurrency community was buzzing, with each protocol offering substantial liquidity incentives. Despite being a nascent and evolving field, the allure of triple-digit APYs remained strong.

A decisive moment: Edward's growing interest in cryptocurrency was decisively influenced by the capital efficiency of DeFi. This involves rapidly using digital assets like Bitcoin and Ethereum as collateral without needing to sell them, an innovative approach to capital utilization that was revolutionary for Edward, further drawing him into the "rabbit hole."

What is Hashed?

Since its founding 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 in ETH with their own capital.

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

By 2018 and 2019, Hashed began investing in early protocols like Sky Mavis, becoming seed round investors and participating in projects such as Axie Infinity and Ronin Chain, acquiring equity and tokens. Their portfolio continued to expand, including well-known projects like Sandbox, Mythical Games, and dYdX.

Initially headquartered in South Korea, Hashed later recognized the importance of establishing connections with Western markets, leading to the establishment of teams in San Francisco and Los Angeles in 2019.

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

Originally a team of only 30, Hashed has grown into a strong team of 250 professionals, divided into five main business departments:

Investment Department: This department operates teams in the US, Seoul, and other global locations, running three entities: a proprietary capital tool for token trading, an LP fund for equity trading initially with $100 million rapidly deployed and a $200 million fund raised in 2021 targeting entertainment, NFT, and metaverse, currently 70% deployed.
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 need for support in capital and scale, leading to the establishment of Hashed Emergent with partners deeply connected to the region.
Factomind: This is Hashed's asset management subsidiary, providing services from consulting to data visualization and liquidity provision. This is in response to actively managing the important asset base of Hashed, led by a team of former quantitative finance traders and engineers.
UNOPND Incubation Studio: As the largest part of Hashed, UNOPND is currently incubating three projects in the NFT, metaverse, and K-pop fields. 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.
Hashed Open Research: A unit dedicated to policy and framework research. This department serves as a liaison between the public sector and the private sector, including venture capitalists and investors, aiming to align government initiatives with private initiatives in the cryptocurrency space.

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

In the East Asian retail market, exemplified by South Korea, the country exhibits a strong retail market for individual traders, as evidenced by the substantial trading volume on centralized spot exchanges like Upbit and Bithumb.

The Korean market is very robust, and the listing of any new cryptocurrency can lead to significant price increases, reflecting strong demand from individual traders for cryptocurrency trading and ownership, supported by a large and active community.

In contrast, Southeast Asia presents a different picture.

For example, in Singapore, the participation rate of individual traders is significantly lower, and cryptocurrency is treated as a casual topic, not as common in social settings as in South 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 South Korea.

In terms of 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, institutions in Southeast Asia prefer to invest through funds, possibly due to limited capacity for direct involvement in the industry.

However, there are notable initiatives in Thailand, 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, FPT Group, an important technology conglomerate in Vietnam, has launched Aura Network, a blockchain aimed at adoption in emerging markets.

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

With the emergence of new stablecoin projects like Ethena Labs and Mountain Protocol, what are your thoughts on the new stablecoin models?

Edward pointed out that while these concepts may not be novel, their success depends on the completeness of the infrastructure and the underlying principles behind their creation.

He examined Ethena's Delta-neutral stablecoin model, where users provide ETH, and the protocol shorts on centralized exchanges (CEX) to maintain Delta neutrality. The strategy issues receipt tokens to users' ETH while aiming to provide a stablecoin that reduces risk and generates returns.

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

Edward highlighted inherent risks, including smart contract vulnerabilities related to ETH collateralization, and timing differences between receiving and shorting ETH. He mentioned innovative solutions to reduce centralized exchange risk using mirrored models with custodial wallets like Fireblocks and managing short-term funding rates.

Additionally, he discussed Mountain Protocol's on-chain treasury bond tokenization and redistribution of earnings to holders, acknowledging that this is not a unique concept but emphasizing the expansion potential when integrated into the DeFi ecosystem.

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

What are your thoughts on the next cycle of value accumulation? What problems do we need to address?

Edward emphasized the importance of a clear investment strategy from the perspective of equity and tokens, highlighting the need for alignment between investors and projects on long-term goals such as growth, scale, and community development to achieve successful exits, whether through token issuance or IPO.

Edward stated that in the investment stage, identifying the primary sources of value addition is crucial, whether through traditional equity models or through tokens incentivizing and tracking user engagement.

Using a project focused on creating non-custodial debit cards and other on-chain payment solutions as an example, Edward illustrated that not every blockchain company needs tokens to facilitate user transactions.

For example, a project focused on creating non-custodial debit cards and other on-chain payment solutions may not need tokens. Instead, the project should evaluate how equity can add value, 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.

When discussing the next cycle of value accumulation, Edward believes it is necessary to achieve a balance between equity and token models, ensuring that each model serves its purpose, aligns with broader business objectives, and provides a clear path for investor returns.

Addressing this balance requires thoughtful integration of equity and tokens, recognizing when both are necessary and how they complement each other in ecosystem growth and value distribution.

Rapid Q&A

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

Finematics and Economic Design newsletters on YouTube.

2. What was your biggest investment mistake?

Lack of risk management ability to adjust biases when necessary.

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

Payments or privacy.

4. What is the most contrary view you hold on cryptocurrencies right now?

Gaming won't bring the next billion users.

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

Regulatory risk.

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Dialogue with Hashed investor: Unveiling Hashed's departmental structure, gaming will not bring the next billion users