AI and machine learning are very suitable for monitoring, so it makes sense to use them in preventive threat monitoring or network analysis.

Exclusive Interview: 1912212.eth, Foresight News

After experiencing a series of thunderstorms in the last cycle, some users have realized that many so-called asset management companies or protocols are not truly responsible for the security of users' funds. Some misappropriated funds and violated lending regulations, leading to thunderstorms, while others suffered heavy losses from hacker attacks. The funds entrusted by users turned into nothing in the blink of an eye, resulting in heavy losses.

There are not many truly reliable and uniquely advantageous Web3 asset management platforms. How to escort users' funds and maximize the search for returns for funds is an unchanging theme. Recently, the encrypted asset management platform Fyde accepted an exclusive interview with Foresight News to discuss their views on industry trends, AI, and more.

Currently, most so-called AI empowerment is just a marketing gimmick, but Fyde extensively uses AI for risk management and liquidity optimization, helping users to earn better returns and achieve compounding faster. In addition, with a strong team background, Fyde plans to focus on consumer narrative tokens, re-staking, and other areas. The full interview is as follows.

From Crypto Hedge Funds to AI Asset Management

Foresight News: Some readers may not know what Fyde does. Could you briefly introduce it?

Cryptocurrency users, including myself, find it really difficult to keep track of the positions of tokens in different investment portfolios. They cannot track which tokens are performing well, which tokens are not, and forget to sell profitable positions in real time and reduce losing positions. Many times, users do not have time to react, or even have time to claim airdrops. Their biggest problem is, "Which rising category or token narrative should I buy or sell first?"

Fyde's liquidity treasury solves this problem for users. We are an on-chain AI-driven investment portfolio rebalancer and liquidity optimizer. Users can deposit one of many different types of tokens, and our liquidity treasury will automatically allocate them to various tokens and narratives that they can see on our dapp.

By allocating them to different ranges, this increases the opportunity to not miss out on token surges. Profit gains are locked in, and losses are minimized. AI and machine learning can identify risks before they occur to protect users' funds from the impact of volatility or isolated and drastic price actions. The treasury tracks and manages all risks, so users don't have to worry. The goal of the liquidity treasury is to help users continuously lock in returns, earn profits, and maintain liquidity. This way, users can accumulate cryptocurrency holdings faster, with less volatility.

Foresight News: As far as I know, the Fyde team lineup is quite luxurious, with former members from NASA, Morgan, Wintermute, and Synthetix, so why did you choose to do asset business, and do you have any stories to share?

Interestingly, we initially planned to be a cryptocurrency hedge fund. Starting with four founding members, we all have experience in large asset management companies, private equity firms, and a deep background in quantitative research. This made sense, but as we built, we noticed that some people who wanted to use our services were actually DAOs, protocols, and many native cryptocurrency residents.

Their positions were very concentrated, or they simply had a large amount of assets on-chain, and they wanted different types of risk exposure and to capture continuously rising cryptocurrency narratives, but they needed someone to do this for them. We realized that if these people were willing to transfer their assets off-chain, into illiquid cryptocurrency hedge funds, then there certainly weren't many good on-chain solutions for them.

At the same time, we also launched the LBS Blockchain Association and LBS DAO, and were looking for ways to manage our assets. We found it difficult to find something that truly met our needs, so we decided to abandon the idea of a hedge fund and build a good on-chain investment portfolio and liquidity management solution. It helps lock in returns and uses AI for risk management.

The Spark of AI and Crypto Collision

Foresight News: AI is very popular, and it is reshaping various industries. How do you view the combination of AI and Crypto?

We believe that there are very few practical use cases for AI in the crypto field today. Some of the really interesting things are more about reducing risks (which is also how we use it), but many AI products do not really add a lot of value, or they claim to be AI, but are actually just simple data analysis.

AI and machine learning are very suitable for monitoring, so it makes sense to use them in preventive threat monitoring or network analysis. These are the best points we currently see.

Foresight News: Specifically, how does AI play a role in Fyde's asset allocation, risk control, and market forecasting?

We use AI in two aspects: risk management and liquidity optimization. In terms of risk management, the goal is to run machine learning on the network analysis we conduct. Machine learning is very suitable for identifying patterns that humans cannot monitor, so we can use it to actually look at the relationship between network transactions and token prices, and use it to quantify risks. For example, if we see rapid consolidation of token wallets, or if we see a large amount of wash trading between wallets, these are signs of problems, and we should be more cautious.

An example: in terms of risk management, we also added Hypernative, which uses machine learning for preventive threat monitoring. They monitor on-chain transactions to proactively identify liquidity pool risks, governance attacks, hacker attacks, etc. We run them for the tokens in the treasury and isolate marked tokens, undoubtedly adding another layer of risk prevention and security for assets that most people cannot access on their own.

We incorporate these tools into the treasury as safeguards against manipulation, hacker attacks, and other behaviors, providing a layer of protection for user assets.

Finally, we are researching AI to optimize liquidity. Creating advanced simulation environments is to test and optimize our own token's liquidity under different market conditions - this allows us to increase DEX liquidity for every dollar and make real-time dynamic adjustments using machine learning outputs.

Foresight News: How is Fyde's AI model trained and optimized?

We use AI in several different ways. In terms of network analysis, we use a subset of AI called graph machine learning. Here, we develop a network graph that contains many different on-chain parameters. These parameters are then used to predict information about wallets (e.g., whether they are tied to market makers) and transaction information (e.g., predicting the flow into Uniswap V3). This can help us identify centralized risks, wash trading patterns, and more.

To ensure that our tokens have super liquidity, we run a simulation modeling called agent-based modeling to determine how to build DEX liquidity. These agents mimic the trading behavior of DeFi participants, modeling optimal arbitrage amounts, certain trader behaviors, and more.

We input all of these into our simulation engine, which uses methods such as Monte Carlo analysis to not only identify network patterns that the human eye cannot see, but also to find the best way to provide on-chain liquidity.

What are the Advantages of Asset Management?

Foresight News: What are the unique aspects of Web3 asset management compared to traditional asset management?

Web3 asset management definitely has more styles than traditional asset management. Of course, in Web3, you have classic buy-and-hold strategies, you can perform yield farming, Delta neutral strategies, and the volatility is much higher than traditional asset management.

Although there is overlap, there is also a lot of room for innovation. On the one hand, it relies on market rebalancing or executing trades. In traditional asset management companies, there are execution traders. In the portfolio management of banks, there may be 50 such people. Their job is to trade and get the best pricing execution, and they may average a $200,000 annual salary, which is a $10 million cost annually. In contrast, what we do is incentivize the ecosystem to do this for us.

Now, everyone in the cryptocurrency field is a potential execution trader, not just 50 people. We will provide common market incentives, meaning the cost will be much lower, not $10 million. This is one of the coolest things about Web3 and the power of task democratization.

Foresight News: In the competitive Web3 asset management market, what are Fyde's competitive advantages?

When people focus on DeFi, most people usually focus on generating returns. But unfortunately, if the assets you invest in drop by 95% in a bear market, a 20% return rate is not important. The goal of our protocol is to help cryptocurrency users continuously lock in returns while preventing Rug, hacker attacks, etc., so that their portfolios will continue to grow over time, and the negative impact will not be so bad. This way, they can compound and accumulate intergenerational wealth faster.

We use AI and machine learning to better manage users' risks, helping them avoid manipulation, severe negative price behavior, and more. Of course, we use whitelists to ensure that only pre-vetted assets can enter the treasury. Our whitelist filters are designed to filter out scams and pump-and-dump projects.

Additionally, users can access the platform using any whitelisted token. Most projects now only accept ETH, wBTC, or stablecoins, but through us, users can deposit any token on the whitelist, allowing more people who want to grow and protect their cryptocurrency portfolios to use this method.

Trends and Challenges

Foresight News: What are the noteworthy technologies or trends in the Web3 asset management industry?

L2 and how to effectively use them will be an important part of the future development of the Web3 asset management industry. To effectively run portfolios and manage risks, a large number of transactions are needed. Unfortunately, this is too expensive on the ETH mainnet. However, much of this work can be done on L2.

For example, we run a large number of machine learning and AI models, each of which requires thousands of iterations to run. Imagine doing this on the mainnet, with a gas fee of $20 for each transaction. We would never be able to do what we need to do. But on L2, we can pay $0.02 for each transaction, reducing our costs by 99.9%.

Foresight News: What industry challenges has Fyde encountered in its development process? How are they being addressed?

The biggest industry challenge we face is regulation. Of course, the transparency of cryptocurrency regulation is currently very low, especially in DeFi. But we believe that you should not stop building because of concerns about what regulation might become. That being said, we have taken all necessary measures to ensure that the platform complies with today's regulatory system.

We have completed all legal affairs, obtained legal opinions, and set up our company structure correctly, and more. With this, we are ready to continue building to ensure that both we and our users are protected. As regulation continues to evolve, we are actively engaging with lawyers to ensure that we are aware of the latest developments.

Foresight News: What development roadmap does Fyde have for the future that can be shared?

Of course, we plan to do a lot of cool things on L2. Our current liquidity treasury focuses on risk protection, but in the future, we hope to do more in consumer narrative tokens, re-staking, and other types of treasuries that users are interested in. We are very keen to build a treasury for MEME tokens, where users can buy without worrying about rugs. We will use AI to try to identify the best MEME tokens for users to purchase. We also plan to use MEV to increase the returns we currently provide for the liquidity treasury.

Next year, our goal is to make our tokens as liquid as possible, which will further incentivize users to use our products and help us penetrate the B2B space more deeply.

Foresight News: What good advice do you have for investors or users who want to get involved in Web3 asset management?

For users, my advice is to look at who the core team is before using Web3 asset management products. Many people developing products have never worked in asset management companies, or do not understand risk management at all. These are not the people worth investing money and time in - which is also why there have been so many thunderstorms in the cryptocurrency field. Use products with a sound team and meaningful products.

For builders, what I want to say is to truly understand the trends in the market. It's easy for people to get caught up in all the cool technology and various new things, but ultimately, the construction of technology needs to have a purpose.

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