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Pantera Capital talks Amber Group: Filling the user gap in the crypto world

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Paul from Pantera and Wu from Amber kick off an in-depth conversation between two top crypto investing firms. Wu noted that cryptocurrencies as an asset class are highly financialized, and all Web3 applications naturally contain this financial element.

Source: Pantera Capital

原文编译： 7upDAO

"Cryptocurrencies as an asset class are highly financialized. All Web3 applications naturally contain this financial element. But most users are not financial users, so there is this gap. If we don't fill that gap, then crypto is going to be a very niche, narrow, highly financialized thing where all the utilities are going to be around financial applications. We recognize that need."

- & have spent Michael Wu, Amber Group

The development of Amber

Paul: I first got to know you about five years ago, when you were just starting your business, and now you've got $3 billion in investment. Can you share your journey over the past five years?

Wu:It's been almost six years since 2017, and it's been an absolutely amazing journey. Looking back, I think there are many kinds of interesting facts.

We started Amber Group very late. 2017 was a boom year. We all remember the ICO boom, and I thought there was a big gap between institutional allocation and retail allocation in the crypto market. Most retail participation in the crypto market is, well, more of a fast game.

We started the company's first differentiated service by filling the gap in the crypto market for financial services. When we started, because of our background, we had a lot of clients in the hedge fund space. Traditional hedge funds, VCS, family groups, they're looking at this space, they kind of want to invest, but they feel a little uncomfortable. They felt they didn't feel safe trading on exchanges, and they needed more than one exchange, and that's how fragmented the crypto market was at the time. I think that's where we start, connecting all the exchanges, aggregating all their products, and then gradually adding more and more services to manage their portfolios. Then we move into DeFi, into NFTS, into the realm of all the exciting crypto natives. That's why Amber has developed so quickly.

The fact is that the application layer of the encryption space is growing so fast, but the service layer is getting worse. Retail investors may be happy with a five-minute candlestick chart and 100x leverage, but professional investors need more professional services, and that's what Amber Group is doing.

To provide services for retail investors

Paul: You're like the super app of Asia. You started with an institutional focus, but now you're moving to retailers. Can you tell me why and what your plans are?

Wu:You asked a very important question. When defining the Web3 industry in terms of crypto or broadly, I think crypto is a course about assets, which naturally gives it a financial element. But for most users today, most of the products are not financial products, and most of the companies that provide these services to users are not financial companies. So if we don't do this, this gap will always be there. And that gap will keep encryption a very niche, narrow thing. We recognize this need because we want to accurately provide comprehensive crypto investment services to more institutions and people.

我们继续讨论加密货币，Web3 的采用或下一波浪潮，我认为很多应用程序会发生在非金融领域。用户会被吸引到加密货币非金融交易的领域。但同时你知道，因为它是加密的，有一个用户必须处理的 Token 元资产，他们需要处理 Token 的价格，需要关注 Token 的流动性。这就是我们的设想，我们希望能够提供所有这些服务。

回到你的观点，关于超级应用程序，我们当时觉得需要一个普通消费者能够访问他们的 Token 并能够使用他们的 Token 做任何事情的地方。他们无需财力雄厚，但也可以管理自己的投资组合。我们希望将我们的平台打包成自动投资工具，自动投资计划，这将会推动当前的加密市场超越到更广泛的范围。

Private Wealth Management

Paul: Maybe there's an opportunity for you in private wealth management?

Wu:Yes, as all of you have noticed, there is one country where a lot of wealth is pouring in - Singapore. Macro uncertainty is increasing, so people want to find simple ways to protect assets with room for appreciation, such as crypto and other digital assets. At the same time you know that these people don't have trading needs, they can't be satisfied by a simple trading account. They need more sophisticated coaching tools and a wider range of products. That's all Amber had to do, so we moved to Singapore and we wanted to continue to be trusted.

Security issues

Paul: A few months ago, companies like 3AC and Celius were doing the same thing, but they went bankrupt because of some bad practices. So how do you keep it safe?

Wu: The industry is still young, so it's too early to talk about it from a regulatory perspective. In terms of regulatory transparency, from an external or customer perspective, it's hard to tell the difference between the examples you give here. Three Arrow Capital was a trading platform until the last day, and some clients, unaware of this, became their creditors. Whereas Celius is essentially a back-to-back lender, they collect deposits or savings from customers and then land them in encrypted form at the other end, and they both cause a lot of problems.

Amber will deal with it in different types of ways. We focus on providing a variety of different services and products to meet the needs of our customers. If you look at our platform, you'll see more of the variety of products we offer, and you'll know when we offer them to customers, depending on what they actually want to do. Internally, we also have risk management mechanisms. We have been market neutral compared to all of our cryptocurrency peers. Since my first day, we've positioned ourselves as a neutral service provider. The massive growth of assets is itself a right of the individual.

Secondly, we never do credit. In the crypto market prior to the second quarter, bad things happened to these credit-type companies. If you want to run a credit service in a crypto market, it's hard, because not only do you have to get the borrower to trust you, you have to investigate the customer's credit. Even at the peak of a bull market, where there is a lot of demand, we never want to evaluate or take on counterparty risk.

Finally, we've always automated almost all of our business, especially in terms of risk, like technology. Human discretion is dangerous. We come from a traditional financial background and know how dangerous human judgment can be, especially in extreme market conditions. Therefore, we want to leave my risk. Management, from rules to discipline, we have algorithms, we have technology, to protect these risk metrics, rather than relying on human judgment.

I think Amber Group has been able to survive in this volatile industry because of three things.

Non-financial Services

Paul: You'll be launching non-financial services later. Can you tell us a little bit about that?

Wu:Yes, we will. The first thing I want to say is that you can't completely separate out the financial value of cryptocurrencies, which is a very important part.

But at the same time you know that things like NFTS are right. We have already seen the utility of NFTS. Many gaming companies, social companies and even consumer brands are beginning to experiment with NFTS as part of their customer acquisition strategy or growth strategy, or even as part of their core product. We think that's what we believe is basically the right direction. I want to get our product platform to the right service layer, where if you already have an NFT, you can deposit and share your NFT rights on our platform, and we can use it to work with other companies. We will also enable payment channels to easily connect the legal and digital worlds.

Coming back to the financial component, and I think the financial component is also important where we have to go, we have to distinguish between short-term speculative trading needs and long-term portfolio management or wealth creation needs. The next wave of entrepreneurs will have to figure out how to make it more useful, so good that they will be willing to spend money on it, even if they don't get rewarded. Also be aware of P2E or social factors and guide to a more loyal community.

What we really want is a service platform with the forefront of innovation. Innovation is exactly what we need to think about. What services are needed to make this kind of innovation more.

The actual value of encryption

Paul: I see you as a point of contact that allows users and organizations to connect to the crypto world. What practical value do you think crypto will have in the future beyond speculation?

Wu：我想我们已经看到了很多正确的事情，比如我们可以举出 2020 年 DeFi Summer 的例子。今天 Token 的单产农业的回报非常低，对于这些 DeFi 协议中的大多数而言，他们不再回馈他们的用户，但仍有实际用途。我认为同样的事情会与其他互联网应用程序一起发生。

对游戏而言，将会出现无论有无 Token ，人们都会愿意玩的游戏，对于社交来说也是如此。但有了通过智能合约设计的 Token ，它可以快速通过客户引导阶段。

We don't think we can or even intend to serve all of our customers. Each customer likes different things. We can't have the capacity to serve all of the scale of the regions. The core of our architecture is that we provide all the services needed, infrastructure, security services, pricing engines. We hope that all companies can rely on our infrastructure to provide different services.