Interview with Sonic Zhang of ValueNet capital on the future of venture capital and ICOs

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I visited Sonic Zhang, founder of ValueNet capital and his team in Beijing in December 2017. We (joint work with Julian Hoelz) talked with Sonic about how he and his team is evaluating deals in the blockchain space. How to cut through the noise and find the next big unicorn?

Can you tell us a bit about the history of ValueNet capital?

Sonic Zhang: Sure. We started out as an exchange. With the regulatory actions of the Chinese government this year, we shifted our focus from the exchange business to an venture fund. As a such, we are focusing only on investments in Blockchain technology.

I guess that is an interesting transitions. Running and exchange and running a venture fund is quite a different business to be in. In this world of hyper-innovation, where new investment opportunities come thick and fast, how do you keep track about what is going on in the space?

Sonic Zhang: That is true, running an exchange and a venture fund are two different things. For both businesses it helps a lot if you know the most  important players in the field. It is the network we have that we carried over from the exchange business to the investment business. For example, we have a network of partners we work together. They help us to find the best deals in their geography. Our local team then does the 2nd level due diligence on this preselected set of investment opportunities.

For the deals you are willing to do what are the parameters that need to met in order for ValueNet Capital to invest?

Sonic Zhang: That differs from deal to deal. But let me mention three things that we think are the most important ones. First, it is the team that is behind the projects. I think about it the following way – has the team worked together in the past or is it a random set of people that came together to do an ICO “gig” together. A more extreme point of view could be: if they raise 30 million USD, will the team be tempted to “run away” with the ICO proceeds or are they one something bigger, one a mission to solve a real, large scale problem? For this we also tap into all communication channels (Telegram groups, slack chats, reddit post, etc.) that are available and ask questions and observe the communications.  Second, we favor to invest in products or technology that has been around prior to the ICO mania. Having a solid and well-thought white paper is one thing, but having an actual minimum viable product (MVP) that demonstrates the feasibility of the product is a much better proof point that the project can succeed. And lastly, I think it is something that is very similar to traditional VC investment: how scalable is the idea? For example if a project is tackling the energy market in one country, how easy is it to copy this to other countries. The question is are you going to build a local taxi company or are you aiming to build the next Uber. By following this approach we make sure that we only invest in the absolute best projects. One of the investments that fulfills all three parameters that I outlined, is the Australian-based Powerledger project.

It seems as if the wild-west times are slowly but surely over. How do you think will the sector evolve?

Sonic Zhang: The future is always hardest to predict [laughs]. I believe we will witness a revolution about how new businesses are funded. The idea of ICOs as a funding vehicle where everyone can attract funds for an idea from all parts of the world is very powerful and will ignite innovation. This has some interesting implications. I think that the competition between new ideas is going to rise. If you are doing and ICO today, it is not a Silicon Valley or a Beijing Zhongguancun thing anymore, it is a truly global thing. With an ICO, you are entering a global competition.

Sonic, thank you so much for your time!

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 About Sonic Zhang:
  • Sonic Zhang graduated from University of Sydney with a Bachelor degree in Engineering in 2011 and a Master degree in Project Management in 2012.
  • Sonic is the Co-founder and Global Director of 20 Nations League of Blockchain (B20, http://www.b20.io), an international NGO focused on bridging blockchain and cryptocurrency communities worldwide.
  • He  is also the co-founder of ValueBank Group, a global network of fiat-crypto exchanges, with a crypto wallet and payment solution.
  • In his latest project, he founded ValueNet Capital (http://valuenet.capital), where he is focusing on investing in blockchain startup. He currently resides in Beijing, China.

More information about ValueNet Capital can be found on their website: http://valuenet.capital

About the Author

Dr. Thomas Reinbacher is computer scientist and management consultant and works as independent adviser in Munich and Beijing. If you want to work with me please find me on http://dr-reinbacher.com/

Interview led by Dr. Thomas Reinbacher and Julian Hoelz © Thomas Reinbacher. Disclaimer: All information presented herein is given strictly on a non-reliance basis and under the exclusion of any responsibility or liability, in particular with regard to loss or damages and/or administrative and regulatory sanctions

Use cases of Bitcoin in the long tail of international trade – an interview with Quora top writer Joseph Wang

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Follow me on a visit to HongKong in November 2017 to visit Joseph Wang, co-founder of Bitquant Research Laboratories and top writer on Quora (2014-17) about use cases of Bitcoin. A conversation about the meteoric rise of Bitcoin and the different perception of cryptocurrency in Asia versus Europe.

Joseph, Bitcoin just climbed above $ 8,000 today [editor’s note: the interview was conducted on November 20th 2017]. Many people in Europe remain skeptic whether this is justified, and whether there is any value at all in a currency you can’t buy anything for. Where do you see the value of Bitcoin?

Joseph Wang: The market for bitcoin is certainly overheated right now and a lot of the recent price surge is driven by pure speculation. We might see a correction of that soon when speculators try to cash in. For now, Bitcoin remains a high return high volatility asset, but the introduction of Bitcoin futures by the Chicago Stock Exchange, the CME, NASDAQ and others might smooth that out in the future. Anyway, I believe the big, the unique value of Bitcoin lies not in it being an object of financial speculation, but in its capacity to store wealth and to facilitate international trade.

Let us expand on that thought. The Bitcoin community has long been split between proponents of making it fit to use as digital money, thus increasing its scalability, and those who argue for its main function being the store of wealth, much like “digital gold”. Could you please explain why you believe it’s the latter?

Joseph Wang: Sure. So I’m certainly not speaking for the whole world, but for Asia, and for China especially, the question of digital money or mobile payment has already been answered. In China alone, WeChat Pay has 600m active users and AliPay has 520m. There’s just no need for another digital payment solution. However, there is a huge need across the Eastern hemisphere to have an alternative global currency that, from a state’s perspective, is outside US control, and from a citizen’s perspective, is outside the local government’s control and independent of the sometimes shaky local fiat currency. Bitcoin fulfills all of these characteristics. People are flocking to it as a new, global store of value because it is scarce, yet easily movable and divisible, and thus transferable across borders. And that, to me, explains a huge part of the attraction of Bitcoin apart from the recent buzz and the speculation. If Europe needs a mobile payment solution, other blockchain settlement implementations can do the job. And WeChat Pay, AliPay, Paypal or Transferwise for that matter have shown that people don’t necessarily need a blockchain to pay for their coffee or send money home.

You also mentioned Bitcoin’s capacity to facilitate international trade as a second major advantage. What excites you about use cases of Bitcoin in international trade?

Joseph Wang: First of all, for full disclosure, at my company Bitquant we are funding loans using Bitcoin to promote trading goods between Africa and China. Now, to your question, I see huge benefits in blockchain technology, and thus in Bitcoin as its major and most trusted means of settlement, in enabling direct commerce between people of different countries that to-date just does not exist?

And why is that? What hinders people to engage in direct commerce and how does blockchain help here?

Joseph Wang: By establishing trust through technology. To-date it has been very difficult to do business with someone you don’t know, have never met personally, and might or might not ever meet again. So you rely on middlemen to provide that trust, i.e. extend credit and facilitate the transaction. That’s what banks are for and why they’re so central to our economies. However, a bank will not facilitate what is not profitable to it. So the keyword here for me is “the longtail of international trade”. Bitcoin enables this longtail. I’ll give you an example of what we do at Bitquant: Through bitcoin, we provide trade finance to buy coffee from farmers in Tanzania and sell directly in China, avoiding banks and other distributors in the traditional supply chain, and distributing the gain to the farmers. Now the banks don’t lose anything because today they don’t engage in these forms of small, direct commerce as transaction volumes are low and their transaction cost would be too high. But for the individual farmer this small extra can make a big difference, and on a combined scale, the longtail can amount to substantial added value.

In Europe, there is a large movement towards more locally sourced food. Consumers want to know where they’re buying from, and in China, the same is true. So blockchain can help a lot to make this happen.

Joseph Wang: Exactly. Again, big corporates can manage their supply chains perfectly well with a centralized system. But blockchains allow the longtail, the farmers in my example, to build up a reputation that you are a legit coffee seller. And the consumer can access the record on the blockchain to check exactly what batch of coffee she got.

This is a very good example for how blockchain technology can actually expand and not cannibalize commerce. On the whole, how do you evaluate the maturity of this technology and what needs to happen?

Joseph Wang: We are still in the early days. Many liken the situation to what the Internet was in the nineties, and while I believe adoption will happen much faster this time, it’s not far off. So far, the only business making money off blockchains are the exchanges. But this is bound to change as the sector is professionalizing rapidly. As much as the investment and trading side will mature through bitcoin being listed on major exchanges and the issuance of tokenized securities only open for accredited investors, the business building side will expand as libraries and templates for smart contracts will be published and open sourced to provide the link between the business-minded and the technology-minded people. And then we will see real, profitable business enabled by the blockchain.

What else do you see necessary to promote real Use-cases of Bitcoin and blockchain technology?

Joseph Wang: I think the point is exactly that no centralized effort by any state is needed, or possible. To the contrary, I think both Bitcoin and Ethereum are key drivers in leveling the playing field for international business.

How is that?

Joseph Wang: By competing for cryptocurrency trade volumes and for blockchain-enabled businesses. While Hong Kong, as one of the traditional financial hubs of Asia, has proven to be very open and friendly about cryptocurrencies, Singapore has adopted a very proactive stance on ICOs (Initial Coin Offerings), what they see as an equity vs. a utility token and how they are going to be treated legally. Thus the blockchain scene in Singapore is thriving, attracting both talent and major capital inflow to Singapore. Other hotspots for ICOs include the canton Zug in Switzerland, Gibraltar and Estonia. Note that all of those are relatively small countries that are suddenly sensing a seat at the big table for this new way of doing business. This is why I started Bitquant in Hong Kong to help promote and aid in the development of this exciting new technology!

Joseph, thank you so much for your time!

About Joseph Wang:
  • Joseph is a physicist by training with a bachelor’s degree from the Massachusetts Institute of Technology, Cambridge, and a PhD in astrophysics from the University of Austin, Texas.
  • Prior to founding Bitquant, he spent over 6 years as Vice President of front office quantitative analytics and equities derivatives teams at JPMorgan Chase, responsible for infrastructure coding of pricing libraries used through all asset groups.
  • Today, Joseph is the Chief Science Officer at Bitquant Research Laboratories, a financial technology startup in Hong Kong, where he focuses on the development of scalable and “one-stop shopping” open source trading systems which can be used by individual investors, small hedge funds, and family offices.
  • His current research involves investigating the valuation of bitcoin options, and research in the dynamics of the upcoming RMB equity option market.
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More information about Bitquant and use cases of Bitcoin can be found on the website: http://www.bitquant.com.hk. Joseph is also one of the top writers on Quora about Bitcoin with a total of 35.5m answer views https://www.quora.com/profile/Joseph-Wang-9, and code geeks can check out his source code at https://github.com/joequant/bitquant

About the Author

Dr. Thomas Reinbacher is computer scientist and management consultant and works as independent adviser in Munich and Beijing. If you want to work with me please find me on http://dr-reinbacher.com/

Interview led by Dr. Thomas Reinbacher and Julian Hoelz © Thomas Reinbacher. Disclaimer: All information presented herein is given strictly on a non-reliance basis and under the exclusion of any responsibility or liability, in particular with regard to loss or damages and/or administrative and regulatory sanctions

SmartMesh Blockchain: A global network without the Internet – a discussion with the founder Henry Wang

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I visited SmartMesh Blockchain in Beijing to talk to the team team around internet protocol scientist Henry Wang, founder and CEO of SmartMesh foundation in December 2017. Henry has been working on offline communication technology since the year 2013. He launched the p2p social app YueNi (约你) an offline social networking app similar to Firechat. We (joint work with Julian Hoelz) wanted to learn from the team why they think that the internet needs to be augmented with a pure P2P, mesh-organized network.

Let’s start with the basics. Why do we need a new internet?

SmartMesh: We believe that if the internet was conceived today, it would have been a P2P network that connects smartphones and it would be much safer, cheaper, and faster compared to what we have today. With the current penetration of smartphones, i.e., 2.3 bn smartphone users as of today and a smartphone penetration rate of about 60% in 2022 [4], there is a real opportunity for a mesh network that transfers data and value from one phone to another – without relying on the internet as a central coordinating backbone. This is the type of network we are going to create with SmartMesh.

That is interesting can you tell us a bit about the underlying technology of the SmartMesh Blockchain?

SmartMesh: Sure. It all starts with the multi-year research from our Senior Research Scientist Paul on ad-hoc networks. Dr. Paul Gardner-Stephen is a senior lecturer at Flinders university and worked on robust mesh networks to provide connectivity to people which are living in parts of the planet where there is no cellular coverage at all. Another use case are regions with frequent connectivity outages caused by a natural disaster, e.g. earthquakes. His papers give a good scientific introduction to the protocol, but one of the key design decisions was to build an own network layer and thus be independent of IPv4 or IPv6 used in the internet today. The developed mesh technology has already been deployed at Efate, a pacific island located east of Brisbane, Australia. In this case, the technology was able to provide connectivity to people that normally did not have access to a cellular network. Even if internet access is present, smart mesh technology offers a resilient, decentralized, and self-healing way to communicate with higher near-field communication speed and bandwidth than provided by the internet today.

Why is that important for the advancement of Blockchain technology?

SmartMesh: We believe that our technology is important as an underlying enabler for the Internet of Things (IoT), one of the major use cases for blockchain technology. Billions of things in the IoT will need to communicate in locations where access to the internet is not available or too costly to install a gateway. Also energy consumption is important for these kind of devices especially if they are deployed outdoor and rely on battery power. Together with our SmartMesh Blockchain token we are going to couple connectivity with a means to perform payments without the need for the internet to be present. The mesh network we envision is such that people that are willing to share their own mobile phone as nodes in the global mesh network are rewarded in crypto tokens. In order to make this P2P micro-payment possible we need to overcome the current limitations of blockchain technology. We are planning to build on concepts similar as the Lightning network and the Raiden Network. For example, someone with internet access can resell to others who need it.

Are there any other interesting projects that your team is working on we should know about?

SmartMesh: Yes actually there is. We have a new team that is backed by SmartMesh, called MeshBox that is working on a hardware device. MeshBox is not only a router where nodes can connect but also serves as a content server to store and transfer content. We are confident that MeshBox will support a superior access for nodes in the Smart Mesh.

Thank you so much for your time!

More information about SmartMesh Blockchain: More information about SmartMesh on their website: https://smartmesh.io, Code geeks can check out the source code at https://github.com/SmartMeshFoundation. For the scientists: The rationale behind the Serval network layer for resilient communications by Paul Gardner-Stephen, Andrew Bettison, Romana Challans and Jeremy Lakeman, Journal of computer science http://thescipub.com/PDF/jcssp.2013.1680.1685.pdf 

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If you are interested to learn more about the Chinese Blockchain ecosystem, check out the report: State of the Chinese Blockchain Ecosystem 

About the Author

Dr. Thomas Reinbacher is a computer scientist and management consultant and works as independent adviser in Munich and Beijing. If you want to work with me please find me on http://dr-reinbacher.com/


Discussion led by Dr. Thomas Reinbacher and Julian Hoelz © Dr. Thomas Reinbacher. Disclaimer: All information presented herein is given strictly on a non-reliance basis and under the exclusion of any responsibility or liability, in particular with regard to loss or damages and/or administrative and regulatory sanctions

Elastos Blockchain: The return of the P2P protocols – an interview with Rong Chen, founder of Elastos

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We (joint work with Julian Hoelz) visited Rong Chen, founder and chairman of the Elastos foundation, and his development team in Shanghai in November 2017. We sat down with Rong to discuss the next technological frontier that needs to be captured in order to make the distributed web a reality: Operating systems and peer-to-peer protocols for the Elastos Blockchain.

The technology stack for the distributed web is made up of blockchains, smart contracts, peer-to-peer protocols and the distributed applications that run on top of that. While we have seen a lot of progress being made on blockchains and, recently, smart contracts we have yet to see how the peer-to-peer protocol layer will be built. The field, however, is not new at all. P2P protocols became hugely popular in the late 90s with the rise of Napster, eDonkey, and Bittorrent. Information exchange between distributed nodes in today’s blockchain systems (Bitcoin, Ethereum, Neo, etc.) is often limited to settlement information only, large scale data exchange is not yet possible. This is where P2P protocols come into play.

Can you tell us about the motivation behind Elastos?

Rong Chen: I think the internet as we know it today is broken. Broken from a cybersecurity point of view. For example, according to Kaspersky Labs, on peak days we can see about 1500 individual Distributed Denial-of-Service (DDos) attacks every day. Some of these attacks last a whole day. What worries me is that we are now moving to build really safety-critical applications on top of this “broken” infrastructure. Let us take autonomous cars as an example: how can we make sure that our loved ones are not hacked when they are being shuttled in an autonomous car? That was one of the triggers for us to realize that we will need a paradigm shift in networking for this class of applications. Instead of relying on the classical Client – Server architecture, over the past years we have developed an operating system for the distributed web: Elastos

And Elastos will be an operating system that is run by distributed nodes, is that correct?

Rong Chen: Yes, Elastos runs on virtual machines by distributed nodes. Elastos has three fundamental pillars. First, there is the Elastos runtime which allows developers to build truly distributed apps on the one side and on the other side abstracts away any direct access to the network from the application. This is a key concept to make the network secure. There is no need for concepts such as drivers or sockets, apps are prohibited by design to directly access the network. Network access is managed only by the runtime. Second there is the the Elastos Peer-to-Peer (P2P) Network, a set of P2P protocols that will enable efficient data transfer between distributed nodes, such as video and audio streaming or text messaging. The third pillar is the Elastos Blockchain interface to public and private blockchains. This will allow Elastos computers to access services such as settlement or identify verification on blockchains. We are collaborating with the teams of existing blockchains to have interfaces to their systems.

Can you tell us in what stage of the project you and your team are? Were you able to build a prototype of the three pillars that you mentioned?

Rong Chen: Elastos has a long history. I started working on the concepts on Elastos as early as 2000 upon my return from the US. In 2013 Foxconn came onboard as an investor. In 2015 we had a first version of Elastos running on two different devices: An ARM Cortex A7 based Banana Pi and on a home router, we called the Elastos Smart-Router. Last year we were porting it on a Smartphone and the popular Raspberry Pi 3. Our team is currently working on finishing the blockchain integration. Since January 2016 all our code can be found on Github. In 2017 we created the Elastos foundation and we are in the last stages of preparing for an Initial Coin Offering of our Ela token. Tokenizing the foundation will keep it independent and in the hands of the users, thus helping us realize our vision of a truly distributed web?

Since you witnessed the rise of the internet when you worked for Microsoft in the 1990s, what gets you excited about the distributed web when you compare today to the times back then?

Rong Chen: I think we are living in very exciting times. The internet we developed in the past decades is not up for the new challenges that will emerge from the mass-scale deployment of safety-critical applications, such as the autonomous cars we discussed. Blockchains will provide identity authentication and settlement, and now is the time for a paradigm shift to a much more robust network on top of that, a network without DDoS attacks, a network where nodes have no direct access to the communication channel but an operating system will manage that. That new type of network will be distributed and I hope that Elastos will play a key part in this. I would like to invite the international community to come and check out our project. When was the last time you could contribute in building something that big? I was at the first Linux conference by Linus in Seattle in the early nineties, and I remember how excited I felt back then. I feel now is a similar time.

About Rong Chen:

  • Rong Chen graduated from Tsinghua University, Beijing, in 1982.
  • MS degree from University of Illinois at Urbana-Champaign in 1987.
  • Rong was a Microsoft veteran in the early days of the internet from 1992 to 2000. He collaborated in the development of a wide portfolio of projects at Microsoft, for example OS research, IE3 ActiveX, Ole Automation, ECOM, .NET.
  • Rong founded his own company Kortide Corp in 2000 following his long-standing dream to create his own operating system: Elastos. After 17 years, Rong believes that the smart-web powered by the blockchain is the future for Elastos. He established the Elastos Foundation with partners in June 2017.
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More information about Elastos Blockchain on the website: http://Elastos.org, Code geeks check out the Elastos Blockchain github at https://github.com/Elastos

About the Author

Dr. Thomas Reinbacher is a computer scientist and management consultant and works as independent adviser in Munich and Beijing. If you want to work with me please find me on http://dr-reinbacher.com/

Interview led by Dr. Thomas Reinbacher and Julian Hoelz © Thomas Reinbacher. Disclaimer: All information presented herein is given strictly on a non-reliance basis and under the exclusion of any responsibility or liability, in particular with regard to loss or damages and/or administrative and regulatory sanctions