Interview With Jay Hao, CEO, OKEx: ‘Both BTC and DeFi Will Continue to Flourish and Serve Different Purposes as They Grow’
Thank you for joining us today and answering some burning crypto industry questions for the Bitcoinist audience.
Please start by telling us a little bit about your role as CEO of OKEx.
As you can probably imagine, being the CEO of a leading cryptocurrency spot and derivatives exchange, there is never a dull moment. At OKEx, we pride ourselves on our constant innovation and providing our users with the most diverse suite of products possible. That means that we have to be on top of the market at all times and also listen to the demands of our users.
Besides being the CEO, I hold an another position at the company: Chief Customer Service Officer. It’s very important to me to be on the front lines with our customers to really understand their needs and pain points. I can’t say that there is anything like a typical day for me as every day is different in this space but we strive to work on continually improving OKEx, the security and strength of our exchange as well as rolling out innovative products.
OKEx was just recognized by CoinGecko and CoinDesk as the world’s largest crypto derivatives exchange based on our BTC futures volume. This is a great achievement, however, we are also working hard to provide even more interesting and flexible products for traders in the form of perpetual swaps on popular tokens like LINK and DOT against USDT and also expanding our options trading for more advanced traders with BTC, ETH, and EOS options.
I really love working in this fast-paced industry and can assure you that you will see greater things to come from OKEx in the near future.
Why cryptocurrencies? How did you get your start in this industry?
I worked in the technology field for more than 20 years and was exposed to bitcoin very early on and I found it fascinating. I watched its development as it went from being worth almost nothing and 10,000 BTC being traded for a couple of pizzas to the giddy heights of 2017 and its current value today.
For me, the amazing rise of bitcoin was foreseeable and I believe that blockchain will become an unstoppable force, it has already touched me and my life very deeply. Before joining OKEx, I was already in the blockchain industry for a long time, focused on blockchain-driven applications for live video streaming and mobile gaming.
Moving into cryptocurrencies and OKEx was a logical progression for me and I have been able to apply the management skills I learned from starting my own companies as well as the engineering and development skills I garnered mainly in the semiconductor industry. Just like with crypto products, there is zero-tolerance for failure here, as any error can cost millions of dollars. We uphold these rigorous quality standards when creating products and for protecting user funds at OKEx.
The total cryptocurrency market cap is up over 90% year-to-date in 2020 – do you think this is the beginning of a new bull market for cryptocurrencies?
I try to stay away from making price predictions as far as possible because there are so many factors that influence prices and situations can change in a heartbeat. Certainly, after a very difficult period after the March selloff that spilled into all markets, it would seem as if cryptocurrencies have found their momentum again.
We have seen massive moves coming out of DeFi and ETH’s price has definitely dominated the headlines this year. BTC may have been slow to move after the halving but it is currently still showing the world that it is the best-performing asset of the decade. We are living in uncertain times thanks to the pandemic and the global economy is in a very fragile position with many people suffering joblessness and other hardships.
It’s difficult to say that this is bullish for cryptocurrencies as nobody wants cryptocurrencies to find success off the back of human suffering. What I will say is that with unchecked QE and the many problems with fiat currencies, the case for cryptocurrencies is becoming clearer to more people from experienced investors to everyday people.
At OKEx, we believe very strongly in the promise of DeFi and think that it will be an excellent supplement to the traditional financial system allowing us to reach the goal of #FinanceAll and providing financial services to those people who are currently unbanked. This should be the end goal, not focusing on the price of crypto assets.
It’s hard to say whether a new bull market is here when there are so many macro factors we cannot control but, as an exchange, we try to offer traders the best tools to make money regardless of the direction of the market.
How critical has the decentralized finance trend been to fueling new growth in the cryptocurrency industry?
The DeFi movement has played a big part in growth momentum in several ways, but not all of them good. The crazy gains of some DeFi tokens have attracted many speculators looking to make overnight profits and yield farmers seeking the best APYs and locking up tokens to earn interest. This restricts supply and pushes the price up, leading to more inflated prices. I think that this will not end well for many over-leveraged investors, so I always advise people that they should be looking at the real progress of the DeFi project they are investing in rather than seeking short-term gains.
On the plus side, we are seeing real innovation and projects that are tackling issues with oracles like Compound and Chainlink, we are seeing small startups like PowerPool seeking to address voter apathy and governance in the DeFi space, and protocols committed to interoperability and reducing the dependence on Ethereum.
So, the takeaway here is that, yes, DeFi has awoken interest from many speculators especially during BTC’s lack of volatility in June and July. It has brought more people back into the crypto space and also caught the eye of big institutions like TDAmeritrade and Arca. But, we should be looking at DeFi holistically and for the long-term rather than getting caught up in price rallies that may not be sustainable and may put pressure on the entire ecosystem.
Few platforms have been as supportive over the DeFi industry as OKEx. Is this in response to customer demand, capitalizing on a dominant market trend, or does OKEx see a healthy future in this category? Perhaps a combination of all the above?
It’s a combination of all of the above but mainly because we believe that DeFi will play a huge role in furthering the blockchain space and crypto adoption. Just as we think there is a place for the traditional financial system alongside crypto, we believe that CeFi and DeFi can and should work together. We have not been watching the DeFi boom from the sidelines nor is our only way of supporting it listing promising tokens. We do have the biggest DeFi offering of all top-tier exchanges, but this is not the only way.
We launched our decentralized public chain OKChain in February and are busy developing that as well as have several Dapps building out its ecosystem. We also launched OKEx Oracle as a trustworthy signed price feed for DeFi projects working alongside major DeFi protocol Compound, we have a C2C Lending feature on OKEx, and we are also supporting ETH’s move to ETH 2.0 with OKPool as a validator on the Topaz testnet. We are expanding our footprint all the time in DeFi as we are bullish on its future and we also want to satisfy our users’ demands by listing many of its high-quality projects.
What was the motivation behind OKEx launching the OKEx Oracle price feed? And what has the response been thus far?
We are continually innovating in the space and want to create as many products that help grow the ecosystem and diversify away from our core business model. We are steadfast in our commitment of DeFi and vulnerabilities with oracles continue to be an issue in that area. OKEx Oracle is one small way that we can help DeFi to overcome its issues and grow sustainably and securely.
After OKEx Oracle went online, it was widely welcomed by our global users, especially professional and institutional traders. At the same time, we are also actively collecting user experience and suggestions to further optimize our products. This is also one of my duties as the chief customer service officer.
Over the last several weeks, OKEx has listed as many as 32 unique and innovative DeFi tokens. How does OKEx narrow down which tokens to list?
We look for high-quality and projects that are really making a difference not just making money. We do listen to our customers but all projects go through a rigorous due diligence process before we decide to list. We look at areas like potential growth, the strength of the technology, past performance where available, the problems they are trying to solve, the strength of their community, support, and the team.
Of course, we also see that traders want to gain access to DeFi and we are helping them to do this by listing many promising projects from that category. We put a lot of time into finding and vetting the best projects but that does not mean that investors should place their money into them blindly, especially where there is a need to lock up tokens that they may not be able to access. Investors must always understand what they are investing in and know the risks. We provide them with the tools to make money but it is up to them to use them responsibly.
Would you say you are optimistic about the growth of the DeFi category?
Absolutely, we are convinced that DeFi will lead the future direction and growth of blockchain. There will obviously be some projects that don’t stay the distance and some people will gain and lose money along the way but DeFi should be a long-term project, a marathon, not a sprint. There may be a bubble coming for many projects due to the yield farming craze but we believe that this will only shake out the weak hands and separate the truly robust and secure protocols from the rest.
The current total USD value locked in DeFi applications has reached $9 billion and is climbing rapidly. Where do you see this number in one year, five years, and ten years out?
A lot bigger! Although, it won’t necessarily go up in a straight line. We are living in very uncertain times and still in the middle of a pandemic with global tensions between countries at fever pitch and many other macro factors at play. The fundamentals of DeFi are not keeping pace with the explosion in token prices either. I think it’s realistic to see this number rise and fall a few times before the whole sector is firmly established and we see the transfer of real world assets onto the blockchain bringing trillions of dollars with it.
Are there any DeFi projects you feel are particularly ambitious? Any particular trend that stands out in your mind? For example, yield farming.
OKEx doesn’t endorse any particular projects but, yes, there are many projects that are innovating and impressing us with the problems that they are aiming to solve. Yield farming as with most trends, I see somewhat as problematic as over-leveraged investors pledge tokens that they cannot withdraw and may stand to lose a lot of money when and if the prices crash.
It’s also artificially inflating prices by restricting supply. I am rather more excited by the projects that are tackling governance, and other outstanding issues of oracle vulnerabilities and interoperability, also projects that are offering independent solutions that don’t rely on the Ethereum blockchain.
What do you have to say about the comparisons between DeFi and ICOs?
I see some validation in this as is typical with human behavior when we see money being made, more people want to hop on the bandwagon and chase the trend. We are seeing some FOMO in DeFi like we did with the ICO craze. Yet, in many ways, I think it is a lot different.
To start with, unlike in the ICO boom, investors are much better-informed these days and the infrastructure is much safer. Moreover, this time around, we are looking for the most part at high-quality projects and, at the very least, working projects that are already showing a use case rather than a whitepaper and a promise.
Unlike the ICO boom, there is more regulation this time around as well and investors are less susceptible to scams with companies being held more accountable. The gains and losses may be on a par with or even surpass those of 2017 but the tech underneath and the chances of long-term success of most of these projects is definitely much higher.
What are the primary benefits of decentralized finance in general, in your opinion? And are there any use cases you can envision that haven’t yet been realized or experimented with?
Being able to transfer value in fractions of a second at a minimal cost anywhere around the world is an extremely compelling value proposition. I think that beyond short-term gains in yield farming and token surges, moving real world assets to the blockchain will allow us to generate untold efficiencies in traditional finance, in the transfer of ownership, and in moving trillions of dollars onto the blockchain.
Also, we believe that DeFi applications will eventually allow us to provide financial services to every individual on earth and this will be DeFi’s killer app. For sure, this will happen in many ways that we can’t even imagine, especially with the advent of Web3 and the internet of everything, it will certainly be interesting to see how it evolves, we are living in very exciting times.
Does OKEx have a short-term or long-term goal in mind when it comes to DeFi, either in terms of support or coin listings?
Long-term, as I have mentioned above, DeFi is a long game. There may be short term gains happening now but the technology still has some ways to go and it will be several years before we realize the full benefit of what is starting now.
Which aspect of the DeFi trend offers users the most immediate short-term benefits, and which will prove to be more valuable in the long run?
Finding promising undervalued projects to invest in and making gains as they hit the market, also trading perpetual swap on margin can provide traders with larger gains and losses. Yield farming is also another area for short-term gains. But keep in mind that both these things are equally risky, there is no certainty of making quick gains.
It will be interesting to see what protocols emerge stronger in the long run but I think that a whole ecosystem will grow up around DeFi and we will see less dependence on Ethereum. Those protocols that can prove their stability in volatile markets, that can ensure the integrity of their code, can fix any vulnerabilities with oracles and interoperability all have a good chance of going the distance.
How will Bitcoin fit into the DeFi trend in the future?
We have seen BTC benefit from the DeFi momentum so far and I don’t see a reason for this to end. In fact, we see a fair amount of wrapped BTC being locked up in DeFi protocols and we also see investors buying bitcoin first before investing in DeFi tokens, then perhaps, taking their gains and putting them back into BTC.
If the DeFi bubble bursts it could even be good for bitcoin short term as capital returns to it. However, this is a very myopic view. Long term, these price movements are almost irrelevant, both BTC and DeFi are long games and both will continue to flourish and serve different purposes as they grow.
How do you believe the DeFi movement will impact traditional finance? Will traditional finance fade into obscurity, or will the current giants of that world eventually join in on the change in trend?
I think that DeFi will be an excellent supplement to the existing finance system and it will push central banks to do better, it will force retail banks to lower their fees and improve their offerings. But I don’t think that there will be a violent revolution or that we will see the end of traditional finance.
DeFi can serve the billions of people that for banks it is just not possible or practical to serve. Banks and DeFi can work together to offer faster and cheaper solutions for customers. Let’s not forget that not everyone wants to be nor should be their own bank, there will always be a need for some centralized services as well, but DeFi will be there as an excellent supplement and alternative. Some people will sidestep the banking system completely while others will continue to use it and benefit from the tech pushing it to be better.
How does OKEx intend to ensure it remains an industry leader in the DeFi space?
By supporting up and coming projects, by collaborating with leading protocols and projects, and by creating our own suite of innovative products within the DeFi arena. Always innovating and staying on top of trends is key to being an industry leader and this is what we are committed to doing at OKEx.
Thanks again for your time. Are there any closing thoughts you’d like to share with the Bitcoinist audience regarding crypto, DeFi, OKEx, or in general?
Both blockchain and DeFi are very exciting spaces to work in at the moment. Many many companies in the space, OKEx included, continue to grow and hire at a time when traditional companies are cutting back. This is the best place to work right now and I would encourage anyone who wants to know more about crypto to find out! Take online courses, ask friends, read our guides on the OKEx Academy, try to earn your first crypto, and be part of this movement happening now and that is shaping the future as we speak.