Tech Waves - Cryptocurrency with experts from Coinbase and Jump Capital
Tech Waves is a fireside chat series that features industry insiders and provides insights about emerging fields in technology. In the #2 Episode of Tech Waves: Cryptocurrency, we have the pleasure to welcome our two guest speakers - Henry Nguyen & Khoa Ho to discuss industry's latest trends and outlook.
Speakers
Henry holds a bachelor degree from Rutgers University, and he is a 2nd-year MBA student at University of Pennsylvania Wharton. Before business school, Henry worked as a management consultant at PWC New York and Axoni, a technology firm that specializes in blockchain infrastructure. At Wharton, he continues to propel his focus on blockchain technology through working at Portag3 Ventures, Canada’s largest fintech focus VC, developing core investment thesis on DeFi. Currently, Henry spends his time at Jump Capital scouting and investing in blockchain startups globally.
Khoa was a CS major at Georgia Institute of Technology when he did his internship as a Software Engineering at Coinbase. Khoa then decided to join the company full-time as a Software Engineer in 2018. His job involves building data platforms for all-thing analytics (e.g blockchain analytics, experimentations and data processing systems). On top of that, he has experience working in Robotics at OhmniLabs.
Joining Khoa and Henry is our host, Linh Dang, VTS Product Manager. Beside from her involvement with VTS, Linh works as an Investment Banking analyst for Citibank in San Francisco.
This blog entry is a recap of TechWaves Episode #2 - Cryptocurrency done by VTS. The transcript has been condensed, translated and edited for clarity. Full interview can be found here.
Cryptocurrency as an asset
What exactly is cryptocurrency? And why does it matter?
Cryptocurrency is a decentralized money that eliminates the control of centralized parties like the government or any central bank as much as possible. Everything is codified so no one can control it and no one can print more money. Throughout history, humans have used various commodities as money such as seashell and copper. However, the problem with those commodities as money is that humans can actually produce more of it right when the price goes up. So, the easier for the commodity to be produced, the weaker it is. Bitcoin is the next generation of money that functions by code. It is better than traditional money because it is absolutely scarce. It can be transferred across the world instantaneously and cannot be taken from you by the state or by the government as long as you remember the key - the private key that you hold there.
So what is Bitcoin? It’s actually the most superior monetary technology that we have ever had access to!
When do you think the currency will stabilize for normal people to store as a part of their assets?
Before I answer that question, we need to understand why volatility exists. Why do bitcoins go up and now all the time? It's not supposed to be stable against the dollars because the base monetary that we compare is not stable at all. The value of USD is one USD because we use USD as a medium of exchange. We buy one thing for $1 dollars, that $1 doesn't change when I use that to buy something else.
When Bitcoin can become a unit of exchange like that, if you see people code something in Bitcoin value, then that value doesn't change. So for example, if I said, Hey, I want to buy this laptop for 100 Bitcoin, then that 100 Bitcoin is the same for every other purchase.
Stabilization, as a result, is not the goal. The goal is to be able to use it as a medium of exchange later on in the future. And when the majority of assets or items that are coded using a Bitcoin or cryptocurrency, that's when you see it as stable in the normal monetary sense.
What challenges that cryptocurrency would pose to the financial sector, particularly the traditional banking sphere, and also to governments and regulators ?
To the financial sector, the thing about technology is that it is not kind to the laggers. With blockchain technology, the role of the middleman will become redundant, and most of the bank or financial institution is actually playing that role. So, they will be severely impacted in the future, as blockchain can grow and mature. It's going to force them to innovate or bring in a better way to serve clients, especially in financial services applications. Think about how long it takes people to send money for us to Vietnam, and how much it costs to do that. And with cryptocurrency, you can send money globally instantly, with extremely low fees, no counter-party risk, and those things are not easily achieved.
Regarding the government, I don't think Bitcoin in the future will pose much of a challenge to the government. Because Bitcoin, like any financial asset, can be regulated. That's why you see institutional investors start holding Bitcoin and owning Bitcoin now, because people realize that the government can regulate it. They cannot shut it down because to do so, they have to shut down the internet. Government does not want to relinquish their monetary monopoly, the ability to bring money, I would say. As Bitcoin and other private currencies start to seriously compete with regular currency, then the government and policymakers will crack down on those activities. But in the end, regularly regulating cryptocurrency is not that difficult. And I think regulation will come especially around the later part of 2021 or early 2022. It can be a turning point for a cryptocurrency. And again, you know how we're going to do it? They cannot shut down Bitcoin, but they can control people who own Bitcoin via the centralized exchange. Whether the KYC process or tax implications are good or bad for Bitcoin is still debatable. But again I don't think it's much of a challenge as people think it is.
Do you have any advice on investing in cryptocurrency ?
My overall advice is just to learn as much as you can. In 2021, there are many things to learn about technology, the trading part of it, the ability to make money from it, and having to deal with the crazy volatility.
If you are in it for a long time, you will make profit, and it will eventually normalize. It will be worth five to ten times more than it's ever been today. Most people mess up during the first trial and it's totally okay. I got hit pretty hard in 2017, but I keep learning during the bear market and work in a blockchain company. So my advice to you is just, if you are really new, get involved, buy a little bit of it, and write down everything you learn from this bull run. Your goal, I would say, is not to make a lot of money, like 10x your portfolio, but to really to control the fear of missing out and not losing money. I would say that is the most important thing. And from there, learn about different applications of different coins, and see how it's different. Remember not to make the same mistake again, and don't just give up. It's actually when it bottomed out and at the lowest point, when everyone claimed that crypto is dead, that's when you start buying and start accumulating. And, you know, trust me, I think you'll be if you do that, you'll be much, much more profitable in the next cycle or in the year to come.
Cryptocurrency as a technical career
How has the infrastructure of cryptocurrency evolved over time?
The infrastructure itself, like, especially for Bitcoin, has evolved over the last like 12 years, but not quite a lot. One big reason is that changing is very, very hard, and because we don't want to break it. I think one of the issues that we have with cryptocurrency nowadays is that it doesn't produce a lot of high throughput, which means that we can only have a certain amount of transactions per second or per minute. There's been a lot of money put into improving that. For Bitcoin, we had the lightning network, which is something like printing a bit as a layer, two blockchain built on top of Bitcoin to improve the core throughput on a theorem. I think one of the leading technologies today is probably polygons.
Can you share some common, technical roles in cryptocurrency companies? And how are different roles related to each other?
There are four categories. First of all, we have engineers who work directly with the protocol, building the blockchain and the tooling to interact with the blockchain itself. Those are the crypto engineers. They will try to keep up to date with all the upgrades of the blockchain, and try to train the infrastructure.
The second group of people are security people. Because of the nature of blockchain, everything is reversible. You need to have a very strong security background and strong cryptography knowledge.
Thirdly is the one that builds the UI/UX, so that we expose a very friendly UI to the customer. We try to make it as simple as possible that people can interact with defy without worrying about security.
The last group built a data system for both the platform and also for blockchain. Most companies have public data and private data. At Coinbase, we have a massive amount of data from both the production data and the data that we get from the customers. This group does analyses to get the insights to learn, for example, what are people interested in?
Do you have any advice for someone who wants to break into the industry as a software engineer or as a data scientist?
Start doing some side projects and interact with the blockchain. Try to understand technical terms, the mechanism of proof of work, proof of stake, and how it works. I think those are the ways that you can get the knowledge. Besides that, I don't think you need to have a particular crypto background to join a crypto company.
I think to prepare for it, you just need to play around with it. Nowadays, with all the new tools, you can just put $5 and play around with the protocols. Try to read as much white paper from legit protocols as possible. At that time, I barely heard about Coinbase, but I read the Bitcoin white paper, and immediately I was hooked. So I decided to go with Coinbase even though I barely heard of the name. Crypto white papers are the best way to learn about the technical side of crypto and prepare yourself for a crypto career. If you want to get into that as an engineer, even as a data scientist, those papers offer basic statistical information that can help you.
How can companies like Coinbase ensure the stability of the platform?
For most other systems, the traffic coming to your website is approximately the same throughout the year. Let's say you are Amazon, on Black Friday, you know that the spike will happen. At our platform, however, it requires a lot of engineering work for everything to be extremely reliable. It has to be able to automatically scale up and down based on the volume. During the peak and the boom, Coinbase commerce had a lot of scaling issues. With high traffic to our system, we'll also get high traffic to this smart support queue, so we allow customer support tickets. One more thing that we have been doing for the past three years is that every week, we're sending a lot of traffic to our system unexpectedly to see if our system can handle the load. I think our system right now is getting to 100x or higher load compared to 2017.
What is the key takeaway you want each of us to have after this conversation?
There's a lot of things to unpack and to learn. What the Internet can do is allow people to transfer data, easily send an email without going to the post office. With cryptocurrency and exchange, in particular, it is the ability to transfer money digitally. There are a lot of innovations going to happen. I truly believe that we are still in the 1995 period of the Internet. The true startup, the Facebook and the Amazon moment, will happen in the next 5 to 10 years. Like any other new practice, there'll be a lot of Intel, there will be bubbles happening, just like the.com bubble, but it doesn't mean that it will die. After every bubble burst, it goes much stronger after that. During the Internet bubble, there were a lot of internet scam companies. But just because you invested in a scam tech company, it doesn't mean that you don't invest in the Internet anymore. The same applies to crypto.
We'd love to have more talent, especially from Vietnam, to participate in the journey, learn about it, work on it, and contribute to the growth of the industry.