Original source: Pantera Capital
Original compilation: 7upDAO
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—— Michael Wu，Amber Group
Amber's History
Paul: I first got to know you five years ago, when you were just starting your business, and now that you've got $3 billion in funding, can you share your five-year journey?
Wu：It's been almost six years since we started in 2017, and it's definitely been a great journey. Looking back, I think there are many kinds of interesting facts.
We started the business of Amber Group very late. 2017 was a market boom. We all remember the ICO boom at that time. At that time, I think that in the encrypted market, there is actually a big gap between institutional allocation and retail allocation of retail investors. Most retail investors participate in the crypto market, well, it's more like a quick game.
We started the company's first differentiated service to fill the gap in financial services in the encryption market. When we first started, we had a lot of clients in the hedge fund space because of our background. Traditional hedge funds, VCs, family groups, they're looking at this space, they kind of want to invest, but feel a little bit uncomfortable. They didn’t feel safe trading on an exchange, and they needed more than one exchange, which is how fragmented the crypto market was at the time. I think we just start there, connecting all the exchanges, aggregating all their products, and gradually adding more and more services, managing their portfolios. Then we get into DeFi, we get into NFTs, we get into the realm of all the exciting crypto-natives. That's why Amber has grown so fast.
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Provide services for retail investors
Paul: You guys are like a super app in Asia. You guys started off focusing on institutions but are now moving to retailers, can you tell me why and what are your plans?
Wu：You asked a very important question. When defining the Web3 industry in terms of encryption or broadly, I feel that encryption is a lesson about assets, which naturally gives it a financial element. But for most users now, 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 that, the gap will always be there. Then this gap will make encryption always a very niche and narrow thing. We recognize this need because we want to accurately provide comprehensive crypto investment services to more institutions and people.
We continue to talk about cryptocurrencies, Web3 adoption or the next wave, and I think a lot of the applications will happen in the non-financial space. Users will be drawn to the realm of non-financial transactions in cryptocurrencies. But at the same time you know, because it is encrypted, there is a Token meta-asset that users have to deal with, they need to deal with the price of Token, and they need to pay attention to the liquidity of Token. That's our vision, and we want to be able to provide all of these services.
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Private Wealth Management
Paul: In terms of private wealth management, maybe you also have opportunities?
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Security Question
Paul: A few months ago, companies like 3AC and Celius were doing the same thing as yours, but due to some mishandling, they went bankrupt. So how do you ensure security?
Wu：The industry is still young, so it's too early to talk about it from a regulatory standpoint. In terms of regulatory transparency, from an external or customer perspective, it is difficult to distinguish the difference from the example you gave here. Three Arrows Capital has been a trading platform until the last day, and some customers did not know this and became their creditors. And Celius is essentially a back-to-back lender that collects deposits or savings from customers and then lands on the other end in crypto, and they both cause a lot of problems.
Amber handles it differently. We focus on providing various services and products to meet the needs of our customers. Looking at our platform, you will issue a wider variety of products that we offer, and you also know when we will provide these services to customers, it depends on what the customer actually wants to do. Internally, we also have a risk management mechanism. We have always been market neutral compared to all of our cryptocurrency peers. From my first day, we have positioned ourselves as a neutral service provider. The substantial growth of assets is an individual right in itself.
Second, we never do credit loans. In the crypto market before the second quarter, very bad things happened to this type of credit loan company. If you want to operate a credit service in the encrypted market, it is too difficult, because you not only have to convince the borrower to believe you, but you also have to investigate the credit of the customer. Even at the height of a bull market, where there is a lot of demand, we never want to evaluate or take counterparty risk.
In the end, we always let almost all of the business, especially in terms of risk, be automated like technology. Human discretion is very dangerous. We have a traditional financial background and know how dangerous human judgment can be, especially in extreme market conditions. Therefore, we want to leave this risk to me. From management to rules to discipline, we have our algorithms and our technology to protect these risk indicators, rather than relying on human judgment.
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non-financial services
Paul: You will launch non-financial services in the future, can you tell us a little detail?
Wu：Yes, we will. First of all, I want to say that you cannot completely separate the financial value of cryptocurrencies, which is a very important part.
But at the same time you also know that things like NFTs are right. We've already seen the utility of NFTs. Many game companies, social companies, and even consumer brands are beginning to experiment with using NFTs as part of their customer acquisition or growth strategies, or even as part of their core products. We think that's basically the right direction in what we believe. I want our product platform to reach a correct service layer, if you already have an NFT, you can deposit and share your NFT rights on our platform, and we can use it to cooperate with other companies. We will also enable payment channels to easily connect the fiat and digital worlds.
Going back to the financial part, I think the financial part is also important where we have to differentiate between short-term speculative trading needs and long-term portfolio management or wealth creation needs. The next wave of entrepreneurs will have to think hard about how to make it more useful, good enough to be willing to spend money on it even if it doesn't get rewarded. Also recognize the P2E or social element and lead to a more loyal community.
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The real value of encryption
Paul: I think you are like a touch point, allowing users and institutions to connect with the encrypted world. What do you think the future of crypto will have practical value beyond speculation?
Wu：I think we have seen a lot of things right, for example, we can cite the example of DeFi Summer in 2020. Yield farming returns for tokens today are very low, and for most of these DeFi protocols, they no longer give back to their users, but still have practical uses. I think the same thing happens with other internet applications.
For games, there will be games that people will be willing to play with or without Token, and the same is true for social networking. But with a token designed through a smart contract, it can quickly pass the customer onboarding phase.
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