Head of Hashed Research Current Status of Hashed and How Hashed Views the Cryptocurrency Market

Hashed Research Head A Comprehensive Look into the Current State of Hashed and Cryptocurrency Market Perspectives

Author: Marco Manoppo, Column: Chain Venturer; Translator: LianGuai0xxz

Edward Tan is involved in research and investment at Hashed, a global early-stage venture fund that focuses on supporting the founders of blockchain and cryptocurrency for the future.

The Hashed team consists of blockchain experts and builders from Seoul, Singapore, Bangalore, and Silicon Valley.

Edward studied accounting and finance at the London School of Economics and entered the real estate private equity industry through two years of working at Fraser Property Limited.

Prior to joining Hashed in 2021, Edward also held a fund management position at LOGOS, an expanding logistics group with operations in 10 Asia-Pacific countries.

Ultimately, Edward entered the cryptocurrency field in 2021.

This is my conversation with Edward Tan.

Main Points of this Article:

One decisive factor behind Edward’s growing interest in cryptocurrency is the capital-efficient approach of DeFi.

Hashed currently has 5 departments and more than 250 professionals.

The cryptocurrency landscape in East Asia and Southeast Asia is significantly different, with the former having a stronger retail market.

There is a need to strike a balance between equity and tokens to ensure that both serve wider business goals and provide clear paths for investor returns.

A differing viewpoint: Cryptogames will not drive the next billion users.

What was the decisive moment that attracted you to the world of cryptocurrency?

Edward’s journey into the world of cryptocurrency marks a significant departure from his traditional financial background, where he was accustomed to the stability of real estate private equity and relatively moderate returns. In this field, a robust transaction could generate a 15% internal rate of return (IRR), reflecting a balance of low risk and moderate returns.

However, at the end of 2020, when Edward became aware of the high annual percentage yield (APY) of cryptocurrencies, a drastic change occurred. This contrasted sharply with the familiar low-risk real estate and high-risk stock realms. Cryptocurrencies introduced an entirely different range of risk and returns, not only offering higher returns but also exhibiting exponential growth potential that could surpass traditional investments.

As Edward became ready to embrace greater risks, the asymmetric potential of cryptocurrencies seemed increasingly appealing. This inclination towards cryptocurrencies was further influenced by discussions with a close friend and former university classmate, an excellent finance graduate working at J.P. Morgan at the time and considering a switch to cryptocurrency funds. Their conversations initially revolved around traditional equity and investment analysis but evolved to cover decentralized finance (DeFi), liquidity mining, and other related topics.

In the mid to late 2020s, known as DeFi Summer, was a crucial period. With the emergence of new DeFi protocols like Uniswap, Curve, and SushiSwap, the crypto community buzzed with excitement, as each protocol provided ample liquidity incentives. Despite being a nascent and evolving field, the allure of triple-digit APYs remained strong.

A defining moment: One decisive factor in Edward’s growing interest in cryptocurrencies was the capital efficiency approach of DeFi. This involved using digital assets like Bitcoin and Ethereum as collateral without needing to sell them – a concept different from traditional assets like stocks. This innovative capital utilization method was revolutionary to Edward, further drawing him into the “rabbit hole.”

What is Hashed?

Since its establishment in 2016, Hashed has undergone significant transformations, led initially by a compact team of three founders with engineering backgrounds. These founders transitioned from successful Web2 startups, investing their profits into ETH with their own capital as a foundation.

Their early attempts involved bringing these funds into ICOs, the primary fundraising method in 2017-2018, which eventually evolved into venture capital.

In 2018 and 2019, Hashed started investing in early protocols like Sky Mavis, becoming seed investors and participating in projects like Axie Infinity and Ronin Chain, acquiring equity and tokens. Their portfolio continued to expand, including names like Sandbox, Mythical Games, and dYdX.

Originally headquartered in South Korea, Hashed subsequently recognized the importance of establishing connections with Western markets. This realization led Hashed to establish teams in San Francisco and Los Angeles in 2019.

In 2021, Hashed expanded its operations to Singapore, and the first non-Korean member, Edward, joined the team. Through this expansion, Hashed now focuses on making Singapore the center of its Southeast Asian business. Additionally, Hashed has portfolio companies in Vietnam, Thailand, and the Philippines.

From an initial team of only 30 people, Hashed has grown into a robust team of 250 professionals, divided into five major business divisions:

Investment Entities: This division operates teams in the US, Seoul, and other global locations, running three entities – a proprietary capital entity for token trading, an LP fund for equity trading (with $100 million startup capital rapidly deployed), and a subsequent $200 million fund raised in 2021, primarily targeting entertainment, NFTs, and the metaverse, currently with 70% deployment.

India Division: The Indian team was established in 2022, consisting of a diverse team of less than 15 people responsible for various aspects of fund management, including research, investment, marketing, community management, HR, and legal. This expansion was driven by India’s rich talent pool and the demand for capital and scale support, leading to the establishment of Hashed Emergent in partnership with deeply connected collaborators in the region.

Factomind: This is a subsidiary of Hashed that provides services ranging from consulting to data visualization and liquidity provision. It is led by a team of former quantitative financial traders and engineers.

UNOPND Incubation Studio: As the largest division of Hashed, UNOPND is currently nurturing three projects in the NFT, metaverse, and K-pop fields. It is worth noting that they are innovating a decentralized Korean pop music brand called Modhaus, which enables fans to participate in decision-making by voting on various aspects of music production and gamifies consumer engagement using NFTs.

Hashed Open Research: A unit dedicated to policy and framework research. This department serves as the liaison between Hashed’s public blockchain ambitions and the goals of the private sector, including venture capitalists and investors, with the aim of coordinating government initiatives in the crypto industry with private sector innovations.

What are the differences in cryptocurrency landscapes between East Asia and Southeast Asia?

In the retail market of East Asia, take South Korea as an example, the country demonstrates a massive retail business, as evidenced by the significant trading volumes on centralized exchanges like Upbit and Bithumb.

The Korean market is very strong, and the listing of any new cryptocurrency can lead to a substantial price increase, reflecting the strong demand from retail investors for cryptocurrency trading and ownership, and it is supported by a large and active community.

In contrast, Southeast Asia presents a different picture.

For example, in Singapore, the participation rate of retail investors is significantly lower, and discussing cryptocurrencies as a conversation topic is not as common compared to social gatherings in South Korea. Investors in Singapore exhibit more risk-averse and disciplined investment behavior. However, in countries like Thailand and Vietnam, there may be a comparable enthusiasm for cryptocurrencies to that of South Korea.

Regarding institutional participation, Southeast Asia is seeing an influx of capital into the cryptocurrency space, primarily through fund investments rather than direct involvement.

Unlike South Korea, where conglomerates such as Samsung and Kakao actively participate in developing blockchain infrastructure, institutions in Southeast Asia prefer to invest through funds, possibly due to limited direct involvement in the industry.

However, there are some notable initiatives in Thailand, such as SCBX, which is collaborating with Hashed to develop a venture capital model to test blockchain-based financial instruments in the local market. Similarly, FPT Group, a significant technology conglomerate in Vietnam, has launched Aura Network, a blockchain aimed at adoption in emerging markets.

Overall, compared to the direct and passionate participation in South Korea, cryptocurrency adoption in Southeast Asia tends to be more structured and cautious.

With the emergence of new stablecoin projects like Ethena Labs and Mountain Protocol, what is your opinion on new stablecoin models?

Edward pointed out that although these concepts may not be novel, success depends on the infrastructure being well-developed and the underlying principles behind its creation.

He studied Ethena’s Delta neutral stablecoin model, where users provide ETH and the protocol shorts on centralized exchanges (CEX) to maintain Delta neutrality. The strategy issues receipt tokens to users for their ETH while aiming to provide a stablecoin with reduced risk and yield generation.

In evaluating the implementation of Ethena, Edward emphasized the importance of having the right team and financial support to achieve this ambitious project.

Edward highlighted inherent risks, including smart contract vulnerabilities associated with ETH collateralization, and the challenge of maintaining true Delta neutrality due to timing differences between receiving and shorting ETH. He pointed out innovative solutions like using mirrored models with custodial wallets such as Fireblocks to reduce centralized exchange risk and manage short-term funding rates.

In addition, he also discussed Mountain Protocol’s on-chain treasury tokenization and the redistribution of profits to holders, acknowledging that this is not a unique concept but emphasizing its potential for expansion when integrated into the DeFi ecosystem.

Overall, Edward is receptive to innovative stablecoin models. He believes their integration and risk management strategies are crucial for the success of these stablecoins.

What are your views on value accrual for the next cycle? What problems need to be addressed?

Edward emphasized the importance of a clear investment strategy from both an equity and token perspective. He highlighted the need for alignment between investors and projects on long-term goals such as growth, scale, and community development, in order to achieve successful exits, whether through token issuance or initial public offerings (IPOs).

Edward stated that in the investment stage, identifying the main sources of value creation is crucial, whether through equity from traditional business models or tokens that incentivize and track user engagement.

Edward used a hypothetical payment infrastructure project as an example to illustrate that not every blockchain company needs a token to facilitate user transactions.

For instance, a project focused on creating on-chain payment solutions like non-custodial debit cards may not require a token for the user journey. Instead, the project should assess how equity can appreciate, potentially leading to acquisitions or IPOs.

However, Edward also recognized the potential role of tokens in enhancing user experience and loyalty.

He suggested that reward points obtained through blockchain-based cards could be equivalent to a token system, incentivizing high engagement and allowing for activity tracking similar to leaderboards in games or activity points in platforms like Friend Tech.

When discussing the next value accrual cycle, Edward believes it is necessary to strike a balance between equity and token models, ensuring that each model can fulfill its purpose and align with broader business goals, while providing clear paths for investor returns.

Solving this balance requires a thoughtful integration of equity and tokens, recognizing when both are necessary and how they complement each other in the growth and value distribution of the ecosystem.

Quick Q&A

What content should any aspiring investment professional read/watch?

Finematics on YouTube and the Economic Design Newsletter.

What was your biggest investment mistake?

Lack of risk management and being reluctant to change biases when necessary.

What is the most underrated use case for cryptocurrencies?

Payments or privacy.

What is your most unique view on cryptocurrencies compared to others?

Gaming won’t be the driver for the next billion users.

What is the biggest risk in the cryptocurrency space?

Regulatory risk.