The founder of SPINDLE project, Shuichi Uda, talks about the transition of cryptocurrency market and the future of his project.
With updates on ZETA β (beta) version, a cryptocurrency hedge fund platform, to be released shortly, we would like to ask founder Mr. Uda about the changes in the blockchain arena and cryptocurrency markets in 2019 as well as how SPINDLE has dealt with such changes, especially those of 2018.
Q1. The year 2018 marked a significant turning point for the cryptocurrency markets. What do you think triggered the change?
A1. Well, the most apparent trigger was the hacking incident targeting Coincheck in January. Nearly 40 % of the inflow to the cryptocurrency markets had been from Japan, but after this event, which occurred in the largest cryptocurrency exchange market in Japan, the then leading Japanese cryptocurrency market really cooled down, and eventually this had a major impact on the world market.
Q2. As you said “the most apparent,” so you mean there is some other factor. Can you specify what?
A2. As we already pointed out in SPINDLE’s WHITEPAPER VER 1.3/2.0 (2017 fall / 2018 winter)*, central governments began to regulate cryptocurrency markets much more strictly. Thereason d’être of cryptocurrency is mostly incompatible with the conventional currency system, and the fact that governments had to tighten regulations in response to the burgeoning market growth was an anxiety factor for the market.
*SPINDLE WHITE PAPER Ver 2.0 (Published in English, Mandarin, Cantonese, Russian and Korean, but not in Japanese.)
SPINDLE’s concerns over the situations of cryptocurrency are as follows:
1 Free transaction will be undermined due to excessive regulations
2 Free transaction will be compromised due to excessive consumer protection, and the general public will be hampered from improving their literacy of investment
3 Decentralization (democratization of finance) will be jeopardized
1 Our guiding principle is that economic activities in general society should be free until a transaction in question is found criminal or illegal. We believe that excessive regulations may be limiting technological evolution.
Q３.Why is such an ambiguous situation left unattended?
A3. Regulators do no say anything if businesses adopt stricter standards than actual regulations, so some may have seen such elevated standards as obligatory. Especially, cryptocurrency transaction is an online business that has been subject to online reviews, where people who earn money from page views post critical remarks with sensational headlines (“clickbait”), which often do not have any legal or factual basis. Many investors in turn believed such groundless criticism as accurate and the number of market participants decreased.
Q4 .Do you think such ambiguous regulation led to adverse outcomes?
A4. Personally I don’t think regulation is necessarily “evil.” In new forms of investment such as cryptocurrency or ICOs, some people make a big profit and other people make a considerable loss due to the lack of regulations. Losers around the world turn to the government or competent authorities for remedies. Then the government needs to respond to such voices and consider regulation. There is no other choice.
Q５. So there are multiple factors.
A5. Yes. The bottom line is that some cryptocurrency traders were not mature enough as investors. Of course, many people have advanced investment strategies and there are seasoned investors, but the cryptocurrency markets were indeed easy to enter, and many people did join and trade. This is why the markets expanded rapidly. On the negative side, not a few cryptocurrency traders were not able to sift through gossipy information from self-proclaimed critics or dubious financial specialists with limited knowledge. Posting such questionable news and gaining page views can be financially rewarding for them, but many people blindly accepted articles without legal grounds or decent information sources.
Q６. SPINDLE became in vogue as Mr. Gackt Oshiro joined the team. I think you gained and lost a lot because of this. As a founder, what do you think about the advantages and disadvantages of his participation? What impression do you have of Mr. Oshiro as a businessperson?
A6. We accepted Mr. Oshiro as a management member because I personally believed cryptocurrency should be a mass movement. Some overseas cryptocurrencies also invited celebrities as ambassadors, so the public should have seenus in the same light as them, irrespective of how the celebrities are thought of and believed. On the positive side, his presence was very effective to publicize the size of our ICO. We also attracted attention in Europe and other areas of the world as a major movement, and our range of activity became wider. We heard many people say, “We know nothing about cryptocurrency, but we do know SPINDLE,” probably thanks to gossipmongers in Japan. On the other hand, most of the criticism we got was ambiguous and out of focus, blaming us for simply carrying out an ICO as a means to raise funds from the public. Japanese media today cite various information to criticize their targets, which many people still believe in, but almost 90 % of it is opposite to the facts. Under this situation, some of our partner companies in the early days decided to leave us — a big disappointment for us, and this was a major downside. It is an undeniable fact that Mr. Oshiro is an artist. As he is a well-known celebrity, gossip articles become commercially valuable and beneficial to those who post them. Readers will choose to read articles with sensational headlines. But many of such gossip articles are unaccountable; they just use clickbaitand make money. And perhaps there were many investors in cryptocurrency markets who just accepted articles without question and acted upon them. I find it ironical and incomplete that investors who joined a market that features a decentralized structure could not see what is right and what is wrong, and ended up acting upon information that conventional authorities spread. In this regard, we had to make a complete turnaround from my belief that cryptocurrency should be a mass movement. This trend is a reflection of Japanese society today, and we just have to view and analyze the current movement.
Q7. Ultimately, are we still far from what SPINDLE considers the ideal state of autonomy?
A7. Human beings are essentially swayed by authority, and tend to be dependent on others. No investment promises a profit. Investors need to take full responsibility for their investment decisions. They also have to make sure if information from the internet and media is correct before making the decision. By using blockchain to share operators’ history and investors’ performance in an immutable way, SPINDLE aimed to urge investors to make decisions at their own responsibility and realize autonomy through their free investment activities without intervention of outside authorities. But I feel people still do not feel the need to be autonomous. Especially in Japan, discussion over the nature of cryptocurrency and blockchain has decreased considerably, and people focus on mere safety concerns and talk within a simple framework. A great majority of people cannot analyze and judge the situation by themselves.
Q8. So, will SPINDLE change its goals?
A8. In the long term, we still want to be a platform that allows people to be autonomous. But autonomy requires considerable social change, and people will not be able to face finance independently without certain changes in the existing economy or society. If social values remain unchanged, SPINDLE’s struggle will be prolonged; it may take more than 10 years for it to prove its merits.
Q9. What are the current demands from the market?
A9. Naturally, increasing the price. The other thing is security in case of hacking or malicious transactions. SPINDLE plans to boost security in ZETA. In addition, the market has multiple needs — the current keyword of the cryptocurrency arena is “custody” (storage and management tasks in the financial industry). This is not directly related to currency issuers, but exchanges that do not meet the conditions for custody will be driven out of the market within a few years. Custody is often required in a cryptocurrency platform business, so it is an urgent task for cryptocurrency funds to establish custody. Therefore, SPINDLE plans to provide funds with a custody service in its ZETA platform. This will entail an alliance with a more knowledgeable company.
Q10. How will you bolster security?
A10. It seems that the community surrounding cryptocurrency users is not really interested in whether the system is decentralized or not. We will put aside our ultimate goals and implement functions to deal with theft through hacking or malicious transactions while giving up providing a completely decentralized environment. We have developed a system where the tracking function in our ZETA platform can nullify hacking or malicious transactions.
Q11. Where will SPINDLE head for in the future?
A11. I think Japanese society is becoming bipolar in information access and other various aspects. Since the Japanese mass media is largely skeptical of cryptocurrency, many people are biased against it and unable to choose accurate information. Focusing solely on Japan does not make sense in running a cryptocurrency business, including engineering development. Japanese engineering is excellent but not creative, and Japan’s society does not have the capacity to foster creativity. So, SPINDLE will not focus on a specific region. A sense of stagnation is prevailing in society, and those who seek economic and other kinds of freedom will move in search of freer fields and products. We believe the number of cryptocurrency hedge funds will continue grow, and our activities will develop in accordance with their original concept. We have decided that ZETA will allow its users to access to gold and other commodities, and the test will start in 2019.