Chen Li of Youbi Capital On The 5 Things That Can Be Done To Improve and Reform The Cryptocurrency Industry
See people focus less on bad news: Hacks, fraud and scandal are all growing pains of the technology revolution. Given the massive benefit from the blockchain, none of these will stop adoption. Focusing too much on bad news and even dismissing its merits could cost people or organizations the opportunity of a lifetime.
As part of my series about the “5 Things That Can Be Done To Improve and Reform The Cryptocurrency Industry”, I had the pleasure of interviewing Chen Li, CEO and Founder of Youbi Capital.
Chen Li is an award-winning scientist and early Bitcoin miner from China, who became an early investor and crypto market insider. Given his technical background, he is an expert in vetting the technical validity of innovative protocols and also a key industry leader in market trend foresight.
Chen’s company, Youbi Capital, is a leading digital asset VC and accelerator focused on investing in projects that abstract the functionalities of infrastructure applications. Since 2017, the company has invested in more than 100 blockchain projects.
Thank you so much for doing this with us! Our readers would love to “get to know you” a bit more. Can you tell us a bit about your “backstory”?
I’d love to! I actually started my professional life in chemistry in Shanghai, China. After college, I came to the United States for graduate school at the University of Michigan. I earned my doctorate and joined the pharmaceutical company, Regeneron. I loved my work there, even winning a few awards for my contribution.
However, after a few years of very interesting work, something came along that totally shifted my focus. That thing was blockchain.
Can you tell us the story of how you got first involved in blockchain and the cryptocurrency industry?
Of course — the career pathway from chemistry to crypto is unique! So after a few years of working and saving, my old college roommate mentioned he was into crypto mining. This was in 2015 and, after looking more deeply into what he was doing, I decided to join him in mining for Bitcoin.
I must say, joining any movement in the middle of a bear market is difficult. Back then, Bitcoin was valued at $200 and the future was never certain. However, things really changed for us with the arrival of Ethereum and our greater understanding of smart contracts. We appreciated decentralized applications (dApps) and how this technology could offer people greater control over their data. The idea to decentralize the world took hold of us — and it never let go.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
Yes, the person who changed everything was my college roommate, Peicai Li. He always had a business-oriented mind when it came to crypto, and it was his drive and ambition that saw him become one of the largest Bitcoin miners in China. He’s an eternal inspiration.
Can you share a story of a time when things went south for you? What kept you going and helped you to overcome those times?
This is a tough question. I recall that those early years were often frustrated by sudden downturns. Of course, there was growing excitement and interest in the space, but bear markets made it hard to build momentum. From projects to mining to personnel changes, things were tricky during downturns.
I’m grateful that we held our faith that the market would soon recover and reach new heights. That’s why we continued investing through the worst market conditions — and were handsomely rewarded.
In your experience, what are the top strategies that blockchain companies should consider to have a stronger competitive edge?
There are many that I could mention, but only one matters: transparency. This is blockchain’s greatest feature and should be used by companies to their advantage. This is in stark contrast to normal financial institutes — like we saw in 2007 and 2008 — where there are so many layers that it can be tough to know what’s going on.
Blockchain, when used correctly, levels the playing field for all involved. Unfortunately, there are projects out there that have don’t make things transparent. They don’t disclose the number of tokens in circulation or who they belong to, for example.
My advice for all blockchain companies and projects is to build their product around what made the technology so great in the first place. If companies can best leverage transparency and integrate it into their project, they can increase trust and attract users. Simple.
What are the 3 things that most excite you about the blockchain industry in general? Why?
This is a space in constant motion, so naming three is tough! But if I had to choose:
- Lower barriers to entry: Going back to the idea of decentralization, I love how our industry is democratizing the world. The balance of power is moving away from centralized sources and shifting toward people. It’s nothing short of revolutionary that blockchain applications are lowering the technological, governance, organizational, and even societal barriers to entry.
- Strong, global communities: Blockchain is more than a technology, it’s a movement. I’m always excited to see how people from all over the world come together, use this technology and create vastly different applications. Likewise, blockchain users always turn their passion for projects into constructive feedback. I’m always very happy when users get in touch with ideas to make something better, stronger, faster. Oftentimes, an engaged community is key to retooling a project and making it as good as it can be.
- Composability and the network effect: Finally, I love that all defi protocols can be used as building blocks and composed into higher-order applications. This allows developers to leverage the existing functionality, users base and liquidity of these building blocks and innovate rapidly. With the basic material, composability offers defi ecosystems a strong network effect.
What are the 3 things that worry you about the blockchain industry? Why?
There is far more good than bad in our industry, but if I had to choose three:
- Lack of transparency: This is the top issue. As I said, the trustless nature of blockchain is its foundation. I don’t think it’s ever good when projects try to make things less transparent.
- All aboard the hype train: I do worry that altcoins and meme coins can focus too much on marketing and not utility. Ultimately, investors need to be wary of overhyped coins.
- The spectre of regulation: The constant, potential threat of regulation does cause concern. The crypto ban in China, for example, is a blunt approach to nip blockchain innovation in the bud due to the fear of fraud activities and challenges in regulation. If something like that happened in the US or EU, it would be detrimental to the industry.
Ok, thank you for all of that. Here is the main question of our interview. Can you please share “5 Things That Can Be Done To Improve and Reform The Cryptocurrency Industry”? If you can please share a story or example for each.
For me, as a cryptocurrency venture capitalist, I would like to:
- See projects that don’t overmarket themselves: This is how we end up with meme coins that often don’t have a long term plan. Teams that spend 90% in marketing and 10% in development need to refocus.
- See investors with better understanding: Instead of following the crowd, investors should do their due diligence and invest based on independent decision-making. This will create better projects and better results.
- See people focus less on bad news: Hacks, fraud and scandal are all growing pains of the technology revolution. Given the massive benefit from the blockchain, none of these will stop adoption. Focusing too much on bad news and even dismissing its merits could cost people or organizations the opportunity of a lifetime.
- See more young talent in the industry: This is starting to happen, but it will be exciting to see what more young coders and developers bring to blockchain over the coming years. Especially with the rise of the metaverse, these youngsters will build the next generation of blockchain adoption.
- See blockchain projects that leverage transparency: Last, but definitely not least, our industry needs to keep transparency at the front of mind. Always.
How have you used your success to bring goodness to the world? Can you share a story?
I look at web 3.0 as an incredibly positive thing that I’ve helped to shape over the past few years. Web 3.0 powered by blockchain provides people that are unbanked access to financial services and job opportunities. Yield Guild Games (YGG) is a great example of how blockchain games can give people in developing countries a way to generate much-needed income during the pandemic. We participated in the project in 2020 because of how it was changing the lives of thousands of people with play-to-earn. Now, the play-to-earn model has impacted the lives of millions of people across the globe.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
I’m always inspired by the Chinese proverb: A journey of a thousand miles begins with a single step.
How can our readers further follow your work online?
Of course — they can follow my company, Youbi Capital, or see my posts on LinkedIn.
Thank you so much for this. This was very enlightening!
Thank you, it’s been my pleasure.