Will it run parallel to or replace the traditional economy in the future? This is an open topic. But from a historical perspective, the transition period of such changes is usually very long, and no one can predict who will lead - just like no one thought that Britain would promote the Industrial Revolution, the future of Web3.0 is full of imagination.

Q3: What opportunity made you turn from traditional economics to Web3.0?

Niu Xiaojing:You mentioned that you came into contact with Crypto and blockchain in 2016 and came to Hong Kong in 2018. Did you have the idea of exploring Crypto when you first learned about it? What are the driving opportunities for the transition from traditional economics scholars to Web3.0?

Andy:At the UCL academic conference, I met my current partner (who was a postdoctoral fellow at Imperial College at the time), and we had a great chat. He asked me "Do you know Crypto?" and recommended Satoshi Nakamoto's paper, saying "You should read this if you study monetary theory." I had heard of Crypto at the time, but I didn't know much about it and still looked at it from the perspective of traditional economics. Later, when I worked in an investment bank, many top economists in the Chinese community said "This thing is the tulip bubble."

But I don't agree at all. Because after reading Satoshi Nakamoto's paper, I found an essential problem: whether it is Keynesianism, Friedman's free economy, or neoclassical economics, their starting point is "money supply" - to put it bluntly, "how much money to print." And Satoshi Nakamoto proposed a new perspective: "Why must we discuss it from the money supply side? We should think from the demand side - why should we give the right to issue currency to the central bank? It is most effective to manage your own money", because only you know how to spend money to create the greatest value. This deeply convinced me, and it is also in line with the development logic of artificial intelligence - distributed decision-making is often more efficient.

In 2017, I participated in some ICO projects. Although the industry was in chaos at the time, I saw the potential. In 2018, I entered the Crypto field full-time. I chose the secondary market because I had experience in secondary transactions in investment banks, and most of my partners were scholars in the field of AI, so the team had more advantages in the secondary market. This was the main opportunity for transformation.

Q4: From traditional quantitative to Web3.0 entrepreneurship, which capabilities can be reused?

Niu Xiaojing:You not only combine your own interests, but also make choices based on your judgment of the industry and future value pursuit. From traditional quantitative to hedge funds, and then to Crypto, are there similarities in these experiences during the entrepreneurial process? Which capabilities are reused in entrepreneurship?

Andy:At the beginning, I thought that "academic research, investment banking practice, and entrepreneurship" could be achieved at the same time, and the three were highly related: using academic models to support investment banks, using investment banking resources to feed back Crypto research, and then transforming new Crypto discoveries into academic achievements. For example, the foreign exchange, gold and Crypto that I looked at in investment banks are essentially "currencies". Investment banking models (derived from academic mathematical models) can be used to analyze Crypto, and new insights from Crypto can also be used in papers. But after the scale expanded, I found that decision makers had to go all in - there was simply not enough energy to allocate.

When the scale of the enterprise grows, the social responsibilities and risks you have to bear increase accordingly. The time and energy consumed by decision-making is amazing, and it is difficult to take care of other things. So I had to make a choice. In the end, I followed my heart and chose to start a business - because I think I have entrepreneurial spirit and dare to take risks. As the head of the company, although I am in charge of everything, I am now more focused. Our decisions are mainly divided into two categories: one is short-term hot spots, such as the combination of ICO and Crypto is very popular now, should we do it? What is the valuation? Should we respond to the public market? The second is long-term strategy, such as whether to combine traditional Web 2.0 and Web3.0? Should new quantitative trading strategies be launched?

Q5: In a market with frequent black swans, how to balance risks and returns?

Niu Xiaojing:Many things in the investment field are unpredictable. For example, some well-known quantitative funds in the past had great returns in the first ten years, but they may close down due to a black swan event.

Andy:In abstract terms, we mainly consider two points: one is the "survival problem" - controlling the bottom line risk; the other is the "incremental problem" - how to survive better, create cash flow, make the returns more balanced, and resist the risks of black swans or gray rhinos. The current market environment is highly dynamic, nonlinear, and completely unpredictable.

To be honest, if an investment bank or institution makes a "prediction" for you, don't believe it - most of them are just guessing. The real judgment still depends on yourself. From a mathematical point of view, ultra-high frequency trading (microsecond level) may improve the accuracy of short-term predictions through probability, but I think the prediction of medium- and long-term trends (such as daily level) is pure nonsense. Economics is essentially a social science. It is difficult to study human behavior using the methodology of natural science - there is too much noise and too many black boxes. This is also a big challenge for quantitative research.

Q6: Can you introduce CBCX and Zeuspace? How do the two companies collaborate? What is the future strategic plan?

Niu Xiaojing:Your statement just now makes me feel that the transformation of Web3 may be comparable to the industrial revolution in history, which is a transformation of great magnitude. Back to your career, can you introduce the overview of your institutions - Zeuspace and CBCX? And the main directions and work you are responsible for in these two institutions?

Andy:These two institutions, one represents "tradition" and the other represents "future", and we are gradually integrating the two. CBCX in the UK is an old liquidity provider, similar to the well-known Futu and Interactive Brokers, mainly providing customers with gold futures, commodities, and foreign exchange trading services. At present, we have obtained licenses in the UK, and have also obtained licenses in South Africa and the Middle East, and are transforming to provide cryptocurrency trading services.

Zeuspace in Hong Kong focuses on quantitative trading and has been engaged in asset management for 8 years. Its customers are mainly family offices and institutions, and the scale of self-operation accounts for more than 50%. Simply put, we are a parallel model of "asset management + exchange".

From a strategic perspective, we are promoting the deep transformation and bundling of the two institutions. Quantitative trading in Hong Kong focuses on the pure Crypto field; CBCX uses the advantages of the license to gradually take over the Crypto business. This is what we must do at this stage. CBCX has been running for three or four years, with more than 10,000 users, 80% of which are institutions. Now it is accelerating its transformation. In the future, it will mainly integrate in two aspects:

First, launch financial products, combine Hong Kong's asset management advantages, and provide customers with more asset management products. Originally, we did not touch retail, but now we are turning from high-net-worth people to retail, reflecting our trading strength.

Second, support RWA issuance, such as welcoming RD or tokenization projects to issue coins on our exchange. Energy in the Middle East and gold in South Africa are both good RWA targets, and we can provide issuance services.

Although the exchange used to do traditional business, it has been transforming into Crypto after obtaining the license, and it must speed up. Our advantage is to "help Web 2.0 users turn to Web 3.0". We do not compete with traditional Crypto exchanges for the market, but help them convert customers. In theory, it is a win-win situation.

In the long run, referring to cases such as SQL, Repo, Hidden Road, and Robbing Pool, in the future, Crypto may be able to trade US stocks, US bonds, and even gold and crude oil. We will also open this channel, but the premise is compliance - after compliance, everyone can use Crypto to buy and sell physical spot or futures to create more value. This is actually a "bridge" work, which is very similar to Hidden Road and Repo.

Q7: Where does CBCX's compliance costs focus? What is special about Zeuspace's risk control mechanism?

Andy：CBCX's compliance costs mainly include several aspects: First, the underlying technology, such as the stability of the trading platform and its ability to resist hacker attacks. Stress testing is required, and the construction process takes 6-9 months; second, high-end talents, compliance and technical team operations and maintenance to ensure that there are no risk loopholes; third, user screening, KYC and source of funds review for institutions and individuals, all of which will increase compliance costs.

Zeuspace's risk control mechanism is mainly reflected in two aspects: first, the technical level, matching strategies according to customer risk preferences - aggressive, conservative or neutral, some customers are willing to add leverage, and some pursue capital preservation, which requires targeted design; second, fund layout, which is the key to market differences.

Now the quantitative scale is uneven, small funds may do short-term arbitrage and high-leverage speculation, while we manage funds of over 100 million, and the consensus is "never add leverage, futures at most 1x", and never let customers blow up their positions. If customers want to "double their money in one day", we suggest playing Dex. We don't gamble with the money of institutions or high-net-worth customers. Therefore, the difference in quantitative trading is not in technical strategies, but in fund management and position control.

Q8: How does Zeuspace show asset portfolios to users?

Andy: Full-process quantitative automatic trading, using AI to automatically issue reports and net value. If users want to view fund accounts, they can participate in closed-door meetings, open real accounts to display trading mechanisms, and third-party audited performance tracking (track record), using the traditional fund model.

We communicate with users regularly: discuss strategies at the end of each month, and communicate every Monday night. Because users are mainly family offices, not retail investors, private equity funds are relatively closed. However, in the future, the exchange will open retail wealth management products, and the technology will be provided by Zeuspace to achieve the integration of the two.

Niu Xiaojing: It sounds like "AI on the left hand and Crypto on the right hand."

Andy：Yes, the team is all from AI background, and we can never rely on people to do what machines can do. In Web3 culture, efficiency is the priority, and people should experience life more - AI is better than people except for emotional value, which has been verified in practice.

Q9: How to ensure the security of Crypto wallets or funds?

Andy：I mainly use centralized exchanges (CEX), and I dare not take risks due to large amounts of funds. Dex has too many custody risks and wallet vulnerabilities, and users' security awareness is also insufficient. At present, it is only slowly converting customers (mostly traditional institutions and high-net-worth people who are not familiar with on-chain operations).

What we can do is "remind, prevent, and educate", but the platform is difficult to control the vulnerabilities of the aggregator and the wallet itself, and problems will be very troublesome. Retail investors can only operate on the chain for stimulation, and 99% of retail investors will lose money. Making big money by doing this is essentially gambling, and the few profits are mostly luck.

Q10: (Audience question) How can ordinary people participate in Web3.0? What stage is RWA currently in?

Andy:Ordinary people can start with the Web3.0 report of mainstream media (such as Mankiw), and find a direction to go deeper after a broad understanding. This is how we started.

RWA is too early, just passed the "concept exploration period", and is in the "infrastructure construction period" - the title confirmation agreement, compliance framework, etc. are still being built, especially in emerging markets where there is a lack of standards and are still being explored.

Q11: Talk about your experience in the process of obtaining a license and the progress and challenges in the exploration of payfile (payment files)?

Andy:Hong Kong has obtained offshore licenses and MOS licenses, and more exchange licenses, such as the UK FCA license, which is being upgraded to the bank level (750 license).

The core is two points: First, compliance is a must. It is difficult to get customers in highly regulated areas (London, New York, Hong Kong) without a license. This is the basis of long-termism; Second, develop incremental markets after compliance, such as South Africa and the Middle East - these areas were once British colonies, with many Chinese people, compliance-friendly, and suitable for incremental growth. Simply put: lay the foundation and build a brand in strict areas; do incremental growth in friendly areas. The most feared thing is to be blindly aggressive in existing areas (such as Hong Kong).