 Hi everyone this is Akio Tanaka from Infinity Ventures. We are early stage VC investing in greater China including Japan and today this morning we have a great honor to have a guest from Taiwan Popo Chen. He's actually he's only 27 years old but he's a multiple entrepreneur. He's already done several companies and several exits. I think he's one of the youngest entrepreneur in from Taiwan that actually has done quite a bit at his own age and today he's actually joining us as the founder of Cobing Hood. Cobing Hood is one of the new platform for doing actually ICO itself but also doing a crypto to crypto currency exchange. So this morning we're gonna talk cryptocurrency with Popo here and Popo welcome to Tokyo and welcome to slash. Thanks for introduction by Akio-san. Okay so Popo I just want to I know you've done multiple startups but actually I lost count how many companies have you done so far? You're only 27. I started my first company when I'm in college I studied electrical engineering and at the age of 20 I founded an app company and by now I have exited three companies. So I'm sure some of them I think people here in the audience are also students and it's actually the right time to stop your own first business. Popo did it out of his own college years but today we're not going to talk about his college startups. We're gonna talk about cryptocurrency and just to check the profile of the audience who in the audience actually currently own any form of crypto assets whether it's Bitcoin, Ether or some any other shitcoin anything is fine just raise your hand. Okay and I know this guy does. Okay so some of you including myself it's really tough time right now but we are still I think generally speaking optimistic in this field and today I'm gonna actually probe a little bit of Popo's brain to actually find out why we should be still be excited about this field and some of the interesting trends happening in industry but first since we are in Japan I think that's something we need to address. Japan is I think is the number one country in the world. I think it's definitely number one. This is the number one country in the world for losing a lot of crypto assets for scams and thefts. So this is a great country that has produced Mongols and we also had a recent hiccup at Coincheck and I know a lot of investors lost money and it's actually it's interesting that Japan always comes out number one in terms of cryptocurrency crimes and hacks but I just wanted to get Popo as the founder of actually exchange that actually deals with cryptocurrency trading and I wanted to actually get his perspective on some of those recent cases we have seen in Japan and elsewhere and so Popo why is it so hard to keep cryptocurrency assets safe and why are there so many losses that we see in the real world? Okay so let's do a case study so the most recent event one of the biggest step is in the Coincheck exchange. Coincheck here in Japan. Let me review a little bit about how it happened so actually everyone can see a Coincheck set on the news later they don't actually use a cold wallet for every asset unless they claim why they don't use a cold wallet is because the withdrawal and deposit will be very fast so it's an operational issue but that's very dangerous let me explain a little about like what's cold wallet storage. Okay but just to say does everybody here understand the difference between cold and hot wallet? I know people who have lost money in Coincheck probably know by now but the most people here know the difference okay so only a couple people know so you need to explain what the difference between cold and hot wallet is. Okay so everyone has like many people may have a hardware wallet like ledger nano s or some other hardware wallet that's called a cold wallet. A cold wallet is not connected to the internet correct it's yes it's completely offline and another way to do that is through something we call is like a multi-signature cold wallet it means it has a multiple cold wallet system that together forms a very strong cold wallet vault so for example you can see we can create a new Bitcoin wallet that requires five out of eight to sign off a transaction to withdraw the funds so in operational exchange normally you will put some funds in the hot wallet that is controlled by your cloud server like Google cloud or AWS and like 90 over 95% should be in the cold wallet because even if someone breached your cloud system or someone hacked your API key they cannot steal the cold wallet they can only scan the funds in the hot wallet so is that sounds clear does that sound clear? I think I hope it's clear I hope everybody at least I don't expect 100% of you to understand but if 80% of you got it I think we can continue with the conversation so but I think I did read the release from Coincheck they kept saying it's hard to do cold cold wallet is it hard? Yeah as they said it's very hard to do the cold wallet system but it actually is not too hard but it will cause lots of operational costs for sure so it's not technically hard but it's operationally hard and make sure deposit and withdraw takes longer so user experience may be damaged but it secures your fund it's a trade-off yeah I think Popeye are you gonna say you talk about the other hack I think at Binance can you tell us a little bit about what happened there? Okay so like Binance is currently the world's like top three cryptocurrency is changing in terms of volume and like two weeks ago it very Binance by the way doesn't have a license in Japan but they're also here in Japan yeah yeah so like hack incident occurred in Binance is setting the newsletter is like someone set up a fishing site and it collected a lot of user names and password on Binance but the system on Binance is not hacked actually so actually is a lot of users of Binance got directed to the fishing site and lost their username and password but why will that cause a huge event in Binance because they have two factors of authentication right they have two factors of authentication so even if a hacker got the username and password they should not be able to log in Binance but there exists like a very tricky bug in the Binance back-end system that is when you have username and password you can directly create an API key so that means you have already logged in this API key doesn't require 2FA yes you can basically with a stolen username and password have full access yes so so when the hacker actually collected a lot of accounts that holds a lot of funds they can actually manipulate the market for example I have 100 million worth Bitcoin I can I can influence any trading pair right and as everyone know because there are a lot of alcohol trading boards they will do the arbitrage across exchanges so if the hacker actually don't need to hack the funds in Binance they just need to short or long in other exchanges and they keep spying on one pair and then they take profit from other exchanges they don't need to withdraw from Binance oh that's very smart so actually they're using stolen accounts to create longer short positions and then actually do the trading somewhere else yeah and they cash out by as many about 200 to 20 million US in one day yeah another is changed because Binance triggered a lock lock down on the withdrawal because of it detects the anonymity of the system so Popo you running also exchange so can I do the same trick on your side no how come every API key you are coming who is changed it has access control like read only or rewrite read what kind of resource like balance only or place older so it actually has a full access control detail and every API key creation and revoke needs to FA so does everybody know to FA to factor authentication I think even if you use service like Google and Facebook nowadays or even Apple you the system will actually require you to use something beyond password it might be SMS or it might be you know your authenticator app to so that you actually have to prove provide second form of security in order to log on user service I think it's actually nowadays quite common in many Internet services but it's definitely needed for some places like you know the cryptocurrency or even other fintech services that actually where you're actually putting real money or assets and it's actually surprising how many companies still don't use it and so I think if you if you haven't done so please go secure of your accounts I think use most of your social media accounts nowadays actually have to FA I'm sure most people here use either Facebook or Twitter I just want to check actually people's security awareness here so who uses to FA second-factor authentication security on your Facebook or Twitter accounts Wow okay so I think people I think there are some hackers might be in the audience go after people who didn't raise their hand their accounts are probably easily hackable well okay so this is the problem with the level security awareness so I think one thing you should take away from session apart from what call what Popo has just said I think you should go lock up your social accounts because it's one of the first places hackers will go after now let's move on to the next topic we have about seven minutes left so I think one of the things I wanted to discuss with you Popo is to talk about training a blockchain I think a lot of people are being doing blockchain this blockchain that all kinds of the new systems and the platform they're building on the block or blockchain and I know you guys are also working on some new project and can you talk about a little bit about the trend and we see in this space and to the extent you can also tell us about what you guys are working on okay so as everyone knows what blockchain enables us to do in the future is to transform the financial landscape by doing enabling a trustless value transfer and smart country execution that means you don't need to rely on a third-party authority or notary service to provide a secure your fund transfer because it's decentralized secured by a consensus algorithm and the cryptography property so instead of one authority or the company controlling the transaction security basically have the whole community enabling it yeah decentralized yes so what the problem lies in current cryptocurrencies is the one is the scalability issue because if system is not scalable it's not practical in a real world because you can see like we saw payment network we have about 4,000 per second transactions but Ethereum only can process like 20 Bitcoin can only process a lot about seven and other like 20 or seven in what time period one second one second per second only seven transactions so if you're if you have a building a global financial system on that it's too slow yeah very slow and the less we haven't talked about peak time transaction like in Alibaba like Taobao or like e-commerce system the peak time of an event may causing like ten times or hundred times traffic so if a system it cannot scale out it is not feasible in a real-world application so we have so currently Bitcoin Ether those systems cannot deal with any peak time transaction of say typical e-commerce sites yes too slow yeah so a lot of solutions have emerged like like Ethereum have a sharding solution and we have some lightning network payments network solutions but all these systems have other causing other new issues that we won't address into detail here but actually if you dig into that all solution currently don't seem very promising to solve the fundamental problem and then what are you gonna do about it so actually but just to summarize the issue today is that nobody is still capable of addressing high transaction needs of financial system yes yeah so and even that's for just value transfer we have smart country execution and in one case is called decentralized exchange so everyone why everyone goes to centralized exchange that is vulnerable to like theft or human intervention human error that cause a lot of problems and the system may be on the downtime shutdown or upgrades that cause a lot of issues for users around the globe well actually I always find that's kind of irony because people are now betting on decentralized future of Bitcoin and Ether however they're all betting on the decentralized future on the centralized exchange yeah whether it's Binance or Coincheck or even Corbing Hood yeah at this point yes centralize we are still centralized but in the future I think when the technology advances it will solve one is the scalability issue another one is called an inter ledger issue so it's called interchamp protocol they can facilitate transactions without a third party to do an inter ledger transaction so what does inter ledger transaction do I think in the previous session repo has demo the inter ledger concept right it's kind of like same concept but repo is kind of like a consortium system so it's not fully decentralized it still needs some collateral on the inter ledger bridging banking system nodes so it is still remain unknown problem how to do build a fully decentralized inter ledger protocol yeah so is that something you guys are working on right now yes yeah we will launch our own blockchain system that is the target is to be infinitely scalable solve the fundamental issue and have a dedicated inter ledger protocol designed to bridge all the assets onto the new system so I don't know if you're allowed to say this today on the stage but what that's actually gonna do to your own exchange are you going to actually make Coving Hood decentralized system as opposed to the current centralized system you know like all the other exchanges in the world actually any decentralized system for sure its latency will be a bit higher because it needs every participating validating nodes to reach a consensus about the finality of the transaction right so I think they will coexist like centralized if you rely on a very high volume and low latency trading experience you go to a centralized one but if you want to be more secure and under the funds under your own control you can go to a decentralized one but currently decentralized exchange are mostly not feasible because the latency is super high and the fees also super high transaction cost is very high yeah okay we have about a one minute left so I think I'm gonna actually ask one last question to Popo as also a personal crypto investor I wanted to pick his brain so there are today so many investment opportunity in crypto currency and tokens and apart from your own stuff Coving Hood are there any crypto investments that you think has a very good long-term future and if you can actually talk about something that you think has a promise and share with us I think I'll definitely appreciate I'll make a note of it myself as well yeah I think Telegram is actually launching their ICO but it's not for the public it's like in private placement and it has a long log up period but that I have read through its white paper and technical white paper is about a hundred and thirty pages yeah Telegram telegram ICO it's called the telegram open network and it looks very promising I think it's worth investing in and it actually proposes some sharding mechanism can solve partially the scalability issue so of all the many ICOs why do you think telegram is promising and you guys have nothing to do with telegram yes okay just just to make sure yeah yeah yeah yeah yeah so why do you why do you think telegram has promise so like I said they solve two fundamental issue one is scalability another is like heterogeneous multi-chain system they can do cross-chain transaction intellectual transaction on the mainnet all right you know I'm just doing time check I think we are a little bit over time so I think I'm gonna wrap up this session so thank you very much Popo I think a couple of take away from this session if you haven't done your 2FA on your social media and other financial accounts go home and do it right away and two I think I think blockchains actually enable decentralized systems but our current exchange is still centralized I think it might be interesting I think technical opportunities actually enable decentralized trading in the future I think that's definitely interesting I'm personally my main takeaway is telegram ICO thank you very much Popo and thank you everybody for joining us thank you