Ciara Sun of Huobi talks about the Huobi Ecosystem - Ep. 14

Bobby Ong (00:02):
Welcome to the CoinGecko podcast. I'm your host Bobby Ong. Each week we will be interviewing someone from the blockchain industry to learn more about this fast moving crypto currency economy. If this is your first time listening, then thanks for coming. The CoinGecko podcast is produced each week to help you stay ahead of the curve. Show notes can be found at podcast.coingecko.com. I highly encourage you to join our newsletter where we send out top news in the crypto industry every Monday to Friday. Come back often and feel free to add the podcast to your favorite RSS feed or iTunes. You can also follow us on Twitter and Telegram at CoinGecko.

Bobby Ong (00:39):
Welcome to the CoinGecko Podcast. For today’s episode, we would love to welcome Ciara Sun, Head of Global Business and Markets, Vice President at Huobi. Huobi is one of the largest and earliest cryptocurrency exchanges that has been operating since September 2013. Ciara used to work in Boston Consulting Group, Deloitte and Ernst & Young in financial analysis, strategy consulting and corporate management. Ciara advised many banking and capital markets groups and performed investment analysis to support clients with billions of dollars of AUM. Welcome to the CoinGecko Podcast, Ciara .

Ciara Sun (01:38):
Thank you. It's my honor to be here.

Bobby Ong (01:38):
Yeah, it's a great honor to have you on this show as well. I guess the first question to you right, maybe tell us a little bit more about yourself. How did you get into the blockchain industry and how did you end up leading international growth for Huobi?

Ciara Sun (01:38):
Yeah, sure. So like you said earlier, I was always in the digital finance industry. And I worked in New York and in New York, you know where Consensus is, where the greater blockchain community is. So I got a lot of exposure to digital assets and blockchain projects during my time in New York. So I quit and started my journey with blockchain. And with Huobi, so my role is really leading globalization efforts at Huobi and business developments. It's been quite a journey for me actually. So I actually started as Chief of Staff at Huobi and I managed listing for Huobi Global, and Huobi Japan, Thailand and all the other local exchanges. And then later on, we realized that because we have so many business units and we have different type of partnership with our partners. And they had to talk to so many of us at Huobi and sometimes they get confused. So for a better and one stop really service for all of our partnership we decided to form this new [department] called Business Development Partnership Center so that we can offer a more comprehensive partnership to our partners around the globe. And then later on because of our strategy going forward in 2020 is globalization and global expansion, we decided to separate our marketing, PR and sales team, Western versus Eastern. As you mentioned earlier, Huobi has been known as the largest Asia based exchange. And this year we're determined to really go expand in other countries around the globe. So we decided to do our structuring this way. And I've been leading this global markets team.

Bobby Ong (03:26):
Yeah. I think it's a good move to consolidate all BD and partnerships into one team. Cause I mean, running CoinGecko myself I've seen how sometimes different peoples from the same exchange or from the same team approaching me and they kind of get overwhelming because it shows quite obviously that these guys don't talk to each other and they all approach the same guys like me, trying to get something done. Yeah so maybe tell us a little bit more about Huobi. How did it get started? What was its role in developing the industry in China and maybe Asia and globally after that?

Ciara Sun (03:56):
Yeah, sure. All right. Well, we started as an exchange in China and it's very, like it's very soon, very fast and then Huobi became the largest exchange in the world in terms of trading volume. But in September 4th 2017, when the Chinese government said, "No, it's not okay to operate exchange in China. And then we're gonna be coming out with regulations of the industry and then Huobi shut down exchange business in China and moved all of this business related to token and digital assets overseas. And then started this Huobi China entity in China, headquarters in Hainan and only do blockchain related kind of business. So we do blockchain research, blockchain education. Huobi University has already have about over a thousand alumni or traditional business leads and who wants to learn about blockchain technology. So that's what we've been doing in China. And last year after President Xi endorsed blockchain industry and that's the first time our president ever endorsed any industry. So, and he really encouraged everyone to learn about blockchain. And we quickly had a management meeting and decided that we're going to be putting in our efforts to help with Chinese government entities, traditional business, leading China to learn about blockchain. And so we held about 200 already information sessions and we brought our professors and our, just blockchain-related experts to different cities around China and teach them about blockchain.

Bobby Ong (05:40):
I would like to get your view on fake volume and wash trading. It seems to us that many Asian exchanges are practicing this policy of inflating their volumes to make their markets appear much larger in liquid then what they actually. Yeah, it came to a point where I've told myself that many of these exchanges cheat. And the question is, it's not just if they cheat, we know a lot of them cheat. The question is it actually by 10%, 20%, 50%, 90%. Why do you think many of these exchanges cheat and use this fake volume strategy? And how do you tell internally any exchange also faking things when you compare and benchmark your performance against the others for example?

Ciara Sun (06:15):
Yeah, that's a very good question. So first of all, we don't fake our trading volume. And as, when you operate an exchange, it's actually easy to tell whether the other exchanges are faking their volume or not. So to answer the question where you said, why they fake their trading volume, first is because it's marketing, right? They want to attract more users. And especially with this industry, a lot of people don't know about blockchain or digital assets. When they want to go trade, they want to buy crypto, they'll go on rating companies, maybe rating websites like CoinGecko and they'll see, you know, I'll just go for the biggest exchange. And how people rate exchanges is based on trading. So they'll just think that, "Okay, this is a large exchange so I can trust it. There are so many people trade on this exchange. That's why they got so much volume. So I should probably just open my account with this exchange."

Ciara Sun (07:19):
And that's, I think that's just pure marketing for them. So I have been thinking about this question for a long time and you know, we've been talking about this in the past year or so. The industry itself really need a good, fair and balanced new ranking system. Not like, you know, some of the other ranking system, ranking and rating companies, you know like CMC, they came up with some new metrics, which I don't think is very fair. Like web traffic, you know, what about people using apps, right? And just, it's not good. But there are some metrics that you just can't fake and are very crucial to rank exchange and let customers know where people are really trading. So first is asset under management, right? So as an exchange, people deposit their assets onto exchange to trade. So that means a lot. And the number of assets you manage is really, I think the factor that determines the size of your business. Huobi we manage about 5% of total cryptocurrency.

Ciara Sun (08:30):
And in that sense, we're only second to Coinbase and we're you know, managing more assets then our other competitors like Binance or OKEx. And we don't do custodian for smaller exchanges. So naturally we hold less assets. So besides assets under management, there are some other benchmark measures like market apps, liquidity, security, compliance, which are all very, very important factors. Liquidity is very, very important for traders, for not just institutional trader, but you know, like individual traders as well, because the slippage is very important. It really determines the price that you can get on exchanges and market apps as well. So there are just these factors and other factors like I said earlier, you know, compliance and security that's really crucial. If you just keep losing thousands of bitcoins every year, it's not going to be sustainable at all. And how can people ever trust you if you have this huge security breach issue.

Ciara Sun (09:43):
And we're very proud to say that, you know, at Huobi, we've been running for seven years and there never has been a major security breach. So customers' assets have been safe with us. And we're very determined to be the guardians of our customer's assets and compliance as well. You just have to, as a business, that's already being so big. And we've been serving, you know, millions of customers around the world. It's very important that we do work with calculators and we try our best and putting out offers for compliance. So every market we go to, like you see on the news, we've been trying our best applying for licenses. Like Huobi Japan, Thailand, like our DLT license in Gibraltar. And we are also applying for some of the other licenses around the world as well. So compliance is the way that we do. That's one of our top strategy actually.

Bobby Ong (10:40):
Yeah. I completely agree with you in the sense that they should not be one single metric to evaluate exchanges. Using web traffic as a metric per se is completely flawed because that metric unfairly advantages the exchanges and can be game and many other ways. So that's why we at CoinGecko, we use a trust score, which takes into account web traffic but it's one of the many factors that we use to take into account exchanges quality. I think what you brought up as well in terms of cyber security, in terms of hacking incidents is a very important point and I'm very excited to say that CoinGecko will also be tracking cyber security and you'll be seeing some of these factors being taken into account for our trust score. You also brought up some other interesting point, which is the assets under management. And that's something that's very interesting and I think we should start looking at it more aggressively.

Bobby Ong (11:22):
One of my next question actually is, at the start of 2020, I made 10 predictions for the year. One of the predictions that I made was as follow: "Huobi, OKEx, Gate.io and BithumbGlobal will launch their native blockchains to compete against Binance Chain in 2020. I hope they will be able to build the ecosystem, but I expect things to be tough for them. What value do they bring? We have to wait and see." I'm quite curious to hear your thoughts on this. I understand that you guys are working with Nervos to launch Huobi Chain. What's the plan for Huobi Chain and what use cases are you guys planning on it?

Ciara Sun (11:54):
So it really aligns with our strategy, right? Like I mentioned earlier, regulations compliance and as the first regulator friendly financial blockchain, Huobi Chain aims to enable enterprises financial institutions and exchanges to apply their own blockchain, tokenize assets and also DeFi services. Since the start of this project, our goal is to create an inclusive ecosystem where all stakeholders, from developers and regulators can collaborate and leverage the full potential of the technology. And in sticking to this vision, we're now open the code and inviting the greater blockchain community to help us shape the future of decentralized finance. And Huobi Chain will be optimized for a wide range of financial services and applications. So Huobi Chain will have multi-asset support, smart contract [capabilities] and others to provide enterprise with a high flexibility and to make the whole framework more scalable. And as you asked about differentiation factors for Huobi Chain, one of those key differentiators of Huobi Chain is regulator friendly design. So Huobi Chain is the first blockchain to support regulator nodes and let regulators contribute to the network as validators. This chain will also support decentralized identifiers, such like KYC verification to meet our requirements. So if major banks and financial institutions are to fully embrace and adopt commercial blockchain technology, we need to create a safe and secure environment that make it easier for them to translate their products and services to blockchain. So that's why we think that by ensuring full regulatory compliance, Huobi Chain is well positioned to become the top financial blockchain.

Bobby Ong (13:50):
Let's talk about Huobi token. So if I remember correctly, Huobi token was originally sold as points on Huobi platform, which allows users to buy VIP access or discounted trading fees. Sometime later, this points were converted to Huobi token. What are the use cases of Huobi token these days and how do you see HT increasing utility in the future?

Ciara Sun (14:12):
So redeem points for VIP and trading fee discounts are only part of the rights and benefits on both HT and Huobi. Quite recently, on June 16th, Huobi Japan listed HT. So as the first international and big exchange platform token that's accepted as a regulated token in Japan, where we hold the Japanese exchange license. So in Japan, crypto payment is widely accepted by more than 50,000 plus stores. And compare it to payments in Fiat and Bitcoin, first of all, you know, I see prices around $4. It's more, you know, compared to Bitcoin where it's $9000, it's more convenient for a smaller payment like shopping et cetera. And second of all, world governments are aiming to build a cashless society especially in shades of the COVID-19, the whole situation, economic downturn. And crypto mobile payments can effectively avoid cards and cash contact. We see potential roles HT could play in charity as well and inclusive finance. You know, I lead a Huobi Charity and did a lot of charity work for COVID-19 situations since the beginning of this year. And we have worked with several operations like the United Nations, South-South Corporation to donate HT for medical supply purchase. And cryptocurrency can also be used as a very effective way to help small, medium enterprise to finance, you know, in the South Asian markets.

Bobby Ong (15:50):
Indeed. It's very interesting about your HT's plan, actually. Let's talk about the Huobi's mining pool. So you guys have a mining pool that has been operational since March 2018. Currently it is the eighth largest Bitcoin mining pool with about 5% of all Bitcoin hash rate. Do you think this is a success or do you think it should be better? Wanna hear your thoughts about it.

Ciara Sun (16:13):
Yeah. So Huobi mining pool was the first exchange affiliated mining pool that went live in 2018. And soon after it went live, Huobi mining pool listed HPT, that's the Huobi Pool Token in 2019, and Huobi mining pool reach about 321 million in revenue. And Huobi mining pools will soon launch in mining marketplace with 40% of the bitcoins holding costs to be controlled under $40,000. And among the entire exchange affiliated mining pools, we're very proud to say that Huobi is at the forefront in terms of computing power, cost control, and proftability. According to btc.com, I think right now Huobi mining pool is currently listing as the sixth largest.

Bobby Ong (17:02):
And not many people are aware, but Huobi Pool also has an exchange and a token as well called Huobi Pool ECO for the exchange and Huobi Pool Token for the token. So this is part of where I'm a bit confused. Why create a separate exchange and the token? What is the use case of Huobi Pool Token?

Ciara Sun (17:19):
Yeah, the main purpose of HPT released is to retain miners and see some market share. Huobi is building a global ecosystem. The release of HPT aims to invite and bring miners into this ecosystem. HPT also integrate mining pool into the exchange business. Huobi mining pool has designed a new economic models that faciliate circulation between the mining pool token, HPT and platform token, HT. So HPT has further empower exchange by means of the economic value it creates. And HPT direct buying comes from two populations. So first is miners can join certain discount by holding HPT. And second HPT price directly reflects revenue of Huobi mining platform, which is transparent and fair due to the regular purchase and burning plan. So receive earning by early adoption can be a fair option. And the most practical use of HPT for miners are the VIP services that incorporate into the platform. So like we talked about for HT earlier, it's kind of the same for HPT in this whole mining ecosystem. So for fee discounts, payments for other platform products of the ecosystem, etc. So the larger the ecosystem is, the more working scenarios HPT and HT can engage and higher value of the token can increase.

Bobby Ong (18:54):
So Huobi has been a bit slow in the launch of its derivative market, HBDM. BitMex, and OKEx has always been a leader in this. With the growth in the spot market slowing down and Binance launching Binance Futures last year, we started seeing all exchanges are launching their own derivatives exchange including Huobi with HBDM. What's the plan with HBDM? Do you guys plan to add Options and Leveraged tokens markets as well this year?

Ciara Sun (19:19):
Yeah. So just to clarify, on May 17th Huobi DM has rebranded exchange as Huobi Futures, as the crypto derivative surge in popularity. Yeah. That is a great event for us. So yeah, Huobi Futures has been alive for over a year and a half and June 15th Huobi Futures has just introduced a new futures products that by quarterly contracts. And these contracts join will be successful stable of derivatives trading tools and come soon after the success launch of perpetual swaps, which it was late March I think. So as you said, it's true [years] are the biggest competitor in this space. But we did quite well. Our Huobi perpetual swaps quickly surpassed our biggest competitor like BitMex in the markets with a record time of 47 days and we became the largest perpetual swap trading platform in the world.

Ciara Sun (20:19):
Similarly as perpetual swaps, for our contracts trading, we are also years later than our other competitors like, OKEx [inaudible] which right now is the biggest futures exchange. And the option product is currently undergoing pre-launch testing. Exact date has not been set, but I'm sure we'll meet the public very very soon versa. So stay tuned with Huobi Futures. It's a great team. They've just got all the skill sets and professionalism to run a very successful derivatives exchange. They've got the best risk management, risk control protocols in place to protect our users from great volatility like, you know, March 12th, major crash of the Bitcoin price. Liquidation volume on Huobi Futures is the smallest among all of our other competitors. Like I said earlier, we are already in terms of volume bigger than the next, but our liquidated volume on that date was only about 18% of what happened on BitMex.

Bobby Ong (21:27):
Yeah. I think consumer protection is important. Like we don't want to get like consumers to lose unnecessarily too much, especially during large market crashes like what we saw in March. So Huobi has been active in the IEO market last year, but the market seems to have died off. What are your thoughts on the IEO market these days?

Ciara Sun (21:46):
Yeah. So in terms of listing, you know, first of all, this market and industry have been very, very fast evolving and developing, changing. And listing has been pained quite a few times on Huobi and on all of the other exchanges. We have been taking listing very seriously recently. And as you can see from last fall until now, we really didn't list any new tokens besides Hive. And we recently listed Origin. And that was pretty much the only tokens that we listed. We have been very considerate on the quality of the asset that we list. We want to be able to provide the best and most secure assets to our exchange users. And I think that's why we have been listing very slowly. And like you said earlier, we have been not very active on the IEO market and I believe that's a good strategy and that really shows our whole value system, who we are and what we stand for. If you look at IEO projects in the past about a year or so, when we stopped listing the other projects that our competitors listed as IEO project really didn't do that well. And there's a lot of, you know, like speculation and to be able to provide a healthier environment to our exchange users. Like I said earlier, we have been taking those metrics very seriously and right now getting listed on Huobi is very hard.

Bobby Ong (23:24):
Yeah, indeed, indeed. I think not listing that token is one of the key things in taking care of your users. Yeah. I think we kind of reached the end of the podcast. Before we ended the last question, if someone's interested in learning more about Huobi, where's the best place to follow and learn more?

Ciara Sun (23:40):
Well, first of all, you can always find me on my Twitter, @CiaraHuobi. And since our seventh anniversary is coming very soon, we'll be launching a website upgrade and a blog upgrade for our seventh birthday. And all of the latest news and data about Huobi's business will be shared on our official blog. And we also aim to build consistent and close relationship with media and general public. So if, you know, anyone who wants to make any inquiry, you can just send questions to media@huobi.com. Our staff will add you or our media contact list will. And we'll share our mostly events, news and press release in our newsletter.

Bobby Ong (24:20):
Sounds good, Ciara. Yeah. Thanks a lot for taking the time to come on the CoinGecko podcast. We really appreciate your time and we learned some new stuff about Huobi today.

Ciara Sun (24:29):
Yeah. Thank you so much. I really had fun, you know, very chill conversation.

Bobby Ong (24:33):
Yeah, same here. Same here.

Bobby Ong (24:36):
All right, that wraps up the show. Thank you for listening to the CoinGecko podcast with Bobby. If you like our show and want to know more, check out podcasts.coingecko.com or please leave us a review on iTunes. Do you have any feedback? Do drop us an email at hello@coingecko.com. Join us for more next week. See ya.

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