Crypto 101. Crypto’s growing legitimacy is coming from real world benefits, passive income, yield and versatility.
Oleg Smagin provides a great background for everyone on how crypto was sparked and developed into a burgeoning career with Alex.
Oleg Smagin career in crypto shows how the blockchain-based currencies continue to develop new opportunities. The company he works for, Delio, offers investigative services including digital asset backed lending, decentralized finance, and custodial solutions.
Their goal is to generate passive income for their users as well as lending services. They are also currently looking into building businesses in decentralized finance and NFT.
Decentralized finance is the ability to buy & sell different tokens without relying on an intermediary. In the NFT space, Delio is looking to build a market place, where verified creators can offer NFTs.
Oleg and Alex discuss the growing sense of legitimacy around the crypto industry. Unlike previously where tokens were simply bought and sold, the industry now has the ability to offer a range of services very close to what a normal bank might offer, lending, passive income etc.
Oleg also talks about how many developing countries, that previously suffered because they lacked traditional banking infrastructure have leapfrogged into crypto-banking because their populations have smartphones and are able to access their wallets much easier than a brick-and-mortar bank. On top of this, crypto currencies yields are now much more attractive that regular bank yields.
Oleg then deep dives into NFTs, explaining exactly what fungible and non-fungible means and why this offers investors and creators so many new opportunities including gamification. NFTs look like becoming a stable of the future gaming industry as a way to buy and sell game items.
Government regulation around the industry is becoming clearer, recent legislation in Korea has taken away some of the wild west feeling. Licenses, taxation and registration reassure people that they protected to at least some degree. This may take away some of the crypto original attractiveness as a decentralized place to do business, but for many others it brings reassurance.
This process of legitimization is growing, with 15% of the Korean adult population have now had at least one experience involving crypto currencies.
Crypto’s growing legitimacy is coming from real world benefits
Crypto’s growing legitimacy is coming from real world benefits, passive income, yield and versatility.
Alex Jensen: You’re listening to Koreabizcast with the KBLA. I’m Alex Jensen and it’s Wednesday, November 24th. Now, there’s been so much said in the last few years about cryptocurrencies about crypto investments and the whole world that spreading out from there, including blockchain technology and NFTs. The list goes on.
Our next guest works in this area, though, is a supporter of decentralized finance. And as someone who might help us demystify some of the unknowns that still remain in this area, and if you want to get involved, perhaps you’ve got your own crypto viewpoint that you’d like to share with us, just send us an email firstname.lastname@example.org.
And if you’ve not already done so, find us on LinkedIn search KBLA there and we’d love to connect with you share with you everything that we’re doing so that you can be up to date. And if you like what you’re hearing, please help us out by sharing and spreading the word.
Alex Jensen: Now, I guess when you’re a new podcast, you’re gonna hit quite a few firsts quite quickly. But I imagine there’s not too many out there that can boast having twins on in different industries within the space of just a few days of each other. But that’s what we can do, now exactly.
You may recall, we spoke with Genya Smagin, a few weeks back now actually, on the subject of his work in finance, at SK Telecom, his journey from Russia to Korea, are now his twins Oleg Smagin is with us, and working still in the world of finance but with a crypto in front of it. Thank you all so much for speaking with us.
Oleg Smagin: Oh, Thanks, Alex. It’s my pleasure to talk to you today and thanks for an opportunity.
Alex Jensen: And I should point out your full title as Head of Strategy at Delio. Can you start by telling us how you got involved with Delio and with that role, particularly?
Oleg Smagin: Sure, so I think I should start first from how I got into blockchain because I think it basically started around 2018, 2019 When I was studying in KAIST, MBA here in Seoul. At the time, I already had some experience investing in crypto. But I was never thinking of working in that industry.
I was more excited about FinTech. And this was for a reason because a lot of professors in KAIST will be talking about a revolution in banking, mostly referring to crypto to FinTech or in crypto because the digitalization of Financial Services has been already happening for years. And FinTech was very hot at that time. So, around the end of 2019, about the time I had to graduate, I was seeking for a job mainly in FinTech not blockchain. However, exploring job openings, I saw a strategic position in profit, at that time one of the leading crypto exchanges in Korea.
And it wasn’t a FinTech category as well. So, for a second, I got curious, and I applied, and after going there for an interview, I realize they’re building something quite new and fascinating. And I really wanted to try and get to know more. So, I think they exchange, the place was the one that really helped me to pick up knowledge really fast to become enthusiastic about crypto because I had to do sales, 10s of different projects every week.
And when you speak to each of them, it’s practical communication, you meet people, you talk to people, and you come out from each meeting with a new insight. So, among what was going on in crypto at that time, the most fascinating thing was decentralized finance DeFi. It was just emerging at that time, Uniswap was still in the early stage and even people in crypto and DeFi for them was staring committing at that time, and of course not many people outside the industry really knew much about it.
So, study about it, I realized DeFi is the one technology that can really revolutionize finance, because it can be deployed to many services, and it totally removes the need of intermediary. So soon after that I was searching for not just a crypto company, but the company that is active in DeFi, and I found Delio. It’s just one of few companies in Korea determined to build an ecosystem of DeFi services. So, when the opportunity arose, I decided to take it without any doubts.
Alex Jensen: Well, that’s, I guess, a great example of someone who identifies a passion and goes for it and achieve success. But what exactly does Delio do? What does it mean to be crypto finance company?
Oleg Smagin: So, Delio basically offers investigative services including digital asset backed lending, decentralized finance, custodial solutions, and more I usually call Delio and Bank of for crypto, because to basic services we started from our lending and crypto saves accounts.
I also prefer to call our company yield provide them because we generate passive income for users who don’t want to sell their Bitcoin or Ethereum or other crypto assets but want to build get passive income yield. And on the lending side, you can borrow fiat money, like Korean Won via crypto, the collateral, this is also a very innovative service. I’m going to be expanding into two new sectors decentralized finance and NFT.
In the decentralized space, we are offering an exchange service called Delioswap, where you can sell and buy different tokens without relying on intermediary, like in a Bit to Binance who take custody of your assets. And for NFT, we are currently developing an NFT marketplace where users will be able to buy NFTs from verified sellers. So, my main responsibilities here are defining the long-term corporate strategy.
I also do service planning, develop partnerships, both here in Korea and overseas. I also represent Delio at most of the blockchain events and write to a blockchain media, about the market trends as well.
Alex Jensen: There was a time not that long ago where you talked about blockchain, and cryptocurrency and you might have felt a little bit on the fringes of certain conversations or have a certain suspicion rise around you. What is it? Do you think about these services that is allowing them to become more appealing in the mainstream than traditional finance?
Oleg Smagin: Yeah, I think when we talk about DeFi in general, there are a few reasons why it’s so hot now. I think first, as I have told before, DeFi protocols allow users to perform a fast array of financial operations transaction, they can borrow money, they can trade assets, and more. But all transactions don’t require immediate, mediator like a bank.
All transactions are settled in the blockchain using smart contracts. It’s much safer, cheaper, and very handy for users compared to traditional finance, and second, DeFi make some financial services available to users who cannot use banks. So, for instance if you are user in a very poor country, and have a few, or you can, for example, borrow stable coins to view a theorem as collateral with the same interest rates, users in developed countries do. This is something absolutely fascinating mentionable in the traditional finance because across countries and different countries that are the rates are different. It may actually sound like an oxymoron.
But in fact, some developing countries are leaders in crypto adoption, and much more people have smartphones and crypto accounts then bank accounts. And I think the last and maybe the most important, DeFi protocols offer much more yield on your capital than banks. Let’s say if you have dollars and you put them into the bank. Now the annual interest rates you get will be probably less than 1%.
And some developed countries have even negative rates. However, if you lock your fonts into a smart contract and start to earn yield from users who borrow using the protocol, you can expect much higher yield because all profits go exactly to you.
There is no intermediary who takes it out from you and feeds all the state shareholders and executives. What you can also do is to use aggregator like Delio and we will deploy your assets instead of you for a small fee. In this case, you will earn a fixed yield. For instance, if you deposit your dollar back to stable coins today on Delio, you can earn, sorry, stable coins back to dollar on Delio. You can earn 6% annual yields, and this is many times higher compared to what your any bank can give you.
Alex Jensen: What about the downside? I know it’s not your job, perhaps to convince as against this, but I feel I do have to ask, is there any particular risk that we need to be aware of? There’s always the idea, I’m sure in all of our minds high rewards come with high risks.
Oleg Smagin: Yeah, so as I said, all everything every transaction is settled in the blockchain and uses smart contracts. But smart contract is a code written by person. So, If there is a mistake, if there is an error left in the smart contract, your funds can get lost. This is probably the major, the major insecurity, the major issue with smart contract. And if any fact, a few platforms, a few protocols had this problem before and the funds were lost, though investors lost their money. But for bigger protocols, they will, they have a record, track record, they have been audited by big companies, they don’t have this problem. So, I guess over time, you’ll get more safer, more bigger platforms offering these DeFi services where this problem will not be as big as it was before.
Alex Jensen: Now, I’d also like to ask what you think are some of the most exciting directions for blockchain and cryptocurrencies, generally?
Oleg Smagin: Well, I think, as we have spoken about DeFi, I want to outline probably NFT I think it’s the hottest trend right now. Because the NFT is in fact a very special area in the industry.
Because unlike most of the digital assets, we have been talking about NFTs non fungible tokens. And basically, in economics, a fungible asset is something with units that can be interchanged. Like let’s say money, or like most of the popular crypto everyone knows. So, let’s say with dollar you can swap $10 node for $2, $5 nodes, and it will have the same value same for Bitcoin. 2 bitcoins both, in one exchange equals 2 bitcoins bought in two different exchanges. But we have something non fungible, this is impossible. Everything is unique and from a user point of view.
NFT is a digital item that has a verified and public proof of ownership, thanks to blockchain. So here, I think there are many kinds of NFT and the ones we usually see are mostly collectibles, unique art pieces. The main example could be Cryptopunks. They’re the main NFT collection right now. Some of those items cost up to a million dollars. Other popular items. NFTs that can be used in metaverse, or games, for instance game characters could be also NFT. And the reason why NFTs are gaining so much attention now is because they make items in the metaverse liquid giving users an opportunity to buy them, to sell them, to store them and use in the metaverse.
Most items can also be elevated in value and traded for other collectibles, the players and some game five projects. We call it GameFly, game in NFT, well, it’s hirer than biggest game produces. For instance, there is a game called Axie Infinity. And it has a market cap of its coin about a quarter of electronic eyes valuation, just one NFT game. So, we would want as a company to be all the ranked among the top video game companies globally. So, we currently have a lot of games like that, that use NFTs and offer users who play most games opportunity to sell this item in the form of NFTs.
Alex Jensen: But, here in Korea. We know the government has been very wary of the rise of cryptocurrency and everything around it, despite also wanting to harness the power of metaverse for its own goals as well which would perhaps just add on the side but in the face of cryptocurrency related regulations flooding in in recent months. How’s that affecting the sector?
Oleg Smagin: Oh, well, in fact, almost until this year, Korea was in some sense a wild west for crypto because the regulations were few and very unclear. And the financial authorities for a long time. We were unable to set necessary framework. And this year we have finally seen the introduction of this special act to financial transactions. That is finally define the scope of crypto services and introduced a registration system license system for crypto businesses. later next year, the capital gain tax in Korean on crypto will be introduced.
And this will make crypto investors accountable for profits they make. So, if to speak about the impact both, I see positives and negatives. Overall, I think every industry have to see regulations at some point. Among positive, I think crypto businesses in Korea became for sure became much more compliant this year. Because to acquire the license, both exchanges and custodial services have to add more protection for user funds and user information. We also had to build infrastructure to prevent money laundering. This is very important.
And I think for negatives, I would highlight that as more supervisory comes less decentralized the services become unless crypto serve initial goal. To give people freedom to access financial services, we evolved through line on the government.
Also, I think the entry barrier obviously becomes higher. And this can, in long term limit the competition. But in the end, I just believe that they engagement with the regulators was in any case inevitable and the acceptance, we finally the crypto got accepted by the regulator. And I think it will lead to a more widespread crypto adoption, although of course, some attributes of the decentralized system will be lost.
Alex Jensen: Obviously, you’re working in Korea, would you say that this is still a very exciting place to be in the crypto finance field for you personally?
Oleg Smagin: I think so, I think Korea is an exciting place in many emerging fields, because it’s obviously one of the most innovative countries in the world. And people here are very adaptive when it comes to new digital technologies. And for crypto in particular, I think it’s very exciting, of course challenging at the same time. Korea has a very high adoption rate among investors. More than according to what I have seen recently, more than 15% of Korean adult population have experienced trading crypto.
And the number of new projects, new crypto related events in Korea is big. The industry is developing really fast. For me personally, the most exciting finish seen people trading their crypto every time I take subway in the morning because you can really see people of all ages creating crypto and reading crypto news. This is a picture I really see every day almost every day. And this is fascinating, how the adoption, the institutional adoption is still very low in Korea. And this is probably the biggest challenge.
Because in the US and some parts of Europe, we can see institutions are taking very active part in trading crypto and investing in crypto companies. They also take very active part in DeFi, but in Korea, the industry is mainly supported by the resources of individual investors although institutions here as well will, I think at one moment take part in the game and it will be our task, my task as well to educate these companies and show them the opportunities. So, I’m staying very positive.
Alex Jensen: Can I just ask you to elaborate a little bit on what you would say to company if they would come to you for that advice?
Oleg Smagin: Well, I think the companies need to realize that the crypto assets is not just an asset, you can take and speculate crypto assets are common different forms and some blockchain technology overall offers a variety of different applications and use cases and this is something you should take seriously this is something you cannot just invest for short term.
This is something you can invest for long term and things like DeFi they are not just developing by themselves and creating a new market, they are taking the market from the existing financial companies a DeFi services basically serve the same market and at some point banks and financial companies will realize that not the main rivals they have or not are the bigger banks, main rival they have is DeFi and it will be too late.
So, taking seriously developing their own ecosystem of services trying to jump on DeFi and develop an ecosystem of services in a way that when you can also profit from it. I think it’s a part of the job that should be done by banks, right now, and you shouldn’t be like, this is the advice I want to give.
Alex Jensen: You know, maybe I speak for others as well, when I say this, but there is this fear of missing out even as I am very curious, I’ve never really got involved with cryptocurrencies at all. Would you say that it’s almost too late to start investing cryptocurrencies in Korea now, in a situation where it’s a bit more stable and the valuations of some of the big cryptos are so high already?
Oleg Smagin: Oh, well, interesting question. I think if you asked me if it was investing, I believe it all depends on what your financial goals are whether you are an aggressive investor who can be a high risks or conservative investor. However, for me, the bottom line is that diversifying your portfolio is in any case, a wise thing. And by allocating a part of your portfolio into a new asset class like crypto, you will hedge risks. So here what part you want to allocate is another question. I do think if you are a beginner, starting from little investments that you can afford to lose is the most is the wisest choice, holding, probably holding 90% of all what you have in crypto is very high risk. It also depends what kind of crypto assets because by investing in cryptocurrencies with very high volatility, you’re exposing yourself to the risk of losing almost all the funds. At the same time, by investing only in traditional assets, you can miss the profits and, in many cases, not even keep up with the inflation. So, for me choosing a strategy that meets your personal goals and smart diversification is the task that requires your own judgment. As for when to invest, you just mentioned that the cryptos are too expensive now, the market is volatile. And we’ll see I think we will see corrections in short term. But in the long term, I think all major assets will grow in value compared to what they cost now. So, there is no reason to think you have already missed this train. I think the market will continue growing and millions of more individuals and institutions will start investing and crypto and DeFi a here we’ve asked for a long, long time. This is what I believe personally, and this is why I chose to work in this industry.
Alex Jensen: Are there any particular other areas of advice that you would offer, for example, whether it’s wiser to maybe invest in NFTs particularly or whether it’s better to go for one of the cryptocurrencies that is recognized by the authorities in Korea or whether perhaps it’s better to look at one of the global cryptocurrencies?
Oleg Smagin: Well, as I have just said, it all depends on whether you are aggressive investor or conservative investor, I think invest in if you’re a beginner investing in something well known, like Bitcoin and Ethereum is a safe bet. But at the same time, I’m very cautious here because, you know, if I knew that I will probably not be here today, I will not be speaking to you, I will be somewhere far away not working just in western or I have an earned in high yield. So, I usually don’t give investment advice is it all depends on what the goals are. But I think as I said, if you’re a beginner, better goal with something safe, just test, experiment, and then create your own strategy. That’s what I would do.
Alex Jensen: It’s just that we’ve had a guest in the past that stands out in my mind now saying NFTs that the craze could be over, and all the valuation could drop in an instant and that really you don’t own anything at all. It’s just a kind of fantasy. That was one portrayal of it anyway, how would you rebut that kind of claim?
Oleg Smagin: No, I think. Yes. There’s a point. In 2017, something similar happened to crypto assets. There was an ICO crash. And I think NFT is probably a bubble right now. Especially when we talk about not metaverse and NFT when we talk about collectibles, art pieces. They are sold for incredible amounts of money. And I think it’s a bubble that will burst one at some points. But for most NFTs used in games, GameFi also NFT used in metaverse. I think they have a long way. Because the metaverse is here, it was for a long time. And it was almost items that appear in the metaverse that the easiest way to leave their value to create a liquid market for them is to put them into NFT, is to put them on blockchain. So, I think most kind of NFT will grow in value, and the collectibles, the art pieces I talked about. I believe, of course, this is just my opinion but there will be a crash, maybe a correction. But yes, I think it can be dangerous.
Alex Jensen: Oleg Smagin, Head of Strategy at Delio. We’re lucky to have benefited from this consultation today. Thank you so much for taking the time.
Oleg Smagin: Oh, thank you, Alex. It was a great talk.
Alex Jensen: And please send our regards to your brother, Genya. We’ll have to have you both on together I think sometimes you can thrash it out on the traditional finance versus crypto finance worlds.
Oleg Smagin: I really, I’m very excited for this, we like to appear together.
Alex Jensen: Well, I don’t know personally, how much closer we might be or further away from investing in cryptocurrency or getting more involved in decentralized finance after hearing that but certainly does give some food for thought virtual or otherwise. Maybe you’d like to, as I said earlier, share your own thoughts on this. Maybe that conversation has provoked something within you that you think we need to hear. Send us an email as I mentioned, email@example.com or through LinkedIn search KBLA we’ll be back tomorrow. Join us anytime that works for you.