Dialogue Block Prediction Capital Wang Huilin: Cosmos is like Android, Polkadot is like iOS

This article is an original piece by Chain Catcher, authored by Wang Dashu.

Block Oracle Capital was established in 2018, focusing on secondary market investments in the crypto industry, particularly as long-term advocates of the Cosmos ecosystem with significant investments. It is said to have achieved good returns on assets like ATOM, KAVA, and IRIS.

Recently, Chain Catcher conducted an in-depth interview with Wang Huilin, the founder of Block Oracle Capital, discussing their views on the crypto market trends and their judgment logic regarding Cosmos, which is worth reading.

Chain Catcher: Please introduce Block Oracle Capital.

Wang Huilin: Block Oracle Capital is a blockchain venture capital institution established in 2018, primarily focused on secondary market investments and early-stage investments in blockchain infrastructure. The main investment tracks include decentralized finance (DeFi), oracle, cross-chain, layer 2 networks, distributed storage and computing, cryptographic algorithms, and privacy.

Block Oracle Capital has invested in hundreds of domestic and international projects in both primary and secondary markets, including but not limited to: BTC, ETH, BNB, DOT, ATOM, LEND (AAVE), UNI, LUNA, SOL, XTZ, KNC, IRIS, ANT, KAVA, etc.

In the past two years, Block Oracle Capital has focused on investments in blockchain infrastructure and DeFi as the two main tracks, often active in industry communities as advocates of the Cosmos ecosystem and DeFinance.com, which may make Block Oracle Capital relatively unfamiliar to the outside world.

Chain Catcher: I heard that your market research is quite macro. Given that Bitcoin, as a major support for the crypto market, moves in sync with the U.S. stock market, and considering the Federal Reserve's continuous liquidity injections, what stage do you think the crypto market is currently in during this bull market?

Wang Huilin: I believe the bull market has passed 40%. In the remaining 60%, Bitcoin will likely surge to $80,000 to $100,000, and the total market cap of the crypto market (excluding BTC) has the opportunity to exceed $2-3 trillion. These will also be important reference indicators for our exit strategy in this major investment cycle.

Affected by the broader economic environment, last year, Bitcoin (blockchain) was highly correlated with the U.S. stock market, but this year the industry has gradually begun to break away from that correlation.

As an emerging capital market, blockchain is inevitably influenced to some extent by the overall financial market, but it has its unique cyclicality and explosiveness. After nearly four years of development, the industry has undergone significant changes, with infrastructure beginning to enrich and take shape, and application areas like DeFi reaching a new starting point.

We believe that the upcoming bull market trend in the blockchain industry will have decreasing correlation with the U.S. stock market, and new highs in industry market value will inevitably relate to several major infrastructure clusters, such as the implementation of Polkadot's parachains and cross-chain ecosystems, the blockchain version of the internet constructed by Cosmos, Ethereum 2.0, and the development of layer 2 networks.

Chain Catcher: You seem to have done a lot of research on web3.0. How do you understand the current state of web3.0 and its future opportunities?

Wang Huilin: Web3.0 is a very comprehensive concept, with blockchain playing the most crucial role as the underlying network architecture. Web3.0 is often associated with cross-chain (the blockchain version of the internet). Regardless of whether it's Polkadot or Cosmos, the current infrastructure status of their respective ecosystems remains weak, with many areas needing improvement.

Therefore, the true realization of Web3.0 will take at least 10-20 years. Thus, web3.0 is still in its very early stages, but this is our opportunity.

We like to compare blockchain to the internet (1990-2021), where web3.0 is akin to the internet of the 1990s, requiring significant development in software (Windows operating system, programming languages, various internet protocols, office systems, etc.) and hardware (CPU, bandwidth, graphics cards, hard drives, etc.) infrastructure.

Based on this, we could truly feel the arrival of the internet in 2000, with portals, email systems, office software, mini-games, social networking, etc.

From a capital perspective, our predictions cannot be too lagging or too ahead; otherwise, it is easy to miss out or fail in investments.

Chain Catcher: I completely agree. What is your current investment rhythm?

Wang Huilin: We are relatively conservative and cautious. Regardless of which stage the bull market is in (before reaching its peak), and regardless of how hot the market cap is, we will still exit from overvalued projects.

The funds from exits will be reinvested into other tracks and projects, especially undervalued ones. Therefore, we will maintain a large position and will not engage in short-term trading, ensuring we stay in the game. Of course, maintaining a relatively low cost is our biggest advantage and one of the most important reasons we can hold on.

Currently, most high-risk targets have already been sold off, but given that there is still 60% left in the bull market, we have already screened a batch of undervalued targets to build an investment portfolio, which will unleash its potential in the latter half of the bull market, at which point we will exit at a high.

Chain Catcher: What are the criteria for constructing your investment portfolio?

Wang Huilin: There are four core standards. The first is track diversification, meaning we invest across different tracks for a full-spectrum layout;

The second is to adjust the weight of positions based on the importance and immediacy of the tracks. For example, in the DeFi track, which has a large space and strong certainty, we will allocate a larger position;

The third is to accurately time the rotation of sectors. Regardless of bull or bear markets, sector rotation is always present, with the hottest sectors receiving larger allocations;

The fourth is a combination of leaders and long tails, focusing on leading projects while also selecting some undervalued, low-risk, and counter-cyclical targets as hedges.

Chain Catcher: Regardless of bull or bear markets, there will always be fluctuations. Recently, there have been significant market fluctuations. How do you manage your positions in such a context?

Wang Huilin: Cross-chain, distributed computing, sharding, Layer 2, and other infrastructures account for 60%, which serves as our base position, while DeFi accounts for 40%. Our investment portfolio is quite resilient to fluctuations.

Chain Catcher: For general investors, selecting good targets is not easy. How do you filter good projects?

Wang Huilin: First, the project must be necessary for the industry and contribute to its exploration and development; second, it must be undervalued. There are many economic valuation methods in the industry, and everyone has their own valuation methods. For example, investing in Polkadot and the Cosmos ecosystem can be benchmarked against Ethereum and its ecosystem market value.

Specifically, we categorize sectors and assess value and development space; third is the investment return ratio. Good projects must have a high potential investment return ratio.

Chain Catcher: Previously, you mentioned in your social circle that ATOM is actually undervalued. What is the logic behind this judgment?

Wang Huilin: First is benchmarking. Many DeFi projects on Ethereum have market values that already exceed ATOM, indicating that its value is indeed undervalued.

Second, in terms of industry contribution, the Tendermint consensus mechanism, Cosmos SDK, and cross-chain IBC protocol developed by Cosmos have made significant contributions to the industry's development. Many projects in the industry are based on Cosmos (such as Binance Chain and Ok Chain), and the total market value of these projects has exceeded $70 billion, second only to Ethereum.

Third, the total market value of ATOM is less than $5 billion, accounting for about 7% of the total ecosystem market value. Many people choose not to invest in ATOM because of issues with its token economics and value capture. However, ATOM may soon change its white paper, and with the large-scale implementation of IBC, the token economic model of ATOM will see a qualitative improvement, leading to a value return.

Finally, from an industry perspective, blockchain is still in its early stages. Once multi-chain interoperability is achieved, forming a blockchain version of the internet, it will unleash significant space and imagination.

Chain Catcher: Understood. How do you currently categorize Cosmos ecosystem projects, and what are your specific investment strategies for the ecosystem?

Wang Huilin: The core products of Cosmos are the Tendermint consensus mechanism, Cosmos SDK, and cross-chain IBC protocol. As long as a project adopts one of these three types of products, it can be classified as a Cosmos ecosystem project. Currently, the prosperity and practicality of the Cosmos ecosystem are second only to that of the Ethereum ecosystem.

As a network similar to the Ethereum ecosystem, the Cosmos ecosystem will also "copy" the construction stories of the Ethereum ecosystem.

For example, Ethereum has wallet service providers (MetaMask), lending protocols (AAVE), exchange protocols (Uniswap), oracles (Link), distributed computing (PlatON), storage (Storj), etc. In the Cosmos ecosystem, you will also find "cross-chain" wallet service providers (Keplr), lending protocols (KAVA), exchange protocols (Gravity DEX), oracles (Band), distributed computing (Oasis), storage (Bluzelle), etc.

Chain Catcher: When discussing Cosmos and Polkadot, could you explain the differences between the two from the perspectives of ecosystem, community, and technical economic model design, as well as their respective potential for explosive growth?

Wang Huilin: Cosmos and Polkadot are both star projects in the cross-chain field. Cosmos is like the Android system, with low entry barriers for ecosystem projects, allowing for high independence and autonomy, and strong scalability, though the relationships between ecosystems are relatively loose.

Polkadot is like the Apple system, with high entry barriers for ecosystem projects and greater independence, but the relationships between ecosystems are tight, offering better security. Cosmos leans towards inter-chain cross-chain (completely independent chains), while Polkadot leans towards intra-chain cross-chain (cross-chain of parachains).

Both Cosmos and Polkadot are very important projects for blockchain infrastructure, making significant contributions to the industry. They are two crucial technical solutions that have already brought and will continue to bring rich investment returns to the capital market.

In the foreseeable future, Cosmos and Polkadot may play important roles in different scenarios. For example, Polkadot could become the ecosystem for large enterprises, with many major blockchain projects built on Polkadot, ensuring the absolute security of this ecosystem.

On the other hand, Cosmos is more suitable for general enterprises to launch chains, maintaining high autonomy and scalability (allowing them to build their own ecosystems) while requiring relatively low participation costs (security, development, maintenance, etc.) to go on-chain. The realization of these application scenarios will bring breakthroughs in the imaginative space for these two projects.

Chain Catcher: Recently, a U.S. bank stated that Bitcoin is more flexible than Ethereum, and they believe that DeFi fundamentally changes the mainstream market. Do you think this judgment implies that Ethereum's value is currently undervalued?

Wang Huilin: I believe there is some short-term space, but in the long term, we need to pay attention to its role and position in the industry. Currently, the only project in the industry that cannot be replaced is Bitcoin, which, as a store of value and the internet's gold, will have a very high valuation in the future.

In the future, if Ethereum can truly become the global financial settlement layer (the center of DeFi), it would not be surprising for its market value to exceed that of Bitcoin. However, no one can determine whether stronger competitors will emerge to replace Ethereum on this path.

If ETH2.0 is well-received after its release, there will be no other foundational public chains that can pose a threat to it for at least five years.

Chain Catcher: Your Rhino Fund has achieved over 20 times returns on Binance in the past year. What are the key factors behind this success? What do you think are the fatal traps in secondary market trading?

Wang Huilin: The key was that we bottomed out on DeFi projects in March 2020 and continuously adjusted our investment portfolio based on industry changes, achieving very good returns in foundational tracks like storage, base chains, privacy, and Layer 2.

As for traps, there are generally four: First, money is actually made in bear markets and lost in bull markets, meaning to layout in bear markets and operate cautiously in bull markets; second, high-frequency trading. Many people like to trade short-term, but in reality, you are unlikely to be smarter than the market and are likely to be left behind; third, leveraging. Engaging in futures products in the highly volatile blockchain capital market is undoubtedly gambling, with a very low win rate; fourth, mindset. If you earn twice but envy others earning a hundred times, everyone has different cognition and experience, and it is difficult to earn money outside of your understanding. An imbalanced mindset makes it easier for us to chase highs and sell lows.