Michael Cotton’s Exclusive Interview With TheNewsCrypto
Decipher 2022, a second annual gathering of the Algorand foundation held in Dubai was a massive success. The active community engagement portrayed confidence in the existing blockchain technology. Following below is an exclusive interview of delegates conducted by TheNewsCrypto.
About Michael Cotton
Michael Cotton is the CPO and Economic Strategist at Optio Capital, a blockchain-focused venture firm investing in DeFi and Web3. With his passion and enthusiasm, he has led product strategy for a number of flourishing firms in the blockchain ecosystem over the past seven years, putting a special emphasis on product market fit, real business models, and long-term viability. This has included product strategy, coaching, tokenomics advice, and incubation.
With an extensive background in blockchain innovation and technology, Michael focuses on the use of upcoming technologies and smart contracts to effectively and efficiently address pressing problems.
Could you please tell us about Optio Capital?
Optio Capital is a venture capital fund. We have three key verticals, which are incubation acceleration or accelerators and capital deployment. I suppose it is a sport where I probably would say we differentiate. We put a lot of focus on support outside of the funding. So we often provide a lot of resources around hiring, around marketing strategies, product strategies, economics, and really stepping in to fill some of the gaps in some of the early days businesses have. That means they don’t take on a long additional expense or they can achieve their goals in a more efficient way. The team is led by Ajay Mueller, who is our CEO. There’s myself, who’s the Chief Product officer and then we have CFOs, Dustin Paying and Jean Carlos.
Basically, you find projects in the blockchain or cryptocurrency sector. How are things now that the market is not doing so well?
I think the key thing is different. I think for a lot of funds, there isn’t a lot of clarity to the upside for investing right now. So what it means is that they’re slightly more stagnant in terms of employing capital because there’s potentially maybe more downside and maybe not much upside, which has made the market sort of sit on the pan to some degree. But in reality, I think that quality projects that are going to fill the gap for what’s needed next are strong. So I think for us in particular, we’re really looking at where we are going next with this tech, what is the next evolution of this technology, and looking at where we should be investing on the back of this change, where evaluations really come down. But I think that was fairly crucial. I think there were a lot of inflation evaluations and we’re now coming back to maybe more realistic numbers that are based on real fundamentals than hypothetical token inflation. So I don’t think it’s a bad thing. I think it’s probably having a healthy recheck and helping us take that next step.
The market is down and gloomy, but yet we have a lot of positivity around. People are very positive. Nobody expected such a big event gathering in this condition and events are happening all over the world backing up the industry. So what do you think about this positivity?
I think it’s good. I think in reality, we all want this technology to become broadly used and become a fundamental or a staple amongst the global usage of data infrastructure. And this is going to help us take that next day. This will help move into that order adoption piece.
Additionally, the market has a “buy in the dip” attitude. Have you ever invested? Do you trade cryptocurrencies?
I certainly do. I think what I trade in is there’s such a varying range of assets to buy. I think we’re certainly looking at more. What is the mechanism of value creation behind a token? What does that look like long term and how sustainable is it? I think the times are gone in terms of launching a token that has vague utilities. I think we certainly all would agree that that time has passed. What besides what a token value is? I think there are all kinds of mechanisms. Ethereum has a very different mechanic for equity and then I think we’re seeing a lot of hybrids in between those different models. But I think we’ll also see the digitization of Real-World Assets (RWA). I think we’ll also see the digitization of RWAs that are maybe outside the box such as music licensing, such as things like water through the goals all the way through to maybe revenue generation over time as an NFT stream. So, I think we see a whole range of different versions of RWAs and hybrids between sort of equity and something like an Ethereum-style value creation.
What is your thought on memecoins, the crypto coins backed by popularity and have minimal to zero mechanism or algorithm?
I think there’s a whole human psychology piece there that is probably outside my sort of understanding, but it really does boil down to why as a species do we get attracted to anything? Why are diamonds so valuable, and Why is gold so valuable? There are some clear use cases where they have utility, but diamonds we don’t use for the utility they’re most known for. And gold in most cases is generally held as boolean. So it’s more gold for the value than held for the utility. I understand the idea of meme coins. I don’t pretend to understand how they should be valued and how the value moves to those.
Consider the simultaneous collapse of two big coins. Many approaches have been implemented in order to balance the market. One of them is the proof of reserve strategy from controlled exchanges such as Binance and others. So, what are your thoughts on that?
Centralized exchanges are a necessity. I certainly do not believe we should be getting rid of centralized finances at all. I think DeFi should obviously be far more significant in the market than it is currently. But proof of reserves is one thing, but you’ve got to keep in mind the way actors are held, that those can be offset by liabilities. So if you know, the finance has $10 billion in assets but has equal liabilities, it doesn’t actually have any value there that backing assets on the exchange, which is not to say at all that’s the case of finances. I certainly have no clarity on that.But I think what we actually need is a proof of financial health. so less a proof of reserve and a proof of overall financial health because that’s what actually would dictate what value is there backing the assets inside the exchange. How do we do that? That’s a very tricky question. Proof of reserves is much easier to prove in a decentralized manner.
Proof of financial health is more difficult. But I think this is a problem that goes beyond the centralized exchanges. How do we bring off-chain data on chain in a reliable and trustworthy way? And the same sort of mechanism that would be used for finance and proof of financial health will be used across a lot of other areas as well. So proof of reserves is great. It’s not enough. We need proof of the financial health of the overall business that is captaining those assets will be the crucial fee.
Coming to Optio Capital, what’s your plan for the upcoming year 2023?
We’re launching the algorand accelerator as well, which goes live on 4th of February in the APAC region. It is all taking projects outside of APAC as well, but predominantly APAC. So anyone wishing to apply into the accelerator? It’s an Al grand accelerator. It’s only available in the algorithm. Those positions have been taken at the moment all the way up until early January. Beside that, we have a really key focus on the fund, which is exactly what we are decor. We are a fund and deploying looking at additional projects, looking at four additional high quality projects to do that. The second generation test.
What is your one liner about Decipher or this event? How do you describe it in just a line or just a phrase?
I think Algorand of the last twelve months has proven that it’s a stable, high performance tech that can replicate the functionality of centralized finance in many ways. I think that is really crucial and will be our next phase. How do we take that proven technology and bring more change? So I think our brand is really demonstrating it is a proven, stable, strong technology that can genuinely be used for broader adoption across the whole range of verticals.
Dubai is more supportive of the crypto and blockchain industry. So what other geography do you think is more pro to crypto?
Australia is massive in blockchain and crypto. I prefer to say blockchain. Because I also get slightly nervous about the crypto mixing. But Australia has a massive building coherent. We’ve been responsible for building some of the biggest projects in blockchain, such as synthetic, rune, RenBridge, and stepped. A huge amount of high-quality projects have come out of Australia Maple Finance more recently. We’ve done some incredible stuff in that B2B lending segment. So, there are some incredibly high-quality projects out in Australia. I think we are seeing other countries like Singapore take a step up. There are a lot of regions that are doing a lot, but I think zero tasks on some of these elements. We’re seeing places like Portugal and had a really strong rise in both hosting of conferences. But people migrating to the country to one have zero tax on their crypto and to build out their products, which is great.
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