“The idea of giving away your recipe and expertise is new to me.”
As I make my way to Happy Valley on a recent Monday morning, my thoughts remain just how astounded I am by the number of financial high-fliers who are taking bold career moves into the world of blockchain startups.
A few months ago, Fangfang Chen was chief operating officer for Asia Pacific at a 228-year old financial institution that manages $2.5 trillion.
If you can’t guess which firm this is, let me tell you that you might know State Street’s investment arms also manages the Hong Kong Tracker Fund (HK:2800), the largest and most heavily traded exchange-traded fund listed on Hong Kong Exchange.
The morning is chilly, as this is Hong Kong’s short but pleasant winter. Happy Valley is calm: from street protests to the coronavirus, this great metropolis has become quiet as a small town. We have agreed to meet for a warm coffee and breakfast. Chen arrives looking the part of a startup worker, with company swag in the form of a tote bag.
Zut alors! Poor choice of venue! It’s empty of customers. The waiters, instead of being pleased to see us, look as though they’ve just rolled out of bed. The menu is full of clichés and the food all looks processed. The gastronomy scene in Hong Kong is too rich to allow this. I once lived in this neighborhood and I know a place across the street.
“Let’s go to the market,” I say. Chen is surprised, but she agrees the third-floor cafeterias above Hong Kong’s wet markets do serve amazing breakfasts.
The market is abuzz and so is the food court, where restaurant owners happily wave us to a table. It’s the sort of place with plastic seats, toilet paper rolls on the tables (these days a valuable commodity) and generous portions of fresh cuisine.
Algorand is a startup with its own blockchain protocol, built with open-source software designed by the company’s founder, Silvio Micali. He invited Chen to meet in 2018 at the World Internet Conference in Wuzhen, China. The agenda was so packed they didn’t have time to speak until they shared a car to the Shanghai airport.
It was the discussion that reinforced her conviction that blockchain technology is transforming how people transact. She had been mulling a switch into the industry, and it was Micali’s vision that convinced her. She has joined as head of operations of Algorand Foundation, an affiliate responsible for governance, development and participation regarding the company’s platform.
Algorand’s protocol is permissionless, making it the opposite of the several enterprise-oriented solutions being developed for many financial institutions. But Algorand isn’t ignoring the classical world. Its vision is a technology that allows traditional finance to interact seamlessly with decentralized finance, or de-fi.
The company achieved a $60 million fund raise which led to it releasing a second iteration of its platform in order to offer smart contracts and digital-asset atomic swaps (a technology to enable peer-to-peer transactions of bitcoin and other digital currencies, without going through an exchange or other third party).
If it takes off, Algorand wants to promote money that can be programmed and conditioned, and traded safely on its network without any other participants.
Now that the technology is in place, the to-do list is getting longer. First, market expansion.
“When it comes to blockchain, you can’t ignore China,” Chen says (she’s a Shanghai native).
Beijing has recently come out and officially backed blockchain development. But mainland China doesn’t allow digital assets. This makes the market both attractive and difficult. Chinese enterprises have focused on private, permissioned networks. Many people in the Chinese blockchain industry have a negative view of public chains.
But, Chen says, public protocols are emerging. There are signs some of these will win government support. One example is Conflux Chain, a Beijing company that is building business networks on public infrastructure.
The trick, says Chen, is to localize her platform. “You can’t operate via remote control,” she says.
This reality has made her job very hands-on. The education and evangelizing requirements are relentless. She is also building a team there, one that is embedded in local business culture but also capable of working with a global team. This is not unlike the requirements of a State Street. “Referrals are the best,” she says when it comes to recruiting.
I ask her if she misses the perks and pay of working at a global financial institution. “Don’t you miss the thick carpet?” I ask.
“I don’t miss the carpet,” she says, “but I miss the infrastructure.”
There’s a world of difference between a global company with 40,000 employees and a startup, especially the need for everyone to wear multiple hats. Chen has to build Algorand’s community of developers, generate business, and build and manage the team.
Our food arrives. The other customers in the market’s food court run the gamut of Hong Kong, from high-heeled white-collar workers to construction workers. The food is just as surprising – good, that is. Chen went for eggs and ham, while I ordered noodles with a slice of bread. Except my slice is a block, big enough to merit a fork stuck in top, with melting peanut butter.
The waitress smiles at my reaction. The tourist is spotted.
I ask the Yale MBA what she is learning from her new gig.
“The open-source industry is new to me,” Chen says. “The idea of giving away your recipe and expertise, and then bringing it back. It’s counterintuitive. You don’t see this in other industries.”
Software tools and code are free and anyone can copy them. This allows people to maximize their own interest while supporting a network effect that benefits everyone.
So what’s the benefit of de-fi? This is a fast-growing trend in blockchain, having just surpassed $1 billion in market size.
Chen seems disappointed by the quality of these new financial products being constructed on blockchain protocols.
“So far it’s mostly about collateralization,” she says. “But more applications are coming.”
I see Chen off and take a much-needed digestive before heading to catch the tram.
Happy Valley Market
- 2 Yuk Sau St, Happy Valley
- 1x Egg & Ham
- 1X Breakfast noodles
- 1x bread & peanut butter
- 2X milk tea
- Total: HK$89