Presentation to a local meetup group interested in blockchain in Guangzhou, China on latest trends happening with DeFi, NFT, and other cryptocurrency projects in China

1. Bitcoin, Blockchain and
Current Trends in China
Benjamin Chodroff
ben@elabify.com
2021/03/14

2. BTC – New ATH of $61,844 USD

3. Benjamin Chodroff
• American, living in Guangzhou for the past three years
• Work History:
• HSBC - Head of Cash Equities Technology China
• ExCraft.com (Sold) – CTO - A cryptocurrency exchange in Hong Kong that used an
Ethereum based token to reward traders on trade volume
• ClearObject (Exited)– CTO – IoT systems integration and machine learning on cloud
• IBM – Senior Software Specialist – Watson, IoT, Cybersecurity, and related solutions
• Keybase: https://keybase.io/benjaminchodroff
• Wechat: violinvivaldi
• Telegram: @violinvivaldi

4. Disclosure
The content of this presentation is for education, is not related to any of any past or
current employer, and is making no trade, financial or legal advice.
I was not paid to do this presentation. I do not officially represent any project
mentioned. I hold Bitcoin, Ethereum, and a very small amount of altcoins. Please
consult a tax lawyer, certified financial planner, and your family before making any
investment decisions.
Legal questions in China - free government hotline with lawyers: 020-12348
English translation assistance – free government hotline 24/7: 020-960169
BTC Donations: 3JLn75QU169N45hkoozWAiNXVfAtYTnrpo

5. Agenda
An hour of geeking out on cryptocurrency – you have been warned
• Changing Landscape of Cryptocurrency
• 2020 – What happened
• Institutional interest in Bitcoin
• Future of Finance - DeFi and CeFi
• Ethereum to Ethereum2
• EIP-1559, Mining in China, PoS, Sharding
• NFT in China
• Decentralizing Social Media
• Using Cryptocurrency to Arbitrage the Chinese RMB

6. Changing Landscape of Cryptocurrency
• Bitcoin exceeds $1 Trillion USD Market Capitalization in February 2021
• No exchange, no problem:
• Banks, Savings, Lending, Borrowing, Derivatives, Stablecoins, DeFi
• 36% of Small/Medium Businesses in the U.S. can now accept Bitcoin
(Source: HSB, 2020)
• $20B of Bitcoin OTC trading per day (Source: Hacker Noon, 2020)
• $500B of cryptocurrency exchange trading in first 3 weeks of 2021 (Source:
Coindesk)
Source: Citi GPS – “At a tipping point,” 2021

7. Good: Cryptocurrency Adoption is Spreading
Bad: The Unbanked is still a massive problemopportunity

8. What happened in 2020 to Money?

9. Institutional Clients and Bitcoin
Bitcoin is a volatile asset
Having lots of cash on a balance sheet is also risky
Changes in Behavior, Cash and Infrastructure:
• Digital currencies are increasing in adoption due to efficiencies
• COVID-19 has resulted in unprecedented increase in cash
money supply - especially USD
• Regulations have caught up: KYC/AML on exchanges, derivative
instruments, and tax compliant settlements

10. Institutions - Why risk cryptocurrency?
“The general consensus among treasurers is that very few of them are going
to follow this trend initially,” said Naresh Aggarwal at the UK’s Association for
Corporate Treasurers.
“As a treasurer, if I am right and the price doubles, the company may sell its
holding and make a profit. Whilst the company may be worth more, it won’t
be reflected in my compensation,” he added.
“But if the price falls, I am pretty confident I will be fired. Why bother putting
my neck on the line?”
Opposing View:
Cryptocurrencies provide efficiencies in reaching emerging markets, a way to build
new brand loyalties, and a way to offset cash-rich balance sheets with a fast
growing asset class.

11. Finance – CeDeFi and DeFi
• Decentralized Finance comes in two flavors:
• CeDeFi: Centralized De-Finance (often just called CeFi)
• A traditional central business which offers decentralized lending services
• Examples:
• Celsius – manages $5.3B in assets and provides interest, lending, perpetual swaps
• Ember, BlockFi, and many others are moving rapidly in this space
• China: QHQB.com now offers Crypto Loans
• DeFi: Centralized Finance
• Smart contracts running on a blockchain
• Examples: OmniSwap, SushiSwap, PancakeSwap
• China: Loopring (Shanghai) – zkRollup L2 Exchange on ETH

12. CeDeFi
-
Celsius

13. AMM and Yield Farming
AMM – Automated Market Maker: a type of decentralized exchange that uses a formula to calculate the rate rather than an order
book (Peer to Contract instead of Peer to Peer)
Yield Farming - MakerDao, Compound, Uniswap, SushiSwap, PancakeSwap, Aave
1. You deposit decentralized tokens into a smart contract which creates a liquidity pool (no matching engine – uses index)
2. The liquidity pool then lends your tokens (with interest) to others which require guaranteed liquidity (Example: exchanges,
swapping applications)
3. The liquidity pool shares this interest as yield back back to the pool - pro rata
4. Often will receive a utility token which gives voting rights
Sushiswap is similar to uniswap, but burns the fees to increase the token
PancakeSwap runs on a centralized chain - Binance Smart Chain for increased efficiency - but is not fully decentralized

14. Flash Loans: Warp Speed Finance
• No collateral loans on a blockchain
• Borrow a lot of a token with nothing down, and pay it back within the same
block that you borrowed it. ?!!!?!?!?!? Wow.
• Allows you to borrow a very large amount, as a developer, while in a smart
contract, and pay a very small fee. Welcome to the crazy world of DeFi…
• Can be used to maximize arbitrage opportunities, wipe out other DeFi
contracts, ensure liquidation of positions
Levels the DeFi playing field between whales and minnows by weaponizing
liquidity pools programmatically

15. Case Study: CCFOX.com, Sonic
Shifting CeFi to DeFi
• Sonic is CEO of CCFOX (Cryptocurrency Futures and options exchange 2017)
based in Shenzhen, closed three rounds of funding
• Centralized derivatives exchange that does perpetual swaps on tokens,
mining contracts
• Moving towards decentralized world
• Using swap trading (similar to Sushiswap/Uniswap) in a fashion of
centralized
• Decentralization has risk for new users due to gas fees, incident remediation
• Derivatives DEX /MCDEX
• Layer2 exchange – wallet is decentralized, transactions on chain
• Buying and trading hash power (mining done by third party)
• Buying a new s19 miner is ~$10K USD – alternatively use a fraction of a s19
(buy one terahash/second) and includes the bitcoin.com cost of electricity
• CCFOX pays daily dividend on coins mined
• Even if the cost drops, your equipment/facilities costs are still $0
• Can make profit both on the hash power and dividends
• BTCST on binance is a copy of their model

16. Ethereum – Miners vs Developers: EIP1559
• EIP-1559: Recalculates the fees paid on transactions to be more
predictable, and less incentives going to miners by burning the base
fee, but giving a tip to miners if they want to be incentivize in next
• Could negatively impact miners ~40%
• Will impact oracles which require tx fees to be consistent, and as they have to
update, and this could negatively impact their business model
• It will not lower gas fee, but it will lead to more predictable user fees that are
lower
• Proof of Stake
• Running side by side with Proof of Work - It’s working!

18. Generated >500% ROI
Only caught on fire twice
Probably will find a way to
burn down this time?

20. Ethereum Evolution – Proof of Stake
• Proof of Work:
• Miners must perform complicated cryptographic puzzles to prove the transactions
follow the chains protocol while providing a very simple proof that verifiers can easily
see “must be true based on the work necessary to generate this proof”
• Mining: Censored Addresses and reducing mining in Inner Mongolia:
https://coingape.com/bitcoin-mining-difficulty-lowered-for-the-first-time-in-2021-
amid-chinese-crackdown-on-crypto-mining/
• Proof of Stake:
• What if rather than doing the hard puzzle, we provided a verification WITHOUT any
proof but a pile of very expensive tokens – but if shown to be wrong, would penalize
the persons tokens
• Run your own, or use a custodial or non-custodial service
• Example: Stakefish

21. Ethereum2
Proof of Stake
=
Less
Electricity
+
More
decentralized

22. Ethereum Evolution - Sharding
• Ethereum currently handles 15 transactions/second. That’s not much.
• Sharding would be a way to increase the capacity
• 64x with side chains = ~1k transactions/second
• Additional “rollup” capabilities on shards are likely to result in increased
capacity to 100,000 transactions/second

23. NFT
• NFT – Non-fungible tokens: tradeable unique artifacts with provable
ownership
• Cryptokitties popularized this area first, then NBA Top Shots soaring to $200M
last month
• Art, music, game rewards, home mortgages, land deeds are increasingly
driving adoption
• Can act as a notary which puts a timestamp and signature on the blockchain
• https://cycross.io/, Mintable, rarible, opensea.io, nifty gateway
• Ecomi – Created Veve application, formed trade with Powderpuff
girls, DC Comics, etc. – massive growth

24. VEVE

25. Gamification of DeFi - Aavegotchi

26. NFT and Art in China:
World’s First Crypto Art Exhibit
• “There is no doubt that decentralized NFT platforms are
responsible for users’ infringements” — Katt Gu,
Director of Compliance at Dimension
• https://www.bcaex.co/
• https://foundation.app/CSLIM/winter-fantasia-no-1-4339
• https://www.reddit.com/r/NFT_Asia/

27. Mask.io: MaskNetwork with Suji Yan and Katt Gu
• Decentralized team with partners in China and abroad (US, Japan, etc)
• Overlays existing social media platforms (Twitter/Facebook) to
provide end to end encryption, crypto payment, and other features
• Currently uses a browser plugin, but exploring native application
• Mastadon collaboration underway

28. Cryptocurrency in China
* Peer to peer transactions conducted “Over The Counter (OTC)” are permitted**. However,
as a foreigner you may find it difficult to access local OTC services (example: Huobi OTC)
without a Chinese ID card and real name verification. Most foreign OTC and exchange
services are blocked by the Great Firewall (GFW). As such, it is difficult, but possible.
**Using WeChat and Alipay to buy/sell cryptocurrencies can result in your account being restricted.
Never trade with people you do not know or trust. Avoid these platforms with large transactions and
never exceed $50K USD in a year. Use domestic bank transfers or cash.
**Chinese citizens are limited to buying up to $50K/year USD equivalent in foreign currencies.
Foreigners are limited to their yearly salary minus all tax payments. Buying cryptocurrency beyond
these limits is a grey area as it is not recognized as a currency.
* The GFW blocks most exchanges and services - how do I buy?
• Many online groups exists to trade – ask a friend?
• Using a VPN for personal purposes is allowed in China, but not a guaranteed right. However,
doing illegal things is always illegal – don’t do anything illegal with or without a VPN.
Am I, a Chinese or foreign
citizen, allowed to buy or sell
cryptocurrency with RMB as an
individual to/from an individual?
Yes*
Am I allowed to run an unregulated
cryptocurrency exchange, raise
funding using an Initial Coin Offering,
launder black market money, conduct
gambling or buy other banned items
in China using cryptocurrency?
No
Don’t even try.
There is zero tolerance.
Seriously.

29. RMB Conversion and Transfer for Foreigners
1. Get appointment to go to the Tax Office: 5 Minutes
2. Go to Tax office to get stamped proof of tax payment by your company for each
month of paycheck you intend to convert: 90 Minutes
3. Stamped employment contract that shows a matching proof of salary to your
paystubs, and any documentation which explains any difference such as
bonus/raise/awards
4. Print the pay stubs from your company. Must show a matching tax payment and
matching salary– you can convert money that has proof of tax payment. 10
Minutes
5. Bring original passport with valid employment visa
6. Bring original non-expired foreigner work permit card
7. Process RMB to USD. Retail rate is typically 1-2% over spot FX rate. 30 Minutes
8. Process wire transfer. Estimate 200-400 RMB in wire transfer fees between your
local bank, intermediate bank, and receiving bank. 30 minutes
9. Wait until the transaction arrives. Typically 1-3 business days
Effort: 2-3 hours of work if
there are no delays
Time: 1-5 days to arrive
Cost: ~3% of the transaction
Complexity/Risk: Low

30. RMB to Crypto FX Transfer – For Anyone
1. Use a VPN such as v2ray to bypass the GFW – duyaoss.com
2. Sign into localbitcoins.com to find a reputable Bitcoin trader – 1 Minute
• Ensure you have completed real name verification with a name and phone number that
matches what was registered on your bank account
• Always use unique passwords, 2FA, and never share an account
3. Place a trade to lock the bitcoin into a escrow account until the transaction is
successful, cancelled, or reviewed. Typical rate is 2-4% more expensive than spot –
3 Minutes
4. Do a domestic bank transfer of RMB from your account to theirs, and mark the
transaction as complete – 5 Minutes
5. Seller receives the RMB, releases the BTC from escrow to you, and gives you
positive feeback. You should leave them positive feedback. – 10 Minutes
6. Transfer the BTC to another exchange, service, or wallet (has a 0.00005 BTC
Fee),or sell it to another user on localbitcoins anywhere around the world, or the
leave the BTC in the wallet (not recommended) – 0-60 minutes (It depends)
7. Move the sold amount to your bank account: About 1-3 days
Effort: 30 Minutes
Time: 1-5 days to arrive
Cost: -2% - 3% of
transactions.
Complexity/Risk: High…
Yes, you can make money
by sending money…

31. China Cryptocurrency Arbitrage

32. Why use Bitcoin for RMB Conversions
• Triangular arbitrage opportunities
• If you are willing to wait for the right moment, you can reduces your fees from -3.5%
down to 0%, or often make (small) money at some points
• During periods of volatility, there will exist periods of time where the localbitcoins
market is unable to correctly price their fees relative to the spot rate of RMB/USD
and other major exchanges.
• Less paperwork and time spent in bank and tax offices for foreigners
• No country or reason restrictions on where/why you can send your money
• There is no limit on Chinese citizens to buy more than $50K USD equivalent
of bitcoin. Cryptocurrency is not recognized as a currency in China.

33. Should I buy cryptocurrency?
Yes: I suggest “more than nothing, less than everything”
Bitcoin value is hard to define, but certainly an opportunity to learn something
new. I never expected to make money, and if you think you will get rich quick, you
likely will not. If you expect to learn something new about the world, you likely will.
The developer community is amazing – meet incredible people from around the
world
To me, cryptocurrencies have provided a way to remit money while in China and
meet an incredibly talented group of entrepreneurs changing the world. Join us!

34. Q&A

35. Layer 2 (L2) – Using Sidechains to scale
• Move only the data necessary to execute a smart contract to a
sidechain, execute it, and then move the result back to the mainnet
• Reduce transactions on the mainnets (lowers gas fees) and move
them to a higher throughput, lower consensus network
• zkRollups vs Optimistic Rollups
• Uniswap v3 – if they do it, it could reduce 40% ETH fees across the
network
• Challenges:
• They do not interoperate
• Risk of being first project is difficult