In-depth discussion of serial entrepreneur Aki Balogh's entrepreneurial journey, the technological innovations of dlcBTC, and future developments.

Written by: Joy Chen, Evan Lu

The third episode of the cryptocurrency and blockchain interview show "DripEcho," produced by Waterdrip Capital, features serial entrepreneur Aki Balogh, the founder of the dlcBTC project. Aki previously founded the AI-driven marketing company MarketMuse, achieving significant success, and in 2023, he embarked on another entrepreneurial journey, focusing on creating a decentralized and secure DeFi solution based on Bitcoin—dlcBTC. Today, we will delve into Aki's entrepreneurial journey, the technological innovations of dlcBTC, and its future development.

At the peak of technology, entrepreneurs also face the choice of transformation. For all tech entrepreneurs, there is a question they must confront—how to meet the challenges of the future? Thus, he chose not to remain in familiar fields but instead immersed himself in the wave of cryptocurrency, beginning another journey. Aki's entrepreneurial path stems from his scientific family background. Born in Hungary, his father is a nanotechnology expert, and the family moved to Boston in 1991. Aki recounts that his entrepreneurial spirit originated in childhood when he sold bubble gum at school, planting the seeds of entrepreneurship. In 2011, Aki joined OpenView Venture Partners in Boston, gradually developing a strong interest in big data, AI, and machine learning. In 2013, he launched his first startup, combining AI with marketing to create Market News—a company optimizing SEO content, which quickly gained market recognition. However, Aki did not stop there; the moment he first encountered Bitcoin in 2011 sparked his curiosity about the crypto world. He clearly realized that cryptocurrency is not just a revolution in fintech but also a challenge to the traditional banking system. He believes that more and more people will have opportunities through this technology in the future.

AI or Crypto?

In today's world, where AI is increasingly popular, Aki Balogh chose the cryptocurrency field, which seems to be a natural choice for him. He recalls, "I heard about Bitcoin as early as 2011, but I didn't delve into it at the time. When I truly entered the cryptocurrency space, I realized the enormous potential of its combination with fintech." As an early AI practitioner, Aki admits he invested a lot of energy in the AI field, but he gradually felt that the AI market was becoming increasingly concentrated and monopolized, especially with large companies tightening their control over computing resources and data.

When discussing the reasons, Aki explains, "The barriers to entry in the AI industry are getting higher; only companies with vast computing resources and data can establish themselves in this field, while small and medium-sized startups find it increasingly difficult to compete." In contrast, the decentralized nature of crypto caught his attention. In his view, the cryptocurrency market offers more opportunities for entrepreneurs because it does not have the resource monopolies seen in AI. In the world of crypto, even a small company can find its place, as it does not rely on centralized infrastructure.

The DLCBTC founded by Aki is based on this decentralized philosophy. DLCBTC addresses the centralization risks posed by single custodians and bridging technologies in the current market by utilizing self-custody technology on the Bitcoin chain. Aki points out that this technology not only enhances the security of Bitcoin in DeFi but also provides institutional investors with a more reliable Bitcoin liquidity solution. He firmly believes that DLCBTC will pave the way for the future of decentralized finance.

Despite the explosive growth of AI in recent years, Aki does not regret turning to crypto. He states, "Both have their own charms, but in my view, the decentralized nature of crypto makes me more interested in exploring it. I no longer need to rely on the computing resources provided by large companies; instead, I can innovate in a more open and fair environment." His advice to young entrepreneurs is, "Keep an open mind, try different fields, and don't be too rigid about a single path, as future opportunities often come unexpectedly."

Value Creation and Expectations

In the journey of entrepreneurship, acquiring funding and resources is often seen as the key to success. However, Aki Balogh deeply understands that the mindset of entrepreneurs is fundamentally different from that of investors. He points out that some entrepreneurs view their company as a business, while others see it as a mission, meaning they pursue not just profit but also push the boundaries of technology and innovation.

Pure imitation is meaningless; true value lies in creating unique products. Despite the emergence of countless similar companies and products in the market, Aki believes he has always adhered to the belief in innovation. In the cryptocurrency field, his product is the only one that employs a self-custody mechanism among Ramp Bitcoin products.

People can easily fall into the traps of habitual thinking; in the early stages of entrepreneurship, acquiring funding can easily overwhelm a project. Aki believes that obtaining funding is not the only factor. He shares that in the early stages of his first and second companies, he raised almost no funds but relied on consulting projects and grants to support R&D. This approach allowed him to focus on validating business ideas and customer needs without external pressure. Once he had a preliminary product and market feedback, he suggested considering venture capital.

"In the early stages, you can choose to work part-time or flexibly arrange your time for entrepreneurship." Aki believes that finding the right venture capital partner can accelerate a company's growth. Perhaps the help brought by venture capital goes beyond just funding; its positioning and value also need to be revalidated. In his view, early success relies more on a deep understanding of ideas and a keen grasp of the market; while funding is important, it is not the only factor.

The Balance Between Founders and Investors

We must acknowledge that in the relationship between entrepreneurship and investment, founders and investors often face different challenges and pressures. Aki Balogh shared his authentic experience as an entrepreneur, emphasizing that the primary task of a founder is to create value for customers. He understands that investors focus on financial returns, but he values customer success and long-term business sustainability more. In his view, customer repeat purchases are the cornerstone of a company's success, so when making decisions, he often prioritizes how to provide better service to customers, even if it means making choices that may not be recognized by investors in the short term.

Aki candidly discussed the tension between him and investors, believing that as a founder, one must find a delicate balance between pursuing long-term value and meeting short-term financial goals.

When discussing the goals of his project DLCBTC, Aki expressed his desire to build a safer asset wrapping mechanism that allows Bitcoin users to participate in investment and lending without traditional risks. Through this approach, he hopes to enable more Bitcoin to be safely used for investment, ultimately leading to broader financial applications.

Aki also analyzed the existing Bitcoin wrapping models, pointing out that traditional methods often rely on centralized custody, while his project adopts an innovative self-wrapping mechanism. This mechanism leverages the security of the Bitcoin chain, allowing users to lock their Bitcoin independently, ensuring asset security and avoiding the risks associated with centralized custody.

Excerpt from the interview:

Joy Chen: Transitioning from artificial intelligence to the blockchain field seems like a rather bold and innovative move. What made you decide to focus on Bitcoin? How did you first become interested in cryptocurrency?

Aki Balogh: Actually, I started trading stocks at a young age. I heard about Bitcoin in 2011, but I didn't focus on it at the time. In 2015, I heard about Ethereum and still didn't focus on it. But I thought cryptocurrency would be interesting because it involves fintech. As we know, fintech has traditionally been hard to enter because banks are heavily regulated, so I thought it was a very interesting industry.

I also believe it can truly help many people, especially in the U.S. We are relatively privileged in the U.S., but for example, in Hungary, where I come from, their banking system is not strong. Therefore, my experience in certain countries and many countries is that the financial system is not very good. If we could have something based on software, that would be better. Then the process of me actually starting to build on Bitcoin was quite interesting. I collaborated with a Hungarian engineer to help him with some business development because I had just entered this field and had no ideas. I introduced him to my friend, and as a result, he hired him to develop a wallet for El Salvador. So my friend developed this wallet, which is now used by millions of Salvadorans. This is related to Bitcoin. Then I started thinking, if all Salvadorans can have Bitcoin, then everyone in the world can have Bitcoin. So what can you do when you have Bitcoin? Maybe you want to use it for loans or investments. Thus, I began to explore decentralized finance.

Joy Chen: Why not continue in the field of artificial intelligence? Do you regret shifting your focus to cryptocurrency, especially considering the explosive growth of AI in recent years?

Aki Balogh: Yes, actually, I didn't time it well because I should have done Bitcoin first and then AI. I was indeed a bit hesitant, but you never know. In fact, we did an NLP project in 2018, a few years ahead of OpenAI. I invested millions of dollars in this project, but it wasn't enough to create a good model. However, we did have our own model. So maybe I was too early, but I believe AI has great prospects, will continue to exist, and has many projects.

But I don't regret it. Both have a lot to build. One reason I left AI, or was a bit disappointed, is that it is also very centralized. If you are a big company, you can buy a lot of servers, train AI, and you have all the power, or all the data. Therefore, there is a natural tendency towards centralization. And I actually think opportunities are easier to obtain in the cryptocurrency field because the focus is on decentralization. If you discover something, there will always be a place for you, whereas the minimum requirements for starting an AI company will only get higher.

Joy Chen: As an investor, I naturally pay more attention to potential investment returns and evaluate most projects, but the mindset of entrepreneurs and investors is often different. For many entrepreneurs, there are two ways to build a company: one is to treat it as a business, and the other is to see it as a mission. So for you, is DLCBTC more about making money or pushing the boundaries of technology?

Aki Balogh: You can do both, which may relate to your personality and strengths. I have always wanted to build a company using new science because I want to create something differentiated, so I am not a simple imitator. I believe the value of creating imitative products is very limited.

Some industries can indeed create imitative products that may still be profitable, such as CRM systems. Salesforce is a large company, but there are many different CRM systems. For example, DocuSign's electronic signature has some areas where new things can continuously be created, but after a while, integration will occur. If what you are doing is exactly what others are doing, the likelihood of being swallowed by a larger company will be high. Therefore, I find that both of my company's products have some unique aspects rooted in fundamental science and university research, which makes the products better. That’s my approach. You know, some people have different business types; they can also run business process outsourcing companies and do very well. For me, I have always believed that adding a bit of a scientific perspective makes the product more defensible. Even with this product now, there are many Bitcoin pull-up products today, with new ones appearing almost every month, but we are the only one using self-custody and utilizing Bitcoin L1 for pull-up Bitcoin products. Others use centralized custodians or bridges, and Bitcoin enthusiasts know that both are not secure. Therefore, I feel very confident even now; we just saw Coinbase's CBBTC launch, and Coinbase is a very large company. But we still have an advantage over CBBTC because we are more decentralized, which is why we have survived as a small venture capital company.

Joy Chen: Early-stage financing is often one of the biggest issues in entrepreneurship. So for a crypto project like DLCBTC, do you think early capital is crucial? Besides funding, are the resources we bring important?

Aki Balogh: In the first two years, we did not raise funds. In my first company, I actually did not raise any funds in the first year; in the second and third years, I raised a million. Then I raised venture capital for the second company; in the first year and a half, we only received some grants and then got some venture capital before we started to grow. So, assuming in the first year and a half, it’s actually okay if you didn’t raise any venture capital. Doing consulting projects or obtaining some grants, or having some income to research a field is good. I call it R&D income; when you get grants, for example, doing consulting projects for someone, that’s what we did at the start of both companies. Then once you start having a product, that’s when you might want to raise venture capital. In fact, at the beginning, you can take a flexible approach; you can work part-time between your job and the company, or have different flexible arrangements.

I think venture capital is great. I have been a venture capitalist in both projects, and I always want to use venture capital. Finding some excellent venture capital partners is good because they will push you, make you act faster, and have more resources, so I think that’s great. But I think at the beginning, you just have an idea that needs research and validation, talking to customers, building prototypes, and things like that. You don’t need venture capital. You can go out, find some customers, attend some conferences, and find ways to utilize your time. Then once you start seeing a pattern, thinking, "Wait, I have an idea, it’s now very specific, I have these people telling me they want this, I have this engineer," once those start to come together, that’s when I would suggest seeking early-stage financing.

Joy Chen: I want to delve deeper into your personal experience as an entrepreneur. When facing challenges, investors often focus heavily on financial performance. As a founder, what are your returns and risks? I’m curious if you feel the pressure to ensure investors do not lose money?

Aki Balogh: As an entrepreneur, especially a venture-backed software entrepreneur, it’s really tough. It’s really hard. I’ve been doing entrepreneurship for over ten years, backed by venture capital, and still face doubts, fears, and worries every day. I’m just more accustomed to this state. It’s normal; most people don’t want to be entrepreneurs. You can guarantee that you will feel a lot of uncertainty, a lot of doubt, self-doubt—are we doing the right thing? Where should I spend my time? You know, but that’s the downside. If you can make yourself comfortable with all of this, and you are the kind of personality that won’t be too affected by it.

Then you will gain the benefit, which is learning. You will go through a great adventure, learn a lot quickly, and have amazing experiences. You know, it’s a form of learning, just as you said, your value creation amount, the amount you earn for investors, the results you bring to customers are all measuring you. For us, the most important thing is to achieve good results for our customers, to serve our customers well.

You see your team develop, and then you see your personality and personal growth. I think that’s really cool, and it’s one of the reasons I wanted to get into this field—personal development. If I focus too much on one thing, of course, we want investors to make money, but the most important thing is that I want customers to succeed. I want them to not just make a one-time purchase but to become repeat customers. Repeat customers are the business model you can only base on, so even in the short term, if the decisions we make seem like they might not be the right decisions or are somewhat questionable, if we are optimizing customer value, I believe that in the long run, it will always pay off.

So, there will always be a natural tension or dynamic between me as an investor and as an entrepreneur, but I think as a founder, my responsibility is to focus on creating the most value in the long term. Even in the short term, we will do some things that investors might not like or agree with, you know? But that’s also one of the gains I have from doing this work.

Joy Chen: In one sentence, what exactly is DLCBTC? What is the ultimate goal you want to achieve through this project?

Aki Balogh: We are building a safer wrapping mechanism that uses the entire Bitcoin chain to protect assets, ensuring Bitcoin assets, and then wrapping them into Ethereum and different chains for DeFi. The goal we want to achieve is that anyone who owns Bitcoin should be able to invest, borrow, or participate in finance without facing bridging risks, custody risks, or any traditional risks. Therefore, we want to safely utilize one trillion dollars of Bitcoin for investment to generate returns. That is our long-term goal. We aim to achieve this by launching in DeFi and entering chains like Ethereum, Arbitrum, Solana, etc.

To understand the full content of the program:

Podcast: https://www.xiaoyuzhoufm.com/episode/67079d0a6c7f817786100fea

YouTube: https://youtu.be/LtTgyxNYFkk

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