Shen Yu: How Individual and Institutional Players Can Safely Grow Assets and Scientifically Avoid Risks in the DeFi Space
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Shen Yu: How Individual and Institutional Players Can Safely Grow Assets and Scientifically Avoid Risks in the DeFi Space
Shen Yu's Internal Sharing: Years of Experience Summary – How Individual and Institutional Players Can Safely Grow Assets and Scientifically Avoid Risks in the DeFi Space.
Navigating Web3 tides with focused insights
Cobo Labs is the research lab of Cobo, Asia Pacific’s largest cryptocurrency custodian platform and the most preferred financial asset management service provider among institutions.
We focus on innovative projects, cutting-edge crypto technologies, global regulatory developments, market fundamentals, and volatility factors, aiming to lower the knowledge barrier for market participants and crypto enthusiasts entering the space.
Our core contributors include:
- Shen Yu (Mao Shihang), Co-founder & CEO of Cobo, Co-founder of F2Pool
- Changhao Jiang, Co-founder of Cobo, former Senior Scientist at Facebook
- Lily Zhuo, COO of Cobo, former Chief Legal & Compliance Officer at a renowned $40 billion fund
- Alex Zuo (Zuo Changbai), VP of Asset Management at Cobo, former Co-founder of TokenInsight, leader of the industry's largest FOF
We also welcome lifelong learners with a research-driven mindset and scientific methodology in the cryptocurrency field to join us in contributing insights and research perspectives to the industry!
This is the first article from Cobo Labs.
Shen Yu – Time Management Master’s Years of Insight
In the last week of August, the rarely seen Shen Yu appeared at an internal Cobo business meeting to discuss market demand for DeFi funds.
Shen Yu answered sharp questions from industry practitioners. Below, Cobo Labs summarizes key reflections and insights on current innovation opportunities in DeFi, NFTs, and associated risks.
At the end, Shen Yu shares personal life details—offering everyone a glimpse into his world!
The Three Core Questions About Cobo
What is Cobo’s DeFi risk control system like? In the event of a hack similar to the Poly Network incident, how can DeFi funds be kept secure? Are Cobo’s fund assets managed personally by Shen Yu, and how is risk controlled?
Shen Yu:
First, Cobo did not participate in that project—it was my personal investment. However, we captured relevant information immediately and assisted in coordinating channels such as Binance and Tether to handle the hacker incident. The response went smoothly—from intelligence gathering, internal team discussions, to ultimately obtaining actionable data. We were fortunate, and I’m grateful for the collaboration with various security teams.
The hacking incident prompted reflection across the DeFi industry. Given the massive scale involved, we’ve since reevaluated our investment approach in DeFi, especially yield farming, where principal is exposed to uncertain security risks.
To ensure security, we implement the following:
1. Monitoring and Alert Systems
Drawing from over a year of practical experience, before committing large capital, we jointly evaluate project metrics—especially attack risks. Any suspicious activity—such as changes in timelocks or multisig configurations—triggers immediate alerts from our risk monitoring system.
2. Hardware Security Modules for Rapid Capital Withdrawal
For blockchain security, Cobo employs multi-party collaboration through an internal system using multiple permissions to safeguard assets. If an alert indicates potential loss, Cobo’s online hardware security module automatically processes withdrawals. This module holds a low-privilege key; once suspicious activity is detected, it swiftly pulls out principal. Operating 7x24 hours with strict controls and specialized methods, it enables us to react faster than hackers.
3. Investment Committee Oversight
Cobo has an investment committee that conducts internal security audits after reviewing a project’s economic model. We anticipate common issues and communicate warnings via our media channels and private community “Defi耕田” (DeFi Farming). We also advise project teams to upgrade and improve their systems. Through this practice, we’ve helped major DeFi farmers resist attacks, continuously enhancing our risk control capabilities and ensuring the safety of projects we engage with.
On Reporting: Why Not Involve Law Enforcement?
Immediately after the incident, we communicated directly with public chain teams and available support channels. With help from security teams tracing the hacker’s footprint, we explored whether we could identify or freeze assets linked to the attacker. Legal procedures would be slower and less responsive than our self-organized efforts. Moreover, DeFi is highly complex for traditional law enforcement, and hackers typically use money laundering tools immediately. If negotiations fail later, legal action remains an option.
How to Handle Extreme Market Conditions
We’re in a bull market that’s already surged significantly. Is now too risky to invest in a DeFi fund? How should one prepare for extreme events like the May 19 crash?
Shen Yu:
DeFi offers new ways to grow assets and access fair market interest rates. Returns come from locking principal value in DeFi protocols to earn tokens. Most of these mining rewards are hedged quickly—we sell them rapidly using automated tools, often every 10 minutes. During events like May 19, we minimize leverage or rely on automation to prevent losses. Beyond smart contract risks, overall returns in DeFi remain quite acceptable.
When Whales Like Shen Yu Drain the Mine—What Should Retailers Do?
Which mine should I jump into? Which current mining mechanisms are better designed? And how can small investors avoid being crushed by whales—especially when so many mines have been ruined by big players like Boss Shen Yu?
Shen Yu:
Current conventional farms offer modest but relatively stable yields. Yields are recovering, and TVL across established and new-chain markets is rising. There are many good farms available now.
Key considerations in yield farming: first, security; second, whether the economic model is sound, whether there’s principal erosion, and whether large inflows will collapse the farm. Our investment committee conducts research reports, performs due diligence, and runs test simulations to assess model sustainability. We analyze sector models, price expectations, and capital thresholds where positive or negative feedback loops emerge.
Specifically, we evaluate whether large investors entering will dilute yields. We calculate how much capital delivers optimal returns and dynamically adjust based on market conditions—sector trends, models, valuation ranges—to estimate sustainable capacity. When拐点 (tipping points) appear, we set take-profit and stop-loss rules. It’s a highly dynamic process—decisions shift with parameters to find the optimal capital allocation strategy.
Your View on the Future of DeFi
Where do you see DeFi heading next?
Shen Yu:
Over the past year, DeFi has built critical infrastructure—algorithmic stablecoins, core lending protocols, and rich derivatives. A clear headwinds effect has emerged. The main challenge now is scalability. Though DeFi has over $100 billion locked, public chains only support a few million users. As the industry grows and scales, current performance won’t suffice. Likely solutions involve multi-layer architectures. Within six months to a year, Layer 2 networks will develop dominant players and attract core applications.
Given DeFi protocols are scattered across chains, cross-chain protocols are unavoidable. After Layer 2 scaling matures, liquidity routing and cross-chain interoperability will become key directions.
Additionally, DeFi’s expansion into areas like NFTs and GameFi presents short-term breakout potential. Over the next 3–6 months, convergence between gaming, metaverse, and DeFi will create growth opportunities.
Finally, recent U.S. regulatory discussions around DeFi also present opportunities—for example, on-chain data analytics, compliance needs driven by regulation, and demand for privacy-preserving protocols and anonymity-enhancing tech innovations.
The Hottest Topic Now: NFTs
What’s your involvement in NFTs? What’s your underlying logic for investing in NFTs?
Shen Yu:
The fundamental logic is still simple—the industry is very early. The core catalyst is blockchain-native redefinition of art and aesthetics. The current image craze, epitomized by CryptoPunks, isn't just about avatars—they represent social identity and network value.
For investors, consider allocating 70% of assets to major cryptocurrencies, 20% to emerging sectors (those proven over time), and 5–10% to promising but early-stage assets. This balances conservative and aggressive strategies—if any segment takes off, overall returns benefit.
Also, NFTs are consumer goods, not pure speculation. Current participants often have significant disposable income. The market is still tiny—avatar NFT valuations are low. Even modest capital inflows can cause bubbles due to liquidity spillover, not sustained deep liquidity. So, participate according to your own situation.
Bonus: Shen Yu’s Personal Life
How does Shen Yu manage work-life balance? With such intense market activity, there’s barely time to sleep.
Shen Yu:
Most NFT projects are overseas, operating at night—checking every 1–2 hours. Many friends practice distributed sleep: nap briefly, check updates, repeat. People adapt. But bull markets are indeed exhausting. Traditional mining used college students to monitor physical farms. Now DeFi mining requires personal oversight—reviewing economic models, security reports, hardware wallets. Participation in DeFi and NFT projects has intensified dramatically—last year alone exceeded the previous four combined. I average about 100 hours per week.
Besides making money, what hobbies do you have, Boss?
Shen Yu:
Fishkeeping—marine fish. I couldn’t keep corals alive though. (Here, “fish” refers to real aquatic life.)
Tuesday’s event, “Cobo Private Salon,” is co-hosted by Cobo Labs and Cobo’s Client Services Center. Using an internal format, we aim to distill valuable knowledge and experiences, accumulate wisdom, and encourage sharing of personal insights and challenges!
This invitation-only online event features AMAs known for authentic, direct, and impactful answers—condensing years of Shen Yu’s hands-on experience. Invitees include crypto influencers, leading industry media, traditional finance and primary-market investors, secondary fund founders, and Cobo’s VIP custody clients. Content premieres exclusively on the Cobo Labs official account! Interested readers can sign up via the Cobo Assistant to join future internal exchanges.
Cobo Labs aims to help crypto investors mitigate risks and enhance returns, providing objective, in-depth data analysis for traditional financial institutions, venture capitalists, token funds, individual investors, exchanges, and media partners.
About Cobo, Asia Pacific’s largest crypto custodian and asset management platform: We provide institutions with leading secure custody and enterprise asset management services. We offer global high-net-worth qualified investors crypto wallets and flexible fixed-term and structured products. Committed to financial innovation, in Q3 2020 we launched the first institutional-focused fund product globally—“DeFi Pro.”
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