Roundtable Discussion: Reexamining Web3, Why Does It Keep Sparking Controversy?

On January 15, Chain Catcher held its first closed-door meeting in Beijing, inviting Wayne, CEO of the crypto research institution Tokeninsight, Wang Xiang, partner at the crypto investment firm Zonff Partners, Will, co-founder of Solv Protocol, and Bruce, VP of the crypto investment firm EVG, to engage in a roundtable discussion on "Revisiting Web3: Why Does It Keep Sparking Controversy?" The discussion was moderated by Loners Liu, research director at CatcherVC. Below is a summary of the conversation by Chain Catcher:

Host: Hello everyone, I am Loners Liu from Chain Catcher, currently responsible for project research at CatcherVC. There is a lot of focus on Layer2, cross-chain, and Cosmos at the moment. Today, we mainly want to talk about Web3. In fact, the metaverse is quite popular domestically, but in Silicon Valley, the heat around Web3 is even higher, and some scientists from Silicon Valley have also joined Web3-related companies. There are many projects on-site that are also hiring.

So, we want to ask the guests, when you mention Web3, what is the first thing that comes to your mind? To what extent can Web3 replace the current Web2, or what are the difficulties? What are the areas where Web2 cannot do well, but Web3 can solve? Let's first invite Will to share his views.

Will: Let me briefly say something. I believe everyone knows the background of Web3; this concept was first proposed by Gavin Wood. I believe it is closely related to blockchain and has a necessary correlation. This is indeed different from what many people currently refer to as the metaverse. We now think that whether it is Web2 or even the previously mentioned Web1, I feel that there is not much essential difference between them; the core is still a kind of information network.

When Web3 was first proposed, it had some similarities with blockchain, and I believe it will carry attributes of resource networks or value networks. I think this is also what most Web3 builders are considering; it will not simply be an information network. Because purely from the perspective of information transmission and storage, the so-called Web3 or blockchain that currently exists is inefficient.

From this perspective, I personally do not think Web3 is the "next generation internet"; I believe it should coexist with the existing web, each playing to its strengths. The existing external forms in terms of information storage and dissemination are definitely still the most efficient and fitting. But Web3 may play a greater role from the perspective of mixing information and resources. This is what I think is the biggest characteristic of Web3 and also my first thought.

Secondly, Web3 has just started to develop not long ago, so it will utilize some characteristics of the current Web2 at the infrastructure level. I don't know if the controversial topic today comes from the article written by the founder of Signal, which provided a particularly typical example: if an NFT seen in a decentralized wallet is taken down from Opensea, the decentralized wallet cannot see it. This is actually a very ridiculous thing; how can this be considered a decentralized wallet? This relies on a centralized system.

For such matters, I personally prefer to adopt an optimistic perspective; this is an inevitable phenomenon in its development process. We all know that building such centralized custodial wallets has a significant technical cost, requiring many servers and strong security. Many people are currently building more reliable decentralized wallets to reflect NFTs, including our own developed NFTFi or Financial NFT. In the future, when we develop wallet functions, we will definitely use a decentralized model and will not rely on Opensea. However, I personally hold an optimistic attitude, believing this is just a phenomenon that must occur in the development process.

Host: I understand what Will means; Web3 may be a network for value transmission, and the current controversy may just be a more efficient measure at this stage. Next, let's invite Wayne to share his views.

Wayne: Two questions: First, what will happen if Web3 replaces Web2? If Web3 replaces Web2, it will become "Web2." In ancient times, if a person rebelled and defeated the emperor, that person would become the emperor.

This question is actually somewhat difficult; Web3 has not been defined up to this point. From one perspective, Web3 is the future of this industry. Because NFTs are quite "terrifying," as they can represent any type of asset, all our future assets will be presented in data form. NFTs are essentially Non-Fungible, so they can replace any type of asset; Fungible can replace money as a means of value transfer.

Therefore, you can represent anything you encounter in life using these two methods and transmit it across one or more value networks. The intermediary layer of this value network is the blockchain, the top layer is your interaction through a certain application, and below that is the data layer, decentralized data. This data needs a place to be stored, but it cannot be placed in a centralized database like Google and AWS. What if one day the server is stolen, there is a power outage, or even destroyed by a missile? That would be disastrous! So we cannot do it this way; we need to create a new storage method for Web3.

The ultimate internet will definitely run on physical lines; between two continents, there are cables running under the sea, so they are first controlled by operators. This thing is also centralized; cutting off the network is very easy. Recently, Kazakhstan had a network shutdown, right? The network can be turned off at any time. We cannot allow this; we need decentralization, so we have Helium. Every household can participate in building this network. Once we have a real network layer and a blockchain layer, we can build applications on top of that. Isn't this the whole system of Web3? Everything we have is on it. When combined with our senses and a bit of VR, isn't that the metaverse? This is the future; doesn't it sound exciting? So if we answer the question from this perspective, I think it might be like this. I just feel the whole thing is a bit mystical; it seems too simple, as if you really want me to live a good life, I don't quite believe it.

Wang Xiang: My view on Web3 is as follows. For example, when we entered the industry in 2017 and 2018, the decentralized concept that the entire crypto world talked about was actually what we referred to as the application world of Web3. At that time, all the products we could see on the market were public chains, and when you couldn't see how this public chain would help you truly step into that world, the market turned into issuing public chains, issuing tokens, and dumping.

In fact, over the past two to three years, especially in 2021, we have seen a significant change; real closed-loop commercial applications have started to emerge in the market, such as DeFi, NFT markets, and GameFi. They can truly operate independently of any investors, Nasdaq, or existing financial systems, ensuring that the company can operate completely and has its own developers and users. Some people can profit, while others may lose money. In the past six months, more new types of DAO organizations have emerged, leading to some closed-loop scenarios.

The impact of this closed-loop scenario over the past year is that I have noticed that entrepreneurs in this industry have begun to develop their own entrepreneurial philosophies. Everyone is creating a new system that departs from the Web system, discussing how to circulate tokens, how to use tokens to incentivize my business, and what products I deliver. Many Web3 entrepreneurs now believe that the products they deliver consist of tokens as one part and the community as another, rather than being merely a tool.

I think, first of all, this will lead to a phenomenon of large-scale influx, because everyone will have this dream, but everyone's dreams are somewhat overlapping. There may be dreams related to crypto, AI, the Internet of Things, and even the gaming circle. People from various industries feel that this dream is related to them. This will become very chaotic; chaos will attract more people to participate. Every wave of entrepreneurial trends must be chaotic enough; only when it is chaotic enough will more people feel they can make money here.

As long as someone feels they can make money here, new things will continuously emerge in this industry, leading to an endless stream of projects and various changes. Why do people feel they can't make money in Web2? Because they feel there is no change in this industry; whatever they do, they cannot compete with Toutiao or Tencent. Everything they want to do has already been monopolized, and they no longer have dreams in this scenario.

As for whether Web3 can replace Web2, I think we need to break it down. What exactly is the internet we are talking about? There may be several categories; for example, the traditional internet broadly includes games, social media, e-commerce, and tools. Some even combine social media and gaming into one category. The underlying business models that can be derived from this are few. For example, SAAS is a monthly fee, e-commerce takes commissions, and gaming and social media rely on advertising. Essentially, there are only these three business models.

Then let's see if Web3 can cover all these scenarios. Web3 may not be able to fully cover e-commerce well, as it involves manufacturing, but the commission model does exist in this industry. From the perspective of exchanges and NFT markets, it is essentially still an e-commerce model. Does the gaming and social media model exist? At least it does not exist currently, but it does not guarantee it won't in the future. Currently, there are no large-scale C-end fully decentralized products emerging, so the focus of the entire crypto world is actually on private domain traffic. Will there be a public domain in the future? I think it will emerge; I can use fiat currency to buy traffic from TikTok, and I might use tokens to buy traffic from a large-scale C-end Web3 social or content product. So this business model can also be covered.

Further down, we may lean towards architectural or technical layers like SAAS and BAAS. In the future, we may need more paid-layer tools. At least from a business model perspective, it can encompass Web2, but it will involve more connections with the physical world. In fact, Web3 will also have new business models; I think DAO is a model that does not exist in the traditional world. Based on existing PEOPLE and SOS, there may be more entrepreneurial ideas around DAO.

Originally, I thought what everyone referred to as DAO was just voting and pooling money. I used to distrust this concept, as I felt that when many people invest, it becomes a mob. However, when everyone now has a consensus and a goal to do something, I believe this business model does not exist in the traditional world. I think Web2 and Web3 intersect; perhaps about 70-80% overlap. Web2 cannot cover some small scenarios of Web3, and Web3 will also break through some innovative models to ensure it does not simply turn a centralized product into a decentralized one.

Bruce: The previous guests have talked a lot about Web3; I want to give some specific product examples, such as Mirror. Before joining EVG, I worked at the traditional internet company Tencent. I had related doubts, such as when you read some great articles or watch videos, suddenly they disappear, and some public accounts or influencers suddenly have their accounts canceled, and the related data is definitely erased.

I think the Mirror platform solves this problem very well; the articles you write are always yours, they are browsable, and you own them. The Write-to-Earn model allows creators to earn tokens through writing articles or creating IP, which is a great way for content creators or users. It also excels in anti-censorship, permanent storage, and data rights confirmation.

Of course, there may be some specific products in the entire Web3 that solve the pain points of Web2. I think at least for certain specific use cases, it is a very good development trend. Including the emergence of specific products like DeFi and Uniswap, which construct the entire DeFi scenario. Web3 is still in its early stages and needs some blockchain-native product forms, with a grounded application that truly allows users to vote and experience the product before they know what Web3 is. Mirror itself may have its own issues, such as its storage may not be permanent or may have regulatory issues. But for now, for creators, besides posting on WeChat public accounts, I might prefer to post on Mirror because I feel that this article truly belongs to me.

Wayne: I have a question: if one day you cannot access Mirror, will you doubt yourself? Will you still believe in it?

Bruce: If I cannot access Mirror, then it might mean it has failed, but I believe there will still be forms that allow people to access Mirror. Because if the front end is blocked, you can still access it through APIs or other contract forms; I believe there will still be a solution.

Host: Let's move on to the second question. Just now, Wang mentioned the criticism of Web3 by the founder of Signal, and the founder of Twitter also said that users do not actually own Web3; it is the VCs and their backers who own it. After Opensea chose the traditional IPO route, there were also corresponding interviews. What do you think about these criticisms of Web3 and some practices that feel very un-Web3?

Will: I think the facts of a matter are related to your perspective on it. When I first read the article by the founder of Signal, I felt a bit amused; I thought this was like an article I would have written when I was younger. Because I come from a technical background, I like to critique it from a technical and logical perspective.

Just like the example I gave earlier, claiming to be decentralized, but a centralized system takes down its content, and the content is gone. What is the meaning of decentralization? But from another perspective, what if it is a temporary phenomenon arising from a process of development towards a certain direction? Do you think that is unreasonable? If you want to improve it, go ahead; as long as you believe in that direction.

True courage is seeing the harsh truth of life but still loving it. So I think the development of every industry is like this; the core issue is how you view it. It is currently unchanged, but if you want to change it, you can push it towards the future. So I think this kind of thing can become something very simple; you could say it is a calm acceptance of the situation.

Host: What do you think about Jack's view that the biggest beneficiaries of Web3 are VCs, and what kind of VCs does Web3 need in the future?

Will: To put it bluntly, did Web2 succeed? Wasn't the biggest beneficiary of the Web2 era the VCs? Alibaba's stock price could also be halved due to a policy. Whether it is Web2, Web1, or the industrial age, the beneficiaries are the early visionaries; their investments also carry huge risks, so they should benefit. From this perspective, it is completely normal for VCs, yield farmers, and speculators to benefit from Web3.

Wayne: I think Opensea is not wrong; it did not steal, rob, or violate the law, nor did it do anything it shouldn't have. Some people who are envious because they didn't make money are criticizing it; I think that is not a problem. On the contrary, those who are parasitic should have a problem. Why shouldn't entrepreneurship be for making money? Should I contribute light and heat? The Opensea team seems to have worked hard for five years to develop it; there is nothing wrong with that. We are also a small company, and if we succeed in the future, making money is justified.

I believe that in any industry, the ultimate beneficiaries should be those who create value, the entrepreneurs themselves, not the VCs. The companies with the largest market capitalization, such as Apple, are real businesses that make phones and software. Internet companies like Google also make software and real products, not VCs. Which of the strongest companies in the world is a VC? VCs are vampires; I know this because we also do investments, and sometimes I feel quite embarrassed; VCs are vampires, and they shouldn't make so much money. How much is vision, and how much is luck?

From my perspective, if I make money from investing in projects in the future, 80% of it is luck. Of that 80% of luck, 90% comes from industry-driven dividends, and the remaining 20% may be due to good fortune, along with a bit of experienced judgment. Why is it that VCs are making so much money in this industry now? There is no reason for that; it is not right. Ultimately, it should be Uniswap and Compound that earn the most money, but it is not. It is very normal for these teams to keep 10% or 20% of their token share for themselves. But sometimes, in one round of financing, they give out 10%, in two rounds 20%, and in three rounds 30%. After four rounds, 40% is gone. Almost half is gone, and then with public offerings, all the money is earned by others. This is unreasonable, and it is all earned by investors.

So I think that viewpoint is not wrong. If you look at it from that angle, then it is a group of people who have concocted a very compelling story to raise money? I think the true love for this industry is when you discover that 90% of this industry is made up of scammers, and 90% of the people are speculators who do not want to do serious work, yet you still love this industry. You find the shining points of this industry are genuinely good; I think this is challenging, but it is also possibly the way to enjoy the benefits of this industry. I have this experience because I have to work with the team, reviewing hundreds of projects every week. Some projects pass in a second; the good projects in the market are one in a thousand, or sometimes even less, so sometimes there will be some emotional expressions.

Wang Xiang: When I first entered the investment industry, one of my mentors said that the essence of VC work is to throw out about 10 billion yuan to cultivate a market worth 100 billion yuan, and some of the money thrown out may not cultivate a market at all. This is the VC business model; in a long cycle, VCs will not earn excess returns; this is the first point.

The second point is, if you really think this is a problem, then what everyone looks forward to most in the next three years is the emergence of a decentralized company that can take down Opensea, valued at 13 billion dollars. The community will think that the world has feared Opensea for a long time; this is the motivation.

Another better point is that the entire Web3 entrepreneurial architecture, the products and competitors between products have no barriers.

Regarding the controversy surrounding Web3, my mindset is like this: the mindset of entrepreneurs doing things is an infinite game, while investors prefer to deduce the endgame. However, in the Web3 ecosystem, because even if you are an investor, you are also a user and a co-builder of the community. Everyone should have a mindset of an infinite game; we participate in the co-construction of this product, which is certainly the reason for the current state. If there are points that do not meet my needs or points that make me very dissatisfied, I need to make it better or reach a state that I think is good.

So as long as the purpose of this matter is singular, many things may happen in between. Perhaps in one to two years, Opensea will be gone, but it will not affect the development of the entire NFT industry. For Web3 entrepreneurs, as long as this matter is developing in a good direction, your product is your product, your users are also your product, your community is also your product, and perhaps your tokens are also your product.

Bruce: We are still very optimistic about community-driven projects. People may think VCs are parasitic or something, but for Opensea, before a16z invested, its trading volume was relatively small, and its market share was not large. After a16z invested, its trading volume immediately increased, and it became the leader. In fact, it seems that people only see some comments about VCs being parasitic, but in reality, institutions like a16z provide a lot of post-investment services, such as early-stage token economic models and later-stage promotional services, all aimed at growing together with the project party.

When the project grows, the benefits it gains from there are not only for the VCs but also for the users participating in the project. When these three parties grow together, that is a long-term project, a project worth investing in. The project party, VCs, and users work together to develop the project better; isn't that a good positive interaction model?

Host: The third question is for everyone to freely discuss the Web3 tracks they are most interested in, such as permanent storage, creator economy, etc. What kind of Web3 products do you like, or what direction do you see potential in?

Bruce: I think it still depends on specific products. The entire Web3 mainly revolves around social identity, data rights confirmation, as well as on-chain storage and corresponding product facilities. We may currently focus more on on-chain social. It is not just about putting traditional social identities on-chain, but really allowing users to own their data on the blockchain itself while interacting and communicating with others. Of course, there are currently not many products in this area, but they are in progress, and many are still in the early stages.

Wang Xiang: I focus on two directions. The first is actually the infrastructure of Web3. We can already see where that dream is; once we step into that dream, there will definitely be many problems to solve. Solving these problems may be a relatively good technical or infrastructure project. In this industry, entrepreneurship does not require creating an ecosystem or a closed loop; as long as you solve the problem well enough, and it is not too bad for others' scalability or extensibility, that is a good technical solution and a usable infrastructure. Especially for long-cycle funds, it has always been a relatively stable direction.

The second is that I am also very optimistic about social. Whether it is creating a creator economy or doing social, I think it is a type of product that incentivizes a large number of C-end users to use your product, thus generating a network effect. Over the past 20 years, the demand for online social interaction itself has not changed much. However, if instant communication is a demand, or based on interests or a certain category, it will generate a vertical social scene. In fact, this demand is inherently three to five types; later, through the evolution of the entire internet to mobile internet, different products may combine to meet these three to five demands.

In the Web3 world, the traditional internet social industry is a very chaotic track, but this chaotic track can produce huge companies. The reason for its chaos is that there are many dimensions in the combination of demand and product, and tokens add another dimension in Web3, which is an exponentially increasing complexity that leads to a very chaotic entrepreneurial scene, which I personally enjoy.

Host: Which social scenarios in Web2 do you think have not been met, prompting you to want to create new social platforms? What is the biggest difference between new and old social methods?

Wang Xiang: The biggest difference is that your assets will not be trapped on the platform. Recently, many projects on the market talk about creating Web3 social, but they may not be able to create reputation yet, possibly because DID and other aspects are not yet perfect. It may be difficult to have short-term reputation on-chain now. However, creating a social graph is simple. This may be based on ENS or wallet addresses, generating a social graph, and then using more Dapps to attract users and connections.

Host: It actually still leans towards how creators can monetize this aspect.

Wang Xiang: Yes, because this track is the most directly facing users. As long as you have users, you have countless ways to close your business model. The simplest way is to sell ads; as long as you have users, I will sell ads, and then this company won't die. So generally, I feel this is a track where as long as the market is very chaotic, there will definitely be new projects to invest in or a new giant company will emerge.

But if I specifically say what a good social graph looks like in my mind, I actually can't think of it. Because I think this industry is too chaotic; it must emerge in a very wild way to create a product that can win the market. So for my current investment in this track, I am more concerned about the entrepreneurs' understanding and cognitive ability regarding different levels of architecture. In traditional industries, finding economic social products is very difficult. Although everyone can say a few words based on this track, the differences are still quite large.

Host: I will share my own views. I think China has done quite well in the creator economy, with live streaming, Xiaohongshu, and various methods; some content can already be monetized. If you say they are suppressed by big companies, leading to asset zeroing, that is also a possibility.

But I think the creator economy and platform economy are related; why do we need platforms? Platforms help us allocate traffic, and we can gain some users we need from them. In this triangular relationship, such as content creators, content consumers, and companies, it actually wants to incentivize content creators. When you have enough content, it will attract more content consumers. Everyone prefers a design model like Bilibili, where content consumers gradually turn into content creators. What Douyin has been doing is continuously optimizing the "camera," so that everyone likes to shoot videos directly with Douyin.

When people mention Web3, they always talk about a lack of money; I think that is not what creators care about. What they care about now is how to optimize the creation tools so that I can shoot more and have a platform like Mirror to showcase my work. As for whether it can attract enough users, I might even build my own private domain traffic on it, etc. It seems that we rarely hear about how to produce a work well from the creator's perspective.

Wang Xiang: I think the thinking is quite similar to that of public chain developers. In 2017 and 2018, we thought that public chains must develop a good community and create many plugins that satisfy developers. Now we find that creating an ecological project, pulling up the price of the ecological project's token, and then pulling up your own token, and then retail investors come in, makes developers feel that there are retail investors here, so they come in.

It is actually a different thinking of whether the chicken or the egg comes first. At least the public chains in 2018 did not operate like this, but at least the public chains that operate like this now have a path to success. I think whether as a content producer or consumer, there is actually a similar relationship. At least effective financial incentives or various token incentives will definitely effectively stimulate content production.

Host: When video publishers can earn tokens through likes, and many celebrities post videos there, where is the product perspective? What kind of content should be incentivized? This is actually very difficult. I think it is not just about having tokens that will make it better.

Wang Xiang: I think such a product can have a counter-system; when its popularity reaches a certain level, for example, the odds become lower and lower, but when you really discover a high-quality piece of content that has not been discovered by others, you will receive a higher investment return. I think this matter can be optimized through the design of tokens to improve the algorithm itself.

Host: Yes, but content is actually very subjective. For example, many people prefer to watch funny content, while you believe that truly high-quality content is only a small part of the field. This is actually quite difficult.

Wayne: The Web3 direction I am more optimistic about is the ability to help users lower the usage threshold, addressing users' hard needs such as security and privacy, serving as middleware between users and protocols. Another aspect is to help developers lower the development threshold, becoming middleware between development protocols and underlying frameworks.

Will: Because I come from a technical background, it is difficult for me to analyze from an investment perspective; I still want to analyze from a fundamental logical perspective. I believe Web3 definitely carries strong resource attributes, and further, it can even be said to have strong financial attributes. So I do not have any optimism for those so-called Web3 systems that rely purely on information for storage and transmission; I believe that logic does not hold. Companies that create this system bear the costs of operating this storage and network. If you haven't paid them a dime, why do you think you have the right to see it again next time? If you want that right, shouldn't you consider paying?

So I think if we talk about replacing Web2 purely from the perspective of information, I believe Web3 is meaningless. It is a mixed model of resources, finance, and information. The currently popular metaverse or GameFi is because they are somewhat bound to money and resource models. So I think this is very normal. If a Twitter or WeChat is created in Web3, I hope that every operation or many operations are charged; only then can it operate normally. Otherwise, it completely contradicts economic logic. I believe Web3 will develop in this direction.

Host: Thank you to the four speakers for today's sharing.