Web3 "invasion" of the mobile phone industry

Author: Zhou Zhou, Huxiu Technology Group

"The news has not been officially announced yet, but at least three departments at Huawei are researching and exploring Web3, and the HarmonyOS team is one of them," a person close to Huawei revealed to Huxiu.

Huawei is just one of many smartphone manufacturers exploring Web3. Before it, "old rival" Samsung and HTC had already laid the groundwork and successfully integrated Web3 with their mobile hardware. The rising star Nothing is also closely following in the footsteps of the three giants.

It's not just the major smartphone manufacturers that want to create Web3 phones. Since June of this year, blockchain giants Solana and Polygon have also begun exploring Web3 phones.

An industry insider stated: Most Web3 products are currently showcased on computer web pages, and for Web3 companies to break out again, "occupying" the mobile end has become an inevitable choice.

By definition, Web3 companies also belong to the internet sector, but compared to traditional internet companies, they have a very obvious characteristic: they continuously attempt to decentralize, gradually reclaiming control over data and finance from major platforms like the Federal Reserve (central banks and financial institutions), Apple (large tech companies), and Tencent (internet companies) to return it to the public. In the process of achieving "financial democratization" and "data democratization," most of them inevitably become semi-centralized and semi-decentralized institutions to attract users.

Currently, some outstanding Web3 companies (including crypto, DeFi, NFTs, etc.) have already amassed millions, tens of millions, or even over a hundred million users. For example, StepN has over 3 million users, Metamask has over 30 million users, and Binance's user base exceeds 120 million. Although Web3 companies still have a long way to go to match the user numbers of traditional internet companies, these products have demonstrated explosive growth similar to that of internet companies, with the user count of a wildly popular product reaching millions or even tens of millions in just a few months.

For many smartphone manufacturers, Apple, with a market value of $3 trillion and sitting at the top of global tech companies, is "as stable as a mountain" in terms of hardware, operating systems, and app ecosystems. They want to overtake the competition by getting ahead in the Web3 space, which boasts over a million DApps (decentralized apps), and this seems to be a good choice. The complete ecosystem built by Web3, from software to hardware, attempting to rival Apple's ecosystem, has also made smartphone manufacturers sense new opportunities.

People inside the walled city want to get out, while those outside want to come in; the gate to Web3 phones is slowly being opened by people both inside and outside the walls.

People outside the wall "want to come in"

Web3 is like a city that has just unearthed a gold mine, attracting the envy of those outside.

These outsiders can be roughly divided into several large circles, such as the internet circle, including Meta, Google, Amazon, Twitter, etc.; the banking circle, including JPMorgan, Unibanco (Brazil's largest private bank), Bank of New York Mellon, etc.; the investment circle, including Sequoia Capital, SIG, A16Z, etc.; the sportswear circle, including Nike, Adidas, Puma, etc.; the news circle, including The Wall Street Journal, The New York Times, and Hong Kong's largest English newspaper, South China Morning Post, etc.; luxury goods circle, automotive circle, sports circle, film and television circle… These outsiders all want to create revenue and value through Web3.

The smartphone circle, as one of the circles that can most influence the development of Web3, has attracted the attention of many industry insiders and outsiders due to continuous news over the past two months. Among them, Huawei, Samsung, HTC, and Nothing have begun exploring Web3.

HTC and Nothing have both announced the launch of new Web3 phones in the second half of this year.

In June 2022, HTC released a new version of its Web3 phone, which facilitates the management of cryptocurrencies and NFTs. The phone comes with a built-in hardware wallet, allowing users to purchase and store NFT assets on Ethereum and Polygon.

Unlike the "crypto phone" launched in 2018, this time HTC not only has a built-in wallet but also attempts to provide users with a virtual space through NFTs, and tries to combine various elements: cryptocurrency + NFT + VR + phone, creating a metaverse phone with an immersive experience.

"NFTs are the cornerstone of the metaverse. The non-fungible characteristics of NFTs make every item in the metaverse, such as props, buildings, and characters, unique, establishing a more stable economic system in the virtual world that better meets human demands for immersive experiences," an industry insider pointed out.

Movie "Free Guy"

Nothing is the "newcomer" in the smartphone circle. In July 2022, Nothing partnered with blockchain giant Polygon to officially explore Web3.

"We want to shape a decentralized world and help users regain control." Polygon's Vice President of Growth, Arjun Kalsy, stated. "Every Apple and Android phone people use requires logging in with a Google ID or Apple ID. To some extent, Apple and Google own the customers, while users have no choice over the use of their data; people have become accustomed to being controlled by these two companies."

Nothing's idea may be simpler. This newly established company aims to break through in the smartphone industry dominated by giants like Apple, Huawei, and Samsung by actively embracing the latest technological trends to capture users in niche markets.

Its wireless earbuds launched in 2021 support crypto payments. Now, it hopes to further integrate Web3 into its phone DNA, aiming to seize opportunities in markets where giants have not yet laid their groundwork.

In the past two years, Web3 has made significant progress, showcasing its potential to influence the mobile ecosystem and even the mobile internet, both at the foundational and application levels.

Latest data from KingData shows that there are over 1 million DApps on BSC and Ethereum alone.

At the application level, DApps (decentralized apps) have far exceeded 1 million, giving rise to products like StepN and Metamask with millions or even tens of millions of users; at the foundational level, Web3 wallet projects (equivalent to the App Store) have surpassed 95, and public chain projects (equivalent to Apple's iOS system) have reached as high as 127.

"To use a somewhat inappropriate analogy, DApps are equivalent to the apps people currently use, wallets are equivalent to the App Store, and public chains are equivalent to Apple's iOS system… Web3 is building a complete system to change or even disrupt the current mobile internet." a Crypto fund investor told Huxiu.

However, the existing mobile systems have developed into a very "comfortable state" over the years, while DApps and existing mobile systems often encounter various frictions. "Current mobile systems are not friendly to DApps (Web3 products); phones do not support crypto frameworks, and some of the underlying infrastructure for DApps has not been established, requiring more costs for each change," a Web3 entrepreneur told Huxiu.

Nothing's early layout in Web3 is also aimed at becoming a crypto-friendly phone by adapting to the Web3 ecosystem in advance, making it the first choice for Web3 phone users. Polygon stated: "Through this collaboration, users will find it easier to access DApps like Game-fi, enabling smoother payments and secure crypto identification functions, among others."

As a leading international smartphone brand, Huawei has also shown considerable interest in Web3, both in its overseas teams and domestic teams.

"Multiple departments or teams at Huawei (domestically) are exploring Web3, including Huawei Cloud, HarmonyOS, and Huawei Wallet," a person close to Huawei told Huxiu.

Abroad, Huawei has also been quite "open." In May of this year, Huawei released an NFT called Caked Apes on Twitter, causing the floor price of the series to soar. Additionally, Huawei Cloud has provided cloud services for Web3 games like Ankots of Misteria and Revoland.

Huawei, Samsung, HTC, Nothing… More and more smartphone manufacturers are beginning to pay attention to and explore Web3 phones. However, whether Web3 phones will become a future trend is not determined by them, but by the "natives" of Web3.

Web3 giants "want to get out"

The history of Web3 development is a series of breakthroughs.

Starting from a single currency (Bitcoin), evolving into an independent financial system (DeFi), and then developing into an economic system with more interactions with the real business world (NFT)… Web3 continuously breaks through circles, reaching more and more groups.

However, the breakout of Web3 has always been limited to the web end, while 99% of users are on mobile. Occupying the mobile end of Web3 and creating an influential Web3 phone is the true "landmark event" for Web3's breakout.

In June 2022, Solana announced its intention to create a high-end Android smartphone for Web3. This phone will use its carefully designed software—Solana Mobile Stack (SMS). It not only smoothly adapts to Web3 phones, ensuring that every transaction is saved on-chain, but also creates a decentralized App Store.

The Solana phone hopes that every phone will have not only an App Store but also a DApp Store. In the former ecosystem, users can download apps like Tencent and Alipay; in the latter ecosystem, users can download DApps like StepN and Metamask.

The Solana phone is a true Web3 phone. Polygon collaborates with Nothing, but the phone is still called Nothing phone, not Polygon phone. Solana collaborates with OSOM Products, but this phone is called Solana phone.

This is a key distinction. The "Web3 natives" finally have enough financial resources, technology, and ecosystem to influence the world outside the walls; they have also become giants and may one day "arm wrestle" with mainstream giants like Huawei and Samsung.

"Unlike Ethereum, which hopes to become a purer decentralized organization and is currently the most successful DAO, Solana and Polygon, as blockchain giants, are essentially improvements based on Ethereum, leaning more towards external expansion; they are more like semi-centralized and semi-decentralized companies," Ning Wentao, investment director at Glock Ventures, told Huxiu.

In the pursuit of Web3 phones, if Huawei, Samsung, and HTC focus on serving hardware like phones, then Solana and Polygon are expanding outward around the core of Web3.

Solana's layout, from public chains, wallets, DApps, to DApp Store, phone software, and phones, is gradually shaping itself into a Web3 empire. "To establish a new mobile ecosystem, the Solana Foundation has launched a special fund of $10 million to encourage the development of mobile DApps," Solana stated on Twitter.

Solana's goal is to expand its user base; it hopes that the software will not only be used by itself but also by Android phones from Samsung, Google, and others. Solana co-founder Anatoly Yakovenko stated that if this software is adopted by major Android phones, people may witness the arrival of the next era of 1 billion Web3 users.

Polygon has also made similar statements, believing that Web3 phones can allow users to access DApps more easily, making crypto funds safer and crypto payments more convenient, which will become the entry point for hundreds of millions of future users.

Centralized giants like Samsung and HTC are trying to decentralize step by step to get ahead in the future user layout; decentralized giants like Solana and Polygon choose partial centralization to reach more customers. They seem to have reached a consensus: the centralized world is dangerous and monopolistic, while decentralization offers more opportunities for innovators and more choices for users.

Two trends: Mobile first and APP-Chain

"In the Web3 world, there is almost a disconnection from the real world," a CEO of a startup lamented to Huxiu.

This reflects the general impression people have of Web3, a field that not only has an independent economic system and technology tree but has even developed a language system that is difficult for outsiders to understand. It also highlights the current predicament of Web3 development: insiders refer to each other as comrades and are enthusiastic; the public is confused and indifferent.

However, this phenomenon is changing. From the currency circle to the financial circle, to the internet circle, and then to various traditional industries… Whenever people feel that Web3 is about to perish, it always bursts forth with strong vitality. "Foreign cryptocurrencies correspond to domestic digital RMB; foreign public chains correspond to domestic alliance chains; foreign NFTs correspond to domestic digital collectibles, Web3 touches on something essential in human nature; oranges grown in the south of the Huai River are oranges, while those grown in the north are trifoliate oranges. Perhaps its growth varies in different soils, but its vitality remains," a top investor from a domestic venture capital firm told Huxiu.

Where will the next major breakout occur? AnchorDAO researcher Xie Guangwu believes: Mobile first, APP-Chain.

Previously, the vast majority of Web3 companies' products were presented in the form of web DApps rather than apps. This greatly increases the barrier for users to enter Web3.

"On one hand, this is limited by industry infrastructure and talent. Whether it's the iteration of underlying public chains or the investment in application layer development, there isn't enough to support large-scale user apps running on a specific public chain, nor are there relatively mature mobile development teams investing in Web3. On the other hand, from the perspective of Web3's own network effects, in the face of a global crisis, practitioners should have the mission to bring a decentralized free financial network to a larger scale of mobile users. For relatively closed developing countries, these users are primarily mobile users. The core of Mobile first and APP-Chain is no longer just focusing on the blockchain's underlying layer, but rather influencing more users in a more inclusive and convenient way, making blockchain accessible, which will further strengthen the robustness of decentralized networks," Xie Guangwu stated.

Especially with the phased success of StepN, people have seen the enormous potential of Web3 products on the app side and their driving effect on public chains. Creating an independent app not only enhances user experience but also forms a closed loop of its own ecosystem. StepN is not just a game; it is also a wallet product and an NFT platform.

StepN's breakout has turned more users into Solana users. Binance recognized this and collaborated with StepN, successfully encouraging more people to use Binance. This is the best example of how an app drives chain user growth.

The goal of Web3 phones is the next hundreds of millions of users. To achieve this, a series of changes from DApps, software, operating systems to phones is essential.

In conclusion

Binance 120 million users, Metamask 30 million users, StepN 3 million users, CoinSwitch 10 million users… Over the past decade, Web3 has experienced multiple cycles of bull and bear markets, and people's understanding and definition of it have been continuously dismantled and reshaped.

Now, it stands at another new height. It has not only made an impact in the currency and financial sectors but has also successfully caused a broader influence in the real world, the internet industry, listed companies, and traditional enterprises through NFTs in the past two years.

Currently, an important issue facing Web3 is that most products have not yet adapted to be presented to users in the form of apps, which directly relates to whether the public can access Web3 products. Smartphone giants and Web3 giants are both trying to solve this problem.

The current internet is still a world full of flaws. All the internet companies we know must "adapt" to Apple's ecosystem in the form of apps to survive. Even internet giants like Tencent, which are "too big to fail," often lower their proud heads when facing Apple's tough terms. When Apple "exploits" internet companies, internet companies are "exploiting" the public's ownership and usage rights to data, which provides reasons and more opportunities for the emergence of Web3.

Web3 has opened up a technological and economic system independent of the real world, with tens of thousands or even hundreds of thousands of teams competing in this independent ecosystem, and the best will "break out" and ultimately present themselves to the public.

The next breakout will showcase more apps before us. And the carriers of these apps will no longer be limited to computers; they will increasingly be smartphones, and even VR devices, AR devices, automotive displays, and other richer hardware.