Roundtable Discussion: Will China Miss the Web3 Revolution?

Author: Jinse Finance

Key Points

Web1 is the read-only internet, Web2 is the read-write internet, and Web3 is the read-write-own internet. This means that users create data and own the rights to the data they create, thus owning the value generated by that data. Therefore, Web3 represents a transformation of data ownership compared to Web2.

Since 2012, as China gradually implemented blockchain regulatory policies, and recently when U.S. lawmakers publicly stated the need to ensure the Web3 revolution occurs in the U.S., the question of "Will China take measures for the Web3 revolution?" has become a topic of great concern across various sectors.

Blockchain technology is a newly emerging technology that has not been around for long, and research on related legal systems is still insufficient. Incomplete legislation and unclear enforcement standards are significant factors restricting the development of the Web3.0 industry in China. It is essential to give the government enough time to explore relevant regulatory laws and solutions while establishing a sandbox to use decentralized blockchain systems. Once a better compliance mechanism is found, the sandbox can be opened immediately, allowing users' data to naturally integrate into the decentralized world.

Practitioners need to explore the ecological development model of Web3 under the current compliance system, using technological means to allow users to experience Web3 application scenarios without engaging with digital currencies. When clear answers can be provided through regulation, further development can occur within this framework, deepening the understanding of the compliance system while maintaining a spirit of exploration.

In the transition from Web2 to Web3, Web2.5 is a very valuable point. It is not necessary to fully decentralize all data at the Web3 stage to bring benefits to society and allow new industries to develop. China has many applications in the Web2 field and a vast consumer base. If combined with information technology and data sharing, it can achieve many network connections in the entire consumer industry and significantly improve efficiency.

Overview

In recent years, the concept of "Web3" has begun to sweep across various industries. It encompasses everyone's ideas and explorations for the next generation of the internet and is seen as an emerging technological revolution that will ultimately extend to various fields, including the economy, society, and daily life, sparking disruptive changes.

So, what exactly is Web3? What is the government's attitude towards this field? Can China seize this opportunity and gain an advantage at the next historical juncture?

Jinse Finance, in collaboration with Tencent Technology, launched a series of interviews themed "How Far Are We from Web3?" In this episode, we invited Wu Ming, co-founder and CTO of Shanghai Shutu Blockchain Research Institute, and Roy, head of investment banking at JZL Capital, with Maxwell, editor-in-chief of Jinse Finance, as the host. Below is a summary of the live broadcast highlights:

1

Why is Web3 called a revolution, and what are the significant differences between it and Web1 and Web2?

Wu Ming: Web1 is the read-only internet, Web2 is the read-write internet, and Web3 is the read-write-own internet. This means that users create data and own the rights to the data they create, thus owning the value generated by that data. Therefore, Web3 represents a transformation of data ownership compared to Web2.

Historically, most revolutions are essentially transformations of ownership. Data creators can obtain the value they create in a fairer way. At the same time, when data ownership changes, the entire industry's business model undergoes significant changes. The value generated by data is no longer monopolized by centralized platform providers, reducing the monopolistic barriers of these providers and leading to more flat and intense competition among them, which in turn significantly improves the quality of the services they provide. This is why the transition of many Web2 applications to Web3 is not about continuing to use existing architectures but rather about systematic reconstruction.

Given such a large-scale change, I believe Web3 can definitely be called a revolution.

Roy: I think calling it a revolution is a bit too heavy. A revolution is something that disrupts the world, but in terms of data, the current user base of Web3 is still in its early stages. Even abroad, the people who surf Twitter daily, discover investment opportunities, and participate in communities are mostly a homogeneous group. Web3 has not yet made a big splash, although many investment institutions are continuously participating, the actual number of people creating and using data is still limited. However, I believe the trend is there, and it may continue to develop exponentially in the future.

Web3 will indeed spark new markets and new business models, but perhaps not in a way that dramatically changes human life on a large scale.

2

Will China miss the Web3 revolution?

Wu Ming: Why do I think China might miss Web3?

I believe Web3 includes several components such as decentralized digital currencies, decentralized storage, and decentralized computing. From a technical perspective, the Ministry of Science and Technology of China includes significant blockchain projects in its annual 14th Five-Year Plan to support the development of blockchain technology.

Optimizing technology is very beneficial for enhancing China's international competitiveness. Currently, many countries impose information restrictions on others, and if the dissemination of information is built on decentralized infrastructure, it will be very advantageous for China's future development.

However, from a financial perspective, the government has some concerns about decentralized digital currencies because they may bring many regulatory issues.

Roy: I believe China has great prospects for the development of Web3. Although the exploration of decentralization in the country, such as consortium chains, still cannot achieve complete decentralization, it does not mean we cannot do anything. The strength of China or the Chinese community lies in application layer development.

This brings us to the concept of Web2.5. In the transition from Web2 to Web3, Web2.5 is a very valuable point. It is not necessary to fully decentralize all data at the Web3 stage to bring benefits to society and allow new industries to develop. China has many applications in the Web2 field and a vast consumer base. If combined with information technology and data sharing, it can achieve many network connections in the entire consumer industry and significantly improve efficiency.

3

In the past 20 years, China has embraced Web1 and Web2 very positively, even leading the world in some aspects during the Web2 era. Why is there now some doubt about the development of Web3, and how can we overcome this doubt?

Wu Ming: I think this doubt mainly comes from the uncertainty of regulatory solutions for digital currencies.

Blockchain technology is a newly emerging technology, and digital currencies are a new field that has emerged not long ago. Research on related legal systems is still insufficient, and incomplete legislation and unclear enforcement standards are significant factors restricting the development of Web3 in China.

We need to give the government enough time to explore relevant regulatory laws and solutions while establishing a sandbox to use decentralized blockchain systems. Once a better compliance mechanism is found, the sandbox can be opened immediately, allowing users' data to naturally integrate into the decentralized world.

Practitioners need to explore the ecological development model of Web3 under the current compliance system, using technological means to allow users to experience Web3 application scenarios without engaging with digital currencies. When clear answers can be provided through regulation, further development can occur within this framework, deepening the understanding of the compliance system while maintaining a spirit of exploration.

Roy: The reason Web3 is so popular in the U.S. is also due to its political foundation. There is still no clear definition of whether certain tokens are securities or commodities and how to manage them. Therefore, regulation will always lag behind technology and applications.

Under many domestic policies, we cannot take too many risks in doing things. In the entire transition from Web2 to Web3, relying on regulation to provide clear answers and then developing within this framework may significantly impact the overall industry.

4

Many people say, "Just like China's success in the Web2 internet, there will be significant development for Chinese people in the application layer of Web3." What do both of you think?

Wu Ming: In the Web2 era, we were relatively close to the international level, and we could even say we were ahead. China's strong Web2 system applications and user base can become fertile ground for the development of Web3.

China's Web3 applications will definitely have good development space. Firstly, the application scenarios for consumers in the Web3 market will account for a very large proportion, even larger than in the Web2 era. This is an inevitable trend brought about by data decentralization, where individual creators can actively and effectively participate in the internet-scale business model. The driving force for consumer applications is indeed stronger, and China's population advantage provides excellent prerequisites for the development of consumer applications.

Secondly, China has a strong industrial foundation, nurturing many excellent system applications as well as engineers and operators. The talent reserve is also a driving force for the development of China's Web3 applications. Technical teams can combine with overseas business teams to participate in overseas Web3 projects for training and explore the feasibility of Web3 application scenarios worldwide.

Additionally, many traditional Web2 capital sources in China are looking at the direction of Web3 and are willing to invest considerable funds in Web3 projects. Chinese technical teams can actually find suitable investment institutions to gain cooperation and support.

Roy: I believe the nature of Web3 leans more towards the consumer layer or application layer, so the development of Web3 in China can be compared to the composition of industries.

In 2021, the contribution of consumption to GDP growth across all industries in China was 5.3%, while the remaining two parts were 1.7% from foreign trade and 1.1% from fixed assets. The high proportion of personal consumption is the first dividend.

Secondly, the talent reserve for Web2 in China has reached its peak. Domestic companies are increasingly focusing on technological improvement and infrastructure, which is very beneficial for improving overall factor productivity and will further release growth.

From these two perspectives, the future is indeed very promising, but whether it will directly reflect in the Web3 application layer still requires time accumulation.

5

For China, what is the most critical aspect of Web3?

Wu Ming: Finding a reasonable way for Web3 application scenarios to reach users under the current regulatory model is crucial. If we cannot promote the Web3 application model to Web2 users, then China is very likely to miss the Web3 revolution.

We must, to some extent, break free from the reliance on the Ponzi scheme rules associated with virtual currencies and provide actual value to traditional Web2 users to scale the user base of Web3 applications to a significant level.

Roy: At this important juncture of transformation and evolution, it is essential to strengthen forward-looking research and strategic forecasting for Web3, which undoubtedly holds significant importance for the future construction of internet technology infrastructure in our country.

"Ponzi" can actually be a reasonable business model; it is not a derogatory term. "Ponzi schemes" are indeed unfriendly. How to solve Ponzi schemes may be a very important step in designing business models. For example, the previously popular game StepN overemphasized financial concepts, leading to fatal flaws.

I believe the future development direction lies in "peer-to-peer interaction," which can maximize the effectiveness of incentives, but the interaction may not be very large. I refer to a model mentioned by Kelly, where to sustain a fan economy, you may only need 1,500 people.

For instance, many streamers have millions of followers and tens of millions of likes; these are the pinnacle of the pyramid. If we truly want to achieve balanced development and allow everyone to have the right to participate in Web3, we need the dissemination of technology and fair incentives, allowing a small number of people to become your die-hard fans and your most loyal users.

Maxwell: Thank you very much to both guests for their wonderful sharing. I hope that through the guests' interpretations, everyone can better understand Web3. Thanks to Tencent Technology for their support, and I hope Tencent Technology's users won't forget to download our Jinse Finance APP for more Web3 information.