Web3 "land grab", no one can ignore it

Written by: Kang Shuiyue, Founder of Fox Tech and Way Network, Chairman of Danyang Investment

Preface: The spring silkworm does not think of autumn silk, and the summer cicada does not see winter snow. Whether you see it or not, Web3 is right in front of you.

Three million years ago, the Paleolithic era began, and early humans made the first stone tools, which they used to hunt animals and cook meat; 20,000 years ago, the Mesolithic era began, and in addition to making a richer variety of stone tools for hunting, stone carvings and ornaments began to appear to satisfy spiritual needs; 14,000 years ago, the Neolithic era began, represented by polished stone tools, and humans learned to sow plant seeds and domesticate wild animals, leading to agriculture and animal husbandry, known as the "First Agricultural Revolution." Ten thousand years ago, humans learned to make bronze tools like bronze hoes, leading to settlement and plowing, known as the "Second Agricultural Revolution"; 5,000 years ago, humans learned to make iron plows and used domesticated cattle for plowing, while utilizing irrigation technology to increase yields, known as the "Third Agricultural Revolution." The three "agricultural revolutions" that occurred over such a long period now seem ordinary.

The timeline reaches nine centuries ago, in the 12th century. At that time, Europe began to see the "Enclosure Movement," a seemingly barbaric yet liberating movement that continued until the 19th century. As humans began to engage in maritime activities and explore new land spaces, the East India Company, the highest MarketCap company in human history, was born. The maritime, textile, and sheep farming industries became the backdrop for the "Enclosure Movement": nobles drove away the farmers who originally rented their land, demolished houses, and turned the vacant land into more profitable sheep farming businesses. With the concentration of land, larger and more intensive farms and pastures took shape; a large number of displaced farmers moved to cities, providing abundant cheap labor for the First Industrial Revolution that occurred from 1830 to 1840.

Figure 1: The Transition of Human Eras

In fact, just before the outbreak of the First Industrial Revolution, the First Financial Revolution erupted in Europe. Although people now hardly talk about the so-called "Financial Revolution," its impact on future generations may be greater than the Industrial Revolution itself. The world's first stock exchange, the Amsterdam Stock Exchange, was established in 1602, the first central bank, the Bank of England, was established in 1694, the London Stock Exchange was established in 1773, and the New York Stock Exchange was established in 1792. Since then, financial products such as stocks, bonds, foreign exchange, and commodities have flourished. The First Financial Revolution provided the capital fuel for the three Industrial Revolutions that occurred over the next 500 years, giving technological research and large-scale industrial production the necessary funding. Finance nurtured technology and further drove technological transformation of the economic society. Now, human society has once again reached a shining moment of FinTech, where technology and finance merge.

Humans took 3 million years to move from the Stone Age to the Agricultural Age, 14,000 years to transition from the Agricultural Age to the Industrial Age, but only 500 years to move from the Industrial Age to the Digital Age. During these 500 years, while the methods of stocks, bonds, foreign exchange, and commodities have continuously evolved, they have all been new bottles containing old wine, until the emergence of Crypto represented by Bitcoin in 2009, which added an unprecedented asset class to the four major financial assets: programmable assets, commonly referred to as "coins." Blockchain is like a golden-horned giant beast that has landed on Earth from outer space, and Crypto is like the golden horn on this giant beast, causing traditional financial markets to panic, which future generations may call the "Second Financial Revolution."

The economic value generated by the 14,000 years of the Agricultural Age far exceeds that produced by the 3 million years of the Stone Age, and the economic value generated by the 500 years of the Industrial Age far exceeds that produced by the 14,000 years of the Agricultural Age. As of now, the economic value generated by the 60 years of the Digital Age has far surpassed that produced by the 300 years of the Industrial Age. Humanity is in the very early stages of a technological explosion, and the continuous emergence of programmable tools globally is a core feature of this technological explosion. The core production tools of humanity have transitioned from stone tools to hoes, and then from hoes to programmable tools, taking a total of 3 million years, a duration that is astonishing. The starting point of all digitalization processes originates from the birth of the "computer."

Figure 2: Changes in the Digital Age

The emergence of integrated circuit computers in 1964 marked the beginning of the Digital Age, providing a physical foundation for large-scale programming. The first characteristic of the Digital Age is that tools are programmable. Humans use these programmable tools to transform the physical world at a speed far exceeding that of their predecessors, ancient people, and apes, profoundly changing the industrial structure in various fields.

The platform structure of the Digital Age is divided into front-end and back-end. The back-end includes two parts: back-end devices and networks; the front-end includes two parts: front-end devices and user interaction. Back-end devices include chips, operating systems, servers, data centers, and communication networks. Starting from the single machine and local area network era of Web0, it progressed to Web1, Web2, and now Web3, marking the development of the internet. Front-end devices include computers, mobile phones, watches, glasses, headsets, cars, and smart furniture; user interaction includes text and images, voice, video, tangible spaces, and brain-machine interfaces.

From the front-end perspective, the main difference between Web3 and Web2 is that Web3 users have more data sovereignty. Why can Web3 establish ownership while Web2 struggles to do so? An important technology is that data has verifiability at the moment of its creation. From the back-end perspective, an important feature of Web2 is the emergence of the cloud, while an important feature of Web3 is the emergence of blockchain. The cloud represents centralized capability output, while blockchain represents decentralized capability supply.

User data in Web2 is typically stored on central servers, which may have several backups, but these servers are all managed by service providers. Although vendors can also provide proof of ownership, the data ownership entirely belongs to these centralized entities, which is precisely due to the emergence of blockchain, allowing these assets and data to have ownership. At the moment of being recorded on the chain, the blockchain generates a verifiable time series, thereby determining ownership at the consensus level.

However, the development of new things is never smooth, as there are always those who exploit new things for evil or illegal purposes. Programmable financial products, as the core products of the Second Financial Revolution, have been downgraded to the colloquially termed "coins" or "virtual currencies" under the heavy suppression of various governments and traditional sectors, making "coins" a taboo term. Meanwhile, blockchain, as the core back-end of Web3, has also faced a bumpy road. Some have been forced to shut down projects, while others have chosen to cross the ocean and become digital nomads.

In the face of unprecedented phenomena, humans are thinking reeds. In the past 500 years of the Industrial Age, new things like steam trains, cars, and airplanes also caused a wave of panic when they first appeared, and misunderstandings were only resolved when ordinary people began to use them. Blockchain and digital currencies will inevitably go through this stage. After all, even great thinkers like Pythagoras, Plato, Aristotle, and Ptolemy mistakenly believed that the Earth was the center of the universe, let alone ordinary people.

Because Web3 is not purely technology-driven, its development is accompanied by the Second Financial Revolution, thus the impact of Web3 on the economic society is not singular but will be compounded by programmable financial products like Crypto. Programmable financial products are not a disaster, and even "stablecoins" are not a disaster. Programmable financial products have never appeared in the past 500 years of the Industrial Age, but they will inevitably emerge when financial digitalization reaches certain specific stages. Governments around the world are clearly still adapting to this new phenomenon, currently in a stage of surprise, confusion, learning, understanding, pondering, and testing.

However, some "trendsetters" have already discerned this technological and financial transformation early on and actively engaged in it. Typical cases include Aptos and Sui founded by Meta (Facebook); Solana founded by Qualcomm; investment institutions represented by Sequoia Capital and a16z have invested $57.3 billion in the Web3 field since 2021; and elites graduating from top global universities have also joined this "Enclosure Movement." According to Rootdata's database of Web3 projects founded by alumni from Harvard University, Stanford University, University of California Berkeley, Massachusetts Institute of Technology, Tsinghua University, Peking University, and Zhejiang University, I have compiled the following statistics by major sub-sectors:

Figure 3: Universities Producing Web3 Projects

More than half of the infrastructure sector has been occupied by the United States; the vast majority of the CeFi sector is occupied by Chinese individuals; nearly half of the DeFi sector is operated by the Chinese community; in the NFT sector, there are many players from China, the United States, and Southeast Asia, but the trend is still led by the United States; gaming is particularly popular in Asia, with players estimated to account for two-thirds of the global total.

Among all the projects that have received funding, the United States has 386, accounting for 35.12%; China has 109, accounting for 9.92%; Singapore has 105, accounting for 9.55%; India has 68, accounting for 6.19%; the United Kingdom has 62, accounting for 5.64%; South Korea has 35, accounting for 3.19%; Canada has 34, accounting for 3.09%; France has 34, accounting for 3.09%; and Vietnam has 26, accounting for 2.37%. The difficulty for Chinese projects to secure investment is significantly higher than that for American projects, and the influence of Chinese Web3 capital is considerably lower than that of American Web3 capital.

Regarding Web3 policies, the stances of China and the United States are crucial. The current policy direction in the U.S. is to loosen initially and tighten later; in China, it is to tighten initially and loosen later. On February 20, 2023, the Hong Kong Securities and Futures Commission released a "Consultation Paper" on cryptocurrency trading, marking the Hong Kong government's opening up of the cryptocurrency trading sector with the tacit approval of the central government. Does this mean that China may regain its dominance in Web3 in the next decade?

Regardless, there are already 250 million global users of Web3, and its penetration has begun to extend beyond the financial sector, gradually entering fields such as gaming, social networking, content creation, communication, transportation, healthcare, education, shopping, supply chain, manufacturing, finance, marketing, and corporate governance. At the current speed of this "Enclosure Movement," it may take less than 5 years for global Web3 users to reach 1 billion, and within 10 years, it could cover 60% of the world's population. In other words, in just over a decade, Web3 could engulf the world. Humanity is in the steepest value climb since the Stone Age; this world changes every generation. Are you ready?