Visiting Conflux Tree Diagram, Nine Questions and Answers: CFX Status, Market Makers, Hong Kong Market, and Hacker Attacks
Two hours, hardcore sharing everything about CFX.Author: Liu Honglin, Mankun Blockchain
Last week, Professor Yao Qizhi, the chief scientist of Conflux and a key figure at the Shutu Research Institute, received a reply that sparked immense interest among Conflux enthusiasts. On the same day that this news trended in the crypto community, lawyer Liu Honglin from Mankun Law Firm posted a tweet on the X platform, announcing that he would lead a team to visit Yuanjie at the Shutu Research Institute in Shanghai next week, inviting everyone to submit their questions of interest. The tweet received enthusiastic responses from netizens.
Purely based on personal emotional preference for Chinese Web3.0 entrepreneurial projects, lawyer Liu Honglin has been maintaining his attention and research on this well-established Chinese public chain. He has previously written several articles analyzing information about Conflux from the perspectives of legal compliance and Web3.0 entrepreneurs, which interested friends can check out.
Thus, nearly a year later, lawyer Honglin entered Conflux with the concerns and questions from many netizens regarding Conflux, engaging in a more than two-hour discussion with Yuanjie, the co-founder of Conflux. This visit focused on high-density discussions regarding the relationship and division of labor between the Conflux ecosystem and the Shutu Research Institute, popular topics about Conflux online, as well as the market conditions and regulatory policy changes in mainland China and Hong Kong, among other angles, with no dull moments throughout, and the visiting team gained a lot.
Of course, it is better to share joy than to enjoy alone (promises made to netizens must be fulfilled, especially since everyone is eagerly urging for updates online). Lawyer Honglin has compiled a transcript of the discussion content to share with everyone.
It needs to be stated clearly: At the end of the discussion, I proactively told Yuanjie that I would organize the content of our conversation into a written format to share, and I would send it to him for review before publishing. If there were any parts he did not wish to disclose or found inappropriate, they could be deleted. He said it was unnecessary. I asked, what if I leaked your business secrets? He replied that I could choose not to acknowledge it.
This is quite acceptable.
So… this sharing only represents lawyer Honglin's personal record of the more than two-hour discussion, organized from memory, and does not guarantee the absolute accuracy of the information. Any misunderstandings or erroneous information are my own responsibility and not Yuanjie's. The related content is intended for friends interested in Conflux or Chinese Web3.0 entrepreneurs for communication and discussion, and does not constitute any official opinions or investment advice from Conflux.
About the Shutu Research Institute and Conflux
Yuanjie provided a detailed introduction to the relationship between the Shutu Research Institute in Shanghai and the Conflux Foundation. Currently, the vast majority of public chain projects on the market operate under a model where the foundation and the development company operate independently. The relationship mechanism between the foundation and the operating company may have close or loose ties. For example, Ethereum's governance structure centers around Vitalik Buterin (V God), with foundation members inside, and the relationship is relatively loose. In contrast, some foundations and projects operate under a "single team, two brands" structure, which may be more practical and efficient in the early stages of Web3 projects.
In this context, the relationship between the Shutu Research Institute and Conflux is characterized as follows: Conflux is a non-profit organization registered overseas, while the Shutu Research Institute is a privately funded non-profit organization supported by the Shanghai municipal government. From a legal perspective, there is no direct subordination or association between the two.
However, the Shutu Research Institute plays the role of a core contributor of open-source code within the Conflux ecosystem, undertaking relevant technical development work. In this relationship, the Shutu Research Institute and the Conflux Foundation are somewhat like Party A and Party B: the domestic research institute is responsible for development work, while the overseas foundation provides compensation through donations or funding.
Additionally, as a research institution supported by the Shanghai municipal government, the Shutu Research Institute not only supports Conflux-related work but also explores new application scenarios and projects in the Web3 field, including projects led by the Ministry of Industry and Information Technology, such as ZeroGravity (0G) distributed storage. The government's related research projects provide a stable income source for the institute, essentially covering daily expenses and operational costs.
Overall, the relationship between the Shutu Research Institute and the Conflux Foundation reflects a typical model of independent operation between a foundation and a development company. The Shutu Research Institute is not only a core technical contributor to the Conflux ecosystem but also obtains stable income through participation in government projects.
Yuanjie also candidly shared that the co-founders of the Conflux Foundation and the Shanghai Shutu Research Institute are continuously exploring better governance mechanisms for the foundation to find the most effective cooperation methods to promote the stable development of the Conflux project.
About the Division of Labor Among Conflux Founders
Due to the relative independence of the Shutu Research Institute and the Conflux Foundation, the division of labor among the co-founders is also quite clear. During this discussion, Mr. Yuanjie shared the current specific responsibilities:
Yuanjie himself mainly focuses on business and operational matters, closely monitoring hot sectors and cutting-edge business opportunities in the Web3 market, seizing opportunities for commercialization and promoting project development.
Long Fan is primarily responsible for domestic government relations and related work, including communication and coordination with government agencies and relevant departments to ensure the smooth advancement of projects in the domestic market and obtain necessary policy support and cooperation opportunities.
Wu Ming is mainly responsible for exploring cutting-edge technical challenges and related technical development work. He focuses on technological research and development, dedicated to solving complex technical problems and promoting innovation and progress in the project’s technical field.
About the Stalled BTC L2
The BTC L2 project was proposed by Yuanjie at the end of last year when inscriptions were booming. The Shutu team actively promoted related attempts, but based on market feedback, the enthusiasm for this sector has gradually waned, and the performance of existing projects is also unsatisfactory. Therefore, the team has chosen to temporarily pause this investment. In Yuanjie's view, this is a tactical exploration and choice, and he will continue to pay attention to and try new emerging sectors and opportunities in the industry.
About Institutional Investment and Market Makers
In the discussion about the investment institutions in the Conflux project and the market price of its tokens, Yuanjie mentioned that the investment institutions of the Conflux Foundation will complete the full unlocking of their investments in the first half of next year. Recently, the Conflux Foundation has also received strategic investments from other partners (though not publicly disclosed). This new funding support has made the foundation's financial reserves relatively ample, ensuring that the team can continue to focus on project development and advancement. In short: Conflux is currently not short on funds.
Regarding the performance of Conflux assets in the secondary market, Yuanjie explained that this is a natural market behavior. Previously, the foundation had collaborated with market makers like DWF. However, both parties found that their styles did not match during the collaboration, leading to the end of the partnership. At this stage, the Conflux Foundation is seeking to collaborate with more mainstream market makers, especially in exchanges across different countries and regions. These new partners will provide Conflux with longer-term and closer market-making services: not only will they provide market services, but they will also participate in on-chain node work. This deep involvement will help build a healthy Conflux ecosystem and improve asset performance in the secondary market. As for whether such an ideal state will be achieved, of course, no one can guarantee that. Therefore, as adults, we must take responsibility for our own judgments.
About the Position of the Conflux Public Chain Ecosystem
For the Shutu Research Institute in Shanghai and the core team of Conflux, the entrepreneurial journey has now entered its sixth year. During this time, the team's mindset has changed significantly compared to before.
Initially, the Conflux team believed that a public chain should hold hackathons in different countries and regions around the world to attract entrepreneurial teams to develop and engage on the public chain, similar to how sponsorship prizes and airdrop subsidies work in business districts. This strategy has been successful for other projects like the Ethereum Foundation and Solana, as these projects have abundant funding and traffic support (such as TON).
However, the team later realized that this path might not be suitable for Conflux. Many ecological projects developed on Conflux gradually shifted to other public chains as market and capital flows changed, and Conflux did not have its own moat advantage. Of course, this cannot be blamed on the developers, as everyone needs to make a living.
The ecological positioning of Conflux in the Web3.0 public chain sector is a long-term strategic path. For Conflux, the Chinese-speaking region is a key market where it can gain differentiated competitive advantages and build its moat. Therefore, while providing high-performance, low-cost, and excellent user experience public chain services, Conflux also aligns with Chinese regulatory policies to ensure the compliance of its network ecosystem. This provides a natural ideal crypto platform for many entrepreneurs with Chinese backgrounds who wish to enter the Web3.0 field.
Although Conflux cannot always wave the flag of patriotism, China and the entire Chinese-speaking region indeed need to have their own public chain projects. Currently, there are very few public chain projects led by Chinese people, and Conflux, due to its compliance and technical capabilities, is in a good state regarding current development pace, future planning, and income sources. It can be expected that in the next 4 to 5 years, Conflux will maintain its position in the global market capitalization rankings and, based on this, remain patient and wait for the right timing.
About the Hacker Attacks on Conflux Ecosystem Projects
Regarding the concerns about asset losses due to hacker attacks on Conflux ecosystem projects, Yuanjie also provided detailed responses and explanations.
Since the incident occurred, he has been actively promoting related work, including assisting users in reporting to the police domestically and frequently communicating with the management of two major exchanges. For the theft losses of users with amounts below 20,000 USDT during this incident, the Conflux Foundation has already initiated compensation, but for users with larger assets, cooperation from the relevant exchanges is still needed.
About the Conflux BSIM Card
Mr. Yuanjie introduced and shared information about the BSIM card project being researched by Conflux. Currently, the research work on the BSIM card has been fully completed and pilot tests have been conducted in two cities in China, with very reasonable pricing packages (lawyer Mankun was also invited to participate in product testing).
Regarding the subsequent large-scale market launch of the BSIM card, this depends more on the progress of telecom partners, as it involves national entities, and the internal progress and market development will be relatively steady. There is no way to rush it; Yuanjie personally optimistically expects substantial progress to be made before the end of the year. If it cannot be realized, everyone can just consider it as him boasting.
About Regulatory Policies, the Hong Kong Market, and Hong Kong Dollar Stablecoins
Regarding whether regulatory policies in mainland China have loosened and the market situation in Hong Kong, Yuanjie has the following points of view:
First, it is highly unlikely that the policies regarding virtual currencies in mainland China will loosen in the short term. This is mainly due to the direct relationship with the current economic situation and capital market performance in the country. If restrictions on virtual currencies are lifted in the short term, it would not bring particularly positive effects to the domestic economic environment, as uncontrolled capital outflows certainly do not align with current policies.
As part of China, Hong Kong has a good opportunity to explore Web3.0 and virtual currency finance with the support of mainland China. However, currently, the vast majority of mainstream financial institutions in Hong Kong remain in a wait-and-see state regarding these new attempts. For example, the trading volume of virtual currency exchanges and the transaction situation of Bitcoin ETFs launched in Hong Kong are not optimistic, mainly because most actively participating in these new ventures are still capital or financial institutions from the mainland, such as Harvest Fund and Southern Fund. In contrast, foreign or Western financial institutions are the main players in terms of capital and resources in Hong Kong's financial market, indicating that Western capital markets and financial institutions have not shown a positive attitude towards the current policies and matters regarding virtual currencies in Hong Kong.
Secondly, regarding Hong Kong dollar stablecoins. Yuanjie believes that the main sources of income for stablecoins come from two aspects: friction costs in the entry and exit stages, for example, Tether's friction cost is about one-thousandth; and the returns on underlying assets. Currently, Tether has issued stablecoins totaling over 100 billion, with passive interest income of around 4 to 5 billion USD per year, while the team behind Tether's stablecoin project consists of no more than 80 people, which is an impressive revenue output from this small team. From these two perspectives, if a Hong Kong dollar stablecoin is to be launched, it needs to address not only the traditional settlement issues between funds or financial institutions but also whether it can become a native application tool in the virtual currency market, such as one of the trading pairs in virtual currency exchanges, or whether it can serve as a payment settlement tool for many small and medium-sized businesses. Currently, some domestic companies are already attempting overseas stablecoin business, including some user settlement operations by JD Finance abroad.
Regarding Hong Kong dollar stablecoins, Conflux's partners in Hong Kong are already preparing for related compliance matters concerning Hong Kong stablecoins and are expected to be on the first batch of lists, but the government's pace in advancing this project is slightly slower than expected. Based on the Hong Kong dollar stablecoin, Conflux hopes to conduct more fintech explorations on-chain, rather than just serving as a settlement tool for traditional financial institutions.
About the Hierarchy of Disdain in the Web3.0 Industry
Yuanjie candidly stated that currently, Chinese projects are not always welcomed in the Web3.0 investment circle. Projects with European and American faces have advantages in fundraising and obtaining higher valuations, while Chinese projects face relative disadvantages, which is a bias that exists in the industry. A few years ago, some domestic investment institutions would continue to pay attention to and invest in emerging opportunities in the Web3.0 field, making large investments. However, in the past two years, traditional domestic funds have significantly reduced their attention and investment in Web3.0 projects. This does not mean that Chinese projects are weaker in development capabilities or technical research; the research and development behind the projects are still led by Chinese individuals.
In this market environment, combined with the existing regulatory policies in mainland China, the vast majority of domestic Web3.0 entrepreneurs face significant restrictions when engaging in native Web3.0 technology development or blockchain projects. A better approach is to seek some intersecting business points, meaning using blockchain as an auxiliary technology applied in interdisciplinary or entrepreneurial fields. For example, the combination of AI and blockchain, utilizing some technologies or elements of blockchain as differentiating highlights in their entrepreneurial projects. This entrepreneurial path, at this stage, is a relatively good choice in terms of both capital market recognition and the risk of the project itself.
