Web3 Native Innovation Silent Period: Tech Giants Are Developing in Polarized Ways

Author: Hedy Bi, OKG Research

Last weekend, the OKG Research Institute accepted an invitation from FT Chinese to participate as a roundtable guest in the Financial Masterclass co-hosted by FT Chinese and the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University. During the roundtable session, I had an in-depth discussion with professors and front-line practitioners of technological innovation in the financial industry about the complex relationship between technology, finance, and humanity, as well as their far-reaching impacts on the future. Notably, Professor Liu Xiaochun, a part-time professor at the Shanghai Advanced Institute of Finance, outlined the development trajectory of the financial industry over the past few decades during this masterclass. One of his points resonated with me: the financial industry actually bears the risk costs of the entire society, which is often misunderstood as a problem inherent to finance itself.

The photo shows the scene of the public class and dialogue event featuring SAIF Financial MBA professors co-hosted by FT Chinese and Shanghai Jiao Tong University’s Shanghai Advanced Institute of Finance.

Professor Liu's insights reminded me of the mixed evaluations faced by the Web3 sector in recent years. As Professor Liu mentioned, emerging technologies are often quickly exploited by criminals, but this is not a flaw of the technology itself; rather, it should serve as a motivation for industry practitioners to accelerate innovative applications. Looking ahead to 2024, the Web3 industry is ushering in new development opportunities: the U.S. and Hong Kong are gradually incorporating Bitcoin and Ethereum into the mainstream financial system, attracting a large number of investors. For example, in the U.S. market, the total amount of funds flowing in through spot ETF channels has reached $14.7 billion. Although this figure seems considerable at first glance, it has not caused a significant stir in the market. Besides the underlying logic of the entire market shifting, I would like to discuss where we currently stand and where we are heading.

Stagnation of Native Innovation, Moving from Fintech to Techfin

The transition from Fintech to Techfin is an ongoing trend in the internet and financial industries. Similarly, Web3 is experiencing a similar trend; we observe that the phase of native innovation has come to an end, with methods such as DeFi, NFTs, and tokenization representing the enhancement of finance or asset liquidity through technology. Since the establishment of Uniswap in 2018, the total locked value of DeFi DApps has grown from an initial $420,000 to a peak of $179 billion in 2021, an increase of approximately 420,000 times in just three years. During this period, many people became wealthy through opportunities in Web3, leading the younger generation to regard Web3 as one of the few wealth-building opportunities and growth industries during economic downturns.

At this week's Goldman Sachs Digital Assets Conference, Yat Siu, co-founder and executive chairman of Animoca Brands, mentioned that the structure of the crypto world is similar to that of the real world and is advanced. Currently, the scale of DeFi is already among the largest central bank asset scales globally. According to specific data, this asset scale can rank in the top 30 among nearly 200 countries worldwide.

However, since the opening of the BTC spot ETF channel this year, investors have shifted their focus to mainstream trading varieties like BTC, and the native innovation of Web3 seems to have entered a temporary stagnation period. From utilizing technological tools to provide financial efficiency (Fintech) to technology companies feeding back into finance to provide financial convenience for users, OKG Cloud Group has evolved from initially providing technological tools around digital finance to solidifying various commercial applications of on-chain data, and now, leveraging our user base across over 180 countries to promote the continuous integration and development of Web3 technology and finance.

In the future, we will see technology companies rapidly enter Web3 using their vast user traffic and data advantages, especially at the application level. In addition to the emergence of cross-border collaborative products with traditional finance, we can also expect super applications similar to ChatGPT that can quickly gather millions of users. These applications will not only open new horizons for Web3 but also bring new tools to Techfin.

Whether it’s Meta's recent plan to integrate more generative AI technology into VR, AR, and mixed-reality games to revitalize its metaverse strategy, or Microsoft's acquisition of Blizzard Games in 2022 and its collaboration with Aptos Labs to develop new blockchain AI tools in 2023, or OKG Cloud Group's use of AI to optimize and enhance the efficiency of underlying platforms, these are all unstoppable future development trends.

Although the development of the metaverse has faced challenges, in the future, the gaming and social branches within the metaverse will likely explode with super applications as hardware improves and AI catalyzes growth. Additionally, we can observe that some tech giants emerging from Web3 are also expanding from Web3 wallets and trading platforms to a broader user base.

Divergence Between East and West, Different Choices by Tech Giants

We have delved into the development situations of several tech giants from the East and West that have explored Web3 extensively over the past 1-2 years. Summarizing, we can find differences in strategic focus, technological implementation, and market positioning:

In terms of strategic focus, Eastern tech companies pay more attention to applying blockchain technology to enterprise-level services and industrial digitization, such as supply chain finance, data sharing, and open-source community development, with companies like Baidu and Tencent providing enterprise-level technical solutions. In contrast, Western companies have shifted their focus in recent years to more broadly explore the applications of blockchain and Web3 technology in consumer markets and innovation fields, including VR, NFTs, and gaming, aiming to create new digital markets and application experiences for consumers, with companies like Apple and Meta focusing on hardware, while TikTok and Google support NFT applications within their existing user bases. Alphabet, Google's parent company, continues to invest in the Web3 field as of early 2024.

In terms of technological implementation, Eastern companies tend to develop directly with their own personnel, while Western companies prefer open collaboration and ecosystem building, such as Microsoft's cooperation with Animoca Brands and Aptos Labs to rapidly drive technological innovation and market adoption.

In terms of market positioning, Eastern companies tend to focus on deepening their local markets, while Western companies leverage the global nature of Web3 for promotion, such as Google Cloud's role as a validator on the Tezos blockchain, demonstrating its globalization strategy and influence.

This chart is based on limited public information, with data as of July 1, 2024.

Based on the borderless and global characteristics of the Web3 community, we can see that some tech companies have quickly integrated into the Web3 ecosystem. Therefore, at the application level, directly expanding across local markets is facilitated by the characteristics of the Web3 community, making global business development easier. As a leader in Web3 technology, OKG Cloud has also personally felt the global nature of the Web3 market. Currently, based on public data analysis, Western internet giants have shifted their focus to the application layer after completing the foundational infrastructure, while Eastern internet giants have yet to show this clear trend.

Although we observe that Web3 has reached a crossroads: native innovation is stagnant, and both Eastern and Western tech giants and financial giants are continuously entering the Web3 field. As these two major forces in finance and technology continue to merge, they are like two hands lifting the Web3 industry towards vigorous development.