What potential does Asia have in the Web3 field?

Author: Jay Jo, Tiger Research

Summary:

• The Asian market is complex and diverse, with different regulations and cultures. To engage in the Web3 industry, one must have a deep understanding of the characteristics of each country.
• Asia has a large population of young, digital natives, which provides significant potential for its leading position in the Web3 market, especially in super apps and consumer applications.
• On-chain data shows that the Asian Web3 market is growing, primarily reflected in the increase of stablecoin usage, developer activity, decentralized exchange (DEX) trading volume, and Web3 social media interactions.

1. Diversity and Complexity of the Asian Market

To understand the Asian market, it is essential to recognize its diversity and complexity. Asia has over 2,300 languages, covering different regions such as Northeast Asia, Southeast Asia, Southwest Asia, and South Asia, and there are more than 48 regulatory frameworks. The cultural differences within Asia are often greater than those between Western countries.

This diversity profoundly impacts Asia's Web3 industry. In Northeast Asia, each country has its unique approach: China implements strict regulations, South Korea combines regulation with incubation support, while Japan promotes Web3 development through government initiatives. This unique combination in Asia requires strategies tailored to specific markets and a nuanced understanding to succeed.

2. Strong Growth Foundation in Asia

The diversity in Asia brings challenges, but its significance cannot be overlooked. It is home to over 60% of the world's population, contributing 34% of global GDP, and has outpaced North America and Europe with a growth rate of 3.6%.

Asia is leading in the Web3 industry for three main reasons:

First, Asia has a large cryptocurrency user base, with approximately 60% of global crypto users (320 million people) coming from the region, primarily driven by a young and digital-native population (data source: Triple-A).

Second, Asia excels in trading activities: at the beginning of 2024, trading volume in South Korea based on the Korean won surpassed that of the US dollar, and recently more than half of the traffic to BN websites also came from Asia.

Finally, Asia boasts a strong pool of technical talent, including 50 million GitHub developers and 40% of global Web3 game developers.

3. Advantages of the Asian Web3 Market: Consumer-Centric and Super Apps

To popularize the Web3 industry, the key lies in developing consumer applications that are easy for the general public to use; merely building technical infrastructure is not enough. This is similar to the past development path of the internet, where killer applications like email drove rapid internet adoption. Similarly, Web3 is expected to gain widespread popularity through consumer applications that can seamlessly integrate into daily life.

Asia excels in two areas. First, Asia is at the forefront of consumer-centric innovation. As of October 2024, 42% of Asia's unicorn companies are B2C, surpassing North America and Europe (data source: CB Insights). This advantage stems from Asia's large digital native population and advanced mobile payment systems. The consumer-driven development approach positions Asia as a potential center for new Web3 applications.

Asia's second major advantage lies in its unique super app ecosystem. Leading platforms like WeChat, Alipay, Kakao, Line, and Grab initially started as single-service applications but have now evolved into comprehensive digital ecosystems. These super apps have become part of the daily lives of millions of users, covering various services such as payments, shopping, and entertainment.

The TON blockchain demonstrates the potential of combining Web3 with super apps. By integrating Web3 features into the popular social app Telegram, user numbers surged due to its convenience. These cases indicate that super apps can lower the barriers to entry for Web3. Introducing new services in familiar environments will drive the adoption of Web3.

4. Data-Driven Analysis of the Asian Web3 Market

The Asian market shows strong potential, but relying solely on expectations and indicators may be superficial. Analyzing on-chain data to understand real user activity is crucial for gaining deeper insights into the market.

Japan's evolving stablecoin policy highlights the necessity for in-depth analysis. Although stablecoin guidelines were introduced in June 2022, and legal revisions in 2023 allowed for stablecoin issuance, there has yet to be a significant on-chain impact. This is due to limited use cases and regulatory barriers to issuing trust-based stablecoins on public blockchains. Bridging the gap between policy and adoption requires more detailed on-chain analysis.

Next, we will evaluate whether the anticipated growth in the Asian market is being realized through on-chain data analysis.

4.1. Stablecoins in Asia

The use of stablecoins in the Asian market is steadily increasing. This trend is significant as stablecoins represent one of the best product-market fits for Web3. On-chain data indicates that stablecoin transfer volumes in Asia have surged to nearly $8 billion, with trading volumes expected to grow further from 2022 to 2024.

Stablecoins pegged to national fiat currencies are creating more real-world use cases. Several locally supported stablecoins have emerged, such as Singapore's XSGD and Indonesia's XIDR. For instance, XSGD connects with services like Grab, driving practical applications. This localized approach and integration with real services are increasing stablecoin transaction volumes. The sustained growth indicates that structural changes are occurring in the Asian market rather than just short-term trends.

4.2. On-Chain Activity of Asian Developers

Asian developers are increasingly participating in smart contract development. On-chain data from Ethereum mainnet and testnets (Goerli and Sepolia) confirms this trend.

In 2024, Asian developers created approximately 1.7 million contracts on these testnets, far exceeding activity in North America and Europe. Since 2022, the growth rate has been rapid, showing a similar trend on the Ethereum mainnet. Asia's share of contract creation has grown from 4% in 2020 to 40% in 2024.

This change highlights two trends. First, Asian developers are driving blockchain innovation. Second, blockchain development is expanding from its Western origins to a global scale. The high activity on testnets reflects positive experimentation and indicates that Asian developers are key contributors to the future of Web3.

4.3. Participation of Asian Retail Investors in Decentralized Exchanges (DEX)

Uniswap's trading data shows high participation from Asia. From 2021 to 2024, Asia consistently held a significant share of total trading volume. During this period, trading activity has steadily increased.

Notably, there are differences in participation rates among different types of Asian investors. When we categorize trading volumes into whales (over $100,000), sharks ($10,000–$100,000), and minnows (under $10,000), significant changes can be observed. In 2021, minnow investors accounted for a small proportion of trading volume. However, by 2024, their share in both transaction count and volume has steadily increased. This change is a positive signal, indicating that users in the Asian market are increasingly utilizing Web3 services. They are not only participating in trading on centralized exchanges (CEXs) but are also active on decentralized exchanges (DEXs).

4.4. Activity of Asian Users on the Web3 Social Network Farcaster

Asian users' activity on Farcaster is drawing attention within the Web3 ecosystem. Daily active user (DAU) analysis shows that Asian users are more active than those in North America and Europe. Although English is the primary language of Web3, posts in local languages such as Vietnamese, Chinese, Japanese, and Korean are steadily increasing. This indicates that Web3 growth in Asia is happening, not just anticipated. Asia is leading in Web3 usage.

5. Conclusion

The Asian market is diverse, with unique regulatory, cultural differences, and varying practices among countries. This complexity presents both challenges and opportunities for Web3. Understanding the unique roles of each country is crucial. On-chain data captures real user behavior, revealing the potential of the Asian Web3 market.

Regionally based analysis using on-chain data is vital for the growth of the ecosystem. Advances in digital credentials and regional analysis will enhance the accuracy of insights into user behavior. These tools will help to better understand the regional context and preferences of the Asian Web3 market.

Source: https://reports.tiger-research.com/p/dunecon2024-asia-eng