Author: Meng Yan
Recently, I traveled halfway around the world, and visited Accra, the capital of Ghana, Zurich, the largest city in Switzerland, Dubai, the economic gateway of the Middle East, and of course Singapore, which radiates Southeast Asia, and Hong Kong, which is backed by mainland China. I mainly attended several industry conferences and investigated the development opportunities of the local Web3 industry. In addition to Rwanda, where I visited last year, Australia, where I have lived for a long time, and mainland China, which I have always paid the most attention to, I now have some intuitive understanding and judgment of the current status and development prospects of blockchain and Web3 in these places, and I would like to share them with you.
Bulletproof
First of all, I need to clearly define what I mean by “blockchain and Web3”, because every time I talk about these things, a bunch of people will jump out and ask, what blockchain? What is Web3? What does it have to do with crypto? In order to deal with these sneak attacks, let me tilt my head and explain my position.
Well, blockchain technology has spawned a new industry called encrypted digital economy, or crypto for short. Like other industries, crypto also has a physical part and a transaction part. Unlike other industries, since blockchain itself is a value Internet protocol with its own transaction infrastructure, crypto can complete the expression and transaction of assets internally, without having to go to a dedicated external venue to trade like other industries. This feature is so prominent and eye-catching that almost all the hot spots in the crypto industry in the first ten years revolved around the transaction link. But this does not mean that crypto has no actual business. Just ask, what assets do you trade? That still depends on the actual business.
Now in this industry, there are three approaches to actual business. The first approach is speculation and gambling. Many projects in this industry are like this now. There is a coin in the foreground, and all the drama is behind it. The better ones are memes, telling you clearly that I have nothing, just a cultural shirt, an open gambling game. The worse ones are pretending to do business, and the outside world thinks there is something, but it is actually fake, and it is actually a Ponzi scheme. The second approach is "industrial blockchain" or RWA, which is the connection of blockchain digital assets to real-world businesses. The third approach is Web3, and the typical representatives are Bitcoin, Ethereum, Solana, etc. There are indeed businesses underneath, and this thing is the infrastructure or application in the open Internet.
I have always focused on the two paths of industrial blockchain and Web3, and I believe that these are the right paths for long-term sustainability. The projects I initiated also emphasize actual business. It may be slow, but I feel at ease, and I firmly believe that the benefits will be greater in the long run. Of course, most of the players I have come into contact with in this industry are trading-oriented, seizing trading opportunities to make profits, and not paying much attention to actual business.
In fact, both types of people are needed, those who do actual business and those who do transactions. But when people like me express their opinions, they are often misunderstood or even ridiculed by transaction players, so I have to make it clear here that I am talking about the "real business" part of the crypto industry, so when describing it, I often use such lengthy expressions as "blockchain and Web3". As for the many people who only do transactions and are not very good at thinking, they insist that there is no actual business in crypto and it is just a pure gambling. I will not spend time refuting such shallow and stupid views.
Blockchain and Web3 in the information framework
Whether it is industrial blockchain or Web3, they should actually be viewed in the framework of informatization. Informatization is a continuous and large process of the entire human civilization, which has lasted for tens of thousands of years and is a large framework. However, the informatization we usually talk about is the informatization of digital computers and networks in the past few decades. This process actually started from the military industry and developed on the enterprise side. Later, the consumer Internet emerged, which greatly changed the path and pattern of the entire informatization and created a new paradigm.
Now, technologies such as blockchain and zero-knowledge proof have the potential to create a third paradigm of informatization. The development of this new paradigm on the enterprise side is industrial blockchain and RWA, and on the consumer Internet side is Web3.
Why do we dare to say it is a new paradigm? Because blockchain redefines the account system and resource hosting model in the Internet, which is different from the current centralized Internet in terms of DNA, so it will either not develop at all, or once it develops, it must be a new species that the traditional Internet has never seen. In the digital age, no matter how weak a new species is now, it cannot be ignored, because once it grows up, it may bring a new dimension of competition that you are completely unable to resist.
As for the industrial blockchain and Web3, my basic view is that Web3 will be faster and more powerful than the industrial blockchain, so now we should focus on the discussion of Web3. To discuss the development opportunities of Web3 in different regions around the world, we must first look at the forms of information development in various regions.
What is the overall situation of global informatization now? In short, China and the United States are competing in artificial intelligence and robotics, Europe and Australia are suffering from insomnia, and high-growth countries in Africa and Southeast Asia are carrying out the first large-scale informatization construction, while Singapore and Dubai hope to reap the biggest dividends in this process.
Below I will talk about my impressions of different regions.
Sleepless Europe and Australia
The situation in Europe and Australia is very similar on the surface. The Internet infrastructure in both regions is not bad, but there are no leading large enterprises. The depth of actual application and the level of innovation are far behind those in China and the United States. They know about and pay attention to new technologies and trends such as blockchain, Web3 and tokenization, but their actual attitude is like Ye Gong who loves dragons. In other words, in principle, since it is innovation, it is welcomed and supported, but if you take it seriously and promote it seriously, then once you encounter specific problems and specific contradictions, you will immediately hesitate. So now both regions are like this, watching such a thing happen, unable to sleep or get up, so it is said to be insomnia.
However, I think the underlying logic of insomnia in the two regions is different. Australia's problem is lack of motivation. Life is too easy for itself. When it comes to innovation, it just goes with the flow and follows the United States and Britain. The United States does not have the technology, so we are not in a hurry to grab the first prize. The United Kingdom has not set up regulatory rules, so we will wait. In fact, I have lived in Australia for many years. The regulations here are relatively loose, and the market is not too big or small. If you really want to do things actively, there is room. But as long as you cooperate with local companies or people, you will find that they are not very motivated. Whenever there is a little difficulty, they will back down in various ways, and six words will float in the sky: "Too lazy to move, no need."
Europe is different. It’s not that they don’t have the idea of independent development, nor do they see the value of blockchain technology, but their governance mechanism is too complicated, with too many constraints and they can’t do anything. I attended the European FinTech conference in Switzerland, and tokenization was the absolute protagonist. But the speeches of the princes of all parties were in a similar format. They first fully affirmed the value and significance of blockchain and tokenization, expressed their confidence in its long-term prospects, and then when they talked about the present, they pulled out a long list of constraints and restrictions. The most unacceptable thing in the world is that it is called the only way, but in fact there are unexpected pitfalls. In my opinion, things in Europe are difficult to handle.
So there is insomnia in both places, one is because you are too lazy to move, and the other is because your hands and feet are tied and you can't move.
Interlocking Mainland China and Hong Kong
China is the biggest winner in the mobile Internet era, and it is the most qualified leader of the Web3 revolution. However, history has repeatedly proved that the winners of the previous cycle are particularly likely to fall behind in the next cycle. Many people attribute this to path dependence, that is, even if interest groups know the right direction, they will choose a conservative path for the purpose of maintaining vested interests. But I think there is still a spirit of adventure and self-revolution in the Chinese Internet industry, because path dependence is not the main problem. If there is a problem, it is mainly in the understanding.
Ideally, China's best attitude towards Web3 is, of course, to let the water flow and raise fish. As long as some key links are well controlled, there will be no trouble and great gains. However, as we all know, China is now in a period of strengthening government control under the guidance of national strategy. If the government has formed a fixed opinion on a certain technological direction, then the space for exploration and experimentation will be limited.
So what opinions has the government formed about blockchain and Web3?
When many people talk about this topic, they sigh and say that China has completely blocked this direction. I disagree with this. I think China has not yet formed a firm opinion on the technical direction of blockchain and is still investigating it. It’s just that the current actions are not effective.
After decades of development in the science and technology industry, China actually has a deeper understanding of the unpredictability and subversion of scientific and technological innovation, and will not easily deny a specific scientific and technological direction. There are sufficient lessons from both positive and negative aspects in this regard. The former Soviet Union failed to accurately foresee the development of silicon-based semiconductors, large-scale integrated circuits, computer miniaturization and Internet technology, which was a very important reason for its failure in scientific and economic competition and its complete collapse. China has successfully fissioned and incubated a large number of new commercial species in the era of mobile Internet, which is also one of the key reasons why China's Internet industry dominated the world in the last cycle. The current situation of Sino-US competition is difficult to reverse. If the wrong technology tree is clicked, the price paid may be global, so the Chinese government will definitely be particularly cautious when making decisions on the direction of scientific and technological development. China recently proposed a new quality of productivity, mainly to focus on supporting scientific and technological directions with great strategic significance in the comprehensive competition between China and the United States. Blockchain is definitely one of the candidates.
However, the elusive part of blockchain technology is that if we analyze it only from a theoretical perspective, its value logic should be smooth. As early as October 2019, China's top leaders had already reached a conclusion on this issue. However, in practice, there are various obstacles and frictions, and no effect has been achieved.
Many people have asserted that blockchain and Web3 are false propositions, and cannot be used in practice or have little value. But I think decision makers are not so shallow. It should not be difficult for them to think of the reasons, because China has experienced similar situations in its history of informatization development.
I mentioned earlier that when China was developing informatization in the late 1990s, it originally copied the American model and started to transform from the industrial end, but the development was very slow. Unexpectedly, in the original wild land, the consumer Internet emerged and advanced rapidly, changing the overall paradigm of China's informatization. So Chinese people understand that it is difficult to transform an old thing. Problems in development must be solved in development, and we must make efforts on the increment. Don't touch the old, let the new grow wildly, and when it grows up, it will naturally force the old to transform. If the Chinese don't understand this principle, then no one in the world understands it. The situation is the same now. If you insist on forcing current enterprises and Internet platforms to transform to Web3, it will be very difficult. But if you can give Web3 a space to grow wildly, you may be able to create some new species.
But the problem is that Web3 is not an ordinary industry. It has strong transaction and speculation, and is very active. If it is not properly controlled, it will cause financial troubles. China is now in a period that is particularly sensitive to troubles and has high requirements for stability. It is not easy for decision makers to make up their minds in the face of Web3, a "bad boy" that is both good and evil. If we follow it, it may impact the existing large enterprises and industrial structure, may cause some chaos, and may also increase the burden of financial supervision. If we don't follow it, and let this thing be put on the international fission reaction, we don't know what kind of monster will be fissioned, and we don't know how much impact such a monster will have. If we are not careful, we will be in a very disadvantageous position.
Therefore, China is somewhat hesitant in developing Web3. If it advances, it will be afraid of taking risks, and if it retreats, it will be worried about missing out. Many people believe that Hong Kong, as a blockchain pilot area, carries a special mission to help mainland China feel the stone of Web3.
However, although Hong Kong is an international financial center, its core advantages are all concentrated in financial transactions. If you ask it to do something in the real economy, it will say, "I haven't been a big brother for a long time." It failed to make the Internet back then, and now it can't even make movies. Now it is difficult to expect it to independently explore a new paradigm for the global Internet industry, whether in terms of industrial foundation, talent pool or market size. So in practice, Hong Kong companies, regardless of the celestial globe and river map, the golden man and jade Buddha, only focus on "transactions" because only this one thing is Hong Kong's comparative advantage. This is obviously far from the need to explore a new paradigm for Web3 for the mainland.
Of course, digital asset trading is a key node in Web3. If the mainland's Web3 industry can develop, it will be enough for Hong Kong to do a good job in trading. But the problem now is that the mainland is waiting for Hong Kong as a special administrative region to explore a path to develop Web3, while Hong Kong is waiting for the mainland's Web3 industry to provide digital assets for trading and earn fees. The two sides are waiting for each other, and no one can break the situation, which has become an interlocking situation.
Big Opportunities in Southeast Asia and Africa
If China does not break through in Web3, then the regions in the world that are most likely to open up new situations and create new monsters are of course the United States, and the other two, I think, are Southeast Asia and Africa. I have not been to the United States, and I have not investigated, so I have no right to speak. But in the past two years, I have been to Africa and Singapore many times, stayed there for a long time, and have some observations.
In recent years, some countries in Southeast Asia and Africa have begun to enter a stage of rapid economic growth. Although the economic scale is not large, hundreds of millions of people are involved, and the potential is huge, which has put forward an urgent need for information construction. Therefore, these countries are experiencing the first large-scale IT and Internet construction. China has also experienced such a process since the 1990s, so it is not unfamiliar to us. The so-called one-shot effort, the first time climbing the technology tree, is the most curious, the most open-minded, the most sincere, and the most motivated. These countries are now at this stage.
However, compared with China, many of their basic logics are different. When China started to build its IT industry, the Cold War had just ended and globalization was gaining momentum. Therefore, China basically adopted a take-it-as-it-is approach, directly introducing American technology and complete solutions without giving much thought to demands such as autonomy, data sovereignty, and privacy protection. It was not until the PRISM incident broke out in 2013 that China came back to make up for this lesson and embarked on a distinctive informationization path with consumer Internet as the core platform and super Internet platform as the main force.
Now the economies of Asian and African countries are developing rapidly, and they also need supporting IT construction, but the times have changed, and the logic has also changed. First, the era of globalization has ended, and China and the United States have launched fierce competition in many fields. When two tigers fight, the fisherman benefits, and these countries have a large space for choice. Second, the concept of data sovereignty and privacy protection has been strengthened. Even the weakest countries and companies are unwilling to run naked in the digital prism of foreign large companies. Third, the demonstration effect of the huge success of the Internet has made economies of a certain scale want to support and build their own platforms so that the benefits will not flow to outsiders.
What are the consequences of these changes? The expansion model of large companies that was originally created by large American companies and later carried to the extreme by Chinese companies like Huawei is no longer feasible, or at least the resistance has greatly increased. Take data privacy protection as an example. In the original model, large companies only need to sign a promise with users, and then issue public relations releases every now and then to promote themselves. They can go straight in and get all the user's data, sell it however they want, analyze it however they want, and put all the profits into their own pockets. Users don't even know about it, let alone object. Such a good thing will never happen again.
Now these countries are developing the Internet and they all want to support their own platforms. Foreign big companies can come in to sell equipment, sell technology, participate in construction, and help train talents, but if you want to directly extend your tentacles and let us join your network unconditionally and become a prefecture-level subnet of your big country's network platform, I'm sorry, I understand this, this is called digital colonialism, we are not so naive.
But the problem is that the Internet has a network effect. Chinese Internet platforms are oriented to the whole of China, and American Internet companies are oriented to the whole world except China. Only in this way can the network established have scale effect, and only when it is bigger can it become stronger. Each of your countries is unwilling to join a large network, and they all want to support their own platforms. As a result, this small piece, that small piece, each one is underdeveloped, not only there is no scale effect, but also brings endless troubles to cross-border cooperation.
People of insight in these countries understand this problem. When I attended a conference in Ghana, a South African industry leader said that Africans always mention Africa, but where is Africa? This is just a continent fragmented by colonists, with more than 50 countries, 48 currencies, extremely complicated internal economic exchanges, and foreign trade far exceeding the mutual trade within the continent, so he wants to establish an African digital economic community. When I went to Rwanda, I found that they have a country of more than 13 million people, and there are more than a dozen payment networks like "Alipay", most of which have only tens of thousands to hundreds of thousands of users. Such a small market is cut into pieces, and no one can be big or strong. The same problem exists in Southeast Asia.
At this point, the value of blockchain and Web3 for the informatization construction of African and Southeast Asian countries is reflected. One is clear ownership, the second is tamper-proof, consensus building, and trust transmission. The third is that the value network sinks to the Internet protocol layer. Everyone's business is separate, but the transaction can be integrated and interconnected, and the benefits can be shared. Fourth, with the cooperation of technologies such as zero-knowledge proof, privacy protection can also be solved very well. With so many advantages, plus they are fearless in informatization, and there is no strong vested interest group to obstruct, it is not difficult to explain that the most enthusiastic and curious regions in the world about blockchain and Web3 technology are now concentrated in Africa and Southeast Asia.
When I communicated with people in these places, I could really feel their enthusiasm and expectations for Web3 technology. They really wanted to use Web3 technology to solve practical problems. In other places, this kind of enthusiasm is now scarce, and more people only care about how to make money. This is also an important risk for African and Southeast Asian countries to build Web3. Their regulatory capabilities are relatively weak. If they are misled and a few bombs are exposed, their attitude may change 180 degrees in an instant. Fortunately, many such things have happened before, so they are generally more cautious now and are not so easily fooled. In terms of blockchain and Web3, they recognize institutions such as Singapore and the Bank for International Settlements. This also brings a unique historical opportunity to Singapore.
Singapore and Dubai: Both hubs, but very different
Singapore has clearly seen the great opportunities in the informatization and digital economy of Southeast Asia and Africa. The Monetary Authority of Singapore (MAS) has launched a series of projects and plans since a few years ago, and has held meetings all over the world. Recently, MAS proposed the "Global Layer 1 (GL1)" plan, taking the lead in creating a cross-border blockchain that is jointly supported, used and shared by commercial banks, financial institutions and commercial institutions in various countries, which more concentratedly reflects Singapore's strategic intentions in the field of blockchain and Web3.
It is not difficult for anyone with a discerning eye to see that Singapore's strategies on blockchain and Web3 are not at all for its domestic market, nor is it intended to directly expand its business to the economic extremities of other countries like Internet giants. Instead, it takes Southeast Asia, Africa and other regions as its market hinterland, and provides enterprises with a value network that is compatible with the existing paradigm, voluntary participation, and shared benefits. This is undoubtedly the greatest common denominator of blockchain applications, which meets the needs of developing countries in Southeast Asia and Africa. Singapore itself has a global reputation in the field of financial supervision and financial technology, especially in the minds of Southeast Asian and African countries, and is a role model. Therefore, in the African and Southeast Asian countries I have contacted, both the government and the enterprises generally recognize and trust the blockchain and Web3 plans led by Singapore, and are less defensive. Therefore, Singapore is indeed likely to accomplish this.
This matter is of great significance to Singapore. If Singapore can play a major role in the informatization construction of Southeast Asia and Africa and truly use transnational digital economy blockchains such as GL1, then it can strive to become the capital of the digital economy in the Indo-Pacific region.
But the route chosen by Singapore actually also contains an important assumption, that is, blockchain and Web3 can be hidden behind the traditional Internet, and are the infrastructure of enterprises, not facing ordinary users. Chains like GL1, which we call "open alliance chains", are only open to existing institutions. Ordinary users still use centralized Internet platform services in the same way as today, which are separated from blockchain. In this way, the implementation of the entire Web3 can be led by existing government agencies and enterprises and promoted in an orderly manner without destroying the existing industrial structure. But what if this assumption goes wrong? If Web3 goes directly to large-scale applications in the future through social or gaming, and if ordinary Internet users begin to have one or more Web3 accounts and communicate and trade with each other in them, what will happen? There is no doubt that this is the most natural form of Web3, and this form of business is bound to subvert the existing Internet industrial structure and application paradigm. If this happens, Singapore must adjust its strategy.
In contrast, Dubai has adopted a hands-off approach to Web3. Dubai is built like a future city, but it is actually a deliberate superficial effort. The real wealth center of the UAE is in Abu Dhabi. Dubai itself knows this, so their core competitiveness is to attract a large number of foreigners to settle there with advanced infrastructure, loose supervision and currently good cost advantages. Dubai itself does not have any industrial policies. "Build a nest to attract phoenixes and let them be free" is sincere and is something written in Dubai's genes. I visited its history museum in Dubai and carefully studied the history of the city. Before the oil wealth changed the fate of the country, Dubai was just a poor Arab country that made a living by mining natural pearls. The rulers of all dynasties here have adopted an extremely relaxed and friendly attitude towards businessmen. In the past, Dubai survived and developed by relying on this policy, and now it hopes to develop by relying on this policy.
Compared with Singapore, Dubai's understanding of Web3 is far behind. The Singapore government may be the government in the world that understands blockchain and Web3 the best. Because of this understanding, Singapore has the confidence to design strategies and actively guide the development of this industry. But because of this understanding, it will say no to certain businesses. Dubai is different. In this city of more than three million people, 90% are foreigners, bringing 360 industries from all over the world. It is impossible for the Dubai government to understand every industry. Since it does not understand, it will not formulate industrial policies and provide industrial support, but at the same time it will not refuse. Therefore, the Dubai government also thinks very clearly that it can only fully relax and allow all kinds of talents to show their talents.
In this case, Dubai's advantages are very prominent. If there is a business that has high requirements for loose regulation, it is most appropriate to place it in Dubai. Now that Dubai has become the main base for crypto centralized exchanges, it clearly shows its positioning.
Another advantage of Dubai is cost. Of course, Dubai's cost is not low, but it depends on who you compare it with. Compared with Southeast Asia and mainland China, it is definitely very high, but if compared with Hong Kong and Singapore, Dubai's cost is too competitive. Doing the same thing, reducing the operating cost by half compared to Singapore is not a difficult goal. Therefore, for businesses facing the international market, with a large team size, and requiring loose supervision, Dubai may be the best choice.
So in comparison, Singapore has a clear blockchain and Web3 strategy, and has supporting policies and support, with the goal of seizing the opportunity of a large number of Asian and African countries to become an international digital economy capital. Dubai does not have such a strategy, but it wins by being relaxed and inactive, and its costs are still competitive.
Summarize
After comparing these regions, I will make a summary. Unless China and the United States suddenly change their attitudes towards the Web3 industry dramatically, blockchain and Web3 will not find a single large market that combines various favorable conditions like the Internet and mobile Internet did in the past. Therefore, the Web3 team is forced to consider the global layout in the early stage. In my opinion, a more ideal strategy is to be based in Singapore and Dubai, actively cooperate with Singapore's strategy, seize the market opportunities for the initial informatization in Southeast Asia and Africa, and also make good use of Dubai's regulatory environment and cost advantages to optimize the overall situation.
This article does not mention Japan, South Korea and the United States, which is an important omission. The main reason is that I have not been there during this period, so I have no right to speak. Fortunately, I will have the opportunity to go to the United States in the second half of the year. If I gain something from it, I may write a supplementary article.
