Last week, the reply received by Professor Yao Qizhi, chief scientist of Conflux and core figure of the TreeGraph Institute, shocked countless Conflux fans. On the day when this news became a hot search in the crypto circle, Liu Honglin, a lawyer at Mankiw LLP, posted a tweet on the X platform, announcing that he would lead a team to visit Yuanjie at the Shanghai TreeGraph Institute next week and sincerely solicit questions of interest from everyone. The tweet received a positive response from enthusiastic netizens.
Purely based on his personal preference for Chinese Web3.0 startup projects, Lawyer Liu Honglin has also been paying attention to and researching this old Chinese public chain. He has also written several articles before, analyzing information about Conflux from the perspectives of legal compliance and Web3.0 entrepreneurs. Interested friends can pay attention to it.
Therefore, nearly a year later, Lawyer Honglin visited Conflux with the concerns and questions of the majority of netizens about Conflux TreeGraph, and had another conversation with Conflux co-founder Yuan Jie for more than two hours. This visit focused on the relationship and division of labor between the Conflux ecosystem and the TreeGraph Research Institute, hot topics about Conflux on the Internet, and the market conditions in mainland China and Hong Kong, changes in regulatory policies, and other aspects. The whole visit was full of interesting moments, and the visiting team gained a lot.
Of course, sharing happiness is worse than enjoying it alone (you should do what you promised to your friends, after all, everyone is pushing you to update online). Lawyer Honglin has compiled a transcript of the communication for everyone, and would like to share it with you.
I need to solemnly declare that: at the end of the discussion, I took the initiative to tell Yuanjie that I would share the content of the discussion in a written form. I would send it to you before sending it out. If there are any parts that you do not want to disclose or that are not properly expressed, you can delete them. He said no. I asked what if I leaked your business secrets? He said I could choose not to admit it.
That's fine.
So… This sharing only represents Honglin’s personal record of this two-hour exchange, which is compiled from memory. The authenticity of the information is not guaranteed. Any deviation in understanding or erroneous information is the responsibility of me, not Yuanjie. The relevant content is only for friends who are interested in Conflux or Chinese Web3.0 entrepreneurs to communicate and discuss, and does not constitute any official answer or investment advice from Conflux.
About TreeGraph Research Institute and Conflux
Yuanjie once again introduced the relationship between Shanghai TreeGraph Research Institute and Conflux Foundation in detail. At present, the vast majority of public chain projects on the market adopt a model in which the foundation and the development company operate independently. The relationship mechanism between the foundation and the operating company may be closely or loosely connected. Take Ethereum as an example. Its governance structure is centered on Vitalik Buterin (V God), and there are also foundation members inside, and the relationship is relatively loose. However, some foundations and projects have "one team, two signs", which may be more practical and efficient in the early stages of Web3 project entrepreneurship.
Then, the relationship between TreeGraph Research Institute and Conflux is as follows: Conflux is a non-profit organization registered overseas, while TreeGraph Research Institute is a private non-profit organization supported by the Shanghai Municipal Government. From a legal perspective, there is no direct affiliation or association between the two.
However, the TreeGraph Research Institute plays the role of a core contributor to the open source code in the Conflux ecosystem, and undertakes related work in technology development. In this relationship, the TreeGraph Research Institute and the Conflux Foundation are a bit like Party A and Party B: the domestic research institute is responsible for development work, and the overseas foundation provides compensation through donations or funding.
In addition, as a scientific research institution supported by the Shanghai Municipal Government, TreeGraph Research Institute not only supports the related work of Conflux, but also explores new application scenarios and projects in the Web3 field, including projects led by the Ministry of Industry and Information Technology, distributed storage 0G (ZeroGravity), etc. The government's related scientific research projects provide a stable source of income for the institute, which can basically cover daily expenses and the operating costs of the institute.
In general, the relationship between Shanghai TreeGraph Research Institute and Conflux Foundation reflects the typical model of independent operation between the foundation and the development company. TreeGraph Research Institute is not only a core technology contributor to the Conflux ecosystem, but also earns stable income by participating in government projects.
Yuanjie also shared candidly that the co-founders of the Conflux Foundation and Shanghai TreeGraph Research Institute are also constantly exploring better governance mechanisms for the foundation in order to find the most effective way of cooperation to promote the steady development of the Conflux project.
About the Division of Labor of Conflux Founders
Because TreeGraph Research Institute and Conflux Foundation are relatively independent, the division of labor between the co-founders is relatively clear. During this exchange, Mr. Yuanjie shared the current specific division of responsibilities:
Yuanjie himself focuses on business and operational matters, closely follows hot tracks and cutting-edge business opportunities in the Web3 market, and is able to seize opportunities in commercialization to promote the development of projects.
Long Fan is primarily responsible for domestic government relations and related work. His responsibilities include communication and coordination with government agencies and relevant departments to ensure the smooth progress of the project in China and obtain necessary policy support and cooperation opportunities.
Wu Mingze is mainly responsible for exploring cutting-edge technical problems and developing related technologies. He focuses on technology research and development, is committed to solving complex technical problems, and promotes innovation and progress in the field of technology.
About the stranded BTC L2
The BTC L2 project was something Yuanjie took the initiative to bring up to the team when Inscription was a big hit at the end of last year. The TreeGraph team also actively promoted related attempts, but according to market feedback, the enthusiasm for this track has gradually faded, and the performance of existing projects is not ideal. Therefore, the team chose to temporarily suspend this part of the investment. In Yuanjie's view, this is a tactical exploration and choice, and he will continue to pay attention to and try emerging tracks and opportunities in the industry.
About Institutional Investors and Market Makers
In the discussion about the investment institutions and market price of the Conflux project, Yuanjie mentioned that the investment institutions of the Conflux Foundation will complete the lifting of all restrictions in the first half of next year, and that the Conflux Foundation has also recently received strategic investment from other partners (but it has not been publicly disclosed). These new financial supports have made the foundation's capital reserves relatively abundant, ensuring that the team can continue to focus on the development and promotion of the project. In short: Conflux is not short of money at present.
Regarding the performance of Conflux assets in the secondary market, which everyone is concerned about, Yuanjie explained that this is a natural market behavior. Previously, the foundation had cooperated with market makers such as DWF. However, the two sides found that their styles did not match during the cooperation and eventually ended the cooperation. At this stage, the Conflux Foundation is seeking to cooperate with more mainstream market makers, especially in exchanges in different countries and regions. These new partners will provide Conflux with longer-term and close market-making services: not only will they provide market services, but they will also participate in the work of on-chain nodes. This deep involvement will help build a healthy Conflux ecosystem and improve the performance of assets in the secondary market. As for whether this ideal state will be achieved, of course no one can guarantee it. So adults, be responsible for your own judgment.
About the Conflux public chain niche
For the Shanghai Tree Map Research Institute and the core team of Conflux, entrepreneurship has entered its sixth year. During this time, the team's mentality changed significantly from what it had been before.
Initially, the Conflux team believed that a public chain should hold hackathons in different countries and regions around the world, and attract entrepreneurial teams to enter the public chain for development and activity. The sponsorship bonuses and airdrop subsidies of each public chain are similar to the investment attraction of business circles. This strategy has been successful in other projects such as the Ethereum Foundation and Solana, because these projects have sufficient financial support and traffic support (such as TON).
However, the team later discovered that this path might not be suitable for Conflux. Many ecological projects developed on Conflux have gradually moved to other public chains as the market and capital flow. For Conflux, there is no moat advantage of its own. Of course, this cannot be blamed on the developers, after all, everyone has to make money.
Conflux's ecological positioning in the Web3.0 public chain track is a long-term strategic path. For Conflux, the Chinese-speaking region is a key market segment where it can gain more differentiated competitiveness and build its moat. Therefore, in addition to providing public chain services with excellent performance, low cost and excellent user experience, Conflux also combines Chinese regulatory policies to ensure the compliance of its network ecology. This provides a natural ideal encryption platform for many entrepreneurs with Chinese backgrounds who want to enter the Web3.0 field.
Although Conflux cannot always wave the banner of patriotism, China and the entire Chinese-speaking world do need to have their own public chain projects. Currently, there are very few public chain projects led by Chinese people, and Conflux is in a good position in terms of current development pace, future planning and revenue sources due to its compliance and technical capabilities. It can be expected that in the next 4 to 5 years, Conflux will be able to keep up with the global market value rankings and remain patient on this basis to wait for the right time.
About the Conflux Ecosystem Project Being Attacked by Hackers
Yuanjie also gave a detailed response and explanation on the issue of asset loss caused by hacker attacks on the Conflux ecological project, which has attracted everyone's attention.
Since the incident, he has been actively promoting related work, including assisting users in reporting to the police in China and communicating with the management of two major exchanges every few days. In response to the theft and losses of small users with less than 20,000 USDT in this incident, the Conflux Foundation has already paid compensation, but for users with large assets, it still depends on the cooperation of relevant exchanges.
About Conflux BSIM Card
Mr. Yuanjie introduced and shared the BSIM card project researched by Conflux. At present, the scientific research work of the BSIM card has been completed and has been piloted in two cities in China. The cost package is quite cost-effective (lawyer Mankiw was also invited to participate in product testing).
Regarding the subsequent large-scale market launch of BSIM cards, this depends more on the pace of advancement of telecom partners. After all, they are state-owned units, and their internal advancement pace and market development will be relatively stable. There is no way to rush. Yuanjie personally expects that substantial progress can be made before the end of the year. If it really cannot be achieved, everyone will just think he is bragging.
About regulatory policies, Hong Kong market, and Hong Kong dollar stablecoin
Regarding whether the regulatory policies in mainland China have been relaxed and the market situation in Hong Kong, Yuanjie has the following views:
First, in the short term, the mainland China’s virtual currency policy is unlikely to be relaxed. This is mainly because the current domestic economic situation is directly related to the performance of the capital market. If the restrictions on virtual currencies are lifted in the short term, it will not have a particularly positive impact on the domestic economic environment. After all, the uncontrolled outflow of funds is definitely not in line with the current policy.
As a part of China, Hong Kong, China, with the support of mainland China, actually has a good opportunity to try Web3.0 and virtual currency finance. However, at present, the vast majority of Hong Kong's local mainstream financial institutions are still in a wait-and-see state for these new attempts. For example, the trading volume of virtual currency exchanges and the transaction volume of Bitcoin ETF launched in Hong Kong are not optimistic. This is mainly because most of the capital or financial institutions actively participating in these new things are still mainland capital or financial institutions, such as Harvest Fund and Southern Fund, while in Hong Kong's financial market, foreign capital or Western financial institutions are the main players in funds and resources. It can be seen that Western capital markets and financial institutions have not shown a positive attitude towards Hong Kong's current policies and matters regarding virtual currencies.
Secondly, about the Hong Kong dollar stablecoin. Yuanjie's view is that the main sources of income for stablecoins are two: the friction cost of the entry and exit links, for example, the friction cost of Tether is about one thousandth; the income of the underlying assets. The total amount of stablecoins currently issued by Tether is about more than 100 billion, and the passive interest income is 4 to 5 billion US dollars each year. The number of people in Tether's stablecoin project team does not exceed 80, and the revenue output brought by these 80 people is very amazing. From the above two perspectives, if the Hong Kong dollar stablecoin is really to be launched, it needs to solve not only the problem of settlement between traditional funds or financial institutions, but more importantly, whether it can become a native application tool in the virtual currency market, such as one of the trading pairs in the virtual currency exchange, such as whether it can become a payment settlement tool for the majority of small and medium-sized merchants. At present, some domestic companies have been trying to conduct overseas stablecoin business, including some user settlement business of JD Finance overseas.
In terms of the Hong Kong dollar stablecoin, Conflux's partners in Hong Kong are already preparing for relevant compliant Hong Kong stablecoin matters and are expected to be on the first list, but the government's pace in promoting this project is slightly lower than expected. Based on the Hong Kong dollar stablecoin, Conflux hopes to conduct more financial technology attempts on the chain, rather than just a settlement tool for traditional financial institutions.
About the Web3.0 industry contempt chain
Yuan Jie admitted that Chinese projects are not always welcomed in the Web3.0 investment circle. European and American project owners have more advantages in fundraising and obtaining higher valuations, while Chinese projects are relatively disadvantaged. This is already a prejudice in the industry. In previous years, some domestic investment institutions continued to pay attention to and invest in emerging opportunities in the Web3.0 field and made large investments. However, in the past two years, domestic traditional funds have significantly reduced their attention and investment in Web3.0 projects. This does not mean that Chinese projects are weak in development capabilities or technology research and development. The people behind the projects are still Chinese who rely on their strength to do scientific research and development.
In this market environment, combined with the existing regulatory policies in mainland China, the vast majority of domestic Web3.0 entrepreneurs will face great restrictions in engaging in native Web3.0 technology development or blockchain projects. A better way is to find some cross-cutting businesses, that is, to use blockchain as an auxiliary technology in interdisciplinary or entrepreneurial fields. For example, the combination of AI and blockchain, using some blockchain technologies or elements as the differentiation highlights in one's own entrepreneurial projects, this entrepreneurial path, at this stage, is a better choice both from the perspective of capital market recognition and the risk of the project itself.
