Author: Jay Jo, Tiger Research
Brief summary:
The Asian market is complex and diverse, with different regulations and cultures. To participate in the Web3 industry, one must have a deep understanding of the characteristics of each country.
Asia has a large young, digital-native population, which provides significant potential for its leading position in the Web3 market, particularly in super applications and consumer-oriented applications.
On-chain data shows that the Asian Web3 market is growing, primarily reflected in the increased use of stablecoins, developer activity, trading volume on decentralized exchanges (DEXs), and interactions on Web3 social media.
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, spanning different regions such as Northeast Asia, Southeast Asia, South Asia, and Southwest Asia, with over 48 regulatory frameworks. The cultural differences within Asia are often greater than those among Western countries.
This diversity also profoundly impacts Asia's Web3 industry. In Northeast Asia, countries have their unique approaches: 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 targeted strategies and a nuanced understanding for success.
2. Strong growth fundamentals in Asia
Asia's diversity presents challenges, but its significance cannot be overlooked. It is home to over 60% of the world's population, contributing 34% of the global GDP, and has outpaced North America and Europe with a growth rate of 3.6%.
Asia is leading the Web3 industry for three main reasons:
Firstly, Asia has a large cryptocurrency user base, with about 60% of the global crypto users (320 million people) coming from the region, mainly driven by a young and digital-native population (data source: Triple-A).
Secondly, Asia has excelled in trading activity: by early 2024, the trading volume based on the Korean won exceeded 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 talent pool, including 50 million GitHub developers and 40% of the world's Web3 game developers.
3. Advantages of the Asian Web3 market: consumer-centered and super applications
To popularize the Web3 industry, the key lies in developing consumer-oriented applications that are easy for the masses to use; simply building technical infrastructure is not enough. This is similar to the past development path of the internet, where killer applications like email accelerated the rapid adoption of the internet. Similarly, Web3 is expected to gain widespread popularity through consumer applications that can seamlessly integrate into daily life.
Asia excels in two aspects. First, it is at the forefront of consumer-centered innovation. As of October 2024, 42% of Asian unicorns are B2C companies, surpassing North America and Europe (data source: CB Insights). This advantage stems from Asia's large digital-native population and advanced mobile payment systems. A consumer-driven development approach positions Asia to become a hub for new Web3 applications.
Asia's second major advantage lies in its unique super application ecosystem. Leading platforms such as WeChat, Alipay, Kakao, Line, and Grab initially began as single-service applications but have since evolved into comprehensive digital ecosystems. These super applications have become part of the daily lives of millions of users, covering various services such as payments, shopping, and entertainment.
The TON blockchain showcases the potential of combining Web3 with super applications. By integrating Web3 features into the popular social application Telegram, user numbers have surged due to its convenience. These cases demonstrate that super applications can lower the barriers to entering 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 real user activities through on-chain data is essential for a deeper understanding of the market.
Japan's evolving stablecoin policy underscores the need for in-depth analysis. Although stablecoin guidelines were introduced in June 2022 and legal revisions in 2023 allow for the issuance of stablecoins, there has yet to be a significant on-chain impact. This is due to limited use cases and regulatory hurdles for issuing trust-based stablecoins on public blockchains. To bridge the gap between policy and adoption, more detailed on-chain analysis is necessary.
Next, we will evaluate whether the expected 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 are 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, and are expected to grow further from 2022 to 2024.
Stablecoins pegged to national fiat currencies are creating more real-world use cases. Multiple stablecoins supported by local currencies have emerged, such as Singapore's XSGD and Indonesia's XIDR. For example, XSGD connects with services like Grab, facilitating practical applications. This localized approach and integration with real services are increasing stablecoin transaction volumes. Continuous growth indicates that structural changes are occurring in the Asian market rather than just short-term trends.
4.2. On-chain activities of Asian developers
Asian developers are increasingly participating in smart contract development. On-chain data from the 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 activities in North America and Europe. Since 2022, the growth rate has been rapid, showing a similar trend on the Ethereum mainnet. The share of Asia in contract creation has increased 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 in 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 trading on decentralized exchanges (DEX)
Uniswap's trading data indicates high participation from Asia. From 2021 to 2024, Asia has 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 various types of investors in Asia. When we categorize trade sizes 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 the trading volume. However, by 2024, their share in trade counts and volumes has steadily increased. This change is a positive sign, indicating that users in the Asian market are increasingly utilizing Web3 services. They are active not only on centralized exchanges (CEXs) but also on decentralized exchanges (DEXs).
4.4. Activity of Asian users in the Web3 social network Farcaster
The activity of Asian users on Farcaster is drawing attention from 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. Summary
The Asian market is diverse, with unique regulations, cultural differences, and varying practices across countries. This complexity presents both challenges and opportunities for Web3. Understanding each country's unique role is crucial. On-chain data reveals the potential of the Asian Web3 market by capturing real user behavior.
Regional analysis based on on-chain data is crucial for ecosystem growth. Progress 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
