Conflux Zhang Yuanjie: Public Blockchain is the Future of China's Web3

As a domestic Web3 Public Blockchain entrepreneur, Zhang Yuanjie, co-founder and COO of Conflux, believes that there are many misunderstandings about the Chinese Web3 industry.

"Web3 is cryptocurrency, and China does not allow cryptocurrency," so China has no Web3. Such statements are prevalent, but cryptocurrency is not Web3; it is merely a hot application within the current application ecosystem of Web3. According to Zhang Yuanjie, the reason for this misconception is largely due to "the fact that these people in cryptocurrency hold a dominant voice and power in the existing Web3 user community."

He sees the statement that "domestic alliance chains are compliant, while public chains are not compliant" as a significant misunderstanding, stating that "there is no policy that says public chain technology is prohibited in the country. The national regulatory authorities have left some opportunities for exploration in this field, which is why we can operate normally domestically." As for the prevalence of alliance chains, he believes this is entirely an attempt by Internet giants from the Web 2.0 era to seize the discourse power of blockchain, because "alliance chains are essentially a disguised centralized database, representing outdated technology, and are a continuation of the past Internet data silos and data gatekeeping."

Regarding the current craze for digital collectibles, the chaotic cryptocurrency market, and the DeFi industry, Zhang Yuanjie believes that these do not represent the true Web3. "What Web3 really looks like has yet to be presented; currently, there are only concepts and underlying philosophies, and it has not yet materialized."

What exactly is the concept of Web3, who are the users of Web3, and how should domestic Web3 startups be developed? Zhang Yuanjie also discussed a lot, which has greatly benefited us.

It can be said that before reading this article, all your understanding of Web3 may have been incorrect.

Key Points:

1. The current internet is dominated by large enterprises that monopolize data, creating data islands. The cost of traffic is becoming increasingly expensive, personal data is divided among a few large companies, and opportunities for internet entrepreneurship are dwindling, leading the entire industry into a stalemate. I believe that Web3 actually has opportunities.

2. If there are no applications with daily active users in the tens of millions or even hundreds of millions, I believe the era of Web3 has not yet arrived, and the concept of Web3 has not been truly articulated.

3. Those who always mention tokens and token economics are actually focused on money and have lost sight of the essential daily needs of humanity. They no longer start from the needs of users but instead concentrate all their attention on how to quickly create and harvest wealth.

4. In the entire blockchain world, true decentralization has never really existed; it is more of a process of de-trust.

5. Believing that consortium blockchains are compliant while public blockchains are non-compliant is actually a misunderstanding that does not seriously interpret the country's laws, mistaking some of the public relations propaganda from large internet companies as a form of national laws and regulations.

6. If Web3 wants to go mainstream and reach more Internet users, it needs to find a place to settle on Earth that complies with local laws and regulations as well as national conditions.

7. Web3 is just a technological component of internet entrepreneurship, not everything; do not get things backward.

Current Status of Domestic Public Blockchain Ecosystem

Conflux is a Public Blockchain, which is the underlying infrastructure of Web3. It can be considered a trustless distributed ledger, primarily used for the issuance of digital assets. The development theory of Conflux was established in 2018, and after 2 years of research and development, it was launched. It has now been running for over 2 years without a single network outage and has successfully completed several hard forks.

Conflux primarily focuses on the domestic Web3 ecosystem. Currently, there are over 8 million digital collectibles issued on Conflux, more than 3 million independent users, serving over 300 brand IPs, and incubating more than 70 enterprises scattered across the digital collectibles, Web3, and infrastructure sectors.

After the central bank issued a document to ban digital currency transactions last year, with the clarification of policies, what entrepreneurs can do has also become clear. Coupled with the popularity of digital collectibles over the past two years, many companies have begun to explore the Web3 field, which is also a reason for the relatively rapid development of our ecosystem this year.

There are some interesting cases and applications on Conflux:

Recently, Jay Chou released a metaverse blind box, which contains a previously unreleased single titled "New York Subway." The blind box has become very popular and even made it to Weibo's hot search, which is a typical case of digital assets reaching the general public.

A fast-food company issued digital collectibles for its internal employees through Conflux; a newspaper created digital collectibles by randomly combining front pages from previous years and gave them away for free to readers. A tea beverage brand launched a presale card for digital humans last year and also placed its digital collectibles on Conflux, with presale card sales approaching 200 million RMB within three days.

In addition, there are collaborations with some car brands, sports brands, and anime brands, all making some attempts in Web3.

The domestic application ecosystem based on Public Blockchain is currently at this stage:

The field of digital collectibles has become very mature, but the entire market is in a contraction state, and many companies are actively exploring how to combine digital collectibles with marketing, social interaction, and the collaborative economy.

Take a marketing-related case as an example. The digital collectible application Taopai, incubated on Conflux, launched a series of avatar digital collectibles called "Friends of Kaozi." This brand collaborated with a niche fashion brand from France to design clothing that debuted at Shanghai Fashion Week and caught the attention of buyers for offline sales orders. Therefore, users holding the avatar on this clothing will automatically receive dividends from IP sales. Additionally, once the clothing is produced, all avatar holders automatically become franchisees and have a higher profit-sharing ratio than others. They can participate in distribution through a mini-program. Since it is fully prepaid, they can directly earn commissions. Subsequently, manufacturers will produce clothing based on orders, which is a typical C2M model(Customer-to-Manufactory), zero inventory, 100% prepayment, and it utilizes a decentralized marketing concept, aligning with the domestic economic trend of "promoting the real with the virtual."

There are also gameplay options that combine with social interactions, such as some businesses' methods: holding an NFT allows entry into user groups, and selling it automatically exits the group; holding an NFT enables the initiation of proposals and voting, turning digital collectibles into tickets or badges for joining organizations. It can also be combined with offline activities, serving as a community access pass.

Many enterprises also want to place their data assets on Conflux. For example, "Black Myth: Wukong" publicly sells 3D models of game items as digital assets.

In addition, there is the creation of collaborative content. Currently, I haven't seen many good cases, but IP brands like Happy Mahua and Unexpected have already collaborated with enterprises in the Conflux ecosystem, attempting to attract more entrepreneurs to participate in their creator economy. The creator economy is a very large part of the entire internet. For example, music copyrights are now basically monopolized by QQ and NetEase Cloud Music, making it difficult for long-tail music producers to earn revenue. Can this issue be resolved through the concepts of NFTs and blockchain? This is something I am very much looking forward to seeing.

Cryptocurrency and Token Economics is not equal to Web3

Firstly, although the concept of Web3 has been proposed, what Web3 truly looks like has not yet been presented. Currently, there are only ideas and underlying philosophical concepts, and it has not yet been implemented.

Many people say that the uncles and aunts in the country are not Web3 users, so I am curious about who the Web3 users actually are. Are the users trading cryptocurrencies in the crypto circle Web3 users? Some might definitely say no, they are just trading coins; many people say they are blockchain users. Currently, the largest application on the blockchain has about 30,000 daily active users. Are these people the Web3 users we need to serve? Is what we are doing just creating applications for these 30,000 people? This is still a big gap from my vision of Web3.

If we say that the hundreds of millions of users of apps like Facebook, Tencent, Alibaba, and Instagram are Web2 users, and the users of blockchain are Web3 users, then the potential target users are only about 30,000, and even if we include the cryptocurrency community, it might just be 1 million. I think the Web3 industry is too small, and it's not worth such passionate investment from so many people. We also feel embarrassed to say this is the third generation of the internet; I believe this is a significant misconception among many entrepreneurs, and it has already formed a serious hierarchy of disdain, thinking that only the "refined" users, users on the chain, and those who have accepted private keys and mnemonic phrases are the true Web3 users.

The breakout of Web3 has just begun. Games like "Axie Infinity" and "StepN" have made some attempts, but perhaps due to their economic models or the results of users participating in a game of economic models, their breakout effects could not be sustained. At their peak, the number of users was around one million, which is still far from the scale of Web3 users I envision. If there are no applications with daily active users in the tens of millions or even hundreds of millions, I believe the era of Web3 has not yet arrived, and the concept of Web3 has not been truly articulated.

When it comes to Web3, it is about token economics, but they are not the same thing.

Web3 advocates for the assetization of personal data, and the assetized data does not necessarily have to have tokens. For example, the soulbound token ( mentioned by Vitalik Buterin, any online or offline organization or individual can issue this type of token to your wallet, which serves as your label, and will remain in your wallet forever, non-tradable. Does a non-tradable label have no commercial value? Not at all; countless internet companies can provide services based on your data label, and many precise marketing business scenarios will be tied to labels, creating commercial value in that case. Moreover, the market costs for these precise marketing efforts will not be directed toward ByteDance, Tencent, etc., but will go directly to the users themselves.

You do not need to relinquish your privacy and data to obtain services; on the contrary, your data tags can become your data assets, bringing you commercial value. This is the process by which Web3 embodies the commercial value of data.

Many people who speculate on cryptocurrencies have the mindset of making quick money, and indeed, many have accumulated significant wealth. They hold a voice and dominance within the existing user base, believing that there is no Web3 in China, and without tokens, there is no Web3.

There are also some GameFi teams that only talk about token economics without ever mentioning their game mechanics. The game itself should have a fun mechanism, and then token economics plays a role within it, rather than placing token economics in the primary position.

Those who always mention tokens and token economics are actually just focused on making money, no longer caring about the essential daily needs of humanity, and they no longer start from the perspective of user needs. Instead, they put all their attention on how to quickly create and harvest wealth. It is precisely for this reason that they want to imitate what others have done, only serving those in the cryptocurrency circle, without ever considering that the number of these people is so small and their quality is so poor, because each of them only wants to take advantage, thinking about how to get others to take over.

When Satoshi Nakamoto proposed Bitcoin, no one really noticed its value; Bitcoin ultimately developed through the black market of the dark web. Vitalik Buterin, the founder of Ethereum, had most of his early capital and supporters from China during its promotion, and when funds were scarce during its development, it was the crowdfunding from Chinese retail investors that helped significantly. You will find that those involved came from all walks of life, representing various backgrounds, including internet café owners, second-hand traders, internet programmers, etc., and the funds did not come from professional investment institutions. Even at Devcon5 in Osaka, Japan, the DeFi developers were not from the mainstream of the industry; they were mainly technology enthusiasts. More than 50% of Bitcoin's hash power comes from China, and before Ethereum transitioned to PoS, China's hash power was absolutely leading. These individuals had no geopolitical considerations and possessed a strong spirit of cryptographic geek culture, hence they are referred to as "crypto fundamentalists."

However, by 2020, with DeFi being validated on a large scale, stablecoins began to be issued on the blockchain in large quantities, and cryptocurrencies caught the attention of Wall Street and Silicon Valley capital. Capital represented by a16z entered on a large scale and began to lobby for more capital and political forces to join. Many new projects no longer raised funds from the public, but were directly contracted by capital, and China's cryptocurrency investment institutions.