Despite the Chinese sweep Banning cryptocurrencies, domestic web3 talent is quietly blooming, with many risky activities beyond the country’s borders.
From providing crypto derivatives products to creating NFT games, the footprint of Chinese web3 entrepreneurs is reaching far and wide around the world. We spoke with dozens of Chinese founders and investors to find out how the group is trying to build global web3 businesses while keeping its roots in China and leveraging abundant source of technological talent of the country.
Many of them asked to remain anonymous. Some do not want to attract the attention of the authorities because of the lack of clear regulations on operating in China and serving users abroad, and others want to avoid being labeled “Chinese” on the Internet. a time when China’s geopolitical tensions with the West are high.
Many believe that the current state of the internet, or web2, has become overly dominated by centralized, rent-seeking corporations like Google and Meta. Part of web3’s appeal is taking back the Internet through distributed ledger technologies like blockchain, which promise more decentralization and user ownership.
Cryptocurrencies and irreplaceable tokens are two popular applications of blockchain that have attracted billions of dollars in investments, but they are not the only use cases of the technology.
China is still figuring out what it wants from web3, but clearly they don’t want to miss out. In 2019, President Xi Jinping himself demonstrated the role of blockchain in the technological revolution.
What China does not want is the falling price of cryptocurrencies that have roiled the market in recent months. It seems to be encouraging a more centralized and controlled version of web3 – blockchain should be managed by trusted organizations rather than anonymous computers on the open web and bring productivity to areas where government sees fit.
No wonder China is outlawing Initial coin supply and Cryptocurrency-based trading for their financial risk, but there is a gray area when it comes to other blockchain applications. While China has warns against using NFTs as financial securitiesit is rebranding it as “digital collectibles,” which can only be purchased with the Chinese fiat currency RMB, has low liquidity, and is tasked with promoting copyright protection.
Several Chinese web3 developers are moving in the direction given above, engaged in building infrastructure for digital collections. Other use cases have also received government approval. For example, Alibaba’s financial arm Ant Group invented a wide range of blockchain services for purposes like using blockchain to verify court evidence and track food supply chains for safety.
Some people argue that cryptocurrency, seen as a store of value, is like the bread and butter asset of web3. Without it, web3 wouldn’t be able to function to its full potential. Those in China who take this view have largely shifted their focus overseas, serving international users and raising capital from foreign institutions.
Over the past few years, a lot of Chinese web3 startups have moved their organizations overseas following the country’s crypto crackdown, but they haven’t completely abandoned China. They follow a book proven by previous generations of tech companies: set up headquarters abroad, keep some operations in China, and pursue overseas markets.
“Where else will you find thousands of capable engineers?” An employee of the China-based crypto exchange said, requesting anonymity.
China played a key role in the early development of the blockchain industry, creating a generation of crypto-savvy talent. Some of the world’s largest cryptocurrency exchanges, including Binance, FTX, KuCoin, Crypto.com, OKX, and Huobi, have started in the China region. The world’s largest cryptocurrency mining company Bitman was founded in Beijing. Chinese conglomerate Wanxiang was the first corporate investor in Ethereum and gave birth to the crypto investment powerhouse HashKey.
“There are seven million developers here and they have proven time and time again that they can innovate,” said Herbert Yang, general manager for Asia at Dfinity. The aSupported 16zThe Zurich-headquartered company has been looking for projects in China that can be deployed on its blockchain network because the country offers “an excellent source of tech talent.”
Other international organizations also turn to China for the same reason. The Ethereum Foundation, the organization behind the second largest cryptocurrency, funded Hackathon “ETH Shanghai” to attract developers to its blockchain network. The virtual version of the event has attracted nearly 1,000 developers this year, with an estimated 60 percent coming from China, according to event organizer Mask Network, a startup bringing web3 functions to the platform. web platform2.
Chinese crypto companies moving abroad try to bring their Chinese employees with them, but most of them use a way of maintaining a presence in China. While crypto-friendly countries like Singapore have policies to attract foreign talent, local governments often set quotas to protect domestic jobs. Employees with families in China did not want to move in the first place.
For web3 startups trying to hire in China for the past two years, the time is right. Cryptocurrency values hit historic highs last year when China cracks down on their internet industry was well underway. Massive layoffs and falling wages have prompted many workers from Tencent and Alibaba to look for opportunities in the web3.
Others voluntarily quit their jobs at established tech companies to follow the web3 wave, either because they were attracted to the technological potential of blockchain or the opportunity to accumulate wealth quickly. For example, Alibaba’s fintech arm Ant Group has lost dozens of employees to web3 startups in recent months, TechCrunch reported.
Top Product Manager
It’s not news that the tech outfit recruits workers in China while serving international users. Zoom yes hundreds of R&D staff in China before Western reports questioned the security of the country’s cross-data operations. Owned by Alibaba Lazada and Shopee, Southeast Asia’s e-commerce foe, also keep significant operations in Shenzhen, a hub for exports and tech talent.
For many tech companies, China remains a place to hire, thanks to a decade of dizzying growth and competition in the internet space. Companies like Alibaba, Tencent and TikTok owner ByteDance have won recognition from Silicon Valley and beyond for innovation in their respective fields.
“Chinese-founded projects are great at managing and designing business-to-consumer products,” suggests a Chinese worker at a US-based blockchain startup. idea. “They are obsessed with data analysis and spend a lot of time refining products.”
China’s strength in web3 lies not in building blockchain’s foundational infrastructure but more in developing applications for users, several crypto investors and entrepreneurs say.
“The original opportunities in web3 lie in protocols [infrastructure for blockchain applications]but they mainly settle transactions while user experience is ignored,” said a founder of a blockchain startup in Hong Kong.
“The Chinese are very good at building user experiences. After all, China has created a strong web2 ecosystem,” he added.
Curt Shi, an early investor in StepN earning app and a partner at the Prodigital Future Fund, which specializes in finding Chinese-founded web3 projects on a global scale. While the culture of overwork in China’s tech sector burned in recent yearsOthers see it as the country’s advantage.
For example, StepN is run by founders who emigrated from China to Australia. Like many entrepreneurs in the Chinese community, they take advantage of their original homes and are raised by keeping a small group in China as part of their international staff.
“That’s why it can support customers 24/7 while many of its competitors can’t,” Shi said.
A cultural issue
Despite the strengths that Chinese-run web3 startups may have, they face the same challenges as their web2 predecessors.
TikTok, a pioneer in rapid video sharing, is said to be the only Chinese consumer internet platform to achieve global success in recent years. Without a significant direct presence abroad, TikTok was an early success thanks to parent company ByteDance’s algorithm-based content discovery machine developed in Beijing.
But understanding the culture of entrepreneurs becomes important in web3. The industry is still in its infancy, meaning a company’s ability to tell compelling stories is key to attracting early adopters. “Companies in web3 have to resonate with users culturally,” said a founder of Singapore-based decentralized autonomous organization (DAO) who is of Chinese descent.
Web3, as its advocates say, is in many cases run by the community. The underlying blockchain technology has the idea of consensus built in. For example, DAOs enforce decisions based on the general consensus of their communities.
Chinese-founded web3 teams lacking the language ability to effectively communicate their ideas or understanding other cultures may have a harder time winning users in new markets.
“I have seen Chinese companies with good products, but they don’t know how to talk to the international community,” said the DAO founder. “Just having a good product is not enough anymore in web3.”