Despite China’s blanket ban on cryptocurrencies, domestic web3 talent is quietly thriving, with many venturing abroad.
From offering crypto derivatives to making NFT games, Chinese web3 entrepreneurs have a global footprint, and we spoke with a dozen Chinese founders and investors to understand how the group is working to build global web3 businesses while still staying rooted in China and leveraging the country’s abundant technical talent.
Many of them requested anonymity, with some not wanting to attract the attention of authorities as there are no clear rules on operating in China and serving overseas users, while others wanted to avoid being labeled "Chinese" at a time of tension between the East and the West.
Explore Status
Many believe that the current state of the internet, or web2, has become overly dominated by centralized rent-seeking companies like Google and Meta, and that part of the appeal of web3 is reclaiming the internet through distributed ledger technologies like blockchain, which promises greater decentralization and user ownership.
Cryptocurrencies and non-fungible tokens are two popular applications of blockchain that have attracted billions of dollars in investment, but they are far from the only use cases for the technology.
China is still figuring out what it wants from web3, but it clearly doesn’t want to miss out. In 2019, the government itself vouched for blockchain’s role in the technological revolution.
What China doesn’t want is the cryptocurrency price crash that has roiled markets in recent months, and it appears to be encouraging a more controlled, centralized version of web3 — blockchains that are supposed to be managed by trusted organizations rather than anonymous computers on an open network, and bring productivity to areas the government sees fit.
Not surprisingly, China has banned initial coin offerings (ICOs) and crypto-based transactions due to financial risks, but there is a gray area when it comes to other blockchain applications. While China has warned against using NFTs as financial securities, it is rebranding them as “digital collectibles” that can only be purchased using China’s fiat currency, the renminbi, have little liquidity, and are tasked with promoting copyright protection.
Some Chinese web3 developers are following the direction given by the top leaders to join the infrastructure for building digital collectibles, and other use cases have also been recognized by the government. For example, Alibaba’s financial subsidiary Ant Group has designed a series of blockchain services for verifying court evidence and tracking food supply chains for safety using blockchain.
Some believe that cryptocurrencies, which are viewed as a store of value, are like the bread and butter assets of web3, and without it, web3 will not be able to reach its full potential. Most Chinese who hold this view have shifted their focus overseas, providing services to international users and raising funds from offshore institutions.
Rich Talent
In the past few years, as China cracked down on cryptocurrencies, many Chinese web3 startups have moved their entities overseas, but they have not completely abandoned China. They follow the script proven by previous generations of technology companies: register overseas, keep some operations in China, and explore foreign markets.
“Where else can you find thousands of capable engineers?” said a China-based employee at a cryptocurrency exchange who asked not to be named.
China played a pivotal role in the early development of the blockchain industry, nurturing a generation of cryptocurrency-savvy talent. Some of the world’s largest cryptocurrency exchanges, including Binance, FTX, KuCoin, Crypto.com, OKX, and Huobi, all got their start in Greater China.
The world’s largest cryptocurrency mining company, Bitmain, was founded in Beijing, Chinese conglomerate Wanxiang was the first corporate investor in Ethereum, and crypto investment giant HashKey was born.
“There are 7 million programmers here who have proven time and again that they can innovate,” said Herbert Yang, general manager of Dfinity Asia. The a16z-backed, Zurich-based company came to China to look for projects that could be deployed on its blockchain network because it offers “a large amount of technical talent.”
Other international organizations have turned to China for the same reason, with the Ethereum Foundation, the organization behind the second-largest cryptocurrency, sponsoring the "ETH Shanghai" hackathon to attract developers to its blockchain network.
The online event attracted nearly 1,000 developers this year, with an estimated 60% from China, according to the event’s organizer, Mask Network, a startup that brings web3 capabilities to web2 platforms.
Chinese cryptocurrency companies that have moved overseas have tried to bring their Chinese employees with them, but most of them have resorted to retaining some presence in China. While crypto-friendly countries like Singapore have policies to attract foreign talent, local governments often set quotas to protect domestic employment, and employees with family in China are reluctant to move in the first place.
For web3 startups that have been trying to recruit in China over the past two years, the time is ripe. Last year, when China’s crackdown on its internet industry was underway, the value of cryptocurrencies reached an all-time high, and massive layoffs and salary cuts prompted many employees at companies like Tencent and Alibaba to seek opportunities on the web3 frontier.
Others are voluntarily leaving jobs at established tech companies to ride the web3 wave, either because they are attracted to blockchain’s technical potential or because of the opportunity to quickly accumulate wealth. For example, Alibaba’s fintech subsidiary Ant Group has lost dozens of employees to web3 startups in recent months, TechCrunch has learned.
Built for user experience
It’s not news that tech companies hire people in China while serving international users. Before Western media reports questioned the security of its cross-data practices, Zoom had hundreds of R&D staff in China, and Southeast Asian e-commerce nemesis Alibaba’s Lazada and Shopee also have significant operations in Shenzhen, a hub for exports and tech talent.
For many tech companies, China remains a desirable recruiting ground thanks to a decade of hypergrowth and competition in the internet sector, with companies such as Alibaba, Tencent and TikTok owner ByteDance gaining recognition in Silicon Valley and beyond for their innovations in their respective fields.
“Chinese-founded projects are very good at managing and designing B2C products,” said a Chinese worker at a U.S. blockchain startup. “They are obsessed with data analysis and spend a lot of time fine-tuning their products.”
China’s advantage in web3 lies less in building blockchain’s underlying infrastructure and more in developing applications for users, some crypto investors and entrepreneurs believe.
“The early opportunities for web3 are in protocols (the infrastructure for blockchain applications), but they are mainly about solving transactions and ignoring user experience,” said a Hong Kong blockchain startup founder.
"The Chinese are very good at creating user experience. After all, a powerful web2 ecosystem has been born in China," he added.
China’s tech workers are also known for being “hard-working,” said Curt Shi, an early investor in StepN, a running money-making app, and a partner at the Prodigital Future Fund, which is looking for Chinese-founded web3 projects to go global. While China's tech industry has come under fire in recent years for its overworked culture, others see it as a strength for the country.
StepN, for example, is run by founders who migrated to Australia from China, and like many Chinese diaspora entrepreneurs, it has taken advantage of its original and adapted homeland by retaining a small team in China as part of its international staff.
“That’s why it can offer 24/7 customer support, while many competitors can’t,” Shi said.
A cultural issue
While China-run web3 startups may be strong, they face similar challenges as their web2 predecessors.
TikTok, which pioneered fast-paced video sharing and is arguably the only Chinese consumer internet platform to have global success in recent years, took off early without a significant on-the-ground presence abroad, thanks to an algorithm-driven content discovery mechanism developed by its parent company, ByteDance, in Beijing.
But cultural understanding among entrepreneurs becomes crucial in web3, an industry still in its infancy, which means a company’s ability to tell a compelling story is key to attracting early adopters. “Companies in web3 have to culturally resonate with users,” said the founder of a Singapore-based decentralized autonomous organization (DAO) from China.
As its advocates say, web3 is in many cases run by the community, and the technology that underpins blockchain has the idea of consensus built in. For example, DAOs execute decisions based on the collective consensus of their community.
Web3 teams created in China that lack the language skills or understanding of other cultures to effectively communicate their ideas may have a harder time winning users in new markets.
“I’ve seen Chinese companies with great products, but they don’t know how to communicate with the international community,” the DAO founder said. “In web3, it’s not enough to just have a good product.”
By Rita Liao (TechCrunch)
Translation: Catherine
IC content you care about
Technology Progress | Project Information | Global Activities
Collect and follow IC Binance Channel
Answer your questions at any time
