Author: Meng Yan
Recently, I traveled half the globe, visiting the capital of Ghana, Accra, the largest city in Switzerland, Zurich, the Middle East's economic gateway, Dubai, as well as Singapore, which radiates Southeast Asia, and Hong Kong, which is backed by mainland China. The main purpose was to attend several industry conferences and to investigate the development opportunities of the Web3 industry in these localities. In addition to the places I visited last year, such as Rwanda, where I reside, Australia, and the mainland of China, I now have some intuitive understanding and judgment of the current situation and development prospects of blockchain and Web3 in these areas, and I would like to share them with everyone.
Deflecting Bullets
First of all, it is important to define what I mean by "blockchain and Web3" because every time I talk about these topics, there are always people who jump out and ask, "What blockchain? What Web3? What does it have to do with crypto?" To deal with these sneak attacks, let me first explain my position.
Blockchain technology has given rise to a new industry called the encrypted digital economy, commonly known as crypto. Like other industries, crypto has physical and transactional components. What sets it apart from other industries is that, due to the fact that blockchain itself is a value internet protocol and comes with its own transaction infrastructure, crypto can complete the expression and transaction of assets internally, without the need to trade in a specialized external venue like other industries. This feature is so prominent and eye-catching that almost all the hotspots in the crypto industry in the past decade revolved around the transaction process. However, this does not mean that crypto has no actual business. Just ask, what assets are you trading? That will be determined by actual business.
In this industry, there are three approaches centered around actual business. The first approach is speculation and gambling, and many projects in this industry fall into this category, where there is nothing behind the scenes except for a coin. A better example is meme, which openly tells you that it has nothing, just a cultural shirt, an open gambling game. A more malicious approach is to pretend to do business, where outsiders think there is something, but in reality, it's all fake, essentially a Ponzi scheme. The second approach is "industrial blockchain" or RWA, which involves the integration of blockchain digital assets with real-world business. The third approach is Web3, with typical representatives being Bitcoin, Ethereum, Solana, etc., which actually have business underneath and serve as the infrastructure or applications in the open internet.
I have always focused on these two approaches, believing that they are the long-term and sustainable paths. The projects I have initiated emphasize actual business, which may be slower, but I feel more secure, and I firmly believe that the returns will be greater in the long run. Of course, most of the players I have encountered in this industry are more focused on trading, capturing trading opportunities for profit, and paying less attention to actual business.
Both types of people, those focused on actual business and those focused on trading, are actually needed. However, when I express my views, I am often not understood or even ridiculed by those focused on trading, so I want to make it clear that I am talking about the "actual business" part of the crypto industry. Therefore, I often use the cumbersome expression "blockchain and Web3" in my narrative. As for those who only focus on trading and are not good at thinking, and insist that there is no actual business in crypto, and that it is purely a gambling game, I will not waste time refuting such shallow and foolish views.
Blockchain and Web3 in the Framework of Informatization
Whether it is industrial blockchain or Web3, they should actually be viewed within the framework of informatization. Informatization is a continuous process of human civilization that has spanned tens of thousands of years and is a large framework. However, when we talk about informatization, we usually refer to the past few decades, mainly based on digital computers and networks. This process actually originated from the military-industrial complex and developed on the enterprise side. Later, the rise of the consumer internet greatly changed the trajectory and pattern of the entire informatization, creating a new paradigm.
Now, technologies such as blockchain and zero-knowledge proofs have the potential to create a third paradigm of informatization. This new paradigm's development on the enterprise side is industrial blockchain and RWA, and its development on the consumer internet side is Web3.
Why do I dare to say it is a new paradigm? Because blockchain has redefined the account system and resource hosting model in the internet, which is fundamentally different from the current centralized internet. Therefore, if it cannot develop at all, it is just a matter of time, but once it does develop, it will definitely be a new species that the traditional internet has never seen. In the digital age, no matter how weak a new species is now, it cannot be ignored, because once it grows, it may bring a competition in a new dimension that you are completely powerless to resist.
Between industrial blockchain and Web3, my basic view is that Web3 will develop faster and more fiercely than industrial blockchain, so the focus should now be on discussing Web3. To discuss the development opportunities of Web3 in different regions around the world, we must first look at the forms of informatization development in each region.
What is the overall situation of global informatization now? In short, it is a competition between the United States and China in artificial intelligence and robotics, insomnia in Europe and Australia, large-scale informatization construction in high-growth countries in Africa and Southeast Asia, and Singapore and Dubai hoping to reap the largest dividends in this process.
Below, I will share my impressions of different regions.
Insomnia in Europe and Australia
The situation in Europe and Australia seems similar on the surface. The internet infrastructure in both regions is decent, but there has been no leading large enterprise, and the depth and innovation level of actual applications lag behind that of the United States and China. They are aware of and pay attention to new technologies, trends such as blockchain, Web3, and tokenization, but their actual attitude is more of a passive interest. In other words, in principle, they welcome and support innovation, but if you are serious about promoting it, as soon as specific problems or conflicts arise, they immediately hesitate to move forward. Therefore, both regions are in this state, watching such a thing happen, unable to sleep, unable to get up, hence the term "insomnia."
However, I believe that the underlying logic of insomnia in these two regions is different. Australia's problem is a lack of motivation, as life there is too comfortable, and when it comes to innovation, they go with the flow and follow the lead of the United States and the United Kingdom. If the technology that the United States has not developed is not being pursued, there is no rush to compete for that prize, and if the United Kingdom has not established regulatory rules, then they will wait. In fact, having lived in Australia for many years, I find that the regulations here are relatively relaxed, and there is room for proactive action if one really wants to do something. However, as soon as you collaborate with local companies or people, you will find that they lack much initiative. At the slightest difficulty, they retreat in various ways, and the six words "too lazy to move, not necessary" float down from the sky.
Europe, on the other hand, is different. They do not lack the desire for independent development, nor do they fail to see the value of blockchain technology, but their governance mechanism is too complex, with too many constraints, making it difficult to act. I attended a FinTech conference in Switzerland, and tokenization was the absolute protagonist. However, the speeches from various parties were all similar in format, first fully affirming the value and significance of blockchain and tokenization, expressing confidence in their long-term prospects, and then, as soon as they talked about the present, they brought out a long list of constraints and limitations. The most intractable matters in the world are those that are said to be the only way, but in reality, they have unforeseen pitfalls. In my view, it is difficult to get things done in Europe.
Therefore, both places are experiencing insomnia, one due to a lack of motivation and the other due to being bound and unable to move.
Interlocked Mainland China and Hong Kong
China is the biggest winner of the mobile internet era and theoretically is the most qualified leader of the Web3 revolution. However, history has repeatedly shown that the previous cycle's winners are particularly prone to falling behind in the next cycle. Many people attribute this to path dependence, meaning that interest groups, even if they clearly know the right direction, will, for the sake of protecting their vested interests, choose to maintain the status quo and take a conservative path. However, I believe that in the Chinese internet industry, there is still a spirit of adventure and self-revolution, as path dependence is not the main problem. If there is a problem, it mainly lies in understanding.
Ideally, China's best attitude towards Web3 is to let it grow freely, with a large environment and large opportunities. As long as certain key points are controlled well, there will actually be no chaos, and there will be great gains instead. However, it is well known that China is currently in a period guided by national strategy and strengthened government regulation. If the government has formed an opinion on a certain technological direction, then the space for exploration and experimentation is limited.
So, what is the government's opinion on blockchain and Web3?
Many people sigh and say that China has completely banned this direction. I do not agree with this. I believe that China has not yet formed a fixed opinion on the direction of blockchain technology and is still examining it, but is currently not handling it properly.
China has a deep understanding of the unpredictability and disruptive nature of technological innovation after decades of technological industry development. It will not easily deny a specific technological direction, as both positive and negative experiences are abundant. The former Soviet Union's failure to accurately foresee the development of silicon-based semiconductors, large-scale integrated circuits, computer miniaturization, and internet technology was a significant reason for its technological and economic competition failure, leading to its complete collapse. On the other hand, China's successful proliferation and incubation of a large number of new commercial species during the mobile internet era was one of the key reasons for its dominance in the previous cycle of the Chinese internet industry. The current situation of the difficult-to-reverse competition between China and the United States makes it crucial to carefully consider the direction of technological development. China recently proposed the concept of "new productive forces," mainly focusing on providing significant support for key technological directions with strategic significance in the comprehensive competition between China and the United States, and blockchain is definitely one of the candidates.
However, the elusive nature of blockchain technology lies in the fact that, if analyzed only theoretically, its value logic should be smooth. As early as October 2019, China's top leadership had already reached a conclusion on this issue. However, in practice, various resistances and frictions have prevented it from producing results.
Many people have asserted that blockchain and Web3 are false propositions, impractical, or of little value. But I believe that decision-makers are not so shallow, and they should be aware of the reasons behind this, as China has experienced similar situations in its history of informatization development.
As I mentioned earlier, when China began its informatization in the late 1990s, it initially copied the American model and started the transformation from the industrial side, but the development was slow. Unexpectedly, in the original wilderness, the consumer internet emerged and surged forward, changing the overall paradigm of China's informatization. Therefore, the Chinese understand that it is difficult to transform an old thing, and problems in development must be solved during development, focusing on incremental improvements. By leaving the old untouched and allowing the new to grow wildly, it will naturally force the old to transform. If the Chinese do not understand this principle, then no one in the world does. The current situation is the same. If you insist on forcing existing enterprises and internet platforms to transition to Web3, the difficulty is significant. However, if you can create a space for Web3 to grow wildly, it may produce new species.
The problem is that Web3 is not an ordinary industry; it inherently possesses strong transactional and speculative characteristics, is highly active, and if not controlled properly, it can cause financial troubles. China is currently in a period where it is particularly sensitive to troubles and demands high stability. Faced with the ambivalent nature of Web3, decision-makers are not easily determined. Following it may disrupt the existing landscape of large enterprises and industries, create chaos, and increase the burden of financial regulation. Not following it may allow this thing to proliferate internationally, and it is unknown what kind of monster it will produce and how much impact it will have, which could put China in a very unfavorable position.
Therefore, China is somewhat indecisive in developing Web3, with concerns about the risks of moving forward and the potential pitfalls of retreating. Many people believe that Hong Kong, as a blockchain test area, bears a special mission to help the mainland of China explore Web3.
However, despite being an international financial center, Hong Kong's core advantages are entirely focused on financial transactions. Asking it to engage in the real economy is not feasible. It failed to develop the internet in the past and is now unable to produce films. Expecting it to independently explore a new paradigm for the global internet industry is extremely challenging in terms of industrial foundation, talent reserves, and market size. Therefore, in practice, Hong Kong companies focus only on "trading" because that is their comparative advantage. This is far from the demand for exploring a new paradigm of Web3 for the mainland.
Of course, digital asset trading is a key point in Web3. If the mainland's Web3 industry can develop, and Hong Kong can handle trading well, that would be sufficient. However, the current issue is that the mainland is waiting for Hong Kong as a special administrative region to explore a path before developing Web3, while Hong Kong is waiting for the mainland's Web3 industry to provide digital assets for trading and earn transaction fees. Both sides are waiting for each other, and neither can break the deadlock, resulting in an interlocked situation.
Great Opportunities in Southeast Asia and Africa
If China does not break the deadlock in Web3, the most likely regions to open up new situations and produce new monsters globally are the United States and, in my opinion, Southeast Asia and Africa. I have not been to the United States and have no authority to speak on it. However, in the past two years, I have visited Africa and Singapore frequently and spent a considerable amount of time there, allowing me to make some observations.
In recent years, some countries in Southeast Asia and Africa have entered a high-speed economic growth stage. Although their economic scale is not large, involving hundreds of millions of people, their potential is significant, and there is an urgent need for information technology construction. Therefore, these countries are undergoing their first large-scale IT and internet construction. China went through a similar process in the late 1990s, so it is not unfamiliar to us. The first time climbing the technology tree, curiosity is the strongest, the mindset is the most open, the sincerity is the greatest, and the enthusiasm is the highest. These countries are currently in this stage.
However, their basic logic is somewhat different from China's. When China started its IT construction, it was the end of the Cold War and the historical stage of globalization was unstoppable. Therefore, China basically adopted an approach of importing American technology and complete solutions, without considering much about independent controllability, data sovereignty, and privacy protection. It was not until the Prism Gate incident in 2013 that China came back to address these issues and embarked on an informatization path characterized by the consumer internet as the core platform and super internet platforms as the main force.
Now, as these countries experience rapid economic development, they also need corresponding IT construction. However, the times have changed, and so has the logic. First, the era of globalization has ended, and there is fierce competition between China and the United States in many fields. These countries have a significant amount of choice. Second, the concept of data sovereignty and privacy protection has strengthened, and even the smallest countries and companies are unwilling to run naked in the digital prism of foreign large companies. Third, the demonstration effect of the internet's huge success has led to even moderately sized economies wanting to support and establish their own platforms, not allowing the fat water to flow into others' fields.
What consequences do these changes bring? The previous model of large companies created by American companies and then taken to the extreme by Chinese companies like Huawei is no longer viable, or at least faces significantly increased resistance. For example, in terms of data privacy protection, the previous model allowed large companies to sign a commitment with users, then intermittently issue self-promotional public relations statements, and gain access to all user data, reaping all the benefits and putting them in their own pockets without the users' knowledge or consent. This will no longer be possible in the future.
Now, these countries want to support their own platforms. Foreign large companies can come in to sell equipment, technology, participate in construction, and help train talent, but if they want to directly extend their tentacles and unconditionally join their networks, becoming a sub-network of their large national network platform, I understand this, it is called digital colonialism, and we are not so naive.
The problem is that the internet has network effects. Chinese internet platforms are aimed at all of China, and American internet companies are aimed at the whole world except China. Only by establishing networks of this scale can they achieve economies of scale and become strong. If each country is unwilling to join a large network and wants to support its own platform, the result will be underdeveloped fragments, lacking economies of scale, and causing endless trouble for cross-border cooperation.
The wise people of these countries understand this problem. When I attended a conference in Ghana, a South African industry leader spoke, saying that Africans always talk about Africa, but where is Africa? It is just a fragmented continent left by colonizers, with over 50 countries, 48 currencies, extremely cumbersome internal economic exchanges, and foreign trade far exceeding mutual trade within the continent. Therefore, he wants to establish a digital economic community in Africa. When I visited Rwanda, a country with a population of over 13 million, I found that they have over ten payment networks similar to "Alipay," most of which have only tens of thousands to hundreds of thousands of users, dividing such a small market, making it impossible for any company to grow and become strong. Southeast Asia also faces similar issues.
When it comes to this, the value of blockchain and Web3 for the informatization construction of African and Southeast Asian countries is evident. First, it provides clear ownership, prevents tampering, builds consensus, and conveys trust. Second, it allows the value network to sink to the internet protocol layer, separating business while integrating transactions and sharing benefits. Third, in conjunction with technologies like zero-knowledge proofs, it can effectively address privacy protection. With so many advantages, coupled with their fearless attitude towards informatization and the absence of powerful vested interest groups hindering progress, it is not difficult to explain why the world's most enthusiastic and curious regions for blockchain and Web3 technology are concentrated in Africa and Southeast Asia.
When communicating with people from these regions, I can genuinely feel their simple enthusiasm and expectations for Web3 technology. They genuinely want to use Web3 technology to solve practical problems. In contrast, this kind of simple enthusiasm is relatively scarce in other places, where more people are only concerned about making money. This is also an important risk for African and Southeast Asian countries in their Web3 development. Their regulatory capabilities are relatively weak, and if they are inadvertently led astray and encounter a few setbacks, their attitude may instantly make a 180-degree turn. Fortunately, there have been many such incidents, so they are generally more cautious and less easily deceived. In terms of blockchain and Web3, they are more inclined to recognize institutions like Singapore and the International Clearing House. This has also presented a unique historical opportunity for Singapore.
Singapore and Dubai: Both Centers, but Very Different
Singapore clearly sees the significant opportunities in the informatization and digital economy of Southeast Asia and Africa. The Monetary Authority of Singapore (MAS) has initiated a series of projects and plans for several years and has been holding meetings all over the world. Recently, MAS proposed the "Global Ledger 1 (GL1)" plan, leading the creation of a cross-border blockchain supported and shared by commercial banks, financial institutions, and commercial entities from various countries, which clearly reflects Singapore's strategic intent in the blockchain and Web3 fields.
It is not difficult for discerning individuals to see that Singapore's strategies in blockchain and Web3 are not intended for its domestic market, nor are they intended to directly extend its business to the economic peripheries of other countries like the internet giants. Instead, they aim to provide a value network that coexists compatibly with the existing paradigm, allowing voluntary participation and sharing of benefits for enterprises in Southeast Asia, Africa, and other regions. This undoubtedly represents the greatest common denominator for blockchain applications, meeting the needs of developing countries in Southeast Asia and Africa. Singapore itself has a global reputation in financial regulation and financial technology, especially in the eyes of Southeast Asian and African countries, making it a role model. Therefore, in the African and Southeast Asian countries I have encountered, both governments and enterprises generally recognize and trust Singapore's leadership in blockchain and Web3 plans, and are less guarded. Therefore, Singapore indeed has the potential to achieve this.
This is of great significance for Singapore. If Singapore can play a leading role in the informatization of Southeast Asia and Africa and truly utilize cross-border digital economic blockchains like GL1, it can strive to become the capital of the digital economy in the Indo-Pacific region.
However, the route chosen by Singapore also includes an important assumption, that is, blockchain and Web3 can be hidden behind the traditional internet, serving as the infrastructure for enterprises without directly facing ordinary users. Chains like GL1 are referred to as "open consortium chains," only open to existing institutions, while ordinary users continue to use centralized internet platform services, isolated from blockchain. This way, the implementation of Web3 can proceed without disrupting the existing industrial landscape, led by existing government agencies and enterprises in an orderly manner. But what if this assumption is wrong? What if Web3 directly transitions to large-scale applications through social or gaming platforms in the future, and if ordinary internet users start to have one or more Web3 accounts, engaging in communication and transactions? Undoubtedly, this is the most natural form of Web3, and this form will inevitably disrupt the existing internet industry landscape and application paradigm. If this happens, Singapore will have to adjust its strategy.
In contrast, Dubai has taken a laissez-faire approach to Web3. Dubai is built to look like a city of the future, but it is deliberately superficial. The real financial center of the United Arab Emirates is in Abu Dhabi. Dubai itself is aware of this, so its core competitiveness lies in attracting a large number of foreigners through advanced infrastructure, relaxed regulations, and currently favorable cost advantages. Dubai itself does not have an industrial policy; it "builds nests and lets birds fly," which is sincere and ingrained in Dubai's genes. When I visited Dubai and carefully studied the city's history at its historical museum, I learned that before the oil wealth changed the country's destiny, Dubai was just a poor Arab state living off natural pearls, and its rulers had always adopted an extremely relaxed and friendly attitude towards merchants. In the past, Dubai survived and developed based on this policy, and now it hopes to develop based on this policy.
Compared to Singapore, Dubai's understanding of Web3 is very different. The Singaporean government may be the most knowledgeable government in the world about blockchain and Web3, and because of this knowledge, Singapore has the confidence to design strategies and actively guide the development of this industry. However, due to this knowledge, it may also say no to certain businesses. Dubai, on the other hand, is different. Ninety percent of the over three million people in Dubai are foreigners, bringing a wide range of expertise from around the world. The Dubai government cannot possibly understand every field. Since it does not understand, it does not formulate industrial policies or provide industry support, but at the same time, it does not refuse. Therefore, the Dubai government is very clear that only by fully relaxing and allowing various talents to flourish can it succeed.
In this situation, Dubai's advantages are very prominent. If a business requires relaxed regulations, Dubai is the most suitable place. Currently, Dubai has become the main base for centralized cryptocurrency exchanges, clearly indicating its positioning.
Another advantage of Dubai is its cost. Of course, Dubai's costs are not low, but compared to Southeast Asia and mainland China, they are certainly high. However, compared to Hong Kong and Singapore, Dubai's costs are very competitive. It is not very difficult to achieve a 50% reduction in operating costs compared to Singapore for the same activity. Therefore, for businesses targeting the international market, with a relatively large team size and a requirement for relaxed regulation, Dubai may be the best choice.
Therefore, compared to Singapore, which has a clear blockchain and Web3 strategy, along with related policies and support, aiming to seize the market opportunities for the rapid informatization of a large number of countries in Asia and Africa, Dubai does not have such a strategy, but it excels in its relaxed approach and cost competitiveness.
Conclusion
After comparing these regions, I will make a summary. Unless China and the United States suddenly undergo a dramatic change in their attitudes towards the Web3 industry, blockchain and Web3 will not find a single large market with all favorable conditions like the internet and mobile internet did in the past. Therefore, Web3 teams are forced to consider a global layout from the startup stage. In my opinion, an ideal strategy is to be based in Singapore and Dubai, actively cooperate with Singapore's strategy, seize the market opportunities for the initial informatization of Southeast Asia and Africa, and also make good use of Dubai's regulatory environment and cost advantages for overall optimization.
This article did not mention Japan, South Korea, and the United States, which is a significant omission. This is mainly because I have not visited these places recently and therefore do not have the authority to speak on them. Fortunately, I have the opportunity to visit the United States in the second half of the year, and if I have any insights at that time, I may consider writing another article.
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