China's web3 talent is booming and going global.
From offering crypto derivatives to making NFT games, Chinese web3 entrepreneurs have a global footprint. We spoke to more than a dozen Chinese founders and investors to find out how they're trying to build a global web3 business while rooting in China and leveraging the country's wealth of tech talent.
state of exploration
Many believe that the current internet or web2 is dominated by centralized, rent-seeking companies like Google and Meta. Part of the appeal of web3 lies in correcting the internet landscape through distributed ledger technologies such as blockchain, which promises greater decentralization and user ownership.
Cryptocurrencies and NFTs are two popular applications of blockchain that have attracted billions of dollars in investment, but they are far from the only applications of the technology.
China is still trying to figure out what to get out of web3, but obviously doesn't want to miss out. In 2019, the government also publicly recognized the role of blockchain in the technological revolution .
What China doesn't want is a cryptocurrency that disrupts the market. It appears to be encouraging a more controlled and centralized version of the web3 - where blockchains should be governed by trusted organisations rather than anonymous computers on the open web, and bring productivity to areas where governments see fit.
Not surprisingly, China has banned ICOs and cryptocurrency-based transactions due to financial risks, but there are grey areas in other blockchain applications. Chinese regulators have warned against using NFTs as financial securities. After NFTs were renamed "digital collections", they can only be purchased in RMB, have little liquidity, and are used to promote copyright protection.
Some Chinese web3 developers are joining the infrastructure to build digital collectibles following the directions given above. Other apps are also approved by the government. For example, Ant Group has designed a series of blockchain services for using blockchain to verify forensic evidence and track food supply chains to ensure safety.
Some argue that cryptocurrencies, seen as stores of value, are like the bread and butter assets of the web3. Without it, web3 would not be able to reach its full potential. Those holding this view have mostly shifted their focus overseas, serving international users and raising funds from offshore institutions.
Over the past few years, many Chinese web3 startups have moved their entities overseas, but they have not given up on China entirely. They follow the development script of previous generations of tech companies: register overseas, maintain operations in China and expand into foreign markets.
“Where else can you find thousands of highly capable engineers?” said a Chinese employee of a cryptocurrency exchange who did not want to be named.
China played a pivotal role in the early development of the blockchain industry, nurturing a generation of crypto-savvy talent. Some of the world's largest cryptocurrency exchanges, including Binance, FTX, KuCoin, Crypto.com, OKX, and Huobi, are all starting in Greater China. Bitman, the world's largest cryptocurrency mining company, was established in Beijing. Chinese conglomerate Wanxiang was the first corporate investor in Ethereum and gave birth to crypto investment giant HashKey.
"There are seven million programmers here who have proven time and time 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, as the country provides “a large amount of technical talent.”
Other international organizations have also turned to China for the same reason. The Ethereum Foundation, the organization behind the second-largest cryptocurrency, sponsored the "ETH Shanghai" hackathon to attract developers to its blockchain network. The event's organizer, Mask Network, a startup bringing web3 capabilities to the web2 platform, said the online version of the event attracted nearly 1,000 developers this year, with an estimated 60 percent from China.
Chinese cryptocurrency companies that moved overseas tried to bring their Chinese employees, but most of them chose to stay in China, and employees with families in China were reluctant to move in the first place. While crypto-friendly countries like Singapore have policies to attract foreign talent, local governments often set quotas to protect domestic employment.
The time is ripe for web3 startups that have been trying to recruit in China over the past two years. Last year saw the value of cryptocurrencies hit record highs and many employees were looking for opportunities on the web3 front as some Chinese internet companies laid off staff.
Some voluntarily quit their jobs at established tech companies to ride the web3 wave, either because they were drawn to the technological potential of blockchain or because of the opportunity to build wealth quickly. Ant Group, for example, has lost dozens of employees to web3 startups in recent months.
Top Product Manager
It's not news that tech companies are hiring in China while serving international users. Zoom had hundreds of R&D staff in China before Western media reports questioned the security of its cross-data practice. Alibaba's Lazada and Shopee, Southeast Asia's e-commerce rivals, also set up operations teams in Shenzhen, an export and tech talent hub.
For many tech companies, China remains an ideal recruiting location due to a decade of high growth and competition in the internet industry. Companies such as Alibaba, Tencent and TikTok owner ByteDance have been recognized in Silicon Valley and beyond for their innovations in their respective fields.
“The Chinese-founded projects are very good at managing and designing B2C products, they are obsessed with data analysis and spend a lot of time fine-tuning the product,” said a Chinese employee at a blockchain startup in the United States.
Some crypto investors and entrepreneurs believe that China's advantage in web3 lies less in building the underlying infrastructure of the blockchain and more in developing applications for users.
“The early opportunities for web3 are in the protocols [infrastructure of blockchain applications], but they mainly solve transaction problems and ignore the user experience, the Chinese are very good at building user experience, after all, China has born a strong web2 ecosystem ” said a Hong Kong blockchain startup founder.
Curt Shi, an early investor in the Move to earn app StepN and a partner at Prodigital Future Fund (which is actively investing in web3 opportunities from China) believes that Chinese tech workers are known for being "hard-working", although in recent years The overworked culture that comes to China's tech industry has raised eyebrows, but it's also seen by some as an advantage.
For example, StepN was initiated by the founder who immigrated to Australia from China. Similar to many overseas companies, StepN has retained a Chinese team as part of its international development. "That's why StepN can provide product and customer support 24/7, while many competitors can't, and that's one of the reasons why StepN has succeeded in breaking out," said Shihai.
While Chinese-run web3 startups may be powerful, they face similar challenges as web2.
TikTok, which pioneered fast-paced video sharing, is arguably the only Chinese consumer internet platform that has achieved global success in recent years. In its early days, TikTok had no significant on-the-ground presence abroad, and it became popular around the world thanks to an algorithm-driven content discovery factory developed in Beijing by its parent company, ByteDance.
But an entrepreneur's cultural understanding becomes critical in web3. The industry is still in its infancy, which means a company's ability to tell a compelling story is key to attracting early adopters. “web3 companies have to culturally resonate with users,” said a Singaporean founder of a China-based Decentralized Autonomous Organization (DAO).
As the advocates say, Web3 is in many cases run by the community. The technology underpinning the blockchain has the idea of a built-in consensus. For example, DAOs execute decisions based on the collective consensus of their communities.
Lacking the language skills to effectively communicate ideas and lack of understanding of other cultures, it may be harder for Chinese web3 teams to win users in new markets.
The DAO founder said: "Chinese companies have good products, but they don't know how to communicate with the international community, and in web3, it's not enough to just have a good product.
Compiled from Rita Liao "Despite crypto ban, China's tech talent rides the global web3 wave"