Conflux co-founder Zhang Yuanjie: Public Blockchain is the future of China's Web3

As a domestic Web3 Public Blockchain entrepreneur, Zhang Yuanjie, co-founder of Conflux, believes that there are many misunderstandings about China's Web3 industry.

"Web3 is cryptocurrency, and China does not allow cryptocurrency," therefore 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 more because "these people in cryptocurrency hold the discourse power and dominance in the existing Web3 user group."

He believes that the statement "compliance for domestic alliance chains, non-compliance for public chains" is a major misunderstanding, and "there is no policy saying that public chain technology is banned domestically. The national regulatory authorities have left some room and opportunities for exploration in this field, which is why we can operate normally in the country." As for the dominance of alliance chains, he feels it is entirely an attempt by large Internet companies from the Web 2.0 era to seize the discourse power of blockchain, because "alliance chains are just a disguised version of a centralized database, representing outdated technology, and are a continuation of the past Internet data islands and data gatekeeping."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 truly looks like has yet to be presented; currently, there are only concepts and underlying philosophies, and it has not yet been implemented at all."

What is the concept of Web3, who are the users of Web3, and how should domestic Web3 entrepreneurship be done? In this interview, Zhang Yuanjie also discussed a lot, which benefited us greatly.

You could say that before reading this article, all your understanding of Web3 may have been wrong.

Key Points of This Article:

1. In today's internet, large companies monopolize data, creating data islands, the cost of traffic is becoming increasingly expensive, personal data is divided among a few big companies, and opportunities for internet entrepreneurship are becoming fewer, leading the entire industry into a stalemate. I believe 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 solely on making money, no longer caring about the essential daily needs of humanity, and have shifted their focus away from user needs, instead placing 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 disintermediation.

5. The belief that consortium blockchains are compliant while public blockchains are non-compliant is actually a misunderstanding that has not seriously interpreted the country's laws, mistakenly taking some of the public relations propaganda from major internet companies as a form of national laws and regulations.

6. If Web3 wants to move towards the mainstream and reach more internet users, it needs to find a place to settle down on Earth that complies with local laws and regulations and national conditions.

7. Web3 is just a technical component of Internet entrepreneurship, not the whole; do not lose sight of the main point.

Current Status of the Domestic Public Blockchain Ecosystem

What services does Conflux primarily provide, and how is its recent development?

Conflux is a Public Blockchain, which is the underlying infrastructure of Web3. It can be considered as a decentralized 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 been running for more than 2 years without a single network outage and has successfully completed several hard forks.

Conflux mainly focuses on the domestic Web3 ecosystem, currently having issued over 8 million digital collectibles on Conflux, with more than 3 million independent users, serving over 300 brand IPs, and incubating over 70 enterprises spread across the digital collectibles, Web3, and infrastructure sectors.

After the central bank issued a document to withdraw digital currency trading last year, with the policy being clarified, the things that entrepreneurs can do have also become clear. In addition, the popularity of digital collectibles over the past two years has led many companies to start exploring the Web3 field, which is also a reason for our ecosystem's relatively rapid development this year.

What interesting cases and applications are there on Conflux?

Recently, Jay Chou released a metaverse blind box, which includes a previously unreleased single titled "New York Subway." The blind box has become very popular and even trended on social media, making it a typical case of digital assets reaching the general public.

The company issued digital collectibles for internal employees through Conflux; the newspaper created digital collectibles by randomly combining front pages from previous years and gave them away for free to readers. Nayuki's Tea launched a pre-sale card for digital humans last year and also placed the digital collectibles on Conflux, with pre-sale card sales reaching nearly 200 million RMB within three days.

In addition, there are collaborations with some car brands, sports brands, and ACG brands, such as Ford Mustang and Qin's Moon, which have made some attempts in Web3.

What stage is the domestic application ecosystem based on Public Blockchain currently in?

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 profile picture digital collectibles called "Friends of Kǎo Zǎi." This brand collaborated with a niche French fashion brand to design clothing that was showcased at Shanghai Fashion Week and caught the attention of buyers who wanted to place orders for offline sales. Therefore, users holding the clothing with the profile picture will automatically receive dividends from IP sales. Additionally, when the clothing is produced, all profile picture holders automatically become franchisees and have a higher profit-sharing ratio than others. They can participate in distribution through a mini program. Since the payment is made in full upfront, they can directly receive commissions. Subsequently, the manufacturer will produce clothing based on orders, which is a typical C2M model with zero inventory and 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 features. For example, some companies' gameplay: holding an NFT allows entry to user groups, and upon selling it, one automatically exits the group; holding an NFT can initiate proposals and voting, transforming digital collectibles into tickets for joining organizations or employee badges. It can also be integrated with offline events as a pass for the community.

Many companies also want to place their data assets on Conflux, such as games that publicly sell 3D models of game items as digital assets.

Also, there is the creation of co-creation content. Currently, I haven't seen very good cases, but IP brands like Happy Mahua and Wanwan Meiyou have already collaborated with companies in the Conflux ecosystem, trying 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 basically monopolized by music platforms, making it difficult for long-tail music producers to earn income. Can this problem be solved through the concepts of NFT and blockchain? This is something I am very much looking forward to seeing.

What was the reason for joining Conflux at that time? What values of Web3 did you see?

The concept of Web3 was first proposed by Ethereum founder Gavin Wood in 2014, but the term truly gained popularity and widespread adoption this year due to a hearing in the United States regarding digital currencies, where many cryptocurrency supporters introduced the concept of Web3. The most important assertion among these is that individuals not only have the right to read and write, but also own their data rights.

When I joined this industry in 2018, there was no such proposition, and it wasn't a topic of interest for everyone. At that time, I was working in a traditional financial institution and always felt that my talents were not fully utilized. My good friend Professor Long Fan mentioned wanting to do a Public Blockchain project. I really valued this entrepreneurial opportunity, but at that time, many notorious ICOs were emerging from Public Blockchains, and the entire industry had lost confidence in blockchain, which left me somewhat conflicted.

The final decision to start a business is based on several reasons.

First is open finance, or decentralized finance (DeFi), which is highly related to my financial background, and I am very interested in this matter.

At that time, I slowly realized that when the server data of centralized enterprises or Web 2.0 companies becomes public data labels, this data can be accessed and analyzed by any third party or neutral developer. Based on this, countless internet services can be developed for users with no barriers and no admission requirements. Users can maximize the value they generate on the internet, no longer being solely owned by a single company.

The concept of Web3 convinces me that the industry actually has a future and absolutely represents an advanced technological direction. Later on, when everyone advocates for Web3, they also clarify this concept more clearly.

In today's internet, large companies monopolize data, creating data islands, traffic costs are getting higher and higher, personal data is divided among a few big companies, and opportunities for internet entrepreneurship are becoming fewer and fewer, leaving the entire industry in a stalemate. I believe that Web3 actually has opportunities, and more and more entrepreneurs are starting to enter this field.

I heard that the early financing was not very smooth, what were the main points of hesitation for the capital at that time?

In 2018, the concept of Web3 had not yet been widely accepted, and it was exactly the beginning of the blockchain bear market, a stage of rampant ICOs, where everyone's perception of the blockchain industry was that it was a scam industry. Although it was known that blockchain technology represented advancement, no one knew in what scenarios it could be applied, and at that time, there were no ecological scenarios such as DeFi.

Moreover, when I explain to investors, I am not talking about the logic of Web3, but rather the concepts of blockchain ride-hailing, blockchain and other shared economy and payment networks. Investors have significant doubts about this matter itself, and we, as infrastructure providers, also lack confidence in the future direction of the ecosystem.

Secondly, the wave of ICO scams has tarnished the advanced nature of the technology, and the high cost of public opinion has made investors cautious about investing in Web3.

It is precisely for this reason that we are very grateful to Professor Qizhi Yao for being willing to endorse us, which led to the subsequent influx of capital.

Cryptocurrency and Token Economics is not equal to Web3

It seems that everyone has not yet reached a consensus on Web3. How should we understand Web3 and its value?

First of all, 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 exactly are Web3 users. Are the users trading coins in the crypto world considered Web3 users? Some might say no, they are just trading coins; many people say they are users of blockchain. Currently, the largest application on the blockchain, OpenSea, has about 30,000 daily active users. Are these people the Web3 users we need to serve? Are we just creating applications for these 30,000 people? This is still quite far from my vision of Web3.

If we consider the hundreds of millions of users of apps like Facebook, Tencent, and Alibaba to be Web2 users, then blockchain users are Web3 users, which means the potential target users are only about 30,000. Even if we include users from the cryptocurrency space, there might only be about 1 million. I feel that the Web3 industry is too small and not worth such enthusiasm from so many people. We can't even say this is the third generation of the internet. I think this is a significant misconception among many entrepreneurs, and it has already formed a serious hierarchy of disdain, believing that only the "refined" users, users on the chain, and those who have accepted private keys and mnemonic phrases are Web3 users.

The breakout of Web3 has just begun. Some games have made attempts, but perhaps due to economic models or the results of the interaction between participating users and the economic models, their breakout effect has not been sustained. During their peak periods, the number of users may be around one million, which is 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.