Conflux Zhang Yuanjie: Public Blockchain is the Future of China's Web3

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

"Web3 is cryptocurrency, and China does not allow cryptocurrency," so 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 perception is more because "people involved in cryptocurrency hold a voice 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, stating that "there is no policy saying that public chain technology is banned domestically. The national regulatory authorities have left some opportunities for exploration in this field, which is why we can operate normally in the country." As for the prevalence of alliance chains, he feels that this is entirely an attempt by major 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power of blockchain, because "alliance chains are just a disguised version of a centralized database, representing outdated technology and continuing the past issues of internet data silos and data gatekeeping."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 not yet been presented; currently, there are only concepts and underlying philosophical ideas, and it has not yet been realized."

What is the concept of Web3, who are Web3 users, and how should domestic Web3 startups operate? Zhang Yuanjie talked a lot in this interview, which greatly benefited us.

Key Points of This Article:

1. In the current internet, large companies monopolize data, forming data islands. The cost of traffic is getting more expensive, and personal data is divided among a few large companies, leading to fewer opportunities for internet entrepreneurship, putting the entire industry in a stalemate. I believe that Web3 actually has opportunities.

2. If there are no applications with tens of millions or even hundreds of millions of daily active users, 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 just focusing on the money, no longer caring about the most essential needs of human daily life, and not starting from the needs of users, but instead putting 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 a process of de-trust.

5. The belief that consortium blockchains are compliant while public blockchains are non-compliant is actually a misunderstanding that does not seriously interpret the country's laws, mistakenly taking some of the rhetoric from major internet companies as a kind of national legal regulation.

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

7. Web3 is just a technical component of internet entrepreneurship, not everything, so don't get the order of things reversed.

Current Status of Domestic Public Blockchain Ecosystem

What services does Conflux mainly provide, and how has its recent development been?

Conflux is a Public Blockchain, which is the underlying infrastructure of Web3. It can be considered a trustless 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 over 2 years without a single instance of downtime and has successfully completed several hard forks.

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

After the policy was clarified last year, many enterprises began their attempts in the Web3 field, which is also the reason for the relatively rapid development of our ecosystem this year.

What interesting cases and applications are there on Conflux?

Recently, Jay Chou released a metaverse blind box, which included a previously unreleased single titled "New York Subway". The blind box has become very popular and even made it to the hot search on Weibo; this is a typical case of digital assets reaching the general public.

McDonald's China issued digital collectibles for internal employees through Conflux; the Liberation Daily created digital collectibles by randomly combining historical front pages and gave them away for free to readers. Nayuki's Tea launched digital human presale cards last year and also placed digital collectibles on Conflux, with presale card sales nearing 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 in now?

The digital collectibles sector has already matured significantly; however, the entire market is in a contraction phase, and many companies are actively exploring how to integrate 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 avatar digital collectibles called "Friends of Kaozi." This brand collaborated with a niche fashion brand from France to design clothing that made its debut at Shanghai Fashion Week and was sought after by buyers for offline sales orders. Therefore, users who hold the avatar on this clothing will automatically receive dividends from IP sales. Additionally, when the clothing is produced, all avatar holders automatically become franchisees, and their revenue share is higher than that of others. They can participate in distribution through a mini-program. Since it is fully prepaid, they can directly receive commissions. Subsequently, manufacturers will produce clothing based on orders, which exemplifies the typical C2M model ( Customer-to-Manufactory ), with zero inventory and 100% prepaid, and it utilizes a decentralized marketing concept, combining with physical goods in a way that aligns with the domestic economic trend of "promoting the real with the virtual."

There are also gameplay options that combine with social interactions. For example, some enterprises have the following methods: holding an NFT allows access to user groups, and selling it automatically removes the holder from the group; holding an NFT enables the initiation of proposals and voting, turning digital collectibles into tickets or ID badges for joining an organization. It can also be combined with offline events, serving as a pass for the community.

Many companies also want to place their data assets on Conflux. For example, "Black Myth: Wukong" has publicly sold 3D models of game items as digital assets.

Moreover, the creation of collaborative content has not yet seen many good cases. However, IP brands like Happy Mahua and Wanwan Meixiang have already collaborated with enterprises in the Conflux ecosystem, attempting to attract more entrepreneurs to participate in their creator economy. The creator economy is a significant aspect of the entire internet; for instance, music copyrights are now basically monopolized by a few platforms, making it difficult for long-tail music producers to earn revenue. Can this issue be addressed through the concepts of NFTs 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 on digital currencies in the United States, where many cryptocurrency supporters presented the concept of Web3. The most important assertion among these is that individuals have their own data ownership rights, in addition to reading and writing.

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 traditional financial institutions and always felt that my talents weren't fully utilized. My good friend Professor Long Fan mentioned wanting to do a Public Blockchain project. I really valued this entrepreneurial opportunity, but back then, many notorious ICO( token issuances) came from Public Blockchains, and the entire industry had lost confidence in blockchain, which was still somewhat confusing.

The final decision to start a business has several reasons.

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

At that time, I gradually realized that when the server data of centralized enterprises or Web 2.0 enterprises transforms into public data labels, this data can be accessed and analyzed by any third party or neutral developer. On this basis, an endless number of Internet services can be developed for users without barriers or entry requirements. Users can maximize the value they generate on the Internet, no longer being exclusive to a certain company.

This Web3 concept makes me firmly believe that the industry indeed has a future and absolutely represents an advanced technological direction. After that, when everyone advocates for Web3, they have also clarified this concept further.

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 large companies, and opportunities for internet entrepreneurship are dwindling, leading the entire industry into a stalemate. I believe Web3 actually has opportunities, and more and more entrepreneurs are starting to enter this field.

What were the main points of hesitation for capital during the early financing?

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

Moreover, when I was explaining to investors, I wasn’t talking about the logic of Web3, but rather the concepts of blockchain Didi, blockchain Meituan, and other shared economy and payment network concepts. Investors have significant doubts about this matter itself, and as infrastructure providers, we lack confidence about the future direction of the ecosystem.

Secondly, the wave of ICO scams has tarnished the advanced nature of the technology, and investing requires a high cost of public opinion, which has also led to capital being more cautious about investing in Web3.

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

Cryptocurrency and Token Economics Does Not Equal Web3

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

Firstly, 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, which have not been implemented at all.

Many people say that the uncles and aunts in the country are not Web3 users, so I am very curious about who Web3 users actually are. Are users who trade coins in the crypto space Web3 users? Some may say no, they are just trading coins; many people say they are users of blockchain. Currently, the largest daily active users on the blockchain are around 30,000. Are these people the Web3 users we want to serve? Are we just creating applications for these 30,000 people? This is still a huge gap from my vision of Web3.

If we consider the hundreds of millions of users of apps like Facebook, Tencent, Alibaba, and Instagram as Web2 users, and the users of blockchain as Web3 users, then the potential target users would only be 30,000, and even with the addition of cryptocurrency users, it might only reach 1 million. I think the Web3 industry is too small and not worth the enthusiastic investment from so many people. We also feel embarrassed to call this the third generation of the internet. I believe this is a significant misconception among many entrepreneurs, and it has already formed a severe hierarchy of disdain, believing that only users who have 'reached out,' users on the chain, and those who have accepted private keys and mnemonic phrases are the true Web3 users.

The breakout of Web3 has only just begun. Games like "Axie Infinity" and "StepN" have made some attempts, but possibly due to their economic models or the results of users participating in a game with the economic model, their breakout effects could not be sustained. During their peak periods, the number of users was around a million, which is still far from the scale of Web3 users I envision. If applications with tens of millions or even hundreds of millions of daily active users have not emerged, I believe the era of Web3 has not yet arrived, and the concept of Web3 has not been truly articulated.

When it comes to Web3, it's about token economics, but they are not the same thing.

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