What do we see from the "Web3 New Economy and Tokenization White Paper"?

Hong Kong Web3 Festival

At the global cryptocurrency event, the Hong Kong Web3 Carnival, held last week, in the “Tokenized Future” theme forum, Wanxiang Blockchain Chief Economist Zou Chuanwei delivered a keynote speech on the new Web3 economy and tokenization, announcing the release of the “White Paper on the New Web3 Economy and the Tokenized Future” (hereinafter referred to as the “White Paper”).

The White Paper will start from the underlying logic and evolutionary trends of Web3, discuss the prospect that all values ​​can be tokenized, and explore issues such as monetary policy and mechanism design involved in token economics. Lawyer Liu will talk about his understanding and views on this based on his experience of participating in this Hong Kong event.

Part 1. What exactly is Web3 and what is its value?

What is Web3? There are many discussions and opinions on the Internet, all of which are based on the rhetoric of "value Internet". However, from the perspective of ordinary people, it is difficult to understand what Web3 is.

There are usually two reasons for this situation: First, Web3 is a technical infrastructure construction, and only when practical applications that benefit the public appear can people understand and accept it; second, Web3 Builders have other intentions, and use some "unclear but powerful" words just to cover up the purpose of "unknown", "unworthy" or even "may violate the law". So far, what is the purpose of these Web3 Builders? - "It depends on the person", or "it depends on one's opinion".

Part 2. "Success and failure are both due to Xiao He" - Web3's "co-construction and sharing" mechanism is inseparable from "issuing tokens and speculating on coins."

Issuing tokens to “speculate on coins” is euphemistically called “token incentive mechanism”, but this model makes people shudder! This is also one of the most fundamental reasons why outsiders criticize the coin circle and Web3 circle. After all, countless families have been ruined by the road of coin speculation. Assuming “no coin issuance, no coin speculation”, can Web3 be built? For this question, it seems that all Web3 Builders have given a negative answer.

Blockchain builders have always criticized that the reason why the development of blockchain in China is limited is that the soul of "token incentive mechanism" has been castrated. Therefore, in the world of Web3 Builders, the development of Web3 must be inseparable from the "token incentive mechanism", that is, it must be "issuing tokens and speculating on tokens". What is the value and significance of "issuing tokens and speculating on tokens"? In the world of ordinary people, it is not completely incomprehensible. For example, "stock market and futures" have also been legalized, and the law recognizes its development, which must have its value and significance.

Part 3. The meaning of “issuing tokens and speculating in cryptocurrencies” must return to the essence of “empowering entities”.

In any case, "issuing tokens for speculation" is essentially a financial behavior! Zhou Xiaochuan, former governor of the People's Bank of China, delivered a keynote speech at the 13th Lujiazui Forum (2021): "Related Policies and Long-term Effects of the Concept of Financial Services for the Real Economy", which specifically analyzed the "model and significance of financial services entities". Although some countries no longer emphasize the purpose of "financial services entities", our country, based on national conditions, political system, people's investment and consumption concepts, is bound to be inseparable from the principle of "financial services entities".

If "issuing tokens to speculate on coins" cannot empower the development of the real economy, its speculation behavior is no different from "gambling" and "Ponzi schemes". However, in fact, according to investigations, the vast majority of coin-issuing project parties have not used the funds raised from the issuance of coins to the projects announced in the white paper at the beginning of the issuance of coins, and even many white papers are fabricated. There is no corresponding corporate development behind the fundraising, let alone the so-called innovative economic development. At present, the most innovative project companies behind the development of coin financing by Liu Lu are nothing more than the so-called "public chain construction". The one that has a scene and can be implemented is the TRON ecosystem built by Sun Mou, who has let Buffett down. However, it is difficult to say whether the significance and value of this on-chain ecology are proportional to the funds raised by its financial behavior. This is like Moutai, which has a market value of trillions of yuan, is just a brewing industry, and the country does not seem to need to spend huge sums of money to train so many brewers to enhance the taste of ordinary people.

Some people say that "issuing tokens for speculation" can increase consumption, which is also a place to create value for society! This is understandable, but we have to calculate the "input-output ratio". If "issuing tokens for speculation" is "cutting the leeks of retail investors and filling their pockets", it only fattens the project parties and big investors, and then relies on these project parties and big investors to squander the hard-earned money of the leeks to promote consumption and drive economic development, it seems to be a losing business.

Some people may ask: Why is gambling legalized in Las Vegas and Macau? Isn't this the same reason? In response to this situation, I can only say: Gathering the big blood-eating households in a certain place to boost the economic development of that place, at the cost of sacrificing the damage caused by the big households around the world, this model does not conform to the national conditions of our country, especially in the mainland where there are "many leeks".

Part 4. Does Web3’s “token incentive” mechanism have any “application scenarios” that can empower the development of the real economy?

"Technology is innocent", technology is neutral, the key lies in what the application scenarios of technology are and what people use technology for? Atomic bombs are used to protect the country and generate electricity, as a new energy source, so technology plays a positive value; if atomic bombs are used to destroy the earth, then technology will bring disaster. Similarly, the "token incentive" mechanism of Web3, is it used as a tool for project parties to "cheat and cut leeks" or to develop a "prosperous new economic model"?

Two years ago, Lawyer Liu discussed the issue of "positive application scenarios of token incentives" with the so-called "currency circle and blockchain circle" leaders many times. I also emphasized this issue in Appendix 3 of my book "Digital Currency and Law", "A Rambling Talk on Value Issues in the Virtual World".

Let me give you an example: the convenient map navigation we use today was actually created by early map development companies at a huge cost, hiring professional personnel, prefabricated professional equipment, and spending billions of dollars. The company that first launched a map development project in our country is the well-known "AutoNavi Map".

In fact, before Amap started collecting real-life data offline, many map companies also had this idea, but they suffered from the huge workload and needed to call on and manage a large number of participants; secondly, it cost a huge amount of money, and it was difficult for companies to make profits through data collection in a short period of time. These two factors led many companies with this idea to back off, causing the technological innovation that is so convenient for the people and has great value to society today to almost stagnate. If Alibaba had not injected a huge amount of funds, I am afraid that Amap's pace of building real-life data for every street and every community in the country would still slow down. Through this case, let us imagine that if there is a project in the real world that is of great value to society but requires huge funds or personnel to participate in the development and construction, in the absence of funds and personnel in the early stage, can this problem be solved through the Web3 incentive mechanism?

For example, AutoNavi Maps issued an announcement, calling on people from all over the country to participate in the collection of real-life map data without compensation in the early stage, and then issue "work certificates" based on the collected data. This work certificate (use right certificate) can be used as a free or preferential use of AutoNavi Maps' future projects; or if AutoNavi Maps' future projects are profitable, the work certificate can be used to participate in the project profit dividends; at the same time, once the AutoNavi Maps project is completed, this work certificate can be similar to stocks that can be listed and traded in a special secondary market (exchange), allowing participants to profit from it. In this way, AutoNavi Maps can spend almost no cost in the early stage, and can call on such a large number of participants to jointly build things that are of great value to society; at the same time, the participants will not be left without any profit.

This kind of participation in project construction is similar to investment. Once the project is successful, with proof of work, participants can enjoy the right to use and benefit from the project, and can also trade in the secondary market. This is probably much more beneficial than paying for the initial compensation, and it is obviously a "win-win" situation. The difficulty lies in building such a "consensus" in the early stage.

Part 5. Which story is sexier: “income + investment” or “use + investment”?

Today, the stock market of listed companies tells the story of "income + investment", creating a mutually beneficial and win-win model for enterprises, capital, investors and supporting industries.

Equity has three characteristics that any shareholder can enjoy: the right to dividends, the right to make decisions, and the right to choose managers. However, small shareholders rarely exercise the latter two rights, and most shareholders of listed companies find it difficult to benefit from company dividends. This has led to a large number of shareholders still making profits through the rise and fall of the stock market, the difference being whether to choose short-term or long-term, and whether to go long or short. However, the vast majority of shareholders do not devote themselves to the construction of the enterprise.

Today, Web3 Builders is conducting innovative thinking from the perspective of "income + investment" in the traditional stock market. Can it further stimulate the space for shareholders to jointly build project companies, so that shareholders can not only enjoy the investment returns of the project, but also participate in the construction of the project?

Lawyer Liu believes that this kind of innovative thinking is of great benefit. But the key is - "What project can support the joint construction of all people?" At this point, everyone thought of the "metaverse", the virtual world. For example: calling on a large number of programmers to participate in the joint construction of the metaverse project, and then by issuing "proof of work", and at the same time giving the proof of work the functions of "project use rights" and "project income rights", it will stimulate the programmers' interest in "use + investment".

However, imagination is imagination after all. At present, no Metaverse project has been found to meet the requirements of "promoting the development of the real economy", "project programmers voluntarily participating in co-construction", "secondary market consensus programmers participating in the project work proof", "co-construction programmers have the need to use the project", etc. However, Lawyer Liu is optimistic and believes that the development of future science and technology can lead to the birth of such projects, further stimulate economic development, better improve the social collaboration mechanism, further optimize work efficiency, and thus create value for the positive development of human society.

Part 6. Web3 innovation cannot be separated from “token incentives”, but we must also be wary of “handing the knife” to Ponzi schemes

Let's get back to the point. Since Web3 innovation cannot be separated from "token incentives", we should respect this fact. Only under the premise of respecting this objective fact can we create. Otherwise, blindly avoiding and covering up can only hinder the pace of innovation; however, at the same time, we see that the current so-called Web3 market does have the phenomenon of "bad money driving out good money", and there are many people who "have ulterior motives", "fish in troubled waters", and even "eat human blood buns".

At the Hong Kong Web3 Carnival, Lawyer Liu talked with the staff of dozens of booths and learned about their respective project introductions. However, in addition to exchanges and some project parties, there were more service providers around Web3 projects, such as data storage companies and server companies.

Finally, in the opinion of Lawyer Liu, the Web3 cause of adding positive value and welfare to human society is still on the way. It not only requires further innovative thinking and practice of Web3 Builders, but also requires the establishment of a more stable, orderly, legal and compliant market. Zhou Xiaochuan said at the Boao Forum Press Conference: Finance has two essences: one is to empower the development of the real economy, and the money raised by the project party should be used for the right things; the other is to control the risk of speculation and avoid all retail investors being harvested by the project party and the big investors. Looking at the entire financial supervision and the development of securities laws in various countries, they are all centered around these two points. Therefore, it is expected that Hong Kong's local legislation can bring a more suitable legal environment to Web3 Builders.

Next, Lawyer Liu will conduct a series of discussions mainly around Hong Kong’s laws and policies, in order to contribute to the great cause of positive Web3 Builders!