When Web2 Migration Meets Web3 Bear Market

Author: LilyKing from Boundary, Cobo COO, Chinese and American lawyers, in-depth research on social policies, collaboration mechanisms and cooperation structures

Starting from the second half of 2021, Web3—a blockchain-based decentralized Internet—has become the new mainstream narrative of the encryption movement under the impetus of philosophical VCs such as a16z, and has quickly gone out of the circle, becoming a hot catch-up The next-generation Internet synonym for "Metaverse".

It also immediately became popular in China's Internet elite circles. At this time, the winners of the last wave of Internet economy fell into a development bottleneck that could not continue to grow at a high speed. Many Internet entrepreneurs and talents looking for a new way out were attracted by the vision of Web3— "Migration from Web2 to Web3" and "Whether there will be Web3 in China" have become topics with a sense of pattern in the circle.

With a sigh, since the beginning of 2022, the epidemic, the Russian-Ukrainian war and the Fed's interest rate hike have brought Web3 assets into a bear market. Many Web3 people who were full of a sense of superiority earlier are now more humble and open-minded, and some even defected to the Web2 platform to experience life as couriers.

In this bear market, Web2 and Web3 have become brothers and sisters, watching the old forces such as oil tycoons and the Federal Reserve show their power.

From Web2 to Web3, the wave of migration begins

In fact, many of the people who came into contact with the blockchain earlier in China are founders, investors and practitioners in the Internet industry. The popularity of the term Web3 VS Web2 is a recent event, but the Chinese Internet circle has never been an outsider in the encryption movement. Major Internet companies have long been planning and investing in blockchain-related research and development.

But the core of Web3 is decentralization, and user ownership must be achieved through tokens/Tokens, so its natural growth in the domestic Internet ecosystem has been limited from the very beginning.

It is worth noting that the overseas institutions of China's Web2 platform are actively deploying NFT, an area with relatively low regulatory risk. Bilibili just launched its NFT series Cheers UP at the end of April, and even added an NFT entry to its app (international version), which can be connected to the user's Little Fox wallet. ele.me has also launched an NFT series based on traditional Chinese cuisine, and its first NFT is a cod fish lion head. Tencent has invested in the NFT platform Immutable X. And TikTok has partnered with Immutable X to launch the NFT series—Tiktok Top Moments.

The above are just small ripples on the water. What is even more turbulent under the water is that the executives and technical talents of funds, family offices, and major Internet companies are investing in the Web3 field with funds, resources, and bodies.

The current bear market of Web3 does not seem to be enough to stagnate the wave of Web2 immigration - its biggest advantage over Web2 is the future imagination space and the token-based interest mechanism.

The narrative masters of Web3 drew a classic pie: Web3 is similar to the Internet in the 1990s in terms of development stage. So all of its current problems are just growing pains. Who would want to pass up an opportunity to participate in an era like the Internet of the 90s?

The old economy strikes back

The subversive object of the encryption movement has always been financial hegemony, including the Federal Reserve, which is flooding currency, and Wall Street, which is manipulating the market. In the Web3 narrative, Web2 super platforms such as Facebook, Google, Youtube, and Twitter are also regarded as the main targets of subversion, aiming to break their monopoly and exploitation of user data and content.

But in this round of bear market, Web2 and Web3 assets have become fellow sufferers, and even synchronized with the Federal Reserve's words and deeds to fluctuate nervously and violently.

The relatively strong performance is companies such as Google and Apple that are already just needed in users' lives. Even with the pessimistic sentiment in the stock market, they still have consistent and even paying users, which forms the value support, so they are only down about 20% year-to-date.

The decline of many Web3 assets is more exaggerated. After the famous LUNA crash, the Web3 community even sang the sad song "Before joining Web3, I always thought that zeroing was just a state of mind".

When inflation worsened, the Web3 community discovered that before subverting Web2, they had to resist the counterattack of the old economy. No matter how attached they are to the creator economy, young people are forced to spend less on JPG avatars and virtual land as they face ever-increasing gas, food, and housing rents. Just like MC HotDog sang in the latest single "NFT", "Metaverse, the days are going to be hard to live, how can there be no air traffic control later".

In order to resist the old economy, Web3 must, like successful Web2 applications, become what users just need and capture value in the real economy.

Those who win the user win the world

At present, the rigid needs of users met by Web3 applications are mainly speculative. Although speculation is also a strong demand of the public, it is too volatile. Whether it is DeFi, NFT or GameFi, the number of users and user activity almost always fluctuate with the price of Token.

Even Metaverse games, which had high hopes of attracting mass audiences, suddenly became less fun in the bear market. In the past May, the average daily active users of SANDBOX and Decentraland were only a few hundred/dozens (DappRadar data), which are only a fraction of mainstream Web2 games.

One of the great advantages of Web3 is that Token can be used to establish a win-win relationship between users and platforms. However, the benefit mechanism of Token cannot replace the matching of products and needs and excellent user experience.

OpenSea is often criticized for not being enough for Web3, but it still occupies 95% of the NFT trading market. Platforms such as LooksRare and Rarible, which have already issued Tokens, still cannot shake its leadership position, because they have not yet provided better functions and user experience.

That's why Web3 is in great need of the experience of Web2 migration.

China's Web2 builders have created products that have won hundreds of millions of users. From Alipay, WeChat to Douyin and Xiaohongshu, Chinese Web2 products have even become learning objects for American Internet giants in terms of functional innovation and user experience.

Of course, there is no shortage of just-needed application fields with great potential in Web3, including payment, social networking and entertainment, etc. These are all familiar tracks for Chinese Web2 builders. The experience brought by Web2 immigration can greatly accelerate the process of Web3 applications capturing user needs, improving user experience, and expanding user scale.

The arrival of new immigrants also brings business opportunities to the Crypto Native team—we are not talking about treating them as exit liquidity.

Web2 entrepreneurs and investors do not lack capital and ambition, but they need Web3 partners to help them: master blockchain decentralized infrastructure, complex token economics (Tokenomics) and DAO-like decentralization Governance mechanism of the organization. The innovative sparks and chemical reactions produced by the collision between the two are very worth looking forward to.

Web3 drama, Chinese builders will not be absent

China's Internet power is second only to Silicon Valley in the United States in the Web2 era. Many people are wondering whether Chinese forces will still have a place in Web3.

In fact, the experience accumulated by the Chinese team in the Web2 era and building products for hundreds of millions of users is still an important advantage in the Web3 era. Coupled with the Crypto Native community formed in the mining and exchange industries for more than ten years, even if the local community cannot continue Chinese builders will definitely play an important role in Asia's Web3 revolution.

The narrative of Web3 has always been dominated by elites in the United States, but this round of bear market may have given Chinese builders a chance to find a unique path.

Chris Dixon of a16z calls Web3 "the internet owned by builders and users". This almost creates a kind of opposition between good and evil, on one side is the Web2 platform owned by capitalists who monopolize and exploit users, and on the other side is Web3, which represents fair empowerment. But such a narrative with a sense of justice can easily lead to a counterattack from Web2. Twitter founder Jack Dorsey once directly tweeted: "Don't be naive, you don't own Web3, VC funds and their partners own it."

Chinese builders will not be entangled in the ideological contradictions between Web2 and Web3.

While embracing decentralization, our Web3 builders have no psychological barriers when migrating to monopoly and centralized Dubai to find a way out for financial democracy— this kind of pragmatic spirit is the most vigorous vitality in a bear market .

Chinese builders rely more on original intentions rather than narratives to build cohesion—"Don't forget the original intention, the original intention is to make money."

This simple original intention to make things practical has promoted the Chinese immigrants who smuggled into Southeast Asia with nothing in the last century to become the economic pillar of Southeast Asia, and it has also promoted Alibaba to become a Web2 giant. It is believed that it will also promote Chinese Web3 builders, whether they are Crypto Natives or Web2 immigrants, leading the next wave of innovation in Asia that attracts hundreds of millions of users.

Web3 opens up a huge space for imagination and development for newcomers to Web2, and the experience output of Web2 builders helps Web3 create killer applications that serve hundreds of millions of users— this may be the best we will see after this bear market What Web2 looks like to Web3.