Web3: Deep Dive & Research

Part 1: Web3 Core Essence & Logic

I. Web3: Marketing Narrative First, Not a Generational Disruption

The industry broadly defines Web3 as the "third generation of the internet," creating a perception of Web1→Web2→Web3 progressive upgrades. However, from a technical performance and architectural standpoint, this positioning is more a successful marketing narrative than a purely technological evolution.

1. Transaction Performance (Authoritative Data)

Blockchain, as Web3's core infrastructure, has far weaker concurrent processing capability than Web2 centralized architectures. Bitcoin's underlying block design limits it to approximately 7 TPS; Ethereum post-upgrade manages only tens of TPS. By contrast, centralized systems like Alipay can handle peak TPS in the hundreds of thousands.

Technically, Web3 does not surpass Web2. They follow different technical paths: Web2 pursues efficiency, high concurrency, and strong control; Web3 pursues decentralization, transparency, and immutability. Each has trade-offs; there is no absolute "generational superiority."

2. Why the Web3 Narrative Took Off

Web3 broke out rapidly because it precisely addresses three major pain points users have with Web2 centralized platforms. This is the foundation for why the narrative could take hold:

• Privacy: Large platforms collect user data without boundaries, stripping users of data sovereignty;
• Cost: International payment processors like Visa and Mastercard typically charge 2-3% transaction fees, keeping intermediary costs high;
• Control: Platforms monopolize traffic and service rules, leaving users and small businesses passively constrained.

II. What Drives Web3: User & Enterprise Demands

Beyond hype, all sustainable Web3 business models center on genuine needs across two dimensions:

• Consumer needs: Privacy autonomy, escaping platform monopolies, lower fees, cross-border free trading;
• Enterprise needs: Efficient cross-border settlement, digital asset circulation, tamper-proof data notarization, innovative business model pilots.

Demand is the core of Web3's viability. Technology is merely the tool to meet it. This is the fundamental criterion for judging whether a project has long-term value.

Part 2: Global Regulatory Landscape

I. Regulatory Consensus: Full Decentralization Cannot Work in Reality

From legal, financial, and social governance perspectives, absolute decentralization is not practically viable. Unregulated anonymous transactions become breeding grounds for telecom fraud, cross-border money laundering, underground banking, and illegal asset transfers.

Hong Kong, the US, Singapore, and other financial centres prioritize financial order and asset security. Regulating Web3 and crypto is an inevitable choice, not an obstacle. The core goal: eliminate grey industries, enable compliant players to enter, and let technology serve the real economy.

II. Benchmark: HK 2025 Stablecoin Ordinance

Hong Kong's 2025 Stablecoin Ordinance is a landmark policy moving the industry from chaotic growth to standardization. Key rules and impacts:

1. Core Regulatory Requirements

• Issuers must register with the HKMA under a licensed regime;
• User transaction and identity data must be retained for at least 6 years;
• Priority for USD and HKD-pegged stablecoins; RMB stablecoins face dual mainland-HK oversight with extremely high approval thresholds (not banned, but strictly gatekept).

2. Dual Impact of the Policy

• Short-term: Weakens the "fully decentralized" label — Hong Kong is no longer a regulation-free crypto haven;
• Long-term value: Establishes a clear compliance framework enabling legitimate enterprises like JD.com and traditional financial institutions to enter legally, isolating fraud and grey capital.

III. Global Divergence & Enterprise Solutions

Regulatory approaches to Web3 and stablecoins vary markedly worldwide:

• Strict regulation: Hong Kong, US, Singapore — emphasizing licensing, KYC, fund traceability, AML;
• Flexible regulation: Saudi Arabia, Dubai — flexible rules, low entry barriers, simplified KYC.

Leading institutions commonly adopt a dual-entity offshore structure:

1. Hong Kong entity: strictly complies with local law for licensed business;
2. Offshore entity (Middle East, etc.): adapts to local flexible rules for full-service global coverage.

This model is the mainstream choice for cross-border Web3 companies balancing compliance and business growth.

Part 3: Web3 Business Value & Case Studies

I. Industry Reality: Old Wine in New Bottles, Value Returns to Substance

Web3 is rife with conceptual hype. Many models existed in Web2 — blockchain merely adds a new technical shell. The key to judging value is whether the project solves genuine pain points with new technology.

II. Benchmark: Polymarket Prediction Market

Polymarket is a benchmark Web3 project with real utility. It builds a decentralized prediction market that functions not as gambling but as a real-time hub for global market sentiment and expectations.

1. Business Model

Users participate in event predictions (Fed rate decisions, corporate earnings, geopolitical events) using stablecoins. Market outcomes reflect collective global participant judgment, forming high-value market intelligence.

2. Real Value & Evidence

The platform aggregates information from numerous participants with strong predictive accuracy. Example: the platform showed Coca-Cola earnings "beat expectations" probability above 80%, enabling profitable stock positioning based on that signal.

3. Core Advantages

Compared to Bloomberg and Reuters, Polymarket's distributed model delivers faster information updates and more direct market sentiment feedback, serving as an effective supplement to traditional data services.

Part 4: Traditional Enterprise Entry into Web3

Using carriers and SOEs like China Mobile as examples, the optimal strategy is "build infrastructure, not consumer applications" — the classic "sell shovels" logic.

I. Core Advantages

1. Infrastructure: National and global backbone networks with bandwidth costs far below typical cloud providers;
2. Cloud capability: Massive storage, computing, and node deployment capacity;
3. Compliance: SOE background with robust risk control and legal frameworks to avoid most compliance pitfalls.

II. Implementation Directions

1. Cloud & Node Hosting for Web3 Projects

Following AWS's model (~37% of global Web3 cloud market), provide computing, storage, and hosting for blockchain nodes and DApps. This is an extension of traditional cloud services with minimal compliance risk.

2. Using Web3 Tech to Optimize Existing Business

• Distributed storage: Apply blockchain-inspired distributed ledger and multi-node backup thinking, paired with user incentives to activate spare storage capacity as supplementary backup, reducing disaster recovery and operations costs.
  Note: User nodes serve as supplementary backup only; core data remains on enterprise servers to prevent data loss from offline or damaged devices.
• Distributed computing: Mobilise idle user computing power for lightweight tasks and data validation, using points or rewards as incentives.

III. Risk Isolation Principles

1. No direct issuance of cryptocurrencies, stablecoins, or NFTs;
2. No C-end crypto trading platforms;
3. Adopt transmission encryption + data isolation: Standard HTTPS and transport-layer encryption, providing only the network pipe without touching upstream business content.

IV. Technical Basics

• IPv6: A network address protocol for expanding the IP address pool, not a security feature — that relies on HTTPS, TLS, etc.;
• Process vs Thread: A process is an independent program unit with its own memory space; a thread is an execution unit within a process, sharing resources. Multi-threading enables parallel processing;
• Subnet mask: Divides the network and host portions of an IP address, fundamental to LAN networking and device differentiation;
• Binary tree: A classic data structure that dramatically reduces search time and computing power compared to sequential traversal, widely used in search and indexing;
• Scalability: Scale Up (vertical, single-server CPU/memory upgrade) vs Scale Out (horizontal, cluster multiple servers). High-concurrency internet systems primarily use horizontal scaling.

Part 5: Trends, Opportunities & Challenges

I. Major Trends

1. AI + Web3 Deep Integration

The combination of these two frontier technologies is a core opportunity: deploying distributed AI on decentralized networks to break Big Tech's monopoly on compute and models, while using AI to optimize smart contracts, on-chain operations, and risk monitoring. Decentralized AI nodes and on-chain AI trading assistants already exist.

2. On-chain Finance Normalization

On-chain trading and DeFi are progressively moving toward compliance, becoming complementary to traditional finance.

3. Real World Assets (RWA)

Real-world assets like property, copyrights, artwork, and bonds are mapped on-chain for digital fractionalization and circulation.

II. Core Industry Challenges

1. Technical bottlenecks: Mainstream blockchain concurrency and speed still cannot support mass commercial use;
2. Compliance challenges: Fragmented global regulation raises cross-border compliance costs;
3. Bubble risk: Many projects lack real demand, relying solely on concept fundraising without a viable business loop.

Part 6: Five Deep-Dive Topics

Independent topics with strengthened arguments and rigorous viewpoints.

Topic 1: Stablecoins & Cryptocurrency

1. Definition & Classification

Stablecoins are crypto assets pegged to fiat currencies like USD, HKD, or EUR, with relatively stable value. They are the core vehicle for Web3 and cross-border payments.

2. Impact of HK Stablecoin Ordinance

The ordinance does not ban RMB stablecoins; rather, it imposes dual approval based on mainland forex and monetary regulations, with much higher entry standards than USD/HKD stablecoins.

3. Stablecoins vs. Digital RMB

• Digital RMB: A central bank digital currency, fully centralized and state-regulated, outside Web3. It may draw on blockchain technology but its architecture is unrelated to decentralization. Current hurdle: no significant differentiation from WeChat Pay or Alipay in payment experience, and limited ecosystem scenarios.
• Compliant stablecoins: Enterprise-issued under financial regulation, core value is cross-border settlement.

4. Stablecoin Value in Cross-border Payments

Traditional cross-border settlement via SWIFT involves multiple bank layers, taking 3-7 business days with high fees.

Under a compliant framework, stablecoins cannot bypass regulation, but can streamline intermediary bank layers, achieving cross-border transfers with near-instant settlement. This is why enterprises like JD.com actively apply for HK stablecoin licenses.

Topic 2: On-chain Trading

1. Key Features

Traditional stock exchanges are limited by trading hours, while on-chain trading operates 24/7 on blockchain. This is its defining feature.

2. Correcting Misconceptions: US Stock Trading Hours

US equities have pre-market, after-hours, and overnight sessions, but markets close completely on weekends, and pre/after-hours sessions have very low liquidity with wide spreads. Only on-chain trading enables truly continuous 24/7 settlement.

3. Existing Risks & Problems

• Liquidity risk: Most niche on-chain assets lack depth; large trades trigger sharp price swings;
• Extreme volatility: Cascading automated stop-losses can cause flash crashes (e.g., Bitcoin flash drops followed by rebounds), surprising investors;
• Regulatory risk: Countries are progressively bringing on-chain securities-like trading under financial regulation; unlicensed operations will be targeted.

4. Development Outlook

On-chain trading will not fully replace traditional exchanges but will become a complementary channel for cross-border and niche assets, inevitably moving toward licensing and compliance.

Topic 3: RWA (Real World Assets)

1. Basic Concept

RWA (Real World Asset) maps real-world assets like property, land, copyright, bonds, and artwork onto blockchain via tokens, enabling fractionalization, circulation, and financing.

2. Core Advantages

It breaks the "low liquidity, high barrier" problem of large assets. Real estate or artwork can be split into tokens, allowing ordinary investors to participate.

3. Core Conflict: Blockchain Logic vs. Legal Systems

Using real estate as an example: most property laws require that co-ownership or common ownership be registered with government authorities, with legal title determined by official registration.

RWA-tokenized "ownership shares" on-chain cannot directly map to offline legal title, creating a legal gap. Similar issues apply to copyright and equity.

Topic 4: AI + Web3 Integration

1. Integration Logic

Traditional AI is centrally controlled by Big Tech, with computing power, data, and models highly concentrated. Web3's decentralized network can distribute AI compute, models, and data for decentralized AI.

2. Existing Applications

• Decentralized AI inference nodes using global distributed compute to reduce single-enterprise costs;
• On-chain AI assistants combining smart contracts for automated trading, data analysis, and risk alerts;
• Data-rights AI using blockchain for user data rights management, with AI using data only within authorized scope, balancing privacy and value.

3. Development Bottlenecks

Distributed AI faces coordination difficulty, slow model iteration, and lack of standards. Currently limited to pilot projects, still far from mass adoption.

Topic 5: Web3 Marketing & Narrative

1. Core Idea: Web3 Is a Master Marketing Narrative

"Web3 = next-generation internet" is a highly successful brand narrative. It creates a sense of technical superiority through version-upgrade concepts, rapidly attracting global attention.

2. Distinguishing Marketing from Technology

• Pure narrative projects: Concepts without real applications or pain points — hype, short lifespan;
• Value projects: Use Web3 narrative to address real needs (cross-border payments, data notarization, prediction markets) — sustainable and long-lived.

3. Practical Takeaways

Web3 promotional logic mirrors traditional marketing: identify pain points, craft value propositions, build narratives, validate with real use cases. Traditional brands can also adopt Web3's "user sovereignty" concept to improve user operations.

Part 7: Summary -- Key Takeaways

1. Essence: Web3 is a combination of value proposition, marketing narrative, and technical tools, not a full generational upgrade. Blockchain and centralized architectures each have strengths;
2. Compliance: Full decentralization cannot work in real financial/social systems. Normalized regulation is the only path to industry maturity;
3. Business: All long-term valuable Web3 projects address real demand. Pure hype will eventually die out;
4. Enterprise entry: Traditional large enterprises should focus on infrastructure, strictly comply, and use new tech to optimize existing operations, avoiding high-risk financial applications;
5. Trends: AI+Web3, compliant stablecoins, and RWA are three long-term tracks, all requiring technology, law, and regulation to develop in tandem.