Uptick Web3 Series | The Impact and Opportunities of Web3.0 on the Real Economy
On April 9th, 2024, at the “Web 3.0 — Digital Revolution of the Real Economy” event co-hosted by Uptick Network and held at the Hong Kong University of Science and Technology, Professor Wang Yang, Vice President of HKUST, delivered a compelling keynote titled “The Impact and Opportunities of Web3.0 on the Real Economy”.
The speech provided insightful analysis on how Web3.0 could revolutionize the economic landscape by empowering individual creators and innovators, thereby democratizing the creation and distribution of value. Professor Wang argued that the seamless integration of Web3.0 technologies with traditional economic structures represents the future of a more equitable global economy. By leveraging Real-World Assets (RWA), he demonstrated the potential for more equitable cooperative settlements on a global scale. Furthermore, Professor Wang posited that Hong Kong is uniquely positioned to lead this transformative era, given its strong development in integrating RWAs with Web3.0.
This manuscript captures the essence and insights of Professor Wang’s visionary speech, offering readers a glimpse into the transformative potential of Web3.0 on the real economy.
The Impact and Opportunities of Web3.0 on the Real Economy
“How can Web3 be integrated with the real economy?
Nowadays, many people are talking about Web3, but what exactly is Web3? Where will Web3 go in the future? In fact, many people can't explain it clearly, and there is no very clear definition. From the traditional definition, Web3 needs to use a blockchain system, be decentralized, and have value distribution. These are all very important components of Web3, but they cannot represent Web3 itself. Professor Lei and I have discussed a lot, what exactly is Web3? We believe that in the future, Web3 can empower not only popular platforms but also niche platforms. From this, we can see the power brought by decentralization, that is, value will not flow into a unified large platform, but will be distributed on different platforms, and many people can benefit from the ecosystem.
A few days ago, I saw Cai Wensheng share on a forum: "In this Web3 era, 80% of people may not have a (full-time) job, but they can still make money." I think this statement may be a bit exaggerated, but it also represents the concept of Web3, that is, Web3 can empower niche groups, provide opportunities for everyone to create value, and benefit from the value created.
However, if we look at the development of the entire Web3 space, we are still in a stage of "air coins" and thinking about how to "speculate on coins." A year ago, few people discussed the future of real Web3, and everyone was talking about stablecoins. Why? Because everyone found that Bitcoin was losing money, so we had to create some stablecoins to put in US bonds, which could not only avoid issuing coins but also attract everyone's investment and gain profits. But in reality? Now it is found that this model is no longer feasible. The current stablecoin model must be a compound interest system, and this is impossible.
The true development of Web3 in the future needs to be combined with the real economy, but how? There are many paths to take, but there is one path that we have been paying attention to and an unstoppable trend, which is the blockchain of real-world assets, that is, tokenization. So why is this a very important field? Let's take an example.
Some time ago, Andy, Professor Chen, and I went to the Hangzhou Business Department for a visit and communication. They encountered a very practical problem, which has existed for many years: the concept of the Belt and Road Initiative sounds very good, and we have done a lot of business with so many countries, but how can we get the money back? For example, if I take Zimbabwe's money, even if I take one trillion Zimbabwe dollars, it seems that I can get rich overnight, but in fact, it is less than one cent. This money is originally worthless, what's the use of taking it back? So now the Belt and Road Initiative also requires everyone to settle in hard currency or RMB.
But what if the partner doesn't have RMB? So we have some foreign exchange swap agreements, or local swap agreements. That is, it is agreed that Argentine pesos can be settled, but an exchange rate will be agreed in advance, and then it will be exchanged for RMB. However, Argentine pesos are becoming less and less valuable, and the money will definitely be stuck there, eventually becoming a loan, and the interest rate of this loan is probably not so favorable. So much so that this colleague from Yiwu said that even if they use stable currencies such as RMB, USD, EUR, and JPY for settlement in their cooperation in South America and Africa, they can only recover half of the money in the end. The remaining half can hardly be recovered, and can only be settled in the other country's currency, but it is useless to get it back.
However, a person from Yiwu said something that made me feel the necessity of RWA tokens. He said, "Actually, these countries have many resources that we need, but Yiwu doesn't." In other words, Argentina's lithium mines are actually strategic resources that China needs, but these small businesses in Yiwu do not have the ability to sell lithium mines into RMB.
If we can digitize these real-world assets from the perspective of Web3, it will make a big difference. Zhejiang Province is very interested in this matter. There are many practical examples that illustrate the importance of asset digitization, and there is no doubt that this is also very important for China's strategy. Because China has made so much effort all the way now, but in this payment process, we still need to use the US dollar to pay taxes. In fact, if we can use RWA for tokenized transactions, we can achieve communication in the form of object-to-object transactions. We don't even need to anchor a fiat currency, just anchor a stablecoin, or even a basket of currencies, and the whole system will be closed loop.
Third world countries, including Belt and Road Initiative countries, especially African countries, are very optimistic about this approach because they know that their resources are not mobile enough. Moreover, many Africans still feel that they are exploited by Western colonialists and that the West still treats them in a colonial posture.
For example, there was a coup in Niger some time ago, which actually drove out the French people. There are many reasons for this, and we don't know why the government encountered such a situation. But one thing is clear: Niger has a lot of uranium mines. The market price of this uranium mine is 200 euros per ton, but the French people get 80 cents per ton from them, and the difference is very, very large.
Thus, many Africans often feel that their resources have been plundered by Western colonial powers. They also hope to have an opportunity to circulate their resources, sell them at a more reasonable price, and tokenize them without so many financial services. Only when they truly flow can they promote Africa's economic development. So in my opinion, this is beneficial to the whole world, beneficial to China, especially the Belt and Road Initiative. I think real world assets (RWA) have become an unstoppable trend, and many people have already started to experiment.
The real estate tokenization we mentioned in the past faces many challenges and needs to improve many rules. For example, if a house is tokenized and I hold 51% of the equity, can I rent the house to others? How should the rental income be distributed? These aspects need to be considered to formulate relevant rules and regulations. However, no matter what, I think this trend is unstoppable. Financial products are now the first step and have already started tokenization. The next step will cover more areas, such as green bonds, US Treasury bonds, etc.
For example, FTX tokenized Apple's stock and split it into different fragmented equity for trading on FTX. What you are trading is only a part of Apple's stock. These financial assets are relatively easy to tokenize, but now physical assets have also begun to tokenize, such as the tokenization of rare earth mines in Vietnam. There are many challenges here, but I think this is a trend that requires our joint efforts. To truly make it happen, it requires professional knowledge and determination, and the industry needs to start from the early sandbox.
I believe that by vigorously developing RWAs, Hong Kong has the ability and opportunity to become a leader in Web3 worldwide. However, determination alone is not enough. I hope that the big shots present, colleagues, and teachers can work together to promote this matter. By holding more conferences like ours, the public may pay more attention.
In the future, it is really possible to make this happen and for Hong Kong to become a true leader in Web3".
-Professor Wang Yang
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