Chinese crossover and Web3
Since the start of our Web3 practice group, we have received constant inquiries about international business and web3 crossings, including companies related to China. Basically, all web3 technologies are international. But unless you’re personally interested in and invested in cryptocurrencies, or your business relies heavily on blockchain technology, you’re probably among the 80% of the population (my guess) still deciding whether to use any of the Web3 tech learnings. quite important. for. Tech enthusiasts in the United States and all other developed and developing countries, including China, are way ahead of the curve. Crossover China and Web3: Introduction to Web3 Technology If you’ve been paying attention, you’ve probably heard of blockchain at the heart of this new wave of technology. This new ecosystem is called “Web3” (or Web 3.0). Perhaps you at least know something about Bitcoin, today’s leading cryptocurrency, or Ethereum, which is like Bitcoin but with additional features beyond ordinary virtual currencies. Web3 includes cryptocurrencies like Bitcoin, Ethereum, and hundreds of others that are currently struggling for survival. All of these virtual currencies are part of the decentralized finance (“defi”) movement that has global reach and disrupts traditional global finance. Web3 also includes NFTs (non-fungible tokens) (see here, here and here), which are unique digital assets that are created, bought, sold and collected around the world. I recently spoke with a Chinese media company that intends to hire Web3 artists to transform some of their existing traditional media into unique NFT artworks (this detail has been changed to protect their privacy). The company will build some initial NFTs for market testing. If the answer is good, the company will dig (make) and release (sell) a total of 1,000 unique NFTs. They will use the revenue from these NFT sales as an additional way to interact with their existing customer base and increase their influence, potentially growing the DAO (more on this below). Crossover China and Web3: DAO (Decentralized Autonomous Organization) Mandarin speakers from China, Taiwan, and other countries are members of the DAO. Many DAOs were created with the clear goal of making money. Some DAOs make and sell NFTs. Other DAOs buy and hold NFTs as investments. Other DAOs also have big ambitions, such as B. acquisitions and the management of functioning companies. Not all DAOs focus on starting a business. Some are simply interest groups that serve as subreddits. People form DAOs based on common interests. Thanks to the global internet, DAOs are cross-border, bringing people together across languages, countries, interests, and financial barriers. This weekend I was on the DAO Mutant Cats discord server and they have a dedicated channel dedicated to speaking Chinese, Japanese, Turkish, Portuguese, Spanish, Korean, French, Persian and Indonesian. Some DAOs use NFTs as tickets (see here) to make DAOs more exclusive. This exclusivity has many characteristics. By creating artificial flaws, DAOs can remain small enough to do anything. It can also increase the DAO and NFT values required to join the DAO. MoonDAO was originally formed around the group’s interest in space exploration. The medium-term goal is to send two DAO members on a trip to the moon by 2022. The long-term goal is to rewrite the eligibility criteria and entry rules for everything beyond planet Earth. Perhaps the Cannabis-like DAO will aim to be the first group to establish a true UN colony in space. China and Web3 Crossover: Smart Contracts DAOs alone cannot replace traditional businesses without integrating with existing legal and financial systems. Many savvy legal, financial, and technical experts are working to develop DAO models that preserve the best aspects of DAOs while implementing best legal and financial practices to ensure DAO members get the best of this world. This is very important and difficult given the international orientation of the DAO. Smart contracts are used in cryptocurrency transactions, NFT declines, and DAOs. Smart contracts refer to computer code that executes certain transaction protocols without using an intermediary to approve the transaction or press the agree button. You can think of smart contracts as automated escrow agents.These smart contracts do not, should not, and cannot replace traditional contracts, as they only contain certain parts of the traditional contract. When the time comes when smart contracts contain terms and conditions that copy traditional contracts, they will be good enough to be used as traditional contracts (although desired user anonymity will remain a constraint in Web3 technology). Before that happens, we need greater adoption and better integration of lawyers into the coding community. And people have to take care of the legal strategies that underlie business strategy, which is not even the case today in a traditional business environment. Just like the early days of Chinese business, all of this Web3 technology is evolving rapidly and everyone is operating somewhere between an unregulated and a poorly regulated field. We are in the midst of a technology and terminology explosion (including stopping the “correct” translation into different languages). Not far behind is the proliferation of litigation, followed by legislation. Most people see this as a good thing, because when investors and entrepreneurs know that their investment in coins and time will be appreciated and protected, we will see wider adoption and more opportunities for everyone. It will take years, if not decades, to do this across international borders. Crossover China and Web3: Cryptocurrency China has a love-hate relationship with cryptocurrencies. In the early crypto frenzy, China’s cheap energy actually fueled the proliferation of crypto miners (connected computer systems), so that China accounted for two-thirds of global bitcoin production by 2021! The madness ended in mid-late 2021 when the Chinese government decided against excessive energy consumption, which contributed to China’s ongoing blackouts. The government also dislikes unregulated financial transactions, which is why it prohibits cryptocurrencies and industry involvement when developing and implementing its own digital yuan ecosystem, which is not the same (not even close) to real cryptocurrencies. By December 2021, experts estimate that up to 20% of the world’s Bitcoin network remains in China, most of it working underground. China and Web3: NFT Crossover There are many other opportunities for China’s growing business base to engage in Web3 technology that the Chinese government has not yet decided or banned. China’s Web3 crossover extends to NFT, which is a natural extension of its pop idol community. NFT is currently the second most discussed aspect of web3 as many prominent artists from all walks of life have turned their art into NFT. Some have sold their NFT collections for millions of dollars. I recently read an article (see here) about the current number one contributor to NFT in China, and he is only 27 years old. Companies involved in the crossover of China and Web3 Over the past 12+ months we have been assisting clients with international and local issues regarding the establishment, management and financing of DAOs (both downstream and downstream, including ICOs) (see here and here). We worked with NFT developers and studios (see here) to determine the best way to create a joint business venture, using a creative compensation structure that also protects both parties’ intellectual property, which is always a concern when doing business with Chinese representatives. Some of our technology clients are developing POS and API solutions that bridge the deep gap between traditional banking, cryptocurrencies and the international business world. And we constantly warn our customers those smart contracts are not smart or comprehensive contracts that build business relationships. Learn more about China and Web3 cross If you are an international company and feel overwhelmed by this new technology boom, take heart. I’ve attended several Web3 conferences where even hard-working Defi, Crypto, NFT, and DAO experts admit they’ve felt like they’re drowning at the bottom of a pool. They all say that technology and terms move so fast that no one is an expert in everything about web3. In my corner of the international business community, we don’t take securities issuance lightly (see here), but even the SEC (US Securities and Exchange Commission) is still trying to figure out how to classify the different types of Web3 tokens. Start in your area of interest and continue your education. Talk to the experts. Attend a conference. Join any Web3 (often DAO) groups that interest you. And you can join our new Web3 Law Group on LinkedIn to discuss practical legal aspects of web3 in real time.