China’s tech giants dip their toes into web3, but prospects are limited so far
During the Staking Summit in Istanbul, a conference attended by hundreds of individuals involved in the staking practice of the crypto ecosystem, two exhibition booths stood out. They belonged to Tencent and Huawei. Amidst a backdrop dominated by twenty-somethings clad in trendy company hoodies and giving out well-designed merchandise, the two Chinese tech giants appeared somewhat incongruous with their more formal corporate banners.
They were next to engineers, marketers and business developers deeply entrenched in staking, where individuals pledge their crypto assets, such as Ethereum, to protocols in exchange for returns. The borrowed assets are subsequently used to validate transactions in blockchains implementing the “proof-of-stake” method.
In the past year, several Chinese tech giants, including Alibaba, Tencent and Huawei, have been popping up across crypto events in different corners of the world. In the hope of carving out a market share in the nascent web3 space, they show up for these events either as official sponsors or assume a more discreet presence simply as attendees.
Chinese tech giants’ participation in crypto sits somewhere at the crossroads of web2 and web3 thanks to their home country’s widespread ban on cryptocurrency trading and initial coin offerings. In the most common case, these tech firms are touting their computing resources to web3 startups in a way not so different from how they have been selling cloud services to companies in more established tech verticals.
Cloud expenses by companies building or leveraging decentralized networks are understood to be still quite insignificant. It’s not uncommon for a “mid-sized” enterprise in web2 to spend over $1 million on cloud computing, but a company considered to be mid-sized in web3 might only be spending in the low hundreds of thousands of dollars, several attendees at the event said.
Yet the limited ticket size hasn’t impeded Chinese cloud providers from venturing into crypto. As underdogs in the global cloud market, Chinese firms are far more proactive and accommodating with customers because they lack brand recognition, especially in the West. As such, they have to compete by offering cheaper — or better services.
Beyond providing cloud infrastructure, Chinese firms have also been involved in areas that are more removed from their core products and put them in competition with crypto-native firms. That includes building blockchains for enterprise use — most tech firms in China have steered clear of the public blockchain sphere in which tokens play a critical role due to the country’s crackdown on crypto.
Some players also offer node-as-a-service business. Blockchains, which are decentralized databases that store and encrypt transaction data, are run on distributed nodes. These nodes, however, can be expensive and complex to maintain, so companies like Huawei offer a node hosting service for developers, an appealing solution to enterprises that want to build decentralized applications but lack the technical sophistication to do so themselves.
Tencent and Alibaba, being the first movers amongst Chinese tech giants to the web3 space, have also acquainted themselves with respected projects to ramp up their reputation in the industry.
Tencent, for example, has formed partnerships with public blockchains like Sui and Avalanche as well as the Ethereum-scaling solution Scroll.
Alibaba, on the other hand, has teamed up with Aptos, a blockchain developed by former Meta employees, to amplify its name in the web3 world. In a joint announcement today, Alibaba Cloud and Aptos Foundation said they will be co-hosting hackathons that utilize the Move programming language in the Asia Pacific region.
For now, web3 is barely making a dent in Chinese tech giants’ top line, but these firms recognize the potential of the burgeoning industry and understand that they cannot afford to overlook the opportunity, even in the face of significant market volatility and the collapse of major players like FTX.
