Author: Luohan Hall Viewpoint
Speaker: Shen Kang
Shen Kang: Graduated from Fudan University with a degree in Aerospace Engineering, holds an MBA from the Booth School of Business at the University of Chicago, and is a qualified CFA in the United States. He has held key positions in several financial institutions such as PIMCO, Solomon Brothers, and Bosera Asset Management. In 2019, he founded Hash Global, focusing on investment and practice in the digital asset and Web3 fields, promoting the construction of a more prosperous Web3 ecosystem.
The following is the original text of Shen Kang's speech:
Good afternoon, everyone! I am pleased to engage with you at the Luohan Hall annual meeting today. The topic I am sharing is 'Web3 and AI Resonance: Driving Finance Toward Internetization and Digitalization'. This title may sound a bit convoluted and not very intuitive. However, the core of what I want to express is quite simple: I want to clarify why the finance supported by Web3 is the true internetized and digitalized finance. Once this point is clarified, I believe everyone will have a deeper understanding of the significance of Web3 for finance and AI.
From Electronic Ledger to Digital Ledger: The Financial Revolution of Web3
I believe everyone has been paying a lot of attention to the development of AI and is quite familiar with it, but may still be relatively unfamiliar with Web3. Before introducing and reviewing the development of Web3, I would like to first talk about the existing traditional banking financial system. The traditional financial system is actually built on a double-entry bookkeeping electronic system, which means that each institution has its own ledger: there is a need for a large amount of data verification work between banks, between banks and brokers, and among branches under a bank, often working overtime for a single number. This means that the capital markets built on it are also fragmented. Our existing banking financial system is actually electronic, rather than truly digital.
You can recall that when we buy things on the internet, we actually use 'two networks'. When I place an order on Taobao, the information is transmitted to the seller via the internet; but the underlying financial settlement is conducted between my bank, such as China Construction Bank, and the seller's bank, such as Bank of China. When we complete an online purchase, the information moves through the internet, while the funds move through the interbank financial settlement network.
Web3 finance is completely different. Taking Bitcoin as an example, in addition to solving the issue of value storage, it also introduced a digital blockchain ledger. This ledger is characterized by being visible across the network and immutable. Shopping with a Web3 wallet only requires downloading a browser plugin wallet, using stablecoins like USD, HKD, or digital RMB for payment, and the entire shopping process does not require banking infrastructure. The speed of peer-to-peer transaction processing is so fast that you hardly feel it, truly achieving the integration of commerce and finance, completing the internetization of finance and enabling assetization of everything. Understanding this point will help everyone better grasp why Web3 is the inevitable choice for the future of finance.
Web3: The Next Generation of Internet Infrastructure
I believe the development of Web3 has dual characteristics. On the one hand, as the predecessor of Web3, crypto finance has accumulated around 600 million users, roughly equivalent to the scale of internet users in 1999. Therefore, we have already seen payment-oriented financial applications like stablecoins and DeFi; however, the essence of Web3 as the next generation of internet infrastructure may still be at the level of 1994-1995. Personally, I judge that it will take about another two years for mainstream applications of Web3 to explode, as there are currently not enough users willing or naturally inclined to use Web3 wallets to interact with the internet.
However, I believe that Web3 technology will undoubtedly become the infrastructure of the next generation of the internet. It will provide a better user experience, as a unified ID across the network will free data from silos and enable convenient sharing. It is the only large-scale underlying coordination network that truly adapts to the development of AI productivity. The significance of Web3 for business is akin to that of Bitcoin for finance - changes in the underlying data ledger technology will inevitably lead to changes in the upper-level business models.
‘De-platformed’ Finance: The True Face of the Web3 Ecosystem
Based on a universally accessible public ledger, what does the financial ecosystem of Web3 look like? Unlike traditional finance, in Web3, whether you are an on-chain broker, bank, or exchange, all transaction records are stored on the intermediary blockchain. Users interact with these financial institutions not with bank accounts but with a 'wallet'. You can think of this wallet as a unified entry point that is not locked by any platform, which essentially makes Web3 a 'de-platformed' finance.
You may often hear the term 'Decentralized Finance' (DeFi), but I prefer to refer to it as 'de-platformed finance'. It does not eliminate centralization or regulation; rather, it must comply with regulation. Since all on-chain users' IDs are unified across the network and all transaction records are traceable, it is actually easier to be regulated. Therefore, compliance and embracing regulation are the mainstream trends for DeFi's future. Currently, the scale of DeFi is about 115 billion USD, with the application ecosystems on mainstream chains like Bitcoin, Ethereum, and Binance Chain rapidly developing, with increasing activity and capital volume.
Web3's 'iPhone Moment': Stablecoins Ignite the Growth Flywheel
I believe everyone has recently noticed a piece of news that the United States and Hong Kong have successively passed legislation related to stablecoins. For the Web3 financial industry, this is a very important turning point, and many people refer to it as Web3's 'iPhone Moment'.
I feel that there must be profound strategic considerations behind the recent regulations related to stablecoins. While there are various interpretations of this matter, I believe the most insightful perspective comes from Dr. Xiao Feng of Hong Kong's HashKey Group. He believes that the breakthrough of stablecoins is a victory for technological innovation, and this is not a technology randomly decided to be adopted by any country or government, but rather the advantages of technology itself dictate that the system needs to adapt to the development of technology.
In my view, the development of on-chain finance needs to get a 'flywheel' turning: the continuous increase of on-chain funds, on-chain users, and high-quality on-chain assets. This flywheel originally turned slowly, but with the availability of compliant stablecoins, off-chain funds can enter on-chain more conveniently, significantly increasing the flywheel's speed. I believe that stablecoins will greatly accelerate and promote Web3 finance toward the mainstream.
Additionally, I would like to illustrate 'the internetization of finance' with two examples. The first example is the recent news about Trump issuing cryptocurrency. Leaving aside the moral questions surrounding his team's coin issuance, this event showcases the advantages of Web3 technology well. In the traditional stock market, if a market maker wants to manipulate the market, it often involves multiple parties and is limited by time and geography - for example, market makers in Hong Kong can generally only influence Hong Kong investors. However, Trump Coin is issued on the blockchain, allowing users worldwide to trade the same capital asset 24/7, regardless of their location. Market prices are formed on a globally universal ledger, which is a truly internetized asset.
The second example is the concept of Real World Assets (RWA), which refers to mapping real-world assets off-chain to the blockchain through tokenization. In this way, the on-chain assets become digital tokens, no longer constrained by the ledger of a specific broker or limited to a particular stock exchange, thus gaining global liquidity. Whether it is a money market fund or stocks, they can be tokenized, allowing users to trade and transfer at any time and from anywhere, significantly improving efficiency.
The 'NVIDIA' of Web3 Finance: Binance and BNB
Next, I would like to briefly introduce the Binance exchange and its issued platform token - BNB. The uniqueness of BNB lies in its dual nature; it has equity attributes and is also an economic token. Currently, Binance is the largest digital asset exchange in the world, holding an absolute leading position. Its trading volume has reached twice that of the New York Stock Exchange, thanks to the advantages of its global platform that supports 24/7 operations, with users numbering up to 270 million. Frankly, no traditional exchange can achieve this.
Binance's business has already transcended mere trading, resembling a super-ecosystem built by an internet giant, encompassing spot trading, lending, wealth management, payments, and even social functions. In this ecosystem, BNB not only has a transaction fee discount function but also has stock buybacks as a value support and possesses currency attributes similar to QQ game tokens. Many people are accustomed to using traditional value investment frameworks to assess BNB, but I believe that Web3 products cannot simply apply stock valuation logic.
Therefore, since 2019, we have attempted to evaluate BNB using the 'currency equation' (MV=PQ) as its nature is closer to that of a currency. We first conducted this evaluation in April 2019 and have completed six phases to date. My judgment is that BNB's current situation is similar to what I observed when I returned to my home country and saw Moutai – at that time, almost no institutional investors were optimistic about it, with the main buyers being retail investors; whereas now, institutional investors are gradually beginning to recognize and understand the true value of BNB.
The time is about right, so finally, I want to talk about the integration of Web3 and AI in the financial sector. I believe that the finance driven by Web3 is the true digital finance, and only truly digital finance can seamlessly integrate with AI technology, bringing about the greatest multiplicative synergy.
Web3 finance possesses the characteristics of digitization and programmability, with its address composed of a series of complex characters. This 'language' is clearly not suitable for direct reading or memorization by humans, but it naturally aligns with the processing methods of AI. In the future, AI's financial needs and services may only be realized through Web3, as it is impossible to open traditional bank accounts for an AI entity, and handling transactions as small as one ten-thousandth of a dollar is also challenging, let alone responding to tens of thousands of service requests within a minute.
Finally, I want to emphasize that AI is empowering the application of Web3 in the financial field, while Web3 is also providing decentralized data and computing power solutions for AI. The fusion of these two cutting-edge technologies is accelerating the construction of a new generation of internet infrastructure and driving profound changes in the global financial system and business models.
Thank you, everyone!
Click to learn about ChainCatcher's job openings
Recommended reading:
Dialogue with Wall Street Guru Tom Lee: Corporate treasury models outperform traditional ETFs, Ethereum is set to experience Bitcoin-like explosive growth
Dialogue with Oppenheimer's Executive Director: Coinbase's Q2 trading revenue fell short of expectations, which businesses will become new growth points?
Backroom: Information Tokenization, a solution to data redundancy in the AI era? | CryptoSeed
