Hackathon Review | Web 3 & AI Innovation Challenge

Web 3 & AI Innovation Challenge Hackathon Review

On September 10, 2023, at 9:30 am Beijing time, the “Web 3 & AI Innovation Challenge” hackathon was held in Singapore. The hackathon was organized by Dev3 and Moledao, co-organized by C² Ventures and Techub News, and Bitpush served as the media partner. The purpose of this event is to promote the global development and application of Web3 and AGI with outstanding developers from around the world. The selected high-quality project teams will share a prize pool worth $60,000!

We have invited top institutions and project guests such as Jack Kong, the founder of Nano Labs, Blade Hu, investor of CEEX, Min from Foresight X, Bruce Lan, partner of Bing Ventures, and MP Edward Chen from Huobi Ventures to the scene. Let’s take a look back at this exciting hackathon.

Opening Speech

• Weekly Cryptocurrency Market Summary (09.09-09.15) NFT Market Continues to Be Lackluster, When Will the Winter End?
• End of support, survival of the fittest, the battle of NFT exchanges
• Wu’s Weekly Picks CoinEX attacked, FTX’s coin selling rules, Binance US layoffs, and Top 10 news (September 9-15)

Speaker: Jack Kong (Founder of Nano Labs)

Topic: Here comes the Al Singularity? Perfect Timing for Web3 Builders

Summary:

The development of AI is leading the Internet into a new stage at an unprecedented speed. From TikTok to Telegram, the user growth of many AI applications far exceeds history. AI, as a new productive force, will greatly improve work efficiency. At the same time, the combination of blockchain technology as an important production relationship and AI will form Web3 and open a new era of the Internet.

Compared with the Web2 era, Web3 has stronger network effects and advantages in open-source collaboration at various layers. In Web3, users can share the dividends of network growth. In addition, Web3 focuses on leveraging the advantages of different teams, and this distributed organizational form is more suitable for the current situation. It can be seen that the growth rate of Web3 projects is unprecedented, with a valuation of hundreds of millions of dollars in just a few months.

AI is productivity, blockchain is production relationship, NFT is interactive carrier, GameFi is interactive form, and metaverse is expressive form, together they constitute the entirety of Web3.

The development of Web3 can be divided into four stages:

The first stage was dominated by Bitcoin, representing the group of miners.

The second stage was dominated by Ethereum, representing the group of developers. They further matured the blockchain through innovations in finance, security, liquidity, etc.

The third stage is the era of native Web3, which emphasizes competition at the application layer and leans towards the construction of underlying infrastructure. This stage is of great significance to Chinese developers, as it provides them with more opportunities to contribute their own value.

The fourth stage is the era of industrial Web3. In the early days, Alipay’s main use was online payment because banks were reluctant to delve into this field. Similarly, the focus of Web3 innovation will gradually expand from native fields to traditional industries, completing the penetration from point to surface.

Looking back at history, the development of technology and industry often shows a spiral upward trend. Web3 is at the forefront and technological innovation and business models will continue to surpass our imagination. Let us maintain an open and inclusive mindset, full of confidence to embrace opportunities. If Chinese developers seize this historic turning point, they may once again rewrite the world’s technological landscape.

Guest Speech

Speaker: Blade Hu (Partner at CEEX Labs)

Topic: The Way Ahead for WAIGC

Content Review:

Currently, AI technology is developing rapidly, and global computing power is growing exponentially. This brings unprecedented opportunities for AI applications. However, there is also a risk of being monopolized by capital, and AI may become the patent of a few technology companies, which is not conducive to the fair sharing of technology. In order to ensure that AI benefits society in an open and responsible manner, the concept of WAIGC has emerged. The core of WAIGC is to promote the decentralization and distribution of AI.

To achieve this concept, it is crucial to establish an open and shared computing power infrastructure. This can break the monopoly of traditional data centers and enable different AI research and development parties to share computing power resources. For example, through blockchain protocols, decentralized computing power can be better scheduled and optimized.

On the other hand, financial innovation can also support the realization of WAIGC. For example, AI training requires a large amount of computing power, which is a scarce resource. It is possible to consider using computing power as a new futures underlying asset, establish price indices, and attract more funds into this market. This allows precious computing power resources to be better allocated and circulated.

To form the ecosystem of WAIGC, it is also necessary to further broaden the participants. Industry exchange activities can be held to enhance connections. Through investment incubation, AI startups can be supported to grow. If all parties work together, WAIGC is expected to promote the development of AI technology in a distributed manner, rather than being limited to a few companies.

CEEX Labs, as a deep investment incubation ecosystem platform, is committed to building a project matrix around AIGC, aiming to support the distributed development of the AI field. One of the core projects of CEEX Labs is the decentralized computing power network EMC. The construction of EMC aims to eliminate the bottleneck of traditional centralized data centers and provide greater computing power support for AI researchers and enterprises. CEEX Labs and EMC jointly released the global AI computing power index formula during the Tokyo WebX Conference in July 2023. This index will provide intuitive linear index support for the fluctuation of global AI computing power, helping investors better understand the development trends and opportunities in the AI computing power market. This innovative index is expected to become a standard in the global AI computing power field, providing more financial innovation support and further promoting the popularization and application of AI technology.

In addition to EMC, CEEX Labs is also actively promoting the computing power infrastructure project Innova. This project aims to build a more efficient and scalable computing power infrastructure to provide reliable computing resources for AI applications. Innova will support various AI workloads in the future, from machine learning to deep learning and other fields, thereby promoting the innovation and progress of AI technology.

The current world economy is facing uncertainties, but WAIGC provides a way to activate the dynamics of the digital economy. CEEX Labs will continue to actively promote the development of the AI field, and is committed to providing the necessary technology and ecological foundation for the next distributed development of AI. Encouraging more companies and innovators to join their ecosystem, and jointly promoting the innovation and application of AI technology, to open up a broader prospect for the future development of AI.

Roundtable

The Road to Security of Web3 Cryptoeconomics

Host: Laura, partner from cointime;

Guests:

Wang Hao, investor from Matabank, has been working in the blockchain industry for 3 years, previously worked in the traditional financial industry for over ten years;

TY, investor from MetaTrust Labs, has been investing in the blockchain industry as an investor since 2016;

Stan, investor from Go Plus, passionate about investments in the industry;

Jasper, security researcher from Beosin, specializes in ZK security, public chain security, and smart contract auditing.

Q1: Encryption is an important part of blockchain, ensuring the security of public and private keys. However, there are various security issues in on-chain Web3 applications and decentralized applications in the blockchain industry. Let’s talk about the reasons why such phenomena occur every day.Wang Hao: I think the main problem people encounter when entering the blockchain or cryptocurrency field is the existence of many hacker attacks and scams, as well as technical architecture and operational risks: operational risks are the problems we may encounter in our daily lives, such as forgetting passwords or passwords being stolen; technical architecture needs improvement and requires a lot of infrastructure investment. The security risks of small currencies are relatively low, but for top protocols like Ethereum, a huge investment is required for an intrusion. So I think the cost of invading a protocol determines the security of that protocol.

Jasper: As a researcher in ZK cryptography, I can tell everyone clearly that attackers always find ways to bypass protocols and encryption principles. Although the encryption principles of blockchain are relatively stable, complex protocols introduce some flaws. Developers may also make mistakes or leave backdoors. Blockchain is not 100% secure.

Q2: It is well known that each public chain is a dark forest. What are the security rules in the dark forest?

Wang Hao: I like the term “dark forest,” just like a game with no rules. To survive here, you must be strong enough, but success also means becoming a target, which hinders the widespread adoption of cryptocurrencies. Certain rules must be established to attract institutional funds to enter this market. There have been developments in recent years, such as the EU’s regulatory framework for crypto assets, which allows institutions to participate. Some banks are also itching to get involved. Singapore is committed to tokenizing real-world assets (RWA). The Layer 0 project attempts to connect different financial institutions. The next step is to issue stablecoins, and even central bank digital currencies. In short, rules need to be set to make this game fair for big players, otherwise the crypto world is only suitable for “pioneers.”

Stan: From a user perspective, it is important to maintain a skeptical attitude and verify before trusting. It is crucial to conduct research and learning, especially in the fields of trading and NFT. For example, we have seen many users trading fake tokens because they look exactly the same, but have different contract addresses. This also happens frequently in the NFT field, where NFTs may appear the same but are actually fake. Therefore, it is essential to carefully check and confirm before engaging in transactions.

Jasper: I would like to propose two principles. The first is that code errors can occur in smart contracts, and the code will automatically execute without external intervention. If you lose funds, it is irreversible. Unless the identity of the hacker is traced by the police, cryptocurrency transactions cannot be reversed. Therefore, in the crypto field, code is law. The second principle is to verify before trusting. If you want to invest in a protocol, you must verify the smart contract code and the identity of the founders.

Q3: Regarding the need for careful confirmation before transactions. I would like to ask, there are various scams in the blockchain industry, such as fake airdrops, fake tokens, and fake liquidity, causing frequent security issues. Can you give some advice on how to identify these scams and how to prevent them?

TY: I believe that conducting research is key. In the past few years, many projects that have resulted in significant capital losses were actually centralized. Many so-called decentralized projects are not truly decentralized, with key decisions controlled by a few individuals. Therefore, if you want to use such projects, you can use tools like ContractChecker to check smart contracts for potential issues. When interacting with them, using tools like DefiSafety can also increase security awareness, as they can inform you of any security issues. Using these tools and conducting your own research can help mitigate these risks.

Jasper: I believe open-source intelligence gathering is crucial. It can be done from both on-chain and off-chain perspectives. Off-chain analysis can involve analyzing community sentiment. If a project has a large number of active users, it may be more reliable, but these users may also be AI-generated fake accounts. Therefore, on-chain analysis is equally important. Tools like Dune.xyz can be used to analyze blockchain activities or to examine token trading activities for abnormal price fluctuations or dumping. By considering all of this information, you can judge the reliability of a project.

Q4: In addition to the law of the jungle in the dark forest, larger-scale security incidents mainly involve contract security and social attacks. For practitioners, how can these two major vulnerabilities be addressed, and what areas should be paid attention to?

Jasper: For the code review part, it is recommended to conduct multiple rounds of review. Smart contract code is very complex, and even top experts may miss vulnerabilities. For example, platforms like Immunify or Code for Mina allow you to upload smart contracts and have a group of professionals review your code. Even if your protocol and smart contract code are secure, it is still necessary to remain highly vigilant as there is no absolute security. Always maintain a high level of vigilance and basic cybersecurity awareness is also crucial.

WangHao: One more thing, besides technical issues, we should also pay attention to human nature. I recommend everyone to watch the movie “Normal Events.” We can focus on the underlying reasons why people lose money due to scams. Because human greed is an unsolvable problem, but we should be aware that we may encounter phishing, fraud, and other online security issues. Recently, I read a book about the 1929 market crash and found many similarities with the current cryptocurrency market. Besides technology, human nature is also an important factor. History can provide us with more valuable things, not just technology, because technology is constantly evolving, and we may not be the best candidates to keep up with the latest technology, but maintaining a potential awareness of security precautions is universal.

Q5: As we just discussed, there is no absolutely secure system in the world, only continuous improvement of security levels. Security events in Web3 code and the legal field are very important. What are the manifestations of maturity in terms of industry’s understanding and implementation of security?

WangHao: I think this industry is relatively immature, and the current maturity level is only about 10%. From the perspective of investment, the current security system level is as follows. Firstly, the highest level is national security built by defense systems, with an investment scale of trillions of dollars, and the largest investors are the United States and China, with the United States possibly two or three times that of China, followed by Russia and several other countries. Secondly, financial institutions such as JPMorgan Chase, HSBC, and Citibank spend billions of dollars to build security systems. Finally, there are security systems related to consumers, such as Amazon, Alibaba, etc. They may spend hundreds of millions to billions of dollars on security-related systems. And we are far from reaching this level. Most websites may only spend a few hundred dollars on security. A few may spend millions of dollars on security. This is my assessment dimension and perspective on maturity.

How will AI and Web3 integrate?

Host: Zoie Zhang, Ambassador of Dev3, and also an investment partner at LK Ventures;

Guests:

Zixi: From Jingwei, responsible for blockchain investment;

Dennis: Chief Security Officer of Mind Network, focusing on data protection and privacy. Currently researching privacy computing;

Alex: Web3 solution architect from Alibaba Cloud Singapore team;

Bruce: Partner at Bing Ventures, a former entrepreneur in the SaaS and data industries, and has worked at top venture capital firms in China, such as ZhenFund and GGV Capital.

Q1: How have artificial intelligence (AI) and Web3 technology interacted and influenced each other in the past few years? Do you think these two technologies complement each other or are they more independent?

Alex: From the perspective of infrastructure providers, they have mostly developed independently. For example, at Alibaba Cloud, we have developed many AI technologies in the past few years, especially large-scale language models and AIGC. In Web3, we focus on underlying blockchain technologies. Ant Group, a subsidiary of Alibaba, has not only made significant investments in Web3 technology but also developed many blockchain technologies for various fields, especially traditional ones. For example, blockchain technology is applied to supply chain management, enabling food tracking and making the supply chain transparent and trustworthy.

Dennis: From a technical perspective, I believe AI and Web3 have almost no common ground. However, I think AI directly benefits from the development of Web3 because they have common demands for computing power or hash rates. The mining requirements of blockchain have directly promoted the rapid development of GPUs. In the past six to eight years, GPUs have developed rapidly. Therefore, AI directly benefits from this rapid development and has contributed to the current wave of AI.

Zixi: I believe that AI and Web3 have mutual influence and promotion in terms of data models, computing power, and applications. First, in terms of data: the business model of using blockchain technology for data labeling can distribute data from AI companies to downstream nodes, enabling triangular trade and promoting the development of third-world countries. This business is naturally suited for crypto, realizing a sharing economy. In terms of models: by using open-source model platforms, we can solve the issue of the creator economy, allowing model developers to share profits and store and invoke model fragments through blockchain technology. In terms of computing power: centralized platforms are suitable for training large models, but for small developers, it is feasible to train with a small amount of data and computing power, utilizing the long tail computing power of Web3 to support their needs. Finally, in terms of applications: for example, applying ChatGPT’s financial model on options trading platforms, we can derive suitable buying and selling strategies through language models, providing groundbreaking consumer applications for ordinary users.

Q2: How can the relationship between AI’s data demands and Web3’s emphasis on data privacy be balanced to ensure the functionality of AI while protecting personal privacy?

Dennis: AI and Web3 have similar requirements for privacy protection, although their driving forces are different. For AI, the driving force for privacy protection comes from regulation. We know that in March of this year, the Italian regulatory agency introduced GDPR and disabled ChatGPT because it violated privacy protection. The issue with AI is that most of the data sources for model training are obtained illegally, without the permission of the data owners, which may infringe upon the privacy of data owners. Therefore, AI needs to address this issue of private data. For Web3, the driving force for privacy protection comes from technology because in Web3’s blockchain, content is publicly transparent and consensus is formed based on plaintext. However, plaintext cannot protect privacy. Therefore, in Web3, we need to encrypt data. As long as data can be transformed into ciphertext, we can achieve privacy protection. Our team has developed a Web3-based zero-trust data protection solution, which can also be applied to AI. With this protection, data owners can have full control over their private data, and these data can be legally traded in Web3. In this case, data owners can profit by selling their private data, and model trainers can purchase data and obtain legal data permissions, solving their regulatory issues. In this way, the issues of both AI and Web3 can be resolved.

Alex: As a cloud service provider, we have collaborated with many clients. For example, if a Chinese manufacturer wants to expand into overseas markets, they need to meet overseas compliance requirements. In such cases, they typically take the following steps: First, they consult legal institutions to understand which data can be made public. For some sensitive data, they undergo anonymization processing, using technical methods to transform sensitive data into a string of meaningless characters, enabling data collaboration and analysis with overseas applications. This is also one of the common methods for data anonymization.

Q3: Do you think artificial intelligence can provide decision support for decentralized systems such as DAO? How do you think artificial intelligence can be combined with Web3 to help make better decisions?

Dennis: The decision-making process of DAO is based on voting to reach a final decision. However, the quality of each participant’s decision-making varies. In this regard, artificial intelligence can help voters analyze information, thereby improving the decision-making quality of each voter and helping DAO make higher-quality final decisions. So, I believe that artificial intelligence can improve the decision-making quality of DAO by assisting individuals.

Zixi: We invested in a project that simulated business operations earlier, and at that time, we didn’t think of using artificial intelligence models. However, looking back now, artificial intelligence models are very suitable for simulating business operations. For example, in the lending platform AAVE, the actual returns are related to factors such as your loan-to-value ratio, the amount borrowed, the amount deposited, and the duration of interest. Traditional simulations currently lack a suitable model to estimate how to balance risks and returns. But if we use large-scale models, it becomes much simpler.

Q4: If AI and Web3 continue to integrate, what new innovative applications do you think will emerge in the future?

Zixi: I believe that business model and technological innovations are key. Traditional data annotation methods are inefficient and require finding local professional teams for annotation, with no guarantee of quality. However, using blockchain can solve this problem. After receiving orders from upstream, there is a platform in the middle, and downstream there are various rules and nodes, including annotation companies in Web2, annotation companies in Web3, YGG, other game guilds, and even retail investors. After each person completes the annotation task, we evaluate together, rewarding those who do well and punishing those who do not. Verification may need to be added in the middle. This will make this industry more efficient, flexible, and scalable.

Bruce: I have listed some areas of web3 applications combined with AI. First is privacy AI, which combines AI to protect user’s private data and provide valuable content from it. Secondly, AI combined with finance to optimize financial decisions and improve financial efficiency. Thirdly, AI combined with DAO to enhance the decision-making and management capabilities of DAO. Fourthly, AI combined with chatbots or trading bots to attract more users to participate in Web3 activities. Fifthly, AI combined with blockchain to improve communication efficiency between different blockchains. Sixthly, AI combined with decentralized identity (DID) to protect user’s identity information. Lastly, AI combined with the fully on-chain game FOG, generating characters with AI and combining them with smart contracts and NFTs to enhance the value of the game.

Web2 to Web3: Changing the Future of Blockchain Games

Host: Edward, Managing Partner at Huobi Ventures

Guests:

Ciara, Founder and Managing Partner at C² Ventures, focusing on early-stage investments in the web3 field;

Jadey, Partner at Baboon VC, focusing on early-stage investments in large-scale application projects combining web2 and web3;

Min, Partner at Foresight X, an accelerator for Foresight Venture with approximately $400 million in assets;

Zoe, Partner at Axia8 Ventures, with investment coverage in DeFi, GameFi, NFT, and other fields.

Q1: Can you recall some prominent blockchain games from the past? What game trends do you think will become long-lasting or more successful forms of business products in the future? This can include any case from Web3 or Web2.5.

Ciara: It’s difficult to choose just one trend for long-lasting or more successful forms of business products. In Web3 games, there is Axie Infinity, but due to sustainability issues with its business model and token economy, it hasn’t achieved true success. However, the concept of “not just play to earn” has left a deep impression because “earning” has proven to not be applicable to all markets. I think PlayFi is also a trend. It is related to sports games, easy to get started but difficult to master, and participants can engage in the game with a low threshold, without having to pay fees, just for the fun of the game. When players truly master a certain aspect, more modes will be unlocked, and they can earn money through carefully designed mechanisms. I think this could be a more sustainable business model. Another trend is blockchain-based online gambling games. If designed properly, they can attract a large user base and provide users with a sustainable economic model.

Zoe: Looking back at the mobile gaming market, social games have always been one of the most successful types. I think the key to their success is that as mobile games, they adopt a combination of free trial and play-to-earn models, allowing even non-crypto users to earn rewards. So, for a long-term game project, it should first be a social game with great playability and balance, and then adopt a reasonable token economy design, rather than simply profiting through token transactions. I think the reason for the failure of the previous round was that projects simply tokenized the points in the game without considering the true utility of the tokens, resulting in a lifespan of only six months for such games. But we have also seen some teams stand out from the previous bear market, combining professional game design with web3 experience and designing truly valuable token economics. I believe the next round needs to increase the fun of the game in order to attract more ordinary players.

Q2: As experts in the gaming industry, what are your expectations for the future development trends of blockchain games and the entire gaming industry? What are your considerations in terms of investment? How do you calculate and estimate the investment return, whether it is from game revenue streams or token itself?

Ciara: I believe that issuing tokens just for the sake of issuing tokens is not necessary, as it needs to have practical use and the marketability of tokens is different from the marketability of the product itself. Regarding investment and the proportion, recent investments have been focused on security and learning, with different proportions. Our team places great emphasis on due diligence to determine the value that equity and tokens can capture, and we require clear representation in the signed documents. At the same time, we also need to clarify the proportion and hope that game tokens are actually used to incentivize the game itself. Therefore, we believe that a deep understanding of token economics by the team is one of the key areas for conducting such due diligence.

Jadey: We will not invest in projects that issue tokens just for the sake of issuing tokens. Issuing tokens must have meaning for the game itself and not just for the sake of attracting attention. For us, we mainly focus on three points: the team’s own experience and background are very important; conducting due diligence on the project and understanding the background; and whether the game really needs a blockchain component. Blockchain is just a buzzword now, and many projects forcibly incorporate blockchain elements to attract investment. So we will see if the project really needs blockchain, which is crucial for us.

Q3: Regarding marketing plans, which method do you think is more effective or reasonable, or should it depend on specific circumstances? As an investor, how do you judge the rationality of their marketing plans when communicating with the product team?

Jadey: My view is that there is no universal marketing strategy, it must be analyzed based on specific circumstances. I believe that marketing must be native, if it appears unreal or unnatural, people are usually less likely to participate. And marketing should be simple and straightforward. Therefore, our favorite strategy is the transition from Web2 to Web 2.5 to Web3. As long as it feels familiar to people, they are more likely to join without having to incur additional costs to make everything native to Web3. If they can access Web 3 supported features through a Web2 platform, it is a successful case because it does not require additional costs for education, adoption, and recruitment. I think when this situation occurs, it will progress smoothly and increase mass adoption.

Min: This is a very practical question. Before considering marketing strategies, it is necessary to clarify the market positioning of the product. If your positioning is in a crowded field, it is not feasible to only acquire users through web2 methods, you must have differentiation. Foresight’s team has rich experience in operating web3 projects, and we also have encrypted media resources. So we can help formulate marketing strategies. These are the ways we can assist project parties.

Q4: In Web2, there are already many very successful platforms, such as Steam. Do you think Web3 platforms have the potential to become very successful game distribution platforms? Or do you think Web2’s power will dominate this area?

Zoe: In my opinion, it is entirely possible to build an attractive Web3 game traffic distribution platform. Let’s review the data. We just talked about Arena, which has 25 million users, but the peak number of online users is only 150,000, which is only a small fraction. However, with the advent of mass adoption, there will be more and more individual traffic distribution platforms in every field. Just like I think those token ranking websites, they were a form of Defi traffic distribution at the beginning of all these Defi projects. So I think there will also be gamified distribution platforms for games.

Min: We are very optimistic about game distribution platforms. In fact, we have invested in a project in this area, it was our first round of investment. I think the key difference between Web2 game platforms and Web3 game platforms is that the traffic on Web2 platforms is quite centralized. Super apps like Tencent and TikTok can distribute any content they want. But in the Web3 world, the traffic is quite decentralized. Apart from some large exchanges, there are no other platforms with very centralized traffic. Therefore, to build a good Web3 game platform, content really matters. If top projects are launched on the platform, the attractiveness will follow. So the first step is to have super games.

Ciara: We have previously invested in Gala and Immutable. I think they have done well in understanding the definition of Web3 and native Web3 users. The definition of Web3 is about the ability to own digital assets and have interconnectivity, where different assets can be transferred between different games, and there are smart contracts with game logic. This is also one of the reasons Vitalik likes blockchain, because his favorite game logic has been changed by centralized institutions. Considering all these native Web3 features, the prospects for Web3 platforms in distribution are very optimistic. But it definitely needs the help of Web2, because it’s not just about developers and capital, but also about how we leverage the talent we gained from Web2.

The Artistic Charm of the RWA Track

Host: Zoie Zhang, ambassador of Dev3 and investment partner of LK Ventures;

Guests:

Calvin: Senior partner from Plutus VC, a $200 million venture capital fund established in 2016;

Francis: Co-founder of Udaya, providing incubation platforms for various cryptocurrency projects;

Jaden: Investor from Flow Traders Capital, responsible for investments and partnership in the Asian region;

Barry: Investment manager from LIF, focusing primarily on early-stage investments in Web3 and providing incubation and consulting services.

Q1: The core concept of RWA (Real World Assets) is to create a virtual investment tool on the blockchain that is tied to real-world assets, such as real estate, precious metals, and artworks. Recently, RWA has gained significant momentum. What do you think are the main challenges for RWA at the moment? What are the main regulatory and legal challenges? Any suggestions for addressing these challenges?

Calvin: RWA has tremendous potential, but when it comes to securities, it faces legal and regulatory challenges. Securities are the only investment field that is fully regulated globally, requiring licenses or regulation, which is one of the main challenges to enter this field. Of course, many people are trying to circumvent securities issues by launching NFTs and other methods, but this does not truly demonstrate the real value of RWA investment assets. Only through regulation can clear answers be provided, and I believe that this uncertainty is the biggest challenge.

Francis: I think how you define “assets” is crucial for RWA. In the crypto industry, over the past few years, many developers have created a lot of virtual assets, such as NFTs, but it is difficult to explain the intrinsic value of these assets. Firstly, most people cannot derive actual benefits from them; secondly, participants tend to overtrade, with prices determining the asset’s value. However, in the real economy, the main purpose of financial assets is to benefit the majority, such as currency facilitating the exchange of different physical goods and improving people’s lives. So I think the main challenge is not to overly financialize all assets, but to focus on how to truly benefit people. One project we are discussing has the vision of “Bank the Unbanked.” This is important for many people who cannot access financial services. Only projects that truly create real value can last 10 or 20 years.

Q2: After discussing the regulatory aspects, what is the main value of converting real assets into RWA? What practical value do you think it brings in the tokenization process of real assets?

Francis: RWA indeed brings a larger audience and increases people’s access to global assets. I would like to add that RWA can bring greater convenience to general investors in investing in traditional financial markets through standardization and simplification of the purchasing process. For example, many people want to trade stocks in the United States, but opening a US stock account requires a lot of KYC and complex verification procedures, taking 3-4 weeks. However, tokenizing stocks significantly lowers the threshold and simplifies the restrictions on individual investors. This is part of the financial marketization. Regardless of your nationality or geographical location, you can access the best global assets, which also aligns with the new lifestyle of digital nomads. In addition, many individual investors have no access to well-priced bonds or purchasing channels, which can yield annual returns of 3-8%. If these assets are standardized and can be exchanged with tokens, it will open the door for investors to access various fragmented and opaque financial products. These are the two major values that RWA can bring.

Q3: As we mentioned earlier about liquidity, will enhancing liquidity also weaken speculative behavior, making the market more cyclical?

Jaden: From the perspective of traders, liquidity is the main attraction for trading algorithms. Higher liquidity brings greater price fluctuations and trading volumes, which is inevitable for the capital market. However, we need regulation to avoid any form of market manipulation. Valuing products is also a complex issue because we are still unfamiliar with it. But I believe regulations will bring more certainty, and price fluctuations will not affect the potential of RWA. I think the main advantages are reducing transaction costs, eliminating intermediaries, and the possibility of different asset combinations. If various types of assets are put on the chain, they can be recombined like Lego, creating more possibilities. Currently, this is still difficult, but if it is put on the chain and combined with existing DeFi applications, it will become very simple and standardized.

Q4: How to protect consumers’ rights and interests in RWA assets, and what are the risks of trading RWA and using RWA?

Barry: I think like current DeFi protocols, RWA also has security risks. First, the project party may not be able to maintain users’ assets. For example, a P2P lending protocol lends to a car manufacturer in Africa, but the other party cannot repay, resulting in bad debt of $5 million. The project party cannot control the collateral, ultimately making it difficult to recover user funds. So we need to pay attention to how to solve these problems, and currently, regulatory and investor protection methods are not mature enough.

Calvin: Currently, many large companies are actively participating in this field. In Singapore, ADDX has tokenized many funds, and so on. These funds will not be abused because Singapore and Hong Kong are leading in this area. Singapore has issued 3 or 4 licenses, one of which was acquired by Formal LianGuaiy. In Hong Kong, three licenses have been issued, and they are working with lawyers to ensure that RWA or asset tokenization is absolutely reliable, as the government will not allow you to have a tokenized security license with vulnerabilities that allow people to embezzle $2 million. If you want to raise funds without issuing tokens, in this case, you can categorize shares of different types of game projects and tokenize these shares for people to support your game or game studio, etc. I think in the next 5 to 10 years, secure tokenization will disrupt many markets and may cause some securities exchanges to lose business.

Project Roadshow

On September 10, 2023, we witnessed an exciting innovation event for Web3 & AI. Participants showcased amazing creativity and technical strength to the judges and guests. Now, let’s review two remarkable projects and relive the excitement of the event.

US3R Network is a blockchain application development and distribution platform for developers and users. The project aims to solve the current difficulties in blockchain application development and the low number of users by optimizing user experience. The platform provides development tools, social functions, etc., which can reduce the development threshold and improve user access and usage experience. The project has recently won awards in multiple hackathons, and its subsequent development is highly anticipated.

Gabby World is an AI-driven metaverse game and creation platform. The project uses blockchain and AI technology to build a virtual world driven by user imagination, where all characters and logic are generated by AI. The platform supports users in creating personalized characters, equipment, scenes, etc. through functions such as image generation, and can interact with digital assets. The project has great imagination and playability. Its technical prototype has been completed, making it an innovative attempt in the metaverse field.

Gameland brings revolutionary social data analysis solutions to the game ecosystem.

Web3 Event is a globally adopted web3 event platform for the public.

SourceDAO is committed to breaking the traditional work model where employees are constrained by companies, and promoting a more flexible and efficient new labor relationship for the Web3 industry based on DID and SBT. They have built a matching competency assessment system for them.

Smarter AA Wallet combines AI and Web3. The AA wallet further upgrades the current account abstraction (AA) and chain abstraction, making demand abstraction the ultimate way for Web3 interactions, which is more natural and efficient than the current Web2 interactions based on applications.

TikBridge is a decentralized full-chain bridging protocol that integrates cross-chain assets, transactions, and aggregate management.

In the pitching session of this hackathon, we witnessed the creativity and efforts of all participants. They transformed their ideas and creativity into practical and feasible projects, which represent the latest achievements in innovation and technology, and bring us unlimited imagination space for the combination of Web3 and AI.

Above is a review of this hackathon. Thank you for your support and attention!

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