By Shuyao Kong
5 min read
Crypto conferences used to be quite the scene in Shanghai: fancy venues in five-star hotels, rooftop bars overlooking Huangpu River at The Bund, where chandeliers sparkled above well-dressed, champagne-sipping attendees, chatting the night away before heading out to clubs where more champagne gets poured.
That scene is no more, now that China’s “zero Covid” policy has turned the buzzing city into a ghost town. Some residents have reported being cooped up in their homes for three months, not once stepping outside.
But the lockdown did not stop ETH Shanghai from happening—this year, a virtual-only event.
ETH Shanghai went live May 20 with an unusual list of speakers: a combination of high-flying Chinese and U.S. government officials, and O.G. Ethereum founders.
The two groups couldn’t have been in greater contrast, and the dichotomy reflects how the crypto community is trying to survive in China: striking a balance between being politically correct (at least in public) but still true to crypto’s grassroots spirits.
What’s really going on in the Chinese community these days?
I just got a phone call from a business school friend. He had started an Invisalign-esque direct-to-consumer company in Shanghai in 2019. The team raised a bunch of VC money, but couldn’t gain adoption. As a result, he pivoted from oral health—a rather hot industry back in the day—to crypto.
My friend is far from alone. Web2 talent has been severely crippled by the Chinese government’s “zero COVID” policy and tech crackdown. Major tech giants’ stocks have halved, if not worse. Many brilliant engineers have seen no salary increases, nor equity bumps. What’s worse, many companies have started to lay off engineers in anticipation of a global economic slowdown.
Tech giants have become tech dwarves.
In the meantime, these brilliant engineers are seeing their not-so-talented friends getting rich by buying profile pictures, participating in algo-stable Ponzi schemes, or even walking on StepN.
Many of them said they feel bitter, yet still want to join the Web3 Ponzi revolution.
Now comes the tricky part. To join the revolution, these engineers must always account for regulation, because the Chinese government is not expected to revert its crypto ban any time soon.
Three creative strategies have emerged as Chinese founders navigate the space:
Most projects choose the anonymous route because it’s safer to stay under the radar. The issue, however, is the type of projects that Chinese founders tend to start. During DeFi summers, many simply forked existing western projects and launched yield farms. During NFT summers, many simply contracted a Fiverr designer and launched 10,000 monkey PFP projects with a fake roadmap.
Not all Chinese projects are rugpulls, of course. But anyone who wants to build a serious business has to stay low key, which means they have to refrain from public marketing, shilling, or narrative building. Without marketing, projects struggle to take off.
The second route allows you to be public about being a blockchain startup by waving the academic flag. Many of China’s layer-1 protocols like Conflux used this tactic. They openly collaborate with university professors, research labs, and innovation centers. Many also have an active student community that helps organize meetups, hackathons, even mini-conferences.
Western Web2 companies want to collaborate with these “deep tech” companies as well, to keep up with the innovation curve.
These projects are in the safe zone, at least temporarily, because China wants to develop capability in the areas of distributed systems, cryptography, privacy, and blockchain.
The main challenge these projects might face is if they ultimately launch a token, and that token becomes volatile. The Chinese government does not like volatility, and it might extend the ban to block these projects.
The last option, and an increasingly popular one, is a combination of having founders and marketers living abroad, while the tech and delivery team live quietly in China. This model allows teams to raise VC money from international funds, run campaigns that target global audiences, and build robust communities, enjoying China’s low-cost tech labor without the worry of being censored by the Chinese government.
Amusingly, most projects that follow this model tend to claim that “we are not a China project,” as if being associated with China is bad.
This brings to my next observation: China is not a place, it’s its people.
As Chinese projects expand abroad in a time of increasing decentralization, China has become less a place and more about its people. The people can live in Singapore, Australia, America, or Europe. Location doesn’t stop them from organizing, supporting, and participating in ETH Shanghai.
We’re already seeing Chinese diasporas making a mark in the crypto space. Remember earlier in the year when I predicted that China would produce a hit crypto game? Well, that’s already happened with the rise of StepN, a move-to-earn game that ignited an Axie Infinity-like frenzy.
The project, standing at a market cap of $680M, is founded by Chinese diasporas in Australia, supported by VCs in India, China, America, and practically everywhere else.
Even as the world became increasingly segregated in the time of COVID, the boundaries around what it means to be Chinese are truly blurred. What unites us all isn’t so much nationality, but the spirit of crypto.
Granted, that spirit is affected by a wider array of factors, judging from how many of my friends escaped China in recent months to start a nomadic, crypto-focused life.
Still, I’m optimistic.
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