Blockchain was the hype five years ago. Companies from start-ups to corporations were interested to incorporate the technology into their business, as the appeal of a decentralised system that distributes activity and information away from a central authoritative group was touted as a “great equaliser” for all. It was also a great buzzword to attract more capital.
But when 2022 became the year of glorious scandals and failures in the cryptocurrency world, blockchain — the technology that supports some of the cryptocurrencies — was no longer the cool kid around the block. A report by venture capital (VC) firm Andreessen Horowitz in 2022 showed that Web3 start-ups did well only when the prices of cryptocurrencies were high. After the market downturn last year, VC funding for cryptocurrency projects fell by 91%, while funding for technology infrastructure providers dropped by a smaller 59%.
Despite this, the sentiment that “builders keep building regardless of market conditions” lingered. Notably, Node Real, a start-up providing blockchain-as-a-service, raised US$16 million ($21.5 million) in its series-A funding round last May, the same month as the Terra Luna crash. NodeReal’s founder Dr Ben Zhang, who was a founding member and builder of Binance’s blockchain network BNB Chain and an executive director at Morgan Stanley for nine years, says this is evidence that investors still have faith in the underlying technology of decentralisation.
Drawing from his years of experience working in the fintech space, Zhang says he saw the opportunity for a faster, more comprehensive and scalable blockchain service provider when BNB Chain reached one million active users daily. He wanted to give users quicker access to the blockchain with no latency, so he launched NodeReal with its flagship product MegaNode, a blockchain remote procedure call service that can serve 700,000 queries per second. At the same time, NodeReal can support 14 blockchain networks, including ethereum virtual machine (EVM)-compatible ones and non-EVM chains.
In an interview with DigitalEdge, Zhang explains the value of blockchain at a time when the world has seemed to move on to the next flashy toy — generative AI; how blockchain-as-a-service will be the tool for the next stage of Web3 adoption; and market opportunities in the next internet generation.
What is the value of blockchain-as-a-service, and how does it work?
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My years as a major coordinator for Binance’s BNB Chain allowed me to grow small protocol layers as far as layer three, and I saw a big opportunity for mass adoption when we reached one million active users daily. It meant that there was a need to improve infrastructure requirements to meet the demand, and the network needed to be scalable, so we built a really complex information provider that can satisfy such high volumes.
Taking the network as a highway, it should have connecting roads that will enable vehicles to enter the main highway. What we’re doing is to ensure those roads don’t face traffic jams. We’re also trying to help others build their own highway, so that they have time to build their own homes.
In Web2, an internet agent who needs to deploy services and data would turn to an infrastructure-as-a-service provider like Alibaba Cloud or Amazon Web Services instead of building their own cloud infrastructure from scratch. Similarly, for companies that want to be in a decentralised system, NodeReal provides a blockchain infrastructure that Web3 companies can deploy without having to build on their own.
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Why should Web2 companies move into Web3?
We’re not trying to go crazy with our Web3 innovations right now because there are no existing silver bullets. There’s no one practice to follow, and it is something like the internet back in 2000 when everyone tried different ideas — such as having an internet website or exploring the internet-of-things.
A similar thing is happening in Web3. We see some of the use cases have matured, so we are working with our customers to ensure the underlying infrastructure is ready to support new innovations.
Web2 and Web3 are very different. The key difference is that Web2 is to read and write, while Web3 is all about ownership. For example, if you publish something on a platform like Facebook, you’re able to read and write the content yourself, but the true owner of the data is Facebook. For these Web2 giants with a big existing customer base, they will have no desire to convert and lose their database to Web3. But we have seen some companies willing to do this, including Nike with their non-fungible token (NFT) collectables.
Let’s say Singapore Airlines C6L and Starbucks issue their loyalty programmes on the blockchain. Web3’s open market will allow users to have control over their own information to decide where they would like to deploy their rewards to, without having to go onto the company’s website directly. When you give more power to the users, this could totally change the relationship between platform and user, and the fundamental business model of a company.
What are some areas you’ve identified that are big for Web3 adoption?
I used the example of loyalty previously to demonstrate the benefits of moving from Web2 to Web3 because it is straightforward and easy to understand. GALXE, one of the largest Web3 loading platforms, is a partner utilising our underlying infrastructure, and this allows them to provide a good loyalty programme to its users.
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There are three other areas that will drive Web3 adoption. The first is the financial services sector. Many asset management companies and trading houses we have spoken to in Hong Kong and Singapore want to have access to both centralised and decentralised platforms, to provide better services for their partners. For NodeReal, we’ll provide the information service so that they can access the blockchain seamlessly.
The second is the gaming and entertainment industry. Using Axie Infinity as an example, the game has its own loading chain that enables more than 100 games and 10 million daily active users. If it deploys its games onto the blockchain, none of the current layer one or layer two highways can handle the volume, which is why it built its own.
Because the user base for games and entertainment is super large, we believe there will be a demand for blockchain-as-a-service in managing the volume. We have two existing pilots, including one where we’re working with a top Korean game studio on completing their gamechain.
Finally, we believe this will be the year for huge data opportunities in the form of NFTs. There will be opportunities to authorise your own data and commercialise it. For example, if you wrote an article that was published on a platform like The New York Times, it would be up to the company to pay you for your work. But if you published it on a decentralised marketplace, you could find more interesting ways to monetise and commercialise your product.
What does the next few months look like for the Web3 space?
According to the report by Andreessen Horowitz, we are about 10 years away from the blockchain boom, from all the angles, such as technology, maturity, ecosystem readiness and even talent. You can see that all these factors are not fully ready, much like the internet 20 years ago.
I think the existing innovators in Web3 need to try and learn from the mistakes of the internet age. Back when everyone was experimenting with ideas such as the “internet plus”, many ideas were killed off.
For Web3, we can be smarter by learning about the fundamentals of Web3 technology and deeply understanding it before creating. But I also believe that mass adoption is coming, as after the downtrend last year, the whole ecosystem has become more resilient. With more regulations in place, we can expect to see sentiments improving.
With regard to funding, I think people have grown more educated about blockchain and cryptocurrencies. When I speak with my investors now, we have deep discussions about different projects, and I’m seeing more stringent due diligence processes. I won’t say the funding for Web3 projects has stopped; just that investors have grown smarter and more cautious.
