The Blockchain Debate Podcast

Motion: China Will Lead the World in Blockchain Innovation (Matthew Graham vs. Avichal Garg)

March 09, 2020 Richard Yan, Matthew Graham, Avichal Garg Episode 5
The Blockchain Debate Podcast
Motion: China Will Lead the World in Blockchain Innovation (Matthew Graham vs. Avichal Garg)
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The Blockchain Debate Podcast
Motion: China Will Lead the World in Blockchain Innovation (Matthew Graham vs. Avichal Garg)
Mar 09, 2020 Episode 5
Richard Yan, Matthew Graham, Avichal Garg

Guests:

Matthew Graham (@mattysino) - debating FOR the motion
Avichal Garg (@avichal) - debating AGAINST the motion

Host:

Richard Yan (@gentso09)

Today’s motion is “China will lead the world in blockchain innovation.” 

With a huge market, vast amount of capital, loose regulations (in a de facto sense anyway), deep bench of talent and prowess for imitation, China is a powerful incubator of tech and product, both in blockchain and other tech industries. China is the place for concentration of mining power, top exchanges and now potentially a pioneer for national digital currency. Global crypto investors may be interested in knowing, will true innovation come out of China? And for western entrepreneurs and operators, what can they learn from their Chinese friends? Today’s debate will help address these questions.

The guests we have for this episode are founders of two crypto funds: One is a US transplant into Beijing who now considers it home. While the other has been a Silicon Valley lifer since college.

If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter.

Please note that nothing in our podcast should be construed as financial advice.

Source of select items discussed in the debate:

Show Notes Transcript

Guests:

Matthew Graham (@mattysino) - debating FOR the motion
Avichal Garg (@avichal) - debating AGAINST the motion

Host:

Richard Yan (@gentso09)

Today’s motion is “China will lead the world in blockchain innovation.” 

With a huge market, vast amount of capital, loose regulations (in a de facto sense anyway), deep bench of talent and prowess for imitation, China is a powerful incubator of tech and product, both in blockchain and other tech industries. China is the place for concentration of mining power, top exchanges and now potentially a pioneer for national digital currency. Global crypto investors may be interested in knowing, will true innovation come out of China? And for western entrepreneurs and operators, what can they learn from their Chinese friends? Today’s debate will help address these questions.

The guests we have for this episode are founders of two crypto funds: One is a US transplant into Beijing who now considers it home. While the other has been a Silicon Valley lifer since college.

If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter.

Please note that nothing in our podcast should be construed as financial advice.

Source of select items discussed in the debate:

Richard:

Welcome to another episode of the blockchain debate podcast where consensus is optional, but proof of thought is required. I'm your host, Richard Yan. Today's motion is: China will lead the world in blockchain innovation with a huge market, vast amount of capital, lose regulations (in a de facto sense anyway), deep bench of talent and prowess for imitation, China is a powerful incubator of tech and product both in blockchain and other tech industries. China is the place for concentration of mining power top exchanges, and now potentially a pioneer for national digital currency. So global crypto investors may be interested in knowing will true innovation continue to come out of China and for Western entrepreneurs and operators. What can they learn from their Chinese friends? Today's debate will help address these questions. The guests we have for this episode are founders of two crypto funds. One is a U.S. Transplant into Beijing who now considers it home, while the other one has been a Silicon Valley lifer since college.

Richard:

Also, be sure to check out our previous episodes too, on Bitcoin's store of value status, tokenization and smart contracts, DeFi and Bitcoin Halvening. If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter. Please note that nothing in our podcast should be construed as financial advice. I hope you enjoy listening to this debate. Let's dive right in!

Richard:

Welcome to the debate: Consensus optional, proof of thought required. I'm your host, Richard Yan.

Richard:

Today's motion: China will lead the world in blockchain innovation. This topic is near and dear to my heart for personal and professional reasons. I'm originally from China, but spent my most formative years in the U.S. And have been working in New York and Silicon Valley for many years, so I'm excited to hear our debaters perspectives on this topic.

:

To my metaphorical left is Matthew Graham, arguing for the motion. His position is that China will lead the world in blockchain innovation. In fact, he's calling in from China where he runs a crypto business. To my metaphorical right is Avichal Garg, arguing against the motion. His position is that China will not lead the world in blockchain innovation. In fact, he previously admitted to being a Silicon Valley maximalist. Friends. I'm excited to have you join the show. Welcome!

Avichal:

Thanks for having us.

Matthew:

Thank you.

:

No problem. So here's a bio for the two debaters. Matthew is CEO of the Beijing based Sino Global Capital, currently focusing on its liquid value crypto hedge fund, which incidentally just announced their series B investment into FTX. Previously he was a managing director at CBC, a Chinese private equity fund with limited partners that included TCL and the cities of Shenzhen and Chongqing. Previously he managed a New York city based trading desk at a boutique technology focused hedge fund.

:

Avichal Garg is managing partner and co-founder of Electric Capital. He is a successful serial entrepreneur with executive experience at Google and Facebook, which acquired his previous company in 2012 at Facebook. He was director of product management for the local product group. He is an investor in crypto companies and protocols such as Anchorage, Bitwise, Celo, Coda, Cryptokittes, NEAR, Spacemesh, Lightning Labs. He also invested in many non crypto tech firms such as Color Genomics, Cruise, Boom Supersonic, Newfront Insurance, Whisper.ai, Optimizely, Threads, and Notion.

Richard:

The debate has three parts: An opening statement from both sides. Starting with Matthew. The second round is the body of the debate with me directing questions to the debaters. Both sides are highly encouraged to follow up with their opponent after hearing answers on the other side. And of course, they're also free to respond to each other's points raised during the opening statement. The last round is audience questions selected from Twitter. And we'll end with concluding remarks from both debaters. Currently, our Twitter poll shows that the pro-China side is actually roughly the same as the other position. We'll have a post-debate poll, and whoever tips the ratio more to their side wins the debate. Okay, let's get started with the opening statement. Matthew, please go ahead.

Matthew:

China will lead the world in black chain innovation, if it's not already. And here are 10 reasons why. The first reason is that it's a classic case of innovator's dilemma, only played out on the country scale rather than the company's scale. The U.S. Is the incumbent, with the hegemony of the United States dollar as well as the influence of wall street. And China is the disruptor. And there, I'll give you two, I think powerful examples of how that comes into play. First example, the United States - it's a leapfrog technology situation. And by way of analogy, I have not even carried my wallet in China in almost two years. You just don't need to anymore. Everything's digital. You use Alipay, you use, WeChat Pay.

Matthew:

Meanwhile, the United States, when I go back, it's cash. It checks, it's cards. There are very powerful advantages to being the disruptor. We see that with digital payments. We'll see that in blockchain to a second example that I think is very powerful is the fact that FTX exchange in Hong Kong, people are trading futures on the U.S. Election, which you can't even do in the United States. So the fact that the United States is playing rearguard, and having a lot of regulations and pushback on the blockchain sector really puts the United States at a disadvantage. That's the first example. The next nine, I have to go a little faster.

Matthew:

Reason number two, is that it's a strategic technology for China in a way that blockchain is not in the United States. The Chinese government uses blockchain as like 5G and therefore there are numerous incentives and subsidies in the blockchain sector, something that's ramping up very quickly.

Matthew:

Reason number three is that there's already a very powerful center of gravity for both blockchain and crypto in terms of investment, in terms of mining, in terms of exchanges. Reason number four, related to the top-down economy. Things are just speeding up for enterprise blockchain in China, whereas they're cooling down in the United States, any United States at this point, it's a bunch of IBM consultants talking about food in a room trying to sell blockchain services. Whereas in China, it's Alibaba, Baidu, Ping An insurance, Tencent, Ant Financial, numerous companies picking up the ball in response to the Chinese government initiatives. Reason number five, we will play dirty. I say "we'Il," I guess, cause I am based in China. Number five is the play dirty. If a better solution for some aspect of blockchain comes out of Silicon Valley, it'll be picked up in China by the next day.

Matthew:

Reason number six, different attitudes towards privacy and data provide a powerful advantage for people that are looking to implement, implement blockchain solutions. Reason number seven, DCEP and Libra, I think is, could have been a good example about different approaches to blockchain innovation, corporate versus stemming from the government, top-down economy, et cetera. But we've already seen what happens to Libra. And I think that's a very powerful example. Reason number eight, early adopter culture is tremendous in China. Number nine, innovation is here. It's not like before where it's only copying. Now we have real innovation coming out of China with examples like Tiktok and WeChat. Now it's Facebook and companies like that, they're actually copying from China. And finally a scale I checked this morning, there are 37,431 companies with blockchain in their name in China. Over 37,000. So in terms of consumer adoption, in terms of companies that are looking to innovate in the space, it's very hard to compete with 1.4 billion people. So that's 10 reasons why we think that China, if it's not already, will be the leader in blockchain innovation. Thank you.

Richard:

Thank you Matthew. I kind of lost count after reason number six. Just kidding. But all very, very convincing. So Avichal, I think you've got your hands full. Time for your opening statement.

Avichal:

Not as cleanly numbered as Matthew's statements, but I'll kind of make a couple of observations. So you know, to frame the problem up, I think if you're talking about global innovation, there are, kind of by definition, two pieces to it. One is the idea of being global and two is the idea of being innovative. I would assert that, on the first, China has struggled when it comes to software and being able to have a global footprint. Tiktok I think is an interesting example as a first case. I mean, I think we'll see what happens going forward. But historically speaking, the software platforms that have existed in China have been great for the domestic market, but have not been able to be exported globally. In part, this is for cultural reasons. In part, this is because people don't love the idea of giving the Chinese government all of their data and all of their access to, you know, basically transactions or personal data, whatever the case may be.

Avichal:

And part of it is that actually, for U.S. Companies, having the air cover of a U.S. regulatory regime and a footprint here, offers them a large enough domestic market to build a meaningful business. And it becomes very easy to scale into LATAM and Europe, which culturally are very similar to North America. And so when you're talking about global footprint, I think, you know, historically American companies have actually done quite well. The second part of the question, I think, not only have American companies done very well, but, Chinese companies have generally struggled when it comes to software. Anything that touches the end user, anything that touches regulated markets, Chinese companies have historically struggled. Of course, with commodity manufacturing. You know, they've really excelled. So I think, you know, if we were talking about just the mining layer, for example in blockchain, you know, I think you can make a strong case that China will lead the world in innovation, but really blockchain is about the software layer.

Avichal:

And that's where most of the value capture will be. You know, the second part of this around innovation, you know, to innovate, I think you need kind of three key ingredients. One is technical depth. truly sort of, you know, pushing these step function changes into what's possible. The second is access to talent to take these insights and actually turn them into products and bring them to market. And the third is long-term patient capital. And all three of these really have very strong network effects, and you need all three to succeed. And historically, Silicon Valley has had access to all three components. And I think China's done a really good job. I mean, obviously school like Tsinghua, and you know, there's great talent in terms of how to scale companies domestically, but China's struggled in terms of how you scale companies in a way that will, that will map globally.

Avichal:

Whereas that muscle, exists very deeply in Silicon Valley. you know, it's not a surprise that Google, for example, was scaled by people from HP and Excite. Facebook was scaled by people from Google. you know, Uber and Lyft have been scaled by people from Facebook, and this pattern repeats. And these are all global companies and these are not just American domestic companies. and you know, so I think if you look at that pattern, I think it's pretty fair to say that China has an early lead right now in a lot of perspectives in blockchain. but this is actually very consistent with how it's worked historically, where the U.S. Is not the first to adopt many of these things. He, the U.S. Was not the first, you know, to mobile for example. Right? Blackberry did it before for Apple; or social networking or share economy or, you know, there are many, many examples. Self-driving, you know, Silicon Valley is often not the first, to these insights, but Silicon Valley is very consistently the one that's able to productize it, get it to scale and take it to the rest of the world.

Avichal:

And so I suspect the same thing will happen here is the U.S. Will be a little bit slow, but really the combination of technical depth in terms of truly innovative technical depth when you're talking about cryptography and distributed systems, and you know, truly hard technology, plus, we need scale, that to actually scale these businesses and products and take them to market, plus long-term patient capital. If you kind of look at where those three things intersect, it's basically in Silicon Valley. so you know, I think on the two sorts of core premises of, whether you're talking about, when can China win in terms of a global context, I think historically has not been the case, and I suspect will not be the case here. When you're talking about truly innovative things that you're able to get to scale, cause I think you can't just sort of have an idea. I think you have to actually bring it, bring it to everybody and get it to scale. The U.S. Historically has done quite well and I think China has struggled in this.

Richard:

Fantastic. Let's move on to the next round. And this will be the round where I'll be shooting questions to you both, but feel free to respond to each other because there's a lot to unpack on both sides. And hopefully my questions will be sort of tied into the cases that you have laid out. So my first question is for Matthew, what are some examples of blockchain innovations on China's side that the West or the rest of the world can learn from, and any other parallels in other industries? And in fact, I'll just ask the follow-up question as well. Could you give examples, innovations in infrastructure/hardcore tech other than revenue models?

Matthew:

So I think you really have to, especially considering the unique characteristics of business in China, I think you have to divide that question into two parts, public and private. And so, public -- I think you have a combination of government subsidies and government incentives that are coming to fruition in terms of things like the pilot blockchain zone in Hainan. But then you also have a lot of interesting such as traffic tickets with blockchain as a backend in Shenzhen. You have a tea traceability platform in Yunnan province, and you even have a private public partnership with a Hangzhou internet court, that is experimenting with judicial smart contracts. So that's public, but then also private. I think you have, this is a huge differentiation, a huge, huge gap in terms of emphasis I think between China and the West where you have really tremendous energy going into enterprise blockchain in China where it's, it's cooling off actually to some extent in the West.

Matthew:

So for example, you have insurance goliath Ping An, which is working on integrating insurance and blockchain especially doing a lot with zero knowledge proofs. You have companies like Jingdong, JD, which is another enormous company, which is leveraging its in-house blockchain expertise to have a platform called JD chain for SME, blockchain adoption, helping SMEs integrate blockchain into their business. They also have an open source community with five different research areas. Then you have Ant financial, which is working on blockchain as a service and also cross border remittance, which is obviously a very obvious and huge potential use case. And Tencent and Baidu that also are working on enterprise blockchain, blockchain as a service; Baidu in fact has their, as what they call their Xuperchain, which is in beta. And that's again a blockchain for SME use cases. So I think you have just a tremendous outpouring of innovation. The enterprise blockchain is heating up in China whereas it's actually cooling off a little bit, by my observation in much of the West, including the United States.

Richard:

Okay, great. Do you have anything to add, Avichal? You can also respond to his earlier points, that you didn't get to address directly in your opening statement if you want.

Avichal:

Yeah, I think, you know, some of those points are interesting. I just go back to this idea that all of those examples are, I think very interesting domestic examples of being successful inside China. Not at all clear to me that they will carry outside of the domestic market. And that's not to say that those companies won't be successful. I mean, I think those are, there' re some massive companies. And to Matthew's earlier point, you know, 1.2 billion people as a global, as a domestic market is remarkable. But you know, when I think about, for example, some of the things that he called out around let's say zero knowledge proofs, you know, all of that research happens in the U.S. when you're talking about distributed systems, and actually like driving the state of the art in terms of the consensus algorithms and how to actually make these things scale happens in the U.S. you know, when you look at kind of the crypto native companies that have potentially springboard, to being able to go global, you know, other than finance, which is sort of, you know, I would consider that Chinese, but, you know, perhaps it's the first crypto native company.

Avichal:

You know, you start running through the list of just the things that are the biggest, either in terms of profit or in terms of reach, you know, Ethereum, Ripple, Stellar, Coinbase, Filecoin, you know, down to the new, the new generation of projects that are launching in terms of truly crypto native, you know, DFinity, Blockstream, Algorand, Oasis, Near, you start running through the lesson and Coda and you start saying, wow, like the really truly crypto native stuff is here. but I would also argue that, you know, on the enterprise side, if you look at, American companies that are, that are embracing this, you know, Fidelity, Facebook, you know, ICE, which runs the New York stock exchange. They're there by default. They're global companies. They're not just American companies. And so kind of back to this idea of "we'll try to win on a global scale."

Avichal:

You know, I think the crux of it really rests on, will people like Alibaba be able to take these insights from the domestic market and actually bring them to the rest of the world? Or will they be actually really fantastic insights that American companies look at and say, I know how to package this for Americans and Europeans and in Latam, and I can take this to the rest of the world, and I already have a bunch of distribution and reach and brand people on the ground and the rest of the world. And so really kind of, at least how it's worked historically is then the American companies bring it to market and scale it in a way that nobody else can. which I suspect is what will happen here. Even though I fully grant a lot of the insights that Matthew's talking about in the Chinese domestic market are real.

Avichal:

You know, another great example I think is, which, which Matthew didn't talk about is because, the financial markets have a different regulation in China than the U.S. There's no SEC there. You see some really clever and innovative insights on the token side in token economics, coming out of projects with Chinese roots. But I suspect what will actually happen is those will get packaged up and brought to scale from companies that are outside China. And those insights will kind of be carried to scale as they have been in past, disruptive waves by non-Chinese companies. And so, you know, I think it actually sort of fits into how I think the world will play out, which is I think China is doing a lot of really domestically innovative stuff right now, but it'll get carried globally by American companies.

Richard:

Matthew, do you want to respond to that? Otherwise we can follow up to the next question.

Matthew:

I think there are some good points in there, especially in terms of research. But I think it's important to understand that crypto -- the reputation is mixed up internationally. There are a lot of legacy issues with the way the industry developed, reputation-wise. I don't think that put a damper on research though in the United States. Whereas in China with the government policies, we're seeing a huge difference in quality of people working in the field, in terms of engineers, in terms of research being done. Especially as companies like Alibaba pouring money into the space, while US has a huge lead currently, you might want to put an asterisk on that in terms of how that will play out in the future.

Matthew:

The second point I want to make is that, the "going global" is a strong point. To some extent, there's a bifurcation as we've seen with the Internet. That could play out again in the blockchain space. I do think Chinese companies will do well in places like South East Asia and Africa. Well, Chinese companies might not do well in United States, and Europe might be to an extent a neutral playing field. If anything, I think Chinese companies will have a slight advantage in places like South East Asia and Africa.

Avichal:

Yeah, I think that's a good insight too. I mean Southeast Asia certainly is, is almost sort of home turf for China. I think Africa will be really interesting to see play out. I think Middle East will be really interesting to see play out. One kind of interesting X factor here that we haven't talked about is the potential reintroduction of India into this ecosystem. just the Supreme court rule that the RBI, the Reserve Bank of India can't block people from having access to crypto and preventing banks from giving licenses and so on. And it's almost like, you know, in like video game parlance, you know, like player two has entered the game. And so it kind of felt to me like, wow, you just had another billion user market potentially come back online here. And I think they're coming from a cold start.

Avichal:

They're coming from way behind in a lot of ways, but at the same time, India has done an interesting job of, for example, having a national identity system. And moving towards a digital money and in some of the ways that China has, but is, sort of, geopolitically, economically and financially much more aligned with the West. And so it'll be interesting to see how that plays out. I suspect, you know, if India is able to actually get, its sort of juices going here, I think, you know, that that will sort of play into this sort of, China versus rest of world. And if you know, they are actually a meaningful player, I think American companies plus, Indian companies and the size of those markets will be quite hard, I think, for Chinese companies to overcome just in terms of market size and reach.

Matthew:

I have to disagree about India actually. And the reason why is that in terms of, political alliances and things like that, I think that may be true. But in terms of the actual business climate, I think it feels much more familiar to Chinese entrepreneurs. It's not structured as in the United States. It's more a case of you got to get in there and it, it starts with the relationships. It's gonna get a little messy. it's a developing economy. It feels much more familiar to Chinese entrepreneurs and Chinese companies like Baidu. I think that, if an American company and a Chinese company are going to face off in India, due to it feeling so much more like a home turf, I think the Chinese company will have an edge nine times out of ten.

Avichal:

Yeah, I disagree with that. For a couple of reasons. I think, one, there are like historical alliances here. You know, India and China generally don't get along. In India, government is willing to be a little bit more protectionist. So I wouldn't be surprised if they sort of create regulatory challenges for Chinese companies. But you know, it also kind of depends on which American companies you're talking about, right? I mean, if it's Google or Microsoft coming in or if it's many of the financial firms coming in, they're actually run by Indian CEOs. Right. Which kind of makes it a home turf for them in many ways. So, you know, I think depending on who's going to market, and which companies you're talking about, I don't think it's going to be as nine out of 10 in favor Chinese entrepreneurs just given that so many of the cultural roots and so many of the interconnections between the companies themselves, I think skew in India's favor.

Avichal:

But sort of stepping back a second, I think more, more macro. I look at that sort of as icing on the cake, right? It's yet another billion user market that I think is slightly more, allied with the West versus China. But even without that, I think historically speaking, American companies being able to bring software to the rest of the world has been something that they've demonstrated time and time again that they can do. Which, I think with the exception of TikTok, I can't think of a Chinese company that's managed to do that. So it's not quite zero times that it's happened, but you know, one time that's happened, whereas, you know, thousands of times for American companies. but I kind of look at India, I think just sort of as icing on the cake if it were to happen. I think if it were to follow, it still falls slightly in America's favor. And so it sort of, you know, but it's icing. I know the, I don't think you even need that necessarily.

Richard:

Okay, great. Let's move on to the next question. And I'm sure these themes will get repeated as I asked the other questions. So this question is for Avichal, it's slightly longer. It's about the copycat problem. An American political strategist once described China undertaking a national strategy of copying Western tech while shutting out Western from local markets. While the latter may not apply to blockchain, the former is certainly true. I'm also reminded of a joke about how China is 12 hours behind any kind of innovation in the U.S. because Chinese people wake up 12 hours after Americans go to bed. Your thoughts on this phenomenon and whether Western competitiveness is weakened as a result in the blockchain sphere and outside of it.

Avichal:

So I think the sentiment is no longer true. You know, I think it's, it would be a tremendous understatement, and sort of underselling of what Chinese entrepreneurs and Chinese -- the economy frankly has pulled off in the last decade. I think it may have been true 10 or 15 years ago to say, there's a lot of copycatting going on. but you know, you look at the rides and success of many of these companies and they've had to solve very, very challenging problems, to get to the scale that they have. and do we have to be able to serve a billion user market domestically in China? They just had to be very, very innovative in many ways, in ways that are uniquely Chinese. so, you know, I think that sentiment is no longer true.

Avichal:

I think the question though is to what extent do, the way that the Chinese companies operate and the way that they run their businesses and the way they build their products and the way they go to market actually apply to the rest of the world. and I think that's where kind of, many of the companies that have, have struggled to, to go beyond those domestic borders is because very often, you know, the regulatory regimes are different. The way the companies operate IN the rest of the world is different. You know, the way that people make decisions on the ground is different. And this is why I think it's also been hard, frankly, for American companies or Western companies to break into China. Like I think the regulatory barriers that the government put up, and the challenges that they put in front of Western companies were absolutely real.

Avichal:

No denying that you can go talk to any software based business that's tried to do business in China. but I don't think that's the entirety of it. You know, I think it's only a small part of it. I think the reality is that the way that American companies and Western companies have built software often is just not a fit For the Chinese domestic market. So, you know, I think that, I disagree with the sentiment of the statement and I think Chinese companies are actually very innovative. it's just the question I always have is, are they innovative and are they good at, AND their core competencies, things that will actually allow them to scale on the rest of the world or by virtue of China being such a unique place in and of itself and do the unique strengths of these companies sort of almost by definition end up containing them to, to China and Southeast Asia.

Richard:

Okay, great. I feel that innovation also comes in different flavors, right? There's innovation in technology research, hardcore tech breakthrough step function. There's also innovation in other forms such as school to market, regulatory arbitrage, relationship building and so on and so forth. And it feels like there's a flavor of innovation with Chinese characteristics that's going on and maybe the product out of that kind of innovation right now it doesn't apply to, outside of China, at least not in the foreseeable future or at least hasn't been proven out that way. And that's what's leading to what you were saying earlier, Avichal, about the innovations staying inside of China.

Avichal:

Yeah, I think it's sort of a product market fit or it's sort of like, you know, if you think of it as a biological system, and the Chinese companies are, are these entities, these biological entities, they're such a perfect fit for that biological ecosystem, but the rest of the ecosystems outside of that one particular ecosystem have such different characteristics, that you don't get quite the same fit. whereas a lot of the Western economies, either from a market perspective or regulatory perspective or user behavior perspective tend to behave much more similarly. And so the biological entity or animal that is, let's say Facebook or Google tends to have a much easier time finding biological fit in this other ecosystem that looks kind of like its home ecosystem. And so it has, yeah, I think it has less to do with how innovative the companies are and more to do with kind of the market dynamics of how easy it is to translate what your core competencies are and your domestic market to the rest of the world.

Matthew:

Certainly if you're talking about Western Europe, I would agree that U.S. Companies having an advantage, but, the world's so much bigger now. If you look at the distribution of GDP. If you look at the story of Africa rising there, there's so much more going on now than just Western Europe and the United States. And I think that again, I would return to the point that, China I think will have an advantage in Southeast Asia, and Africa, and I would add India, to that list. And pretty soon you're talking about, not just the vast majority of the world's population, but also, that GDP is going to add up pretty quickly. The other point that I would make is, I agree with a lot of the things you just said. I would express one aspect in particular though, which is, the point about the nature of Chinese innovation changing over time. And I would suggest that's why the fact that, or are so few examples such as TikTok is not as important because the landscape has changed so dramatically in recent years. The ability of Chinese companies to innovate, and the ability of Chinese companies to compete outside their home turf as well.

Richard:

Okay, great. Let's move on to the next question for Matthew, the president of China called for blockchain-ization on state media at the end of 2019. And this was the impetus for a period of bull market in crypto. What was the true intention of this action and what substantive progress have the public sector and private made in response to this initiative?

Matthew:

Sure. So that was one of the 10 points. And I think it's, it's super important to understand that the Chinese government views blockchain as strategic in the same way as it does 5G, AI and technologies like them. And, so what that means in practice is there's going to be tremendous pressure on not just state owned enterprises, but on companies like Baidu and Alibaba. They integrate and, blockchain throughout many aspects of their business and to, and to innovate in this space, there's going to be tremendous subsidies. there's going to be tremendous funding for R&D. really what we're going to see is, when China decides that something is a strategic technology, it's like a space race. It's like, okay, we're gonna, we're going to focus on 5G, and we're gonna focus on blockchain in the same way as the United States was focused on going to the moon in the 1960s.

Matthew:

And I think it's difficult to overstate how powerful that massing of energy, can be. so then specifically, in terms of some of the early results from that, there have been, we did a quick canvas yesterday and we found, in a matter of a couple of hours research, we've found more than 40 different, municipalities throughout China that have enacted new policies favorable to blockchain. and obviously there has been a huge rollout of, of new initiatives such as some of the ones that I mentioned earlier with Baidu is shoot, shoot, I do is shoot super chain, I guess it's called. It's super chain with an X. And I have to look that...

Avichal:

That's fantastic.

Matthew:

How do you say Superchain with an X? I'm not, I'm not sure. My problem is that we're a research team and we're always reading. So sometimes I don't know. I have to, and then we're speaking in Mandarin. So sometimes I don't know how to pronounce these things in English, but it's Xuperchain with an X at a Baidu. And we're seeing really just a tremendous, emphasis on new R&D initiatives that many of these big companies. It's important to understand. Look, I mean, there's going to be a lot of excess investment. That's part of what's going to happen. So there will be a lot of money by a lot of companies and the Chinese government at blockchain R&D, blockchain innovation, blockchain, A through Z, a lot of it will be excess. A lot of it will be wasted is number one.

Matthew:

Number two, a lot of companies, a lot of regions, will try to brand things as blockchain initiatives that if you look underneath the hood, they're not really blockchain. They're just trying to do some kind of you to get a subsidy, things like that. So we're definitely, definitely going to see both of those two things, but also ultimately we're going to see a lot of real innovation that comes out of this. And it's important to understand how powerful it can be when a whole country mobilizes around a technology just like the United States, did in the space race.

Richard:

Okay, great. Matthew, here's a follow-up question to you though. Where does Beijing stand in issuance of DCEP -- digital currency electronic payment? Have there been concrete governmental action on that front since the announcement?

Matthew:

Sure. So a couple of things about DCEP. Number one, there's a little bit of a misconception in the West that this is a reaction to Libra and I think it's important to understand that the exact timing may have to some extent been influenced by Libra, but this is something that has been in the works and kind of a government skunkworks for years now, for four or five years, R&D and policy discussions, leading up to the announcement. so this has been the works for a long time. This is the first important thing to understand? And the second important thing to understand is that this is going to happen and it's happening sequentially. They have not released a lot of the technical details yet, but this is something that is, increasing in momentum rather than figuring out in any way. And we can expect that there will be a launch in the next year or so. And this is definitely going to happen as opposed to, for example, Libra, where it's getting neutered step by step and who knows if it will even happen ultimately.

Richard:

Okay. Sounds good. Makes sense. So here's a question for Avichal. It's regarding work ethic. So anecdotally, to do a main net token swap from ERC20, I know of a public chain project that was able to integrate with Binance in less than a week, and the process has lasted for more than a few months with Bittrex. This is just one example, but the narrative that I hear from time to time is that, take the Bay area as an example, San Francisco engineer hours where people show up around noon and leave at dinnertime. At the same time. You hear about 9-9-6 in China. So there's this dichotomy of diligence concern you in terms of the pace of innovation?

Avichal:

It's a really good question. I think there's a lot to unpack there. So, it does concern me to some degree. Now I think, the framing of the question though, I think we have to unpack a little bit, which is I think, not all hours, you know, if you're in a 9-9-6 schedule I think are, you know, productive hours necessarily. And I think, you know, many, many of the teams that I know that are the best performing teams, wouldn't tolerate somebody who works like five hours a day and isn't producing. now of course, if you're, you know, smarter than if you're 100X smarter than everybody else around you, and you can work five hours a day and have, you know, twice the output of everybody else, then it kinda doesn't matter. But by and large, the most successful teams I know in Silicon Valley, still work extremely hard. And many work probably just as hard as the top Chinese firms. So kind of what this gets out, I think is a question of distribution, which is, you know, averages are a little bit misleading.

Avichal:

And I think we have to look at is, how hard do the top people work and what kind of output do they have? And, and I would argue, I think at the top of the distribution in Silicon Valley, you see people working just as hard as the hardest working people in China. But I do think that, the work ethic and how that's baked into Chinese culture and Chinese business culture is very admirable. I think many more companies in the U.S. would stand to benefit from, from thinking about where there are places where actually output is directly correlated with effort. And a little bit more effort would actually yield significant output. of course, it's very case by case, right? Like, and I think in many, you know in many cases, I think you'd see people actually working extremely, extremely hard regardless of where they live in the world.

Avichal:

Now I think, related to this idea though is, you know, what else do you need in order to be innovative? And I think hard work is certainly one of them. but you also need people who have the right skill sets. You also need access to patient capital. I think you need access to people who have seen innovative breakthroughs in the past and are able to scale them. and so it's one of the ingredients and it's necessary, but I don't think it's sufficient on its own. and I think that you need some unique mix of things actually generally does not exist in many places in the world and exist in highest concentration I think in Silicon Valley, which is why that sort of magic chemical reaction that happens, happens so frequently here is actually all of those reagents that you need exist in Apple supply. And so when it's time to be innovative, that chemical reaction sort of happens spontaneously, with a far greater likelihood here than it does anywhere else.

Richard:

Cool. Matthew, anything to add there? Are you making your employees working 9-9-6 in China?

Matthew:

We work very hard. The hours are strange sometimes because you know, we're, we got clients and friends and time zones all around the world. So the hours tend to be very, very strange. It's definitely not 9-9-6 in terms of hours. But we were very, very hard as do obviously many Chinese entrepreneurs and many Silicon Valley entrepreneurs. so, I would add about patient capital that, in this case patient capital is the Chinese government, in terms of the fact that if you have a blockchain related project that that needs any kind of minimum bar, you're going to be able to get funded through either the government at the federal level or at the provincial level or at the municipal level. So I would add that in this case, whereas well it's true that that Chinese companies are not necessarily going to be the best source of patient capital, but the Chinese government can play that role.

Avichal:

Yeah. I think there's certainly patient and very, very long-term minded. I think impressively. So if you look at, you know, belt and road for example, just extremely patient, long-term oriented. the other component to that though I think is, you know, to what, to what degree can innovation be influenced top-down versus bottoms up? and to what, to what degree will the solutions that are created in a more top-down way actually, extrapolate out to other markets. And so, you know, I think that the big risk of the top-down approach is, I think it works really well for things that have very high capital costs. things like space race, where you're not really talking about exporting the technology or exploiting the product, but you just have a tremendously hard capital-intensive problem. I think the top-down approach works really well with U.S. Highway system. I think belt and road like, the Chinese government has invested in.

Avichal:

I would argue that in this case with, with blockchain, a lot of what you need is a lot of bottoms up innovation by its very nature. This is a distributed systems technology. And so will you kind of, look at when you, when I look at innovation, generally innovation happens, bottoms up. and so, you know, how do you, I think it's a challenge for the Chinese government to figure out, how do you, marry the idea of long-term patient capital, which is top-down with the idea of allowing this innovation happen bottoms up as a very hard challenge. Historically, it's been very hard for governments, including the Chinese government to, to get those two things to work together. Whereas when it's top-down and, the government can sort of, control the strategy and it's aligned with things like infrastructure development, the Chinese government has done a great job. I think it's yet to be seen whether they can sort of taking the top-down approach to allow a bottoms-up innovation to happen.

Matthew:

I understood your point, but I think actually the United States, this is something I have a very strong opinion about -- I think the United States, as a society, I'm of course American and you know, that's my first and only allegiance, I very strongly feel that the United States is, making a huge mistake by not, encouraging government, R&D in the way that we used to, understood that it was defense related. But I think it's, it's important to remember that the internet itself came from ARPANET. and, I think that that's a huge mistake that the United States is making as kind of as a society is the one point that I feel I've such strong feelings about. I just feel obliged to say that.

Avichal:

No, I agree. I think we don't invest enough in science and technology. I think there are a lot of places, government. Yeah, I agree. No, I agree with you. I think the government could play a very strong role in...

Matthew:

It's not even necessarily related to the debate, but it came up and I have some strong feelings they had the jump in there. But the second thing I would also, like to mention is that, look, obviously I fully understand your point about top-down innovation and it's a strong one. What, what, by observation, what I'm increasingly seeing is that the Chinese government acts kind of like Bell Labs. They're funding all of this innovation and there's not, in terms of the government itself, they don't have that entrepreneurial aspect to them. They're funding the Bell Labs though. And then the Chinese entrepreneurs, come and they're playing the role of Steve Jobs, who's was just kind of cherry picking, all of the different innovations that have added Bell Labs and, and park and places like that. so increasingly what we're seeing is that the Chinese government will throw money, at a sector, whether it be 5G or whether it be blockchain or whether it be AI, and there'll be funding that externally and they'll be funding it internally in different research labs and things like that. And then the entrepreneurs will come and they'll, and they'll just, feed on everything like Steve jobs did. And in that aspect, I do think you can see a lot of, innovation, directly or indirectly come from these kinds of, Chinese government led initiatives.

Avichal:

Yeah. So two thoughts. On the first, I agree with you. I think the U.S. government should be investing far more in science and technology and innovation and, historically has, has been able to actually catalyze some pretty meaningful, fundamental advances. And, and I wish, as an American, I wish we did more of that. Unfortunately, we have a robust venture capital ecosystem. It's unfortunate because I think we could be doing a lot more, and I think there are many, many interesting things in the world that are dramatically underfunded. And the U.S. government could step in and fill that.

Avichal:

To your second point, you know, another kind of related thought that I think is worth mentioning, and it's because you mentioned AI, and some of the other investments that the Chinese government is making. You know, I think there are two types of investments, things that governments can invest in top-down and really benefit from centralization. And I think AI is a great example of this where I actually would expect the Chinese to be world leaders in AI. And it's because it benefits from centralization and you know, your data being clean and, forcing everybody to integrate with each other and interrupt, like those kinds of things I think will really benefit AI. and so I would not be surprised to see, Chinese companies actually take the lead when it comes to anything AI related. I think what type of thing about blockchain and crypto in general is that it's fundamentally, it's about distributed systems and it's about, operating, decentralized. And the fundamental property of it is in many ways I think antithetical to what the Chinese government is good at.

Avichal:

And so if you think about it in a startup context, you know, you have this sort of software platform that does the opposite of what the incumbent is really good at. and generally speaking, when, when you see that sort of a misalignment, it's very hard for incumbents to get their arms around it and fully embrace it. And so you know, I think that the challenge here is going to be, are the investments that the Chinese government is willing to make, going to be the sorts of investments that are so disruptive and so truly groundbreaking that they are actually potentially threatening to the Chinese government. And how does the Chinese government react to those things? So, for example, if you take something like zero knowledge proofs, and privacy preserving technologies, will the Chinese government be okay if Chinese entrepreneurs want to adopt those and push the state of the art on those?

Avichal:

And I think that's a tense place to be. which is kind of what I was getting at in the bottoms up case, which is, I think, you know, on the, on the margins, you start to see this tension between top-down and bottoms up. and I think by the very nature of the technology in the case of blockchain and crypto, there are many, many aspects to this technology platforms that are actually antithetical to what the Chinese government is about, which is gonna make it very hard for them to actually support those sorts of innovations.

Matthew:

I think that's a really strong point. I agree with, with a lot of that. and I think what we will, start to see is that many aspects of blockchain and the subset of blockchain that is crypto will start to be reshaped in a different way, in a different image, in many ways as a result of the tension that you talked about. it's probably outside the scope of this debate for many reasons. We could have a talk about whether that's a good thing or a bad thing. And I strongly suspect we would, we would agree. but yeah, I mean I do think there are a lot of different times since they're a zero knowledge proofs, and different aspects of the chains government need for control. And I think a lot of that is true. I think we'll, we'll start to I, the bulk of that is true and I do think we will start to see a reshape and name of what is blockchain as a result of the China center of gravity and the tensions that you mentioned.

Richard:

And just to add to that, in my own 2 cents about the 9-9-6, I kind of feel that innovation sometimes is sort of antithetical to the whole 9-9-6 concept. If you chain someone to the desk, chances are they can't be all that creative. You're looking for the Vincent van Gogh of programming, you want to give him freedom. And I guess there's a negative correlation between programming skills and interest in corporate servitude. And lots of the best programmers I know happen to be in the open-source sphere and independent consultants. So yeah, just my 2 cents, the host is not really supposed to chime in that much. So I'll just move on.

Avichal:

That's a good point.

Richard:

Okay. So the next question is for Matthew. Tron, the project originally from China, has been in the news a lot lately. Your thoughts on viability and sustainability of their business strategy? Should you see them as representative of the sort of China's style innovation?

Matthew:

Sure. So there, there's a lot to talk about with Tron. I think that, try and I think is, is a good example of, some of the negative qualities of trainees, entrepreneurial style. So crypto is kind of going through an evolution, a process of maturation. And it started out with visionaries and then there were Cowboys and speculators and increasingly lane and then were VCs and retail came and all kinds of things going on. But increasing, increasingly we're starting to see a process of professionalization. I do think that Justin is a tremendous marketer, I think is the one positive thing that I would say about him. I think Tron is a good example of the negative qualities, of Chinese Entrepreneurial-ism is what I started out by saying. And, and my hope is that, last examples of, this kind of business style as blockchain and specifically crypto continues to move.

Richard:

Okay. So moving onto the next question for Avichal. Even though regulations on crypto in China are officially strict, these rules are barely enforced in reality. Do you think this gives Chinese crypto operators an advantage in coming up with business models as compared to their Western counterparts?

Avichal:

Yes. But I think back in the back of the original point, yeah. Yeah, it's pretty straight forward. I mean, I think, I think a lot of the really clever, innovative, thoughtful, creative innovation on token economics and token value capture and incentive alignment. A lot of that is happening, from, from, Chinese entrepreneurs and Chinese projects. you know, I think the ultimate question is how sustainable is it, you know, which of those experiments actually work? Can you pair those experiments with the right technology and the right product value and so on. and you know, Toronto is a really interesting example, right? Like Justin Sun, I agree with Matthew, you know, is not necessarily somebody to model your career after, but, you know, from a marketing perspective or a customer acquisition perspective or an experimentation perspective or a PR perspective, as pushing the boundaries in a way that at least I think is illustrative for other founders and people should be looking at and saying, what can I learn from this? and how do I, how do I absorb some of the best parts of, of what he's getting, right? rather than, you know, don't throw the baby out with the bath water. And so I think this is, this is a great example, I think your questions right? There are a lot of really interesting, innovative things happening because of the different regulatory regimes.

Matthew:

That sounds good. Makes sense. I think it's a really interesting topic by the way. It's something that took me a long time to fully appreciate where I'm in the United States. It's, you know, it's very, 50, 50, 49% of the things are illegal, 49% are illegal, and there's like 2% gray area in the middle. Whereas in China it's more like, it's more like 10% of things are legal, 10% are illegal. And then there's this vast swath of gray area, 80% in the middle, which is something that was really, really hard for me to understand for a very long period of time. And, and so that's, I think it causes a lot of confusion, in terms of international friends understanding what's going on in China. We still even now have people saying, well, wait, isn't crypto illegal or banned in China working?

Matthew:

The guys even do that? How does that work? I think there's a lot of misunderstandings that, that, that STEM from that fundamental difference. And in terms of, one analogy that I think is really interesting that is related to that, which I think helps Westerners better understand, China is in that vast gray area, which is that of a famous analogy which I like, which is that of the Anaconda in the chandelier. So that the Chinese government is, it's like everyone is, all the entrepreneurs are in a big room and there's the chandelier and the Chinese government is this kind of sleepy Anaconda in the chandelier. And so all the Chinese entrepreneurs are, you don't want to be too loud. You don't want to move around too quickly and become a target for the Anaconda to suddenly wake up and get you.

Matthew:

It's kind of just the situation where, don't be too high profile, don't, cause negative attention and you're going to be free to, uh, to innovate and to do creative things and to create value. and then, but on the other hand, if you, if you cause a commotion, you're going to be in big trouble. And so that's, it's, it's more a question of, of that as opposed to black or wait, illegal or illegal. So it's really a very different framing that is incredibly difficult, for Westerners to understand. Certainly it was, for me, for, you know, a very long period of time. And that's where you have so many fundamental misunderstandings of what's going on in the Chinese market, even at the most fundamental level where it's, you know, it's is illegal crypto.

Richard:

Right? So, yeah, and I think the success of Justin Sun has sort of been illustrating that. On the one hand he actually wrote up an apology letter, right. And I think one of the words in this letter as he let down his country and something about socialism is great. And then on the same day, maybe the day after, he appeared at some kind of Tron influencers meetup and a highly publicized event. And in the letter he was apologizing for leveraging the Warren buffet lunch for marketing purposes and over-hyping his product. And eventually this lunch still happened.

:

In any case. Okay. So let's move on to the next round questions from audience members in advance. So the first question is from Nike Louke, and he has two questions. So both of you can feel free to chime in. The first question is, do you think government subsidies and talent programs will help to push innovative practices at blockchain firms or will it just become a free lunch for companies? Question number two is does China's crypto slash blockchain industry regulations significantly stifled firms' innovative abilities? So the two questions seem, sort of at odds with each other. But the first question is just asking if these subsidies and government mandated programs, will they be a boost to innovation or will they just become a free lunch where companies just suck out the subsidy without producing innovation? And the second one is about...

Matthew:

Again, I would just say yes, yes to both. I think it will be a lot of free lunches and I think there will be a lot of innovation that comes out of it and that's where I would return to before where I say we're at the, I think three categories. The first category is a lot of a lot of over-investment in excess and waste the second category. A lot of trying to play games with the subsidies and make things sound like blockchain when they're really not. Then the third category is a lot of real innovation that will come out of the financing bonanza.

Avichal:

Which by the way is not that dissimilar from, from how venture capital works or how you know, the ICO, right?

Matthew:

Yeah, yeah.

Richard:

Yeah. Well I guess it's just that when the partner of the VC, right, the VC liberally referring to the government or the private entity VC, doesn't really care so much for the ROI, has no LP to respond to. I think the waste could be a little bit higher.

Matthew:

That's true. Yeah. I would, I would agree with that. Yeah.

Avichal:

Yeah. There's, there's a short-term versus long-term question there. I think in the, in the long-term, the market force of having, having accountability and getting rid of people who are poor decision makers in this particular capacity is a very good market force.

Matthew:

In terms of that second question. Then I would return again to the Anaconda and the chandelier and the vast gray area. I think if all those rules were enforced in the letter, it would be a major issue. But in fact, there's a tremendous difference between, what's in the book and, and whether or not people are going by the book in terms of the enforcement regime. Right.

Richard:

The snake and the chandelier example is very interesting. Thanks for illuminating us with that.

Matthew:

It's not mine. I forget where I got it from. It's a famous, a famous analogy to help people better understand the way things work in China.

Richard:

Okay. So the next question is from CKG design. How will DCEP impact WeChat and AliPay's stranglehold on payments in China?

Matthew:

I love this question and the reason I love it is I think for many reasons it has not been talked about enough. probably partially because it's not something that Alibaba and Tencent would necessarily want to take the initiative on discussing. and I think, it's important to understand that, the truck has, as in going in reverse, the last decade or so in terms of, uh, central government power in terms of the influence of S, state owned enterprises, SOEs in China, private versus public sector power. And, and I think that, heats up in many ways is another example of, of that, reverse trend. DCEP will open up opportunities for companies like Alibaba and Tencent, but it's super important to understand that it will likely be a competitor as well. I talked very initially about the fact that I have never bothered to carry a wallet in almost two years now when I'm in China, which is true. and the reason is that 99% or more of my transactions, daily transactions, are using either a TenPay, which is Tencent's WeChat Pay or Alipay, from Alibaba. And so that's a lot of private sector power for those companies to have. And I think that, DCEP is an anchor weight to that. It's going to be a competitor, it's going to, take away market share from Alibaba and Tencent for sure. in addition to opening up opportunities as well. I'm sure, I think that that has been one of the most important, least talked about aspects of decent.

Richard:

Okay, great. Actually a follow up question on that. So about DCEP, what benefits does the government actually get out of it? I think this is a more general question just about digital currency.

Matthew:

Well, again, that's about power and where the power is, right. So I do think there are other advantages, but let's assume for a second that there aren't any, it's still about "where is the power"? Is it in the government's hands or it's in the private sector. So I think that, you know, that's super important to understand. however, with that said, I think there are, additional features. So, for one thing, possibly, we still await the technical details, but possibly it could, allow for a more granular control over, the economy to a greater or lesser extent. DCEP -- one interesting feature that hasn't been, another feature that has not been talked about as much as it should have been, maybe is that DCEP does not require an internet connection at the time of transaction, as opposed to Alipay and Tenpay and WeChat Pay. So that could be, especially interesting in some rural areas.

Matthew:

And then I think that the super huge point to understand is that, unlike, Alipay and Tenpay, one of the purposes of DCEP for sure is trying to undermine US Dollar hegemony for sure. That's, one of the purposes. Will that succeed or not? I tend to be a little skeptical. DCEP May have some uptake in bordering nations, nations that are more relying on, on China for trade, these kinds of one belt, one road nations for example. but, but for sure, that's one of the, purposes.

Richard:

Okay. Sounds good. So one last question before we move on to concluding remarks. And, so this is actually especially relevant for the times we live in. I think one very important basis of innovation is actually stability, right? So political stability, societal stability. And so obviously what's been the news lately is this coronavirus COVID-19. So, but that's only, I think, part of the picture. There's also been talks about the Chinese economy behaving like a pressurized cooker, where there are many holes that the government is trying to plug. Now, whether this is correct or not, whether this is the right narrative or not, this definitely is one narrative from a number of China bears. And so I think one fundamental issue underlying the possibility of innovation is the stability problem. is this something you can speak to, Matthew? And feel free to chime in, Avichal?

Matthew:

Yeah, I mean, I think that that's an important question. I would point out first and foremost that Corona COVID-19, this is an international problem. this is going, this is global already. so we, we are all going to have to deal with this. And that could be a whole, a whole show in and of itself, obviously. Right. But that, that's, that's a global thing now. and you could talk a lot more.

Richard:

Oh yeah, sorry, but I'm not saying the aftermath of the disease is China's problem. I'm talking about disclosure. I'm talking about prevention. I'm talking about the citizens' reaction to governmental actions on this, right? So there have been reports about citizen journalists that bravely traveled to Wuhan to report on this and then they get censored. And obviously you know about the doctor that initially warned everybody and then he had to sign a piece of paper at the police station and essentially get punished for it. Right? So this is all just, I think, part of the big narrative of general, an environment that people are living in. Right? So if you're an incredibly smart person and you are a 100x software programmer, would you prefer a place like China versus somewhere else? Right? So I'm just curious about your view from a stability standpoint.

Matthew:

I would say this, I would say that, by observation, those 10X or 100X programmers and engineers, 10, 15 years ago, they would go to Silicon Valley. And they would build their life there. Increasingly, whether they're Haigui, whether they're in other words, are, overseas students or whether they're at universities such as Tsinghua, Beida, increasingly these, types of rare talents are setting up shop in Beijing or Shenzhen or Shanghai or Hangzhou, places like that. So I think that we can observe, rather than trying to delve into the motivations, we can just observe the results, which is that increasingly, these types of top Chinese talents are building their life in China, which was not necessarily true again, 10 years ago. And certainly was not true 20 years ago. And in terms of, stability of the economy, I mean, there's no question that the Chinese economy is slowing down. And that was true even before Corona. There is no question that Corona is wreaking havoc in China as it is all over the world that has major demographic headwinds, and, you know, but, but it's still growing. And there's been a very long track record of China bears that have been making the wrong bet at this point.

Richard:

Okay, great. Let's move on to the concluding remarks. This is the time to summarize your thoughts, synthesize your ideas, and perhaps include some notions that you've picked up from your opponent during the debate. And we'll have Avichal go first. Avichal, please go ahead.

Avichal:

All right, so I think I'll conclude by saying kind of three closing thoughts. One, you know, I think, back to the idea of what the original premise of the conversation was. you know, can China be a leader in global innovation? I think the global part is key and I think historically speaking, Chinese companies have really struggled at this despite being domestically very innovative and creative and having built large domestic businesses. I think taking them global has been a challenge. Whereas, Western companies, Silicon Valley companies in particular have really excelled at this. Point two, I think the skill set on how to do this through the combination of really unique, technical innovation combined with, human organizations that know how to scale these innovations combined with capital, that that knowhow really exists only in Silicon Valley now.

Avichal:

And three, kind of as we discussed during the course of the conversation. I think in this particular case, the nature of the innovation is very bottoms up, and in many ways is antithetical to what the Chinese government, needs for its, for its own existence. And so things like privacy, freedom of speech, you know, owning your own money and being able to circumvent capital controls. These are things that are very existential for the Chinese government. And so to the extent that the government has to try to control what innovation can happen, I think it's a tremendous top-down challenge. Whereas in Silicon Valley for example, all of those things are boundaries that will push on and are actually very well aligned with our values. And so I think in this particular case, the nature of the innovation is such that it actually will create a lot of tension with the Chinese government. Whereas for example, if this were AI, I think you might have a much stronger case that, that, Chinese companies will actually end up being world leaders because the nature of centralization of data plays to their strengths, into the Chinese government strengths. I think in this case, the nature of the innovation is in many ways antithetical to the Chinese system. so those are my three high level points. And then of course, thank you Richard and thank you Matthew for the conversation. This was great.

Matthew:

Great. Thank you. I would say this again: To me, this is a classic case of an innovator's dilemma only played out at the nation state level instead of the company level. The U.S. strengths include us dollar hegemony. They include, the top financial center in the world as a result of these strengths which interact very intimately with blockchain and especially crypto. there are regulators that are trying to stop crypto and blockchain in its tracks. day after day. China here is the disruptor. it's true that bottom-up innovation has many advantages, but I would add that China in addition to the top-down innovation has thousands. In fact, again, the number is 37,431 Chinese companies with blockchain just in part of the company name, China has tens of thousands of entrepreneurs that are working bottom-up and they're also getting the top-down support.

Matthew:

China is already half crypto, half of crypto, rather, is already China. The center of gravity very much is already in China. While it's true that, the ethos of crypto has a lot more in common with the ethos of Silicon Valley, at least in the 70s, before it became, you know, the playground of sort of monopolies like Google and Facebook. That's a conversation for them maybe, but it's true that, the hacker and libertarian, ethos of crypto has a lot more in common with, the Silicon Valley of the seventies and eighties. It's also true that, that crypto is, is already half China. And, and for better or worse, both blockchain and its subset crypto are being remade in China's image, whether we like it or not, every day. And thank you, both for a great discussion and for having me here today. Thank you.

Richard:

Thank you. Thank you. So Matthew and Avichal, it's been an absolute delight to have you both come on the show and debate. So to me, this is not an either-or, even though that very much goes against the nature of the debate motion. We live in a time with ever stronger economic dependency, closing of information gap, and a gravitation towards cross national friendships and family formations. I think we can be optimistic that whoever leads the charge in innovation benefits the world at large. Lastly, how can our listeners get in touch with you?

Matthew:

So my Twitter is @mattysino. Twitter is a good place to reach me. sinoglobal.com is our company website. Thank you.

Avichal:

And I'm @avichal. Just my first name on Twitter and electriccapital.com is our firm so you can find more information about, myself or us there.

Richard:

Okay, perfect. Thank you guys so much for coming on.

Matthew:

Thank you.

Matthew:

Thank you.

Richard:

I would like to express my appreciation again to Matthew and Avichal. My main takeaway from the debate is that the U.S. leads in fundamental research and tech innovation. And China adds its value to the ecosystem in the forms of new token economics, liquidity support for fledgling coins, top-down enterprise blockchain adoption and experimentation of national digital currency. In any case, China is a strategically important location that warrants attention and perhaps even local presence by blockchain investors and operators.

Richard:

Don't forget to vote in our post debate Twitter poll. This will be live for a few days after the release of this episode, and also feel free to say hi or post feedback for our show on Twitter. If you like the show, don't hesitate to give us five stars on iTunes or wherever you listen to this.

Richard:

And be sure to check out our other episodes with a variety of debate topics. Bitcoin Store of Value status, tokenization and smart contracts, DeFi, and Bitcoin Havening. In the coming days, we'll be dropping episodes on debates on proof of work versus proof of stake, best approach to enterprise blockchain, and multiplicity or oligopoly of public chains -- that is whether we'll see many with practical use cases, or will a few chains dominate the scene.

Richard:

Thanks for joining us on the debate today. I'm your host, Richard Yan. and my Twitter is @gentso09. Our show's Twitter is @blockeddebate. See you at our next debate!