By Dr. Kyle Wong, CFA and FRM
In the latest budget announced by Honorable Paul Chan, Financial Secretary of Hong Kong, announced the following measures to support the development of Web3 in Hong Kong:
$50 million to expedite development of the Web3 ecosystem
Set up a task force to advise on the sustainable development of the virtual asset industry
We applaud the Secretary’s initiative to support development of Web3 in Hong Kong. We believe the effort is essential to fulfill its role as the “international innovation hub”[1].
What is Web3?
Web3 is the name some technologists have given to the idea of a new kind of internet service that is built using decentralized blockchains — the shared ledger systems used by cryptocurrencies like Bitcoin and Ether[2].
The term has been around for years, but it has come into vogue in the past year or so. Packy McCormick, an investor who helped popularize web3, has defined it as “the internet owned by the builders and users, orchestrated with tokens.”
Proponents envision web3 taking many forms, including decentralized social networks, “play-to-earn” video games that reward players with crypto tokens, and NFT platforms that allow people to buy and sell fragments of digital culture. The more idealistic ones say that web3 will transform the internet as we know it, upending traditional gatekeepers and ushering in a new, middleman-free digital economy.
But some critics believe that web3 is little more than a rebranding effort for crypto, with the aim of shedding some of the industry’s cultural and political baggage and convincing people that blockchains are the natural next phase of computing. Others believe it’s a dystopian vision of a pay-to-play internet, in which every activity and social interaction becomes a financial instrument to be bought and sold.
Why is Web3 important?
Web 3.0 is an evolution of the internet that promises to transform how we interact with digital content, services, and each other. It is expected to have a significant impact on business in various ways. Here are a few potential impacts[3]:
Decentralized and Trustless Systems
Web 3.0 technologies, such as blockchain, enable the creation of decentralized and trustless systems to revolutionize business operations. These systems can reduce costs, increase efficiency, and improve security by eliminating intermediaries.
Data Ownership and Privacy
Web 3.0 puts data ownership and privacy back in the hands of the users. This can significantly impact businesses that rely on user data, as they must adapt their practices to ensure compliance with new regulations and user expectations.
New Business Models
Web 3.0 enables new business models that were impossible before. For example, creating decentralized marketplaces can allow businesses to sell products and services directly to customers without intermediaries.
Enhanced Customer Experience
Web 3.0 can enhance the customer experience by providing personalized and customized services. This is achieved through AI and machine learning algorithms that can analyze user data to provide recommendations and insights.
Increased Competition
Web 3.0 can lower barriers to entry and increase competition, as anyone can participate in decentralized networks and marketplaces. This can lead to new opportunities for startups and small businesses, as they can compete with more prominent players on a more level playing field.
In summary, Web 3.0 has the potential to significantly impact businesses by enabling new business models, enhancing customer experience, improving efficiency, and increasing competition. Businesses that adapt to these changes can thrive in the new digital economy, while those that fail to do so may need help to remain relevant.
Why does Hong Kong need Web3?
Hong Kong, like many other cities around the world, can benefit from the decentralized nature of Web3 technologies. Web3 technologies offer a range of benefits that can be leveraged to create a more efficient, transparent, and secure ecosystem for businesses, governments, and individuals.
Some of the reasons why Hong Kong needs Web3 include:
1. Decentralized Finance (DeFi) - Web3 technologies can enable decentralized financial services, allowing individuals to access financial services without the need for traditional financial institutions. This can be especially beneficial for underbanked individuals who may not have access to traditional banking services.
2. Transparency and accountability - Web3 technologies can provide greater transparency and accountability in government and business operations, helping to reduce corruption and increase trust between citizens and their government.
3. Data privacy - Web3 technologies can provide greater data privacy and security, which is especially important in a city like Hong Kong, where concerns over data privacy have been growing in recent years.
4. Innovation - Web3 technologies are still in their early stages, and there is a lot of potential for innovation in areas such as decentralized identity, supply chain management, and more.
Overall, Web3 technologies can help to create a more inclusive, transparent, and efficient ecosystem in Hong Kong, benefiting individuals, businesses, and the government alike.
Ecosystem in Hong Kong
Hong Kong has always been at the forefront of blockchain development. Many successful crypto companies started in Hong Kong. Although the development was hampered by the strict government pandemic policy and the clampdown by Mainland, Hong Kong now welcomes and supports blockchain technology. Hong Jong always has a vibrant community in Web3. They will continue to drive innovation and applications in Hong Kong and Asia. Two such companies are NFT Lab and GreatMeta.
NFT Lab
NFT Lab is the award winning blockchain technology company, provides NFT as a Service (NaaS) model. It makes Web2 to Web3 transformation and digital asset creation easy. No coding knowledge is needed.
NFT Lab empowers brands to connect to new possibilities and build stronger relationships with customers through multi channels Payment Gateway; a secure electronic payment system for your businesses, using both Fiat Payment, Visa/Mastercard, and different kinds of cryptocurrency like ETH, ERC-20 tokens etc.
NFT Lan provides One-Stop solutions to help clients build, govern, and grow their business across industries and regions. Our services are prompt to bring higher transparency, security, and efficiency to the client’s business.
GreatMeta GreatMeta aims to provide Metaverse-as-a-Service for 2B value GreatMeta is developing the technology to capture motion and project avatars live via its portal that connects users to the Metaverse. It will organise Metaverse Asia Expo in Oct 2023.
The Expo will focus on uncovering opportunities and practical applications in the Metaverse, with five key pillars: (1) Metaverse technology, (2) Industry solutions, (3) successful use-cases, (4) ESG-related matters and (5) regulatory frameworks.
One of the Expo's primary objectives is to position Hong Kong as the first and best hub for the Metaverse in Asia. By hosting the majority of the physical events in Hong Kong and inviting startups and experts from around the world, the Expo seeks to establish the city as a global hub for the metaverse sector, thus contributing to the city's technological and economic development.
Challenges Ahead
While Web3 technologies offer many potential benefits, there are also several challenges that Hong Kong might face in adopting these technologies. Some of these challenges include:
1. Regulatory hurdles - Web3 technologies are still relatively new, and there is currently a lack of clear regulations around their use. This can create uncertainty for businesses and individuals looking to adopt these technologies.
2. Technical complexity - Web3 technologies can be complex and difficult to implement, requiring specialized knowledge and expertise. This can be a barrier to adoption for many businesses and individuals.
3. Security concerns - Web3 technologies rely on decentralized networks that are inherently more secure than centralized systems. However, these networks are still vulnerable to certain types of attacks, such as 51% attacks, that could compromise the security and integrity of the network.
4. Adoption and awareness - Web3 technologies are still relatively unknown to many people, and there may be a lack of awareness around their potential benefits. This could make it difficult to build momentum and widespread adoption for these technologies in Hong Kong.
5. Interoperability - Web3 technologies are built on different protocols and standards, which can make it challenging to achieve interoperability between different systems. This could limit the potential benefits that these technologies can offer if they are not able to work together seamlessly.
Overall, Hong Kong will need to navigate these challenges in order to successfully adopt and leverage Web3 technologies to create a more efficient, transparent, and secure ecosystem.
Conclusion
We are encouraged that the Hong Kong Government “recognize that VAs, cryptos, are unstoppable new financial innovations.” VA’s and cryptos are the essential elements of Web3 and we believe that Hong Kong will play a key role in the global development of VA’s. In fact Hong Kong has a strong crypto ecosystem which include exchanges, startups, custodian banks and NFT’s marketplace. With the support of the Hong Kong Government, Hong Kong can be the top player of VA in Asia.
REFERENCES [1] LCQ18: Developing Hong Kong Into International Innovation And Technology Hub. Retrieved from: https://www.info.gov.hk/gia/general/202202/16/P2022021600252.htm [2] What Is Web3? Retrieved from: https://www.nytimes.com/interactive/2022/03/18/technology/web3-definition-internet.html [3] What Is Web 3.0, And Why Is It An Important Technology For Business?Retrieved from: https://www.tristatetechnology.com/blog/what-is-web-3-0-and-why-is-it-an-important-technology-for-business
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