Xiao Feng, Founder of Wanxiang Blockchain: 11 Truths About Web3
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Xiao Feng, Founder of Wanxiang Blockchain: 11 Truths About Web3
DAOs certainly have both successes and failures—there are successful DAOs, such as Bitcoin, which is a DAO, and Ethereum, which is also a DAO.
Navigating Web3 tides with focused insights
By: Three Dao, Island of Everything
On September 22, the second episode of "Everything Lives" aired, led by Dr. Xiao Feng, co-initiator of Island of Everything and founder of Wanxiang Blockchain Lab, who answered questions from Web3 entrepreneurs face-to-face.
Lucia from the Island of Everything community has specially compiled 11 key insights shared by Dr. Xiao Feng during this interview. The following content is exclusive — enjoy:
1. Ethereum's Merge wasn't about improving performance
Ethereum, as the mainnet and primary chain, handles only two things: First, ensuring network security and robustness; second, serving as the final settlement layer for value. After operations are completed on L2, they're bundled back to the main chain for registration and settlement. Scalability improvements—such as higher TPS and better efficiency—are achieved through sharding, layering, sidechains, and sub-chains. For example, after the merge, splitting Ethereum into 64 shards, each handling 15–20 transactions per second, multiplies overall performance—even if it may still fall short.
Many new public chains now attempt to boost TPS directly on the mainnet using novel technologies, but often at the cost of decentralization. Decentralization is crucial—only with sufficient decentralization can a network be truly secure. Sacrificing it makes the network inherently insecure.
2. Two major创业 opportunities emerge post-Ethereum merge
The first opportunity lies in protocols for L2, L3, or even L4. Vatalik recently mentioned L3, suggesting that while L2 remains a general-purpose network concept, L3 could represent specialized networks—for instance, offering privacy-preserving computation algorithms available for others to call upon.
The second opportunity is at the application layer. Professionals from large tech firms bring strong operational experience in commercial scenarios—an area where Chinese teams excel globally. You can reimagine familiar business models within Web3.
3. Web3 isn’t here to overthrow Web2, nor should we fear big Web2 players taking over Web3
The fundamental difference between Web2 and Web3: Web2 is corporate-holder driven, shareholder capitalism focused on maximizing shareholder value. Web3 represents stakeholder capitalism, where usage rights are securitized and held via staking. In Web3, there are no companies, only DAOs; no shareholders, only stakeholders—participants. Large corporations are structured top-down, governed by shareholders whose interests are already entrenched—they cannot transition from corporate holders to staking holders.
Big Web2 companies simply can't execute Web3 innovations—but that doesn’t mean they lack future prospects. Web3 isn’t about destroying Web2; it’s about creating something entirely new—like Bitcoin or Bored Ape. These don’t compete with big tech; they introduce novel paradigms.
Web3 returns power from platforms and corporations back to individuals, empowering each person with greater ability and space to create.
4. Web3创业 differs fundamentally from Web2 in two ways
If you’re launching a Web3 venture, remember: you aren’t a founder—you’re a initiator. Founders own and control; even with diluted equity (e.g., 10%), they retain majority voting power (e.g., 60%)—a classic Web2 model.
But in Web3, there are no founders—only initiators. You start the project, but it doesn’t belong to you. You may wield significant influence—as Vatalik does with Ethereum—but neither he nor the Ethereum Foundation dictates daily development. The community decides everything.
Legally, Ethereum has never been registered anywhere—it has no employees, board of directors, or assets.
Web3 will also transform how we work. Skilled professionals at big tech firms currently trade their expertise for salaries and stock options, bound to serve one company. But earning from one employer pales compared to monetizing your skills across thousands.
In Web3, nothing belongs to anyone—anyone can contribute permissionlessly and earn token rewards. No one monopolizes your skills. Using DID or soulbound tokens (SBT), you accumulate verifiable work records. Once established, DAOs and application-layer initiators worldwide will seek you out, sending you tokens. Serve thousands or even millions of projects—and expect far greater returns than any big tech salary.
5. Each crypto bear market births something new that ignites the next bull run
Over the past decade, crypto has followed a four-year cycle—roughly three years of bull market, one year of bear.
Each four-year cycle features a core narrative. In 2013–2014, the story was Bitcoin—its sudden popularity created a bubble. When it burst, something great emerged: Ethereum. Its whitepaper was written in 2014, funded through crowdfunding.
Ethereum’s ICO fueled the 2017 bull market. The ERC20 standard allowed anyone to issue assets in minutes. ICO technology itself was sound—but too many scammers abused it.
The 2018 bear market gave birth to Ethereum’s second killer app: DeFi. That powered the 2019 bull run. DeFi’s popularity inflated another bubble, accelerated later by NFTs. This year, DeFi collapsed—many firms bankrupted or severely damaged.
What will the 2022 bear market produce? What new idea will rise, gain traction, and form the next bubble? I believe it’s DAO—potentially triggering the next bull market, possibly accompanied by a bubble.
Bitcoin and Ethereum have recently been unfairly punished by markets. They naturally hedge inflation and geopolitical risk as supranational assets—but these traits haven’t been priced in. Despite yesterday’s Fed rate hike causing sharp drops, I trust the market will eventually recognize their value. I expect this to reflect within six months.
6. Web3 is like the electrification era of the Industrial Revolution; Web2 was its mechanization phase
PandaDAO, one of the largest Chinese DAOs, recently disbanded. Its founder complained about spending excessive time on coordination and governance, inefficiencies caused by conflicting community opinions—prompting broader reflection on DAOs: Does this decentralized operating model sacrifice efficiency compared to Web2’s tightly managed organizations?
DAOs will inevitably see both successes and failures. There are successful DAOs—Bitcoin is a DAO, so is Ethereum.
But failed DAOs are also numerous—just like companies. Not every company succeeds.
DAO is not a panacea. It has five characteristics: on-chain operation, smart contracts, decentralized governance, open source, and permissionless access—plus economic design via tokens and NFTs. Poorly designed incentive models lead to failure. Without proper alignment, participants won’t stay engaged.
Web3 and Web2 operate differently. Don’t judge Web3 by Web2 standards. Yes, it may seem inefficient. But must everything prioritize efficiency or 996 work culture to succeed? Ethereum proves otherwise. Bitcoin has no employees yet built a trillion-dollar ecosystem.
Web2 isn’t bad—it resembles the mechanized stage of the Industrial Revolution, while Web3 mirrors its electrification.
Britain sparked an industrial revolution with steam and textile machines. Later, America pioneered electric light, telephone, and radio—marking a shift from mechanical to electrical systems.
Several Web2 companies boast trillion-dollar valuations. So does Ethereum—with hundreds of thousands of developers working 24/7 on building new things atop it—no salaries, bonuses, or KPIs, just self-motivation. Whose ecosystem is more vibrant—the internet giants, or this global, permissionless network?
Web3 enables mass collaboration among strangers—a Chinese developer and someone from Argentina can co-create seamlessly. It’s a trustless network: rules encoded in smart contracts can’t be altered. I don’t care who you are—no need for due diligence or audits. Transaction costs drop to near zero.
We believe more businesses will prioritize fairness over pure efficiency. Not everything needs to be hyper-efficient. Some endeavors thrive best through consensus and equitable participation.
To understand Web3, forget the past. Don’t view it from today’s lens—look at today from the future’s perspective.
7. Web3 should be digitally native
Domestically, many digital collectibles merely digitize real-world objects and put them on-chain as certificates—which I believe misuses the technology. These are just copies, meaningless. The IP belongs to the physical world, not the NFT. Instead, create digitally native IP, prove ownership via NFT, then extend it offline—like Li-Ning licensing Bored Ape images for t-shirts. Bored Ape has proven this model works. Don’t get it backward—everything in Web3 should be born digital.
8. Creators monetize more easily in Web3
For creators, Web2 relies on traffic—first attract massive users, then gradually convert. Web3 follows Kevin Kelly’s “1,000 True Fans” theory—just 1,000 loyal fans willing to pay is enough.
Today’s internet uses tipping models with external payment systems controlled by platforms. In Web3, payments are built into the chain—readers pay creators directly using tokens.
Where do tokens come from? Tokens predate the internet—they were access keys or credentials for computer systems. Why are digital assets now called tokens? To enter an online system, you need permission—a token. With it, you gain usage rights. When these rights are financialized, they become digital assets. A token represents assetized usage rights—not ownership. Holding ETH doesn’t mean owning Ethereum, but it grants you the right to use it.
In Web3, your rights are represented by tokens, which can be traded on centralized or decentralized exchanges—providing liquidity and monetization mechanisms for usage rights.
9. Web3’s incentive mechanisms must be carefully designed
Web3 is self-organized. Unlike top-down corporate incentives, it requires two essential tools:
- NFTs—to record contributors’ levels of contribution, activity, and capabilities.
- Token models—reward contributors with tokens based on their NFT-verified contributions. These tokens become their earnings.
In Web3, there’s no HR, finance team, management, or performance reviews—just present your NFT.
Token models must be well-designed—we’ve seen many failures. One public chain halted operation within an hour of launch due to a critical flaw: wrong incentives, wrong distribution—rendering the entire chain inoperable.
10. GameFi is a premature child of blockchain
GameFi is a premature offspring of blockchain. When it emerged, chain performance was insufficient. Gaming demands constant computation for every action, but blockchains couldn’t support it. Due to low performance, fun gameplay elements couldn’t shine—so it devolved into financial schemes. The games themselves weren’t enjoyable.
When chain performance improves, the fun aspects will finally emerge—giving GameFi two wings:
- Numerical models,
- And token models.
Previously, only numerical models existed—controlled centrally by companies. Now, smart contracts ensure in-game items become NFTs, secured on-chain—unstealable, non-revocable, immune to inflation.
Add token models, and games become both fun and profitable. Once blockchain handles hundreds of thousands or even a million transactions per second, GameFi’s problems will vanish.
11. Consortium chains are at best Web2.5—blockchain means public chains
In 2015, many around the world tried building consortium chains—dozens of global banks formed one, IBM launched another, Ethereum created an enterprise version—all ultimately failed. This shows consortium chains aren’t viable. They lean closer to traditional internet architectures—best classified as Web2.5. True blockchain means public chains.
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