During the Staking Summit in Istanbul, a conference attended by hundreds of individuals involved in the staking practice of the crypto ecosystem, two exhibition booths stood out. They belonged to Tencent and Huawei. Amid a backdrop dominated by twenty-somethings wearing trendy company hoodies and donning well-designed merchandise, the two Chinese tech giants appeared somewhat incongruous with their more formal corporate banners.
They were next to engineers, marketers and business developers deeply involved in staking, where individuals pledge their crypto assets like Ethereum to the protocol in exchange for returns. The borrowed assets are later used to validate transactions in a blockchain implementing the “proof-of-stake” methodology.
In the past year, many Chinese tech giants including Alibaba, Tencent and Huawei have been joining crypto events in different corners of the world. In hopes of gaining market share in the emerging Web3 sector, they present at these events either as official sponsors or assume a more discreet presence as mere attendees.
Chinese tech giants’ involvement in crypto lies somewhere at the intersection of Web2 and Web3, thanks to the blanket ban on cryptocurrency trading and initial coin offerings in their home country. In the most common case, these tech companies are selling their computing resources to Web3 startups in a way that is not much different from the way they are selling cloud services to companies in more established tech sectors.
Cloud spending by companies building or leveraging decentralized networks is still understood to be fairly insignificant. It is not unusual for a “medium-sized” enterprise in Web2 to spend more than $1 million on cloud computing, but a company considered medium-sized in Web3 may spend only hundreds of thousands of dollars less, several attendees of the event said.
Yet limited ticket sizes haven’t stopped Chinese cloud providers from venturing into crypto. With a weak position in the global cloud market, Chinese companies are far more proactive and friendly with customers as they lack brand recognition, especially in the West. In such a situation, they have to compete by providing cheaper or better services.
In addition to providing cloud infrastructure, Chinese companies have also been involved in areas that are more distant from their core products and put them in competition with crypto-native firms. This includes building blockchains for enterprise use – most tech companies in China have steered clear of the public blockchain sector, in which tokens play a key role, due to the country’s crackdown on crypto.
Some players also offer Node-as-a-Service businesses. Blockchains, which are decentralized databases that store and encrypt transaction data, are run on distributed nodes. However, these nodes can be expensive and complex to maintain, so companies like Huawei offer a node hosting service for developers, which is an attractive solution for enterprises that want to build decentralized applications but are unable to do so themselves. There is lack of technical sophistication.
Tencent and Alibaba, being the first movers in the Web3 field among Chinese tech giants, have also familiarized themselves with reputable projects to enhance their reputation in the industry.
For example, Tencent has formed partnerships with public blockchains like Sui and Avalanche, as well as Ethereum-scaling solution Scroll.
On the other hand, Alibaba has teamed up with Aptos, a blockchain developed by former Meta employees, to raise its name in the Web3 world. In a joint announcement today, Alibaba Cloud and the Aptos Foundation said they will co-host a hackathon using the Move programming language in the Asia Pacific region.
At the moment, Web3 is barely making a dent in the top line of Chinese tech giants, but these companies recognize the potential of the emerging industry and understand that they cannot ignore the opportunity even in the event of significant market volatility and collapse. Major players like FTX.