Zeng Ming: AI + Crypto is Web3, with value creation first and value distribution later

Author: Zeng Ming

This article is a keynote speech titled "The Future of Web3?" delivered by Zeng Ming, Chief Strategy Officer of Alibaba, at the 9th Global Blockchain Summit hosted by Wanxiang Blockchain Lab on September 19. In this speech, Zeng Ming delves into the concept of Web3.0, emphasizing the relationship between cryptocurrency and artificial intelligence, as well as their significance for the future digital economy. He highlights the rise of the creator economy, viewing it as the core of the future economy, and proposes the idea of the joint development of infrastructure and applications, which will drive the growth of the entire ecosystem. Additionally, he shares his expectations for Al Crypto Native Service, believing it will be one of the most exciting trends in the future.

Today, I would like to share some thoughts on Web3. I spent some time contemplating the theme of the speech and ultimately decided to name it with a question mark. This is because we all know the next stop is Web3, but where will this stop be? How long will it take to reach that point? Is it 2 years or 5 years? This question actually has many confusing aspects, including the ambiguity surrounding the specific definition of "Web3." However, the two main sources of Web3, namely cryptocurrency and the metaverse, are driving the concept of Web3 forward.

Everyone believes that cryptocurrency or the metaverse is a very important direction for the future, but both fields have faced significant challenges over the past two years. This has left many practitioners confused; for example, in Silicon Valley, many friends involved in cryptocurrency may have two-thirds or more who have turned to artificial intelligence (AI). So, what is the future of Web3? I believe this is a topic worth discussing again.

Today, my speech will still focus on Blockchain and Crypto, which I think is a very important part. Now, let’s briefly summarize the achievements of cryptocurrency to date. There are two very solid consensuses and actual results: the first is Bitcoin (BTC), and the second is Ethereum. Ethereum is actually a smart contract technology platform that has gone through three to four important stages: the first was the ICO, which established Ethereum's position and the importance of smart contracts, along with significant first-generation applications such as exchanges and wallets; the second important breakthrough began with DeFi in the summer of 2020, as well as GameFi and NFTs.

However, currently, one of our biggest confusions is what the next step is. Everyone expects significant applications to emerge, but it is difficult to predict what these applications will be and when they will appear. So why has cryptocurrency achieved such success? In essence, it is a value network, not just an information network; more importantly, it allows digital assets to circulate more efficiently. Additionally, one of the related breakthroughs is the design of Tokeneconomics, which enables incentive mechanisms to be applied more efficiently. As Professor Lan mentioned earlier regarding the relationship between Web3 and artificial intelligence, how to effectively combine open-source communities and incentive mechanisms will be an important area of innovation in the future.

Essentially, I believe this is an innovation in production relations. Although this term is somewhat traditional, I think it still captures the essence of the issue, as it promotes collaboration and cooperation, as well as the trading and circulation of assets. It still has great potential for value creation.

However, a particularly interesting point is that finance, in a broader economic context, is a production relationship and a tool for improving efficiency. However, financial products, especially consumer-facing products such as savings accounts or assets, are actually applications of productivity and are closely related to technology. Therefore, in the financial sector, why Bitcoin is one of the lowest applications of blockchain is that another application of blockchain and cryptocurrency has always been a core area of innovation, with finance being one of the earliest fields to land. Finance represents a breakthrough in production relations in a broader economic context, leveraging blockchain technology, but the innovation of financial products can also gain many technological advantages. Thus, finance is a relatively unique field. However, from a broader perspective, regarding the next billion users we expect, cryptocurrency is stuck in an important direction, namely that it cannot directly enhance the consumer experience; it is not a tool for improving productivity.

The second issue is that the digitization of traditional assets is not as smooth as everyone imagines, including real-world assets (RWA). We have recently discussed these issues, but in fact, they have been talked about for several years; however, the process of asset transfer has not been smooth. This is actually easy to understand because any new technology attempting to migrate traditional businesses to new fields usually does not succeed very well, as the value it creates is not large enough, but the costs are high.

Another similar example is the so-called digital transformation of traditional enterprises, which has also been one of the main topics over the past five years, but very few companies have succeeded. The reason is that creating new applications and new assets with new technologies is the future. However, currently, in the entire cryptocurrency field, we do not have new digital assets; we only have Ethereum and peer-to-peer networks (P2P), and all financial innovations largely revolve around these two points. Therefore, I personally believe that the entire cryptocurrency field needs innovation, to accelerate forward, and truly move towards Web3. We need to create new digital assets, and there may be three pathways for new digital assets.

The first pathway is continuous innovation in the financial sector, as finance itself is a large industry and also a key industry. It integrates the advantages of technological innovation in productivity and production relations with cryptocurrency and blockchain. Therefore, I believe financial innovation is still a major direction for the next step. This includes the development of Bitcoin; for example, Bitcoin is relatively successful to some extent, and this success is in the area of alternative assets, similar to the role of digital gold. However, the beautiful vision of payment networks and inclusive finance, which aims to provide financial services to billions of impoverished areas currently without financial services, still requires a long time to achieve and is a key area that needs to be broken through next.

The second important area is that blockchain itself can still achieve technological innovation in the financial sector, such as the latest developments in international payments. In the future, we can see its potential to play a larger role; thus, financial innovation will become a very important component of Web3.

The second step is the new applications we have been looking forward to, such as games. Over the past two years, most innovations have focused on infrastructure, particularly the development of Layer 2 and knowledge about Layer 2, which has led to significant technological advancements in scalability, usability, and convenience. However, when these applications will break through, such as in the GameFi field, is something everyone is very much looking forward to. Many professional teams have invested in this area over the past two years, and it typically requires about two years of development time. Therefore, this year and early next year, we are all very much looking forward to some remarkable products in the GameFi field that will bring more surprises to consumers.

The social field is certainly also one of the areas everyone is looking forward to, just like the recent craze caused by friend.Tech, including whether there will be greater breakthroughs next. Therefore, based on the current development of blockchain and cryptocurrency infrastructure, how to cultivate the next generation of applications is certainly one of the community's current focal points.

But today, I particularly want to emphasize the third pathway. From the end of last year to the beginning of this year, I have increasingly seen that I believe AGI (Artificial General Intelligence) and cryptocurrency are a perfect match. Cryptocurrency primarily serves as a revolution in production relations, while AGI is a technological breakthrough in productivity that will create a large number of new digital assets.

Now let’s briefly look at why I say this. AGI is general artificial intelligence. Since the explosion of chatGPT, we have all realized that this is a significant breakthrough in the field of artificial intelligence. Its first and most important application area is called AIGC, which stands for AI-generated content. This means that AI can create a large amount of new content at low cost and extremely fast speeds. Moreover, this content is essentially digital, and the technological changes in this field are very rapid. We have just seen the technology from text to text and from text to image; soon, there will be a breakthrough area from text to video. As long as the technology from text to 3D video also makes a leap, we will certainly see an explosive growth in the content industry.

Additionally, there is a very important point: in the past, cryptocurrency was relatively marginal because many digital contents, including NFTs, were essentially not significant enough, and their value was not high enough. However, the value of these new digital contents in the overall economy will increasingly rise. If the value of these assets is high, people will truly pay attention. At that time, whether transaction costs can be reduced, whether privacy can be protected, and whether efficiency can be improved will become the focus of people's attention. If, like many traditional contents, much of the content in the past one or two years has had no value, then people's attention to its asset characteristics will naturally be lower.

At the same time, it is very important that the development in the AI field will be very rapid, shifting from the role of assistants to agents. This means that AI teachers, AI doctors, AI designers, etc., will become increasingly common, directly replacing humans. The collaboration between machines will significantly replace the collaboration between machines and humans, as well as between people. Smart contracts are inherently designed for collaboration between machines, so as AI further develops, the complexity and importance of smart contracts will also undergo a qualitative leap.

Therefore, based on the above three points, I believe that the infrastructure of cryptocurrency will become increasingly important, not because cryptocurrency itself has strong momentum, but because the development of AI requires cryptocurrency and infrastructure. Thus, the term creator economy, as well as terms like Metaverse, although they may seem a bit outdated in the past two years, I personally believe that a better term has not yet been found.

I believe that the creator economy is definitely a very important component of the future economy, and it can even be said to be a core feature of the economy. Therefore, the core value of cryptocurrency is to establish a decentralized network for efficient asset rights confirmation and trading, which makes it possible for a vast number of people, machines, and machine collaborations to work together. However, value creation must precede value distribution; thus, how to engage a large number of people in creation, how to enable better collaboration among a large number of AIs, how to solve the issues of incentive mechanisms, and how to address asset trading and distribution issues are all very critical. Therefore, creating a brand new creator economy that allows for participation in creation is the real opportunity for the future, which has significant economic and social implications and will become the mainstream of the economy rather than the margin. Thus, AI, AGI, and cryptocurrency make the future of this digital economy possible and represent the true Web3.

At the same time, an important point is that infrastructure and applications develop together. Since the launch of Landscape in 1993, we can clearly see that every breakthrough in infrastructure is closely related to the emergence of killer applications. Therefore, today, we see that the infrastructure built over the past two years indeed fills us with anticipation for the emergence of the next killer application. Thus, I believe that what we look forward to most in the next two years is the emergence of Al Crypto Native Service.

Although we still do not know what its specific product form will be or in which specific region it will appear, from the trend, this is bound to happen. When such applications emerge, they will bring a large number of new users and will also point the way for the future development of infrastructure, thereby promoting the growth of the entire ecosystem. The current challenge is that true AI localization has not yet been achieved. Although many Web3 cryptocurrencies have turned to AI entrepreneurship, many people who are native to AI, as Professor Lan just mentioned, still have insufficient understanding of cryptocurrency. Therefore, what we need most next is to facilitate deeper integration between people in the AI and cryptocurrency fields and those in the infrastructure field.

Also, returning to what Professor Cao just mentioned, starting from infrastructure, how to continuously integrate technologies like AI and cryptocurrency into the top layer of applications is the future of Web3 and a more anticipated future. Thank you all.