Web3 enters the "Colonial Era"

Source: Meng Yan's Thoughts on Blockchain

Recently, two "big" events have occurred in the fields of AI and Web3, both of which are significant indicators, but their meanings have been buried under a plethora of gossip details in the media.

In fact, there are two different perspectives to view any major event. The first is the entertainment perspective, finding amusement in news events. If this is the goal, then one should look through a microscope, as the more details one understands, the better. With more details, the density increases, leading to more gossip points and thus more enjoyment. The other perspective is macro, primarily judging industry or even global trends based on the event, and thinking about how these trends relate to oneself, mainly to guide decision-making. If this is the purpose, then one should use a telescope and not choose the wrong lens. Only by omitting various trivial details can the patterns at a larger scale emerge, allowing one to identify trends and thus help make choices and decisions.

There is no superiority between the two perspectives; entertainment is also important, especially during bear market cycles. When you are powerless to resist, actively enjoying it is understandable. However, if your goal is to make decisions, the bigger the event, the more one should focus on the broad strokes rather than the details. Don't always think about decoding curiosities; those gossip details have little to do with you. Consider how today's events will be written in high school history textbooks 100 years from now, and think about how these events rhyme with certain historical segments; only then can you discover trends.

Unfortunately, many people in the real world fail to grasp this principle, blindly believing in "seeing the small to know the big," thinking that knowing more details is better, which actually overestimates their brain's ability to process information and leads them astray.

I am not an expert in AI, but take the internal strife at OpenAI as an example. The comings and goings of Ultraman and the palace intrigue behind it are indeed fascinating, but these details are merely entertainment gossip for the audience and hold no other value. The truly important matter is the struggle between the "arrival faction" and the "salvation faction" at the juncture of strong artificial intelligence.

Similar struggles occurred before and after the emergence of nuclear weapons, and have recently come to light due to the release of the film "Oppenheimer." However, if you are obsessed with the details, it becomes difficult to see that these two events actually rhyme across time, making it hard to recognize that the occurrence of such events indicates that the singularity of strong artificial intelligence has arrived, and its capabilities far exceed the expectations of its creators, triggering fear, controversy, and conflict. The outcome of the conflict is also similar to that of the past, with the "e/acc arrival faction" emerging victorious, indicating that the development of strong artificial intelligence has broken free from the last endogenous shackles and is racing forward.

In the future, humanity's limitations and control over strong artificial intelligence can only be achieved through mechanisms such as forming a balance of power with another strong artificial intelligence, or through external constraints like cryptography and blockchain; endogenous mechanisms will no longer be effective.

I have repeatedly expressed the view that AI and crypto are two sides of the same coin. Many people disagree, thinking that AI is a significant matter while crypto is merely a farce, believing that my statement is just trying to ride the coattails of crypto's popularity. In fact, they fail to see that cryptography is the only tool for building order in the digital space. The existing digital world is relatively simple and rudimentary, mainly dealing with relationships between people, which can be roughly managed with some basic cryptographic tools.

After the arrival of AI, the digital world has seen the emergence of super-intelligent entities, while a large amount of economic resources and activities have become digital. The relationships between AI and humans, as well as between AIs, have become more complex and decisive. Building order in the digital space has become a matter of life and death. Simple cryptographic tools and protocols are no longer sufficient. The emergence of blockchain, smart contracts, self-sovereign identities, verifiable credentials, and token economies, whether by coincidence or destiny, ultimately serves as new components of cryptographic protocols, enriching our toolbox to help construct order in the digital world.

Previously, I proposed the idea that "blockchain should legislate for AI." Now it seems that merely mentioning blockchain is too narrow; we should encompass all the tools mentioned above, viewing them as a whole, perhaps naming this whole "crypto," and then saying "Crypto should legislate for AI," which may be more appropriate.

The judicial settlement between Binance and the United States is actually very indicative. The so-called indicative meaning is that when you see this event happen, you can assert which direction the trend is heading. For example, as mentioned earlier, seeing the internal strife at OpenAI indicates that the singularity of strong artificial intelligence has arrived. Similarly, when we see the settlement reached by Binance, we can assert that the entire Web3 has departed from the era of wild growth and entered the era of competing powers.

A brief explanation is as follows.

As early as the initial development of blockchain, many people described the crypto economy as a "parallel world" or a rich new continent. If this analogy is appropriate, then we naturally have to ask how people will react when faced with a suddenly emerging new space filled with immense wealth and risks. This has historically happened at least twice: once when Homo sapiens left Africa, and another after 1500 when Europe colonized the Americas and Australia. The specific process of the former is no longer traceable, while the latter is well-documented and can serve as a reference. Five hundred years have passed, but human nature remains unchanged. When we attempt to grasp the overall trend of the Web3 industry's development, a historical template worth referencing is the process of gradual colonization of the Americas after 1500.

The weekly history of colonization in the two centuries following the discovery of the new continent can be roughly divided into two phases. The first phase is the sixteenth century, where the first wave of immigrants were mainly Spanish and Portuguese adventurers and gold diggers, who quickly occupied the gold and silver-rich South America, acquiring vast amounts of wealth and returning to Europe as prominent figures. With this goal in mind, they had no interest in building institutions in the new continent; instead, they plundered and exploited as much as possible, transporting gold and silver back to Europe to exchange for tea, silk, porcelain, spices, and invincible fleets.

By the seventeenth century, latecomers like the Dutch and the English and French saw the wealth potential of the new continent and began to colonize as well. Arriving late, they could not compete with the Spanish and Portuguese for gold and silver, so they had to develop agriculture and agricultural trade. However, developing agriculture is more complex than simple plunder; it requires establishing cooperative order, building infrastructure, organizing division of labor, and improving the quality of laborers through education. Therefore, the main colonial model of this phase was to export a complex of population, order, technology, and culture to the new continent through companies, marking the beginning of a new phase of regional colonization. Most areas of North America began their colonial history during this phase. It was on this foundation that by the late eighteenth century, the British colonies on the North American continent combined the existing colonial system with local characteristics, under new ideas, to create a nation like the United States.

Such a description may be overly simplistic; if examined closely, one can certainly find many pieces of evidence and details that contradict this broad "historical logic." However, it is only through this coarse filtering that we can free ourselves from the interference of details and recognize the "rhymes of history."

The past decade since the emergence of blockchain can be seen as a "rhyming" with the colonization history of the Americas in the sixteenth century, which can be termed the "exploration era."

In this era, those entering the new continent of Web3 include a small group of idealists, but the vast majority are explorers and fortune seekers. They are not concerned with the concepts, values, and social goals of Web3 itself; their sole purpose for entering this new space is to make money—big money, quick money. Under this goal, the technologies, tools, and innovations of blockchain and Web3 are merely interchangeable means, with the sole aim of returning home laden with gold and silver. As for whether this will disrupt the order of Web3 or damage the ecology of the new continent, they do not care.

This is a phase of wild growth, filled with innovation, exploration, speculation, hype, fraud, and chaos. During this period, Binance, led by a pragmatic idealist, seized the historical opportunity, balancing various complex factors, and rose to prominence amidst the chaos, becoming the king of this phase. While luck played a role in Binance's success, more importantly, Binance has consistently managed to use its power and influence in moderation, consciously providing the most scarce public good—order—for the chaotic and disorderly market.

However, this new continent has yet to give birth to organizations and power forms that can rival the traditional world. Its original set of passive resistance methods, based on thin anonymity mechanisms, has now become ineffective. In this situation, as its scale grows larger and even begins to influence the power balance of the old continent, the old continent cannot sit idly by and will inevitably use its existing power and means to intervene in the new continent. This will push the history of the new continent into a second phase, which can be termed the colonial era, corresponding to the colonial history of the North American continent in the seventeenth century.

In the colonial era, Web3 will enter a phase of order construction, and the active promoters of this order construction will, in fact, be the authorities from the traditional world. They will disdain the potential plunder but will place greater importance on the inherent technological advantages of Web3, hoping to create massive wealth by establishing more complex production and trading structures within Web3, thereby influencing the power distribution mechanisms of the real world. Therefore, compared to the previous group, they will place greater emphasis on institutional construction and will be more inclined to use new corporate forms to advance the colonial process and build a new order.

Countries that recognize this are each advancing the colonial process in different ways. Some countries are more proactive, willing to delve deeper, while others are more passive, merely seeking to defend their borders. The judicial settlement involving Binance is essentially such a matter. This event marks a significant acceleration of the United States' colonial process in the new continent of Web3. Similarly, regions like Hong Kong and Singapore are also accelerating, but their strategies, rhythms, and goals do not align.

The order established during the colonial era will not be the one most aligned with the local characteristics of the new continent; rather, it will be a coexistence and competition of various colonial systems formed by the multiple colonial powers of the old continent after they have staked their claims in the new continent, each integrating new technological characteristics and grafting the existing systems of the colonial powers. The colonial era is certainly not the endpoint. The process of competing systems will ultimately lead to the emergence of a new order. This new order will not only better align with the characteristics of the new technologies but will also possess outstanding competitive advantages and the ability to counter other systems, and it can strongly influence the old continent in return. However, the creation, establishment, and success of this new order may still take a considerable amount of time. For a significant period, we only need to focus on the strategies of the colonial era.

In the next decade, the colonization of the Web3/Crypto world will be the main storyline of the industry, fundamentally changing the narrative of the industry, with the most significant innovations and wealth creation opportunities lying along this main line. We will soon see the following phenomena:

• Central banks, regulators, and multinational organizations from some countries will successively publish heavyweight reports on topics such as central bank digital currencies, programmable payments, decentralized identities, and blockchain.

• Major countries will strengthen their regulatory control over the Web3 world, staking their claims based on population and industry tracks, establishing their own colonies. The order of the exploration era will continue to grow in the cracks, but regulatory agencies in various countries will increasingly be unable to tolerate transgressions.

• Some government agencies will actively support and nurture a group of enterprises, encouraging them to enter Web3 and continuously develop and deploy new application cases.

• Certain latecomer countries and regions, free from historical burdens, will appear more radical and innovative, while some countries and regions that led in the previous phase of the digital economy will hesitate and be conservative, delaying their actions.

• Because the natural advantage of the Web3 world is cross-border business, multinational organizations will take active action, and some countries will proactively establish cooperative relationships to enter Web3 in alliance.

• Enterprises supported by different countries will follow their own rules and systems, competing in different fields of Web3 based on their respective resources and strengths, becoming the vanguard and coordinating forces of the colonial actions of the colonial powers before and after the national powers personally intervene.

• Innovation will still be the key to victory in this phase, but most innovations will no longer be fanciful but will occur within the context of order construction.

Only by viewing the Binance event and Binance itself from this perspective can we better understand it. The settlement of Binance's token issue may seem like a reluctant move, but in the long run, it is actually a very positive event. As the king of the exploration era, Binance will successfully survive and enter the colonial era, and its fundamental strength remains intact, providing ample opportunity to negotiate or cooperate with various major colonial nations and continue to play an important role in the new era. Such good fortune is rare in history. Those who simply believe that the Binance settlement has eliminated the last major thunder before a bull market, and thus expect to become rich, will likely continue to experience a rollercoaster of emotions in life.