Original Author: Jack, BlockBeats
Web3 has seen the emergence of the "Tencent Gang".
As a leading internet giant, Tencent was one of the first to venture into the blockchain field in China. In 2021, the news of "Axie Infinity surpassing Honor of Kings in revenue" became a turning point in Tencent's internal sentiment. Since then, Tencent has actively explored and nurtured numerous influential projects and teams in the field of metaverse and Web3, including ZhiXin Chain and Phantom Core.
However, in the past six months, most of the news about "industry giants entering the game" has come from AntChain and Aliyun. When BlockBeats inquired about the situation at Tencent, it was found that there were almost no Web3-related business activities internally.
Meanwhile, Tencent employees are "group entrepreneurship" in the Web3 space, with close social and collaborative connections. The organization structure and product logic of their projects also have distinctive characteristics, and many projects have already shown promising progress in the industry.
Saving GameFi
On Saturday, the 19th of last month, Meta Space Cafe in Beijing was particularly lively. A Web3 shooting game called Matr 1 x Fire hosted a community offline event here, with over 100 people gathered to share their gaming experiences, perspectives on GameFi, and discuss the project's future roadmap. There was also a 5v5 game battle organized on-site, making the atmosphere highly active.
In the cold winter of the crypto industry, it is rare for a team, even in a highly sought-after field like ZK, to organize such a lively community event on their own. Moreover, Matr 1 x Fire is a GameFi project from a "fallen" track.
Matr 1 x Fire event scene
After StepN fell from grace last April, the sustainability of GameFi seemed to become an unsolvable problem. Due to inconsistent game quality, lack of player demand, and shortcomings in economic model design, GameFi left a profound impression of "doggos" and "Ponzi schemes" for most Web3 practitioners.
According to data from Footprint Analytics, the market value of the GameFi track has shrunk from $93.7 billion at the beginning of 2022 to $13.3 billion. In terms of the number of GameFi projects, there are currently less than 80 active projects, while inactive projects exceed 1,600, and the gap between the two continues to widen.
Data Source: Footprint Analytics
As the track cools down, investors are starting to shift their focus to new narratives, and discussions about full-chain games are becoming increasingly frequent in the crypto VC circle. Automated worlds, on-chain modifications, AI-driven NPCs... Traditional GameFi relying on NFT trading and token incentives no longer seem attractive in the new imagination of full-chain games. Project financing difficulties and slow progress in product roadmaps make GameFi's era seem like a thing of the past.
The emergence of Matr 1 x Fire seems to have interrupted this seemingly irreversible trend.
This is an FPS shooting mobile game that focuses on PVP multiplayer competitions and PVE casual gameplay. A few weeks ago, all 3,000 BattlePass NFTs of this game were sold out in less than 5 hours. In the subsequent open testing, Matr 1 x Fire has obtained user data rarely seen in the GameFi field. BlockBeats learned from members of the Matr 1 x Fire team that the number of registered users on the testing day exceeded 200,000, and the game app still maintains tens of thousands of active users.
Matr 1 x Fire completed a $10 million financing round in September last year with participation from Korean financial giant Hana Financial Investments, HashKey, Amber, and other institutions. Alpha testing and promotional work only began in August this year. According to information revealed to BlockBeats by team members, the team has spent nearly 100 million yuan on game development so far, and a significant amount of time during the past year and a half of the development process has been devoted to polishing product details.
True FPS players or professional players pay great attention to the overall gaming experience, such as time delay, synchronization of opponents' shooting time, matchmakin'g of players from different regions, TTK (Time To Kill), shooting feel, and so on. These are all complex issues. Many players of Matr 1 x have provided feedback and believe that the game has done a great job in terms of recoil feel and overall experience," Hang told BlockBeats.
Matr 1 x Fire game screen
In addition to Matr 1 x Fire, another game called Mahjong Meta, a Web3 mahjong game, has also attracted a lot of attention recently.
On August 3, this Ethereum-based game announced the completion of a $12 million financing round in the cold winter of GameFi, with Dragonfly, Folius Ventures, and StepN's parent company Find Satoshi Labs all on the list of participants. According to data provided by the team, Mahjong started beta testing in May of this year and attracted over 15,000 players in the following two months, completing over 490,000 matches. Its game NFT achieved a total trading volume of nearly 500 ETH on Opensea.
After officially launching at the beginning of August, the Mahjong team remained very busy. "There are still quite a few milestones in the near future, including some detailed features and optimization that we want to achieve in version 1.0, as well as apps and various new gameplays. We are a product-focused team, so most of our time is spent on R&D," said Brice, co-founder of Mahjong, to BlockBeats.
Mahjong, unlike shooting esports games like Matr 1 x, is a broad chess and card entertainment game that is more capable of embracing long-term users. "For example, if a player starts to like playing cards at the age of 25, they are likely to continue playing until the age of 60 or even 70. When combined with some esports mechanisms, it is very suitable for long-term operation, improving the overall game experience through each new season," Brice said.
The team has already completed the recording of CV with well-known Japanese voice actors such as Lin Nai and has invited many artists from domestic and foreign countries to create and select scenes and BGM for the game. During the beta testing phase, many Japanese players contacted the team to inquire about the titles and composers of the game's background music. "It is these details of the experience that many players are very sensitive to, so many fragmented things are personally grasped by me. We hope that the game presented to players is a complete narrative loop that is internally consistent in all aspects."
Against the backdrop of the booming full-chain gaming and the declining narrative of GameFi, Mahjong and Matr 1 x Fire have rekindled the industry's attention and thinking on Web3 games. In addition to a deep understanding of game development, strict control of product details, and mature considerations in choosing the track, these two projects also share an important factor: they are both created by former Tencent employees.
In September 2021, a series of articles titled "Axie Infinity's Revenue Surpasses Honor of Kings" started circulating online. According to the official data released by the game that month, Axie Infinity has over 2 million players logging into the game daily, and the trading volume in the past month has exceeded $334 million, surpassing the $231 million of Honor of Kings. Although the actual revenue obtained by the project from the 4.25% transaction fee is far less than $334 million, the phrase "revenue surpasses Honor of Kings" is enough to attract attention from within Tencent.
"Actually, our group had been exposed to Web3 very early on, but we were still very surprised when we found out that Axie Infinity's revenue had surpassed Honor of Kings. So many people inside Tencent started paying attention to this direction." Before founding Mahjong, Brice worked for Tencent's game investment department for many years, and with Tencent's comprehensive investment tools and upstream and downstream resources in the gaming industry, he took the initiative to explore the team's efforts in the Web3 gaming field.
In just a few months, Brice had conversations with hundreds of GameFi teams and investors. "But within Tencent, you are more of an observer, finding and supporting other people's dreams. But this is completely different from the experience of going out and focusing on developing a product." So, in the fall of 2022, Brice decided to "leave the factory" and start a Web3 venture with his partners.
Unlike Brice, Hang comes from Tencent Financial Technology, the business line that was the earliest to venture into the blockchain and cryptocurrency field within Tencent. The Tencent Blockchain team under it is the core engine driving the exploration of blockchain technology within the company and has incubated many well-known projects such as WeChain and Zhixin Chain. But not long ago, its leader also left Tencent to start a Web3 venture.
The Disappearance of Tencent's Blockchain
In May of this year, Cai Yige, the person in charge of Tencent's blockchain, was interviewed by 36Kr reporters and for the first time revealed the reasons for leaving Tencent to start a Web3 venture.
Cai Yige is a true "Tencent veteran". After graduating from college, he joined Tencent, and in his own words, the most precious ten years of his life were spent growing up with Tencent. After joining Tencent's Financial Technology Business Unit in 2017, Cai Yige has been serving as the General Manager of Tencent's Blockchain Business, responsible for exploring the commercial applications of blockchain technology.
When talking about why he decided to start a Web3 business, Cai Yige said that he and his partners have been discussing Web3 entrepreneurial opportunities for nearly a year. After seeing the gradual introduction of Web3 industry policies in Hong Kong, he firmly decided to leave Tencent. "While I still have ideas and drive, I want to take a leap and not regret it in the future."
After the interview article was published, Tencent employees reposted it and wrote in their Moments: "Go for it, Yige."
"Cai Yige" is a key figure in Tencent's blockchain. Under his leadership, the team has successively incubated Micro-Enterprise Chain, a blockchain supply chain finance platform, and ZhiXin Chain, which is used in the judicial evidence preservation scene. The latter has provided underlying technical support for multiple digital collectible platforms such as Huancore between 2021 and 2022. When Tencent's blockchain business first entered the public eye, Cai Yige often acted as the team's "official spokesperson."
In February of this year, Tencent announced that it had been selected for Forbes' Blockchain 50 List for the fourth consecutive year. However, the representative of Tencent's blockchain business on the list is not "Yige," but Li Li, the head of Tencent Cloud's blockchain.
In fact, since Forbes launched its Global Blockchain 50 List in 2020, Cai Yige's name has never appeared on it. In 2020, Hu Mingli, the current Vice President of Tencent Cloud, was listed as the "Head of the Blockchain Team," representing the project TrustSQL developed by Tencent's blockchain research and development. In 2021, Li Li, the head of Tencent Cloud's blockchain, and Zheng Hao, Vice President of Tencent's Financial Technology, were both selected, representing the project FISCO BCOS (Golden Chain Alliance) launched by WeBank. From 2022 to 2023, Li Li was selected again, and Chang'an Chain, incubated by Tencent Cloud's blockchain, was also included as a representative project in the list in 2022.
In the past four years, the technologies developed and incubated by Tencent's blockchain have only appeared on the list once, while Tencent's most well-known blockchain project, ZhiXin Chain, has never been selected.
2020 to 2023 Forbes Global Blockchain 50 (Tencent vs Alibaba)
Far behind Alibaba Group in all aspects
Compared to Tencent, the Alibaba blockchain is much more stable in terms of organizational structure and business. For the past four years, the Ant Chain and its leader Jiang Guofei have been selected for the list.
Many people familiar with Ant Chain's business have told BlockBeats that Alibaba's blockchain business is driven from top to bottom. In 2015, Ant Financial established a blockchain interest group and studied and verified the feasibility of blockchain in various application scenarios at an internal hackathon. That same year, the newly established Alipay expressed its focus on technologies such as blockchain to solve trust issues, and the group then decided to find a person in charge of the blockchain business.
Initially, Ant found Xu Yiji, co-founder of Neo, as the person in charge. Xu Yiji was originally a Google engineer and a passionate "public chain enthusiast". After joining Alibaba and Alipay, he began to promote his idealism of public chains and steered the entire Alibaba blockchain business in the direction of public chains, even proclaiming that he wanted to replace Alipay with blockchain.
However, after the tightening of domestic policies in 2017, Alibaba no longer recognized Xu Yiji's business approach and replaced him with Jiang Guofei as the head of the blockchain business.
Jiang Guofei is also a technical guru who has developed numerous products and solutions in the field of IoT, big data analysis, and artificial intelligence, and has received multiple industrial innovation awards. Because his English name (Geoff) sounds similar, everyone in the company is used to calling him "Jie Fu (Brother-in-law)". But like Cai Yige, Jiang Guofei is also Alibaba's "top brother" in the blockchain field.
In February 2017, Jiang Guofei joined Ant Financial as a vice president and president of the financial technology business line, in charge of Ant Blockchain. Insiders told BlockBeats that after Jiang joined Ant, there were more than 500 people within the Alibaba group working on blockchain-related businesses. In September 2019, Jiang Guofei became the president of the Ant Financial Intelligent Technology Business Group, becoming the core person in charge of the Ant Blockchain platform.
At the end of 2019, news of Ant Financial's IPO emerged. In December, Ant announced a comprehensive acceleration of its globalization, domestic demand, and technology strategies, and began to accelerate the process of "de-financialization" and transform into a technology-based company. Shortly after, Jiang Guofei led the team to launch the blockchain technology platform Trusple and stated that "blockchain technology allows Trusple to better meet the needs of international trade trust."
In June of the following year, Ant Financial officially changed its name to Ant Group Corporation. In July, Ant Group upgraded its Ant Blockchain brand to "Ant Chain" and disclosed its daily active users exceeding 100 million for the first time. In September, under the guidance of the Shanghai Municipal Government, the first Global High-Level Fintech Conference hosted by Alipay and Ant Group was held on the Bund. Ant Group fully showcased the technological panorama of Ant Chain at the conference, announced the launch of an open alliance chain for small and medium-sized enterprises, and released a hardware-software integrated device for on-chain.
In June 2021, Ant Chain held its first developer conference. Jiang Guofei elaborated on the development philosophy of Ant Chain at the conference. In January 2022, Jiang Guofei became the president of the Ant Group Digital Technology Business Group and the person in charge of the Ant Group Technology Business Division. Since taking charge of Ant Blockchain in 2017, Jiang Guofei's Alibaba blockchain has consistently held the top position in the world in terms of patents in this field. Today, when you visit the official website of Ant Chain OpenLab, you will see solutions such as smart contract security, multi-party computation, ZKP, FHE, and other cutting-edge technologies in the encryption industry, all of which are researched by Ant Chain.
In contrast, Tencent's blockchain business is showing a clear and rapid downward trend. Since 2015, China has been the global engine of blockchain patent inventions, with major contributors including Alibaba, Baidu, Tencent, and other internet giants. In terms of quantity, global patent applications for blockchain inventions reached a peak in 2019 and have since declined rapidly in the following two years. In the competition for patent applications, Tencent is the only major player in China that can rival the Alibaba group. However, since 2021, Tencent has started to collapse across the board, with the number of patent applications dropping from 1,006 items the previous year to 427 items, while the number of Alibaba group patent applications has remained relatively unchanged.
The left image shows the global trend of blockchain patent applications, and the right image shows the trend of Alibaba, Tencent, and Baidu's blockchain patent applications.
In terms of organizational structure, the Alibaba group has also demonstrated a more clear division of business. The Alibaba group's blockchain business is mainly carried out by AntChain and Alibaba Cloud, with AntChain providing underlying technology research and development, and Alibaba Cloud offering enterprise services through the BaaS (Blockchain as a Service) platform. Among them, AntChain is the main bearer of the Alibaba group's blockchain strategy, and most of the Alibaba group's blockchain applications are based on AntChain.
The organization structure of Tencent's blockchain business appears to be disorderly. First, there is the Golden Chain Alliance led by WeBank, followed by Tencent Blockchain and Tencent Cloud Blockchain, with each business line having its own research and development in both underlying technology and top-level applications, fully leveraging Tencent's consistent "horse race mechanism". Since 2022, Tencent's business in the blockchain field has made almost no significant progress. Interestingly, in June of this year, the first national standard for blockchain technology was released, and both Tencent Blockchain and Tencent Cloud Blockchain published articles on their official accounts in the first place, stating that they participated in the drafting of this national standard.
Content of Tencent Blockchain and Tencent Cloud Blockchain official account articles
Between 2015 and 2022, Tencent and the Alibaba group had a highly competitive relationship in blockchain technology research and business promotion. Insiders told BlockBeats that Tencent internally has conducted in-depth studies on the strategies of the Alibaba group in the blockchain field, even having precise knowledge of their annual pricing, KPI completion quantities, and the planning and situation of each business department.
However, after that, Tencent's blockchain suddenly collapsed in competition and disappeared from the domestic blockchain landscape.
The Rise and Fall of Tencent's Blockchain
From the launch time of Tencent's blockchain whitepaper, underlying technology platform TrustSQL, and Tencent Cloud's TBaaS business, Tencent's blockchain business was on par with Alibaba's early on, and even took the lead at one point.
Tencent also started laying out the blockchain industry in 2015. At that time, an important strategic goal for Tencent in its business was to challenge Alipay and Alibaba's financial services through WeChat Pay. In terms of expanding its business, Tencent invested in WeBank to be the first to explore blockchain finance.
In May 2016, WeBank, led by Tencent, initiated the Golden Chain Alliance (Shenzhen Financial Blockchain Development and Promotion Association) and started independently developing underlying blockchain technology. In June, they released the first financial consortium chain cloud service, BaaS. In 2017, WeBank, together with Wanxiang Blockchain and Matrix Element, launched the financial-grade blockchain underlying platform, FISCO BCOS, which was applied in areas such as government affairs, finance, and supply chain. Insiders told BlockBeats that many technical members in WeBank came from Tencent, but there were also a large number of members from Ping An Group. There were some internal conflicts and many people left over time.
However, WeBank is an expansion business invested by Tencent. Within the Tencent system, it was the financial technology team that first explored the blockchain field.
Tencent Financial Technology (referred to as Tencent FiT), affiliated with the Corporate Development Group (CDG), is the backend of financial products such as WeChat Pay and QQ Wallet. Around 2016, some experts in Silicon Valley sent a lot of research on the blockchain field to Tencent FiT, coinciding with Tencent's internal focus on technologies like Bitcoin. As a result, the team responsible for WeChat Red Packet began to lead the research and build Tencent's blockchain system.
In January 2017, Tencent Micro Gold went online, which was the first application scenario based on Tencent's blockchain technology. In April of the same year, Tencent FiT and Tencent Research Institute jointly released the "Tencent Blockchain Solution Whitepaper", becoming the first company in China to publish a blockchain whitepaper. The whitepaper disclosed Tencent's independently developed underlying platform, TrustSQL, two years before Ant Group launched its comparable blockchain technology platform, Trusple.
In 2017, Tencent Cloud, which was then part of the Social Network Group (SNG), also began exploring blockchain business. Internal sources told BlockBeats that at the time, the Tencent Financial Cloud team was often asked by banks and financial institutions if they had blockchain BaaS services. They then reached out to Tencent Blockchain to understand the related technology. However, the team later decided to develop their own blockchain cloud service technology, thus giving birth to Tencent Cloud Blockchain. In December of the same year, Tencent launched the TBaaS blockchain infrastructure platform and started exploring blockchain solutions for various industries.
In March 2018, Pony Ma first mentioned blockchain at the National People's Congress, stating that Tencent was laying out its electronic bill business and that blockchain invoices would be a key focus. In August, Tencent Blockchain, in collaboration with the Shenzhen Tax Bureau of the State Administration of Taxation, launched the tax chain and issued the first blockchain-based electronic invoice in China. This was considered an important milestone event in the blockchain industry by many insiders.
On September 30, 2018, Tencent underwent a reorganization, establishing the Content Group (PCG) and the Cloud and Smart Industries Group (CSIG). Tencent Cloud, which serves B2B businesses, was elevated to a higher strategic position within Tencent. In October, the Trusted Blockchain Summit, hosted by the China Academy of Information and Communications Technology, was held in Beijing. More than 20 companies that passed the first round of functional and performance tests were selected and announced at the event, including Tencent-affiliated Tencent Tech and Tencent Cloud Computing.
In April 2019, the blockchain game "Let's Hunt Monsters," spanning the Interactive Entertainment Group (IEG), the Technology Engineering Group (TEG), and the Cloud and Smart Industries Group (CSIG), officially launched its non-deletion closed beta testing. On the first day, it attracted over 12 million registered users and quickly climbed to the top of the App Store's free download chart within hours of release. However, the game's market response in the subsequent period was not as favorable as hoped.
"Let's Hunt Monsters" launch event
In August 2019, Tencent officially launched the evidence preservation service platform ZXLChain. ZXLChain was initially initiated by Tencent's Smart Legal Affairs team to address judicial evidence preservation issues. It was initially conceived to address technology upgrades in copyright protection scenarios and later expanded to financial evidence preservation scenarios. It subsequently connected to several domestic internet court evidence preservation platforms, while concurrently serving as the judicial chain for the internal circulation of files of the Supreme People's Court via AntChain, as well as being integrated with the "Netcom Law Chain" in Guangzhou and the Internet Court in Beijing, fully blooming in the judicial evidence preservation scene.
In January 2021, Tencent Cloud, Beijing Micro Research Institute, China Construction Bank, and the Digital Currency Research Institute of the People's Bank of China jointly initiated the establishment of the Chang'an Chain Eco-Alliance. As a result, the underlying technology of ZXLChain was upgraded from Tencent Cloud Blockchain to Chang'an Chain.
In August, under the wave of the metaverse, PCG internally incubated the digital collectibles platform Fancore, which quickly ignited the domestic digital collectibles market upon its launch. At the same time, Tencent Cloud revealed that ZhiXinChain has supported the landing of more than ten digital collectibles platform projects, including QQ Music, Kugou, Yuewen Group, and Xiaohongshu.
At the end of the year, Zhang Xiaolong, the President of WXG, gave a speech at Tencent's employee conference, stating that "Web3 may be a false carnival, but what Chinese Web2 left behind is a real disappointment." Three months after the remarks were made, Tencent's venture capital arm participated in the $200 million financing of the NFT game company Immutable, marking their "first investment" in Web3.
Tencent's blockchain business reached its climax. However, this momentum soon began to decline and plummeted to rock bottom.
In May 2022, Wang Shimu, the former General Manager of Tencent News, suddenly transferred to PCG's Social Platform and Application Business Unit, responsible for innovative businesses such as Fancore. Subsequently, in August, Fancore announced the suspension of digital collectible issuances and urged users to apply for refunds. In September, Wang Shimu left the company. In March the following year, Fancore officially announced its shutdown.
The closure of Fancore not only marked the end of the domestic digital collectibles craze but also became a crucial turning point for Tencent's blockchain business from prosperity to decline.
Since August 2022, Tencent's internal blockchain-related businesses have basically stagnated. Tencent's official blockchain public account has almost stopped updating its content, and Tencent Cloud's blockchain official account only has news updates related to Chang'an Chain. ZhiXinChain, which was in the spotlight before the new year, has been put on hold. When BlockBeats inquired about their current ongoing business, the reply received was a simple four-word answer - electronic invoices.
Updates from Tencent's blockchain and Tencent Cloud's blockchain public accounts after the closure of Fancore
Tencent Can't Talk about Dreams
Whether in blockchain, metaverse, or Web3 areas, there is a strong interest and active exploration within the Tencent ecosystem, including managers from the senior level. During the cryptocurrency boom in 2017 and 2021, Tencent's blockchain business also achieved rapid growth. In 2022, Guosen Securities, after reviewing Tencent's related investments, stated that Tencent has the "most comprehensive metaverse layout."
However, Tencent's exploration in the blockchain and Web3 fields is not driven top-down, and its organizational structure is too chaotic and loose, lacking a true strategic backbone. Under the dual pressure of cost reduction and top-level decision-making compression, Tencent's blockchain business was eventually cut off. Today, in the new Web3 and virtual asset fields, Tencent has completely retreated, losing its ability to compete with the Alibaba system.
Rabbit Hole Adventure
Matr 1 x Fire founding member Hang came into contact with Bitcoin during the cryptocurrency bull market from 2016 to 2017. During that time, he read whitepapers on Bitcoin and other blockchain projects daily, often studying until three or four in the morning. "At that time, the concept of 'Web3' didn't exist, but once you entered this rabbit hole, you couldn't get out anymore." At that time, there were also many ideas about blockchain within Tencent, especially within the financial technology business line closest to the financial industry, many of which came directly from its executives.
In addition to WeBank, Tencent also had a small presence in exploring blockchain and virtual assets in Hong Kong, namely Fusion Bank. The president of Fusion Bank is Lai Zhi Ming, who also holds a more well-known title - former vice president of Tencent.
Tencent's official evaluation of Lai Zhi Ming is: Lai Zhi Ming has made significant strategic contributions to Tencent in building payment infrastructure and financial open ecosystem... He laid a solid foundation for overtaking in the mobile payment curve and capturing industry high ground, and successfully established a diversified financial ecosystem covering areas such as finance, securities, banking, blockchain, etc., with payment as the entry point."
Lai Zhi Ming is a Hong Kong native who graduated from MIT in 1995 and returned to mainland China. He joined Tencent in 2009. In September 2012, Lai Zhi Ming became the general manager of Tenpay, which upgraded to Tencent's financial technology business line three years later, with Lai Zhi Ming as the head. During his tenure, he showed a particularly strong interest in blockchain.
In January 2019, Lai Zhi Ming, as a member of Guangdong Provincial Political Consultative Conference, proposed to further promote the trial application scope of blockchain electronic invoices in Guangdong Province. In the book "Blockchain and Asset Securitization" published in October 2020 by Yao Qian, former head of the Science and Technology Regulatory Bureau of the China Securities Regulatory Commission, Lai Zhi Ming appeared as a co-author with Xiao Feng, executive director of Wanxiang Holdings. According to insiders who spoke to BlockBeats, around 2016, Cai Yige was doing startups in the field of financial technology, and it was Lai Zhi Ming who invited him back to Tencent to be in charge of Tencent's blockchain business.
In 2019, Ethereum founder Vitalik visited Tencent. At that time, the cryptocurrency market was full of chaos, and Cai Yige did not want his team to touch these gray areas, but focused on thinking about the scenario value of blockchain technology. After exchanging ideas with Vitalik, Cai Yige felt that Ethereum's narrative as a "world machine that provides trust" was an interesting and exciting direction.
Vitalik and Cai Yige
In June 2019, Lai Zhiming stepped down as head of Tencent FiT and became chairman of Tencent Virtual Bank (Infinium Limited). In November, Cai Yige officially became the general manager of Tencent Virtual Bank's blockchain division, participating in the preparation of Infinium Bank and exploring blockchain finance, digital assets, and other scenes.
Regarding the specific business exploration of Infinium Bank, Cai Yige said, "Hong Kong has very strict requirements, so it takes a long time to launch new business." Internal sources told BlockBeats that Infinium Bank proposed many concepts in the early stages, but most of them did not materialize. For example, Infinium Bank considered issuing its own STO tokens and digital gold. During the 2020 Tokyo Olympics, the team also attempted blockchain cross-border remittances and settlements with Japanese banks. However, these businesses were halted due to Hong Kong's regulatory policies and other reasons.
In 2022, operating data showed that eight banks in Hong Kong collectively suffered losses exceeding 3.7 billion Hong Kong dollars, with Infinium Bank's losses exceeding 533 million Hong Kong dollars. In June, Tencent announced that Lai Zhiming would no longer serve as the vice president of Tencent and would focus on his role as chairman of Infinium Bank. The "behind-the-scenes mastermind" of Tencent's blockchain business was officially expelled. The following year, Cai Yige also left Tencent.
Within Tencent, there is a more enthusiastic exploration of the Metaverse and Web3.
In April 2021, in order to save QQ, Tencent announced a new round of organizational restructuring. Yao Xiaoguang, the president of Tianmei Studio and vice president of Tencent, replaced Liang Zhu as the head of PCG's social platform business.
During his time at IEG (Interactive Entertainment Group), Yao Xiaoguang's "Honour of Kings" was Tencent's "cash cow." After taking on the role of head of social platform business, Yao Xiaoguang immediately started a series of exploration in the "social + gaming" domain. In August 2021, PCG released a game social product called Nao Nao Community (NokNok), which targeted Discord. In September, Tianmei Studio announced the recruitment poster for the ZPLAN project, with a team size rumored to exceed one thousand people. A few months later, Super QQ Show was launched, which was regarded by many as Tencent's demonstration of its determination to explore the Metaverse.
Also related to QQ, in November 2021, Tencent distributed a 23rd-anniversary commemorative version of NFT to its employees.
This series of NFTs, produced by the Fantasy Core team incubated by PCG, is based on the QQ Penguin image for IP derivatives. There are a total of 72,000 pieces, encompassing 58 elements, divided into three grades of high quality, rare, and epic according to their probability of appearance. There are also 1,000 special egg-shaped models. After the NFT series was launched, it quickly sparked a "trading frenzy" within the company, and some even used spreadsheet software to build a rudimentary "trading market." The popular "Chang'e Goose" hidden edition once sold for a high price of 50,000 yuan, and "buying and selling penguins" became a new social trend within Tencent.
QQ Penguin NFT, and its "trading market"
"During that time, the atmosphere within Tencent was particularly good, with our own 'exchange groups' for convenience in conducting transactions. Because we were all colleagues and could see each other's real names on the Enterprise WeChat, we were very reassured." A former Tencent employee told BlockBeats that this internal WeChat group for deposits and withdrawals was set up after a Tencent Blockchain Conference.
In the first half of 2021, the popularity of NFTs soared unprecedentedly, and there were many people within the company who wanted to understand, learn, and participate in this wave. At the time, Zilliqa Chain happened to be the earliest team within Tencent to focus on and study this field. Taking advantage of this opportunity, Wang Leqing, the person in charge of Zilliqa Chain, organized a conference within Tencent with the aim of promoting the asset digitization of internal business. According to Tencent employees' recollections, this conference was particularly lively. "Normally, if Tencent holds a public event, the participation rate won't be particularly high. Having several tens of people is already impressive. However, nearly 500 people participated in that conference, and afterwards, we created Discord and WeChat groups to discuss these topics."
After this Zilliqa Chain conference, many Tencent teams, including QQ Music and China Literature Group, began to establish business exchanges with Zilliqa Chain, including PCG's Fantasy Core team.
The department where the Fantasy Core team is located is an innovative product incubator under PCG, and Xiao'e Pinpin was hatched from here. At that time, the team also developed a domestic alternative to Discord, but after Nao Nao Community was launched in the QQ business line, they began to shift their focus to exploring the Web3 and Metaverse fields.
Former members of the Fantasy Core team told BlockBeats that the main considerations for launching Fantasy Core were two points: firstly, there were a large number of IPs within PCG that didn't have good commercialization methods, and secondly, NFTs could serve as an economic system connected to the Metaverse, linking Tencent's gaming and entertainment content business in the future.
At that time, QQ Music had already been cooperating with Zilliqa Chain for some time. However, the incubation speed of Fantasy Core was very fast, and it went online in just over a month after being launched. With the concept of being the "first NFT platform of Tencent," Fantasy Core became popular overnight, and many subsequent actions by the team have had a significant impact on domestic products of similar types, such as WhaleTank and iBox.
Initially, the target of Fantom Core was the overseas NFT trading platform OpenSea, but later changed to platforms like Nifty Gateway that attempted to 3D-ize the platform. Interestingly, the concept of "digital collectibles" was also proposed by Fantom Core. Prior to this, some domestic platforms used "non-fungible tokens". "This was originally a temporary transitional concept. After we finished, all competitors changed their names to this, and have not changed since then."
In addition to NFTs, the department in which Fantom Core was located also worked on many other projects in the Web3 field. "We also tried GameFi, and the product was already completed at the time, but it was not launched in the end because Tencent has relatively strict compliance requirements internally. If you want to go live overseas, you need to isolate it from the company," a former member of Fantom Core told BlockBeats.
Fantom Core once planned to launch an overseas version, but due to unfavorable timing and trading volume, it ultimately did not go live. "Tencent values the self-revenue-generating ability of a project very much, not just in terms of user growth, but in terms of whether the project can sustain itself. It may not have been important before, but in the past two years, revenue has been the key measure."
Cost Reduction and Efficiency Improvement
At the end of 2021 Tencent staff meeting, Ma Huateng mentioned "winter is coming" for the first time. He emphasized that Tencent now needs to strengthen internal collaboration and achieve cost reduction and efficiency improvement.
In March of the following year, Tencent released its 2021 annual financial report, with a net profit of 123.788 billion yuan, a year-on-year increase of 1%, marking the lowest net profit growth rate in nearly a decade. Among them, Tencent's net profit in the fourth quarter was 24.88 billion yuan, a 25% decline from the third quarter. Subsequently, Tencent's share price fell below HK$300, with a decline of more than 12% for the year.
Ma Huateng at the Tencent staff meeting
Tightening of the capital market, the squeeze of the online education industry due to the "double reduction" policy... The drastic changes in the internet trends have greatly affected Tencent's revenue. According to 36Kr, Tencent started to reduce personnel in multiple business groups since the end of 2021, with the PCG and CSIG groups being hit the hardest, with a layoff ratio exceeding 20%. The IEG, where Tencent games are located, has had little action.
As one of the most affected business groups, nearly half of the 9 products Tencent halted in the past few months are from PCG. Its subsidiaries, including Tencent News and Tencent Sports, also face tremendous pressure. According to internal Tencent employees, the turning point of this round of layoffs is the organizational restructuring of PCG and IEG in April 2021.
After nearly a year of contraction, Tencent reduced its sales expenses by 20% in the first three quarters of 2022. At the year-end employee conference, Ma Huateng continued to emphasize the theme of cost reduction and efficiency improvement, stating that "cost reduction and efficiency improvement should become a habit," and all businesses that are cut off should not be nostalgic. A strong signal at the conference is that there is not much time left for PCG's businesses, with Tencent News being the first in line. Ma Huateng mentioned that if the team does not undergo strong changes, "Tencent News as a whole can be cut off."
Phantom Core also belongs to PCG, but the projects revenue and income have always been good. However, these numbers cannot be compared with the scale of gaming and livestreaming businesses. Therefore, in reality, whether or not to shut down Phantom Core does not have a significant impact on Tencents revenue."Because the overall scale and budget for product deployment are not much, and the revenue needs to be handed over to the company, whether this innovative business can survive mainly depends on the company's level of attention to it," former Phantom Core team members told BlockBeats.
The signal of the changes in Phantom Core's business started from a personnel change in PCG in May 2022.
In August 2021, Wang Shimu, the former vice president of NetEase Cloud Music, joined Tencent News as the new head. But in May of the following year, Wang Shimu was transferred to the PCG social platform and application line, responsible for Phantom Core and other innovative businesses. Then in August, Phantom Core announced its suspension, and a month later, Wang Shimu left the company.
Internal sources told BlockBeats that the decision to shut down Phantom Core and other businesses came directly from Tencent's top level. "At that time, Pony (Ma Huateng) made the decision that these C-end businesses would slowly stop," multiple Tencent employees confirmed to BlockBeats the rumors that Ma Huateng "did not like" Wang Shimu. However, they also believe that the reason for shutting down Phantom Core is not only due to this. Tencent has always been very cautious about financial innovation, and the strong speculative sentiment in the secondary market of digital collectibles means that this business faces regulatory risks far greater than its returns.
"Tencent is a very conservative and 'obedient' company. It will not test the bottom line and boundaries like Alibaba, and it rarely makes risky money, which is also not much for Tencent," former Phantom Core team members told BlockBeats. After the shutdown of Phantom Core, Tencent was required to shut down all its digital collectible businesses, including QQ Music and Tencent News.
The situation is also bleak for CSIG.
In the fourth quarter of 2021, the revenue of the fintech and enterprise services sector grew by 25% year-on-year, reaching 47.958 billion yuan, surpassing online games for the first time and becoming the largest revenue-contributing business sector for Tencent. However, despite its revenue surpassing the gaming business, the fintech and enterprise services sector is also the fastest-growing sector in terms of cost investment, still having a significant gap in net profit compared to the gaming business.
In March 2022, Tencent President Liu Chiping stated in a conference call that Tencent will continue to focus on key investments in international games and SaaS businesses, while strengthening cost control for cloud and long-form video businesses in order to maintain healthier growth.
CSIG was also heavily impacted in the layoffs that began at the end of 2021. In addition to the 20% staff reduction, the remaining employees were informed that CSIG's key performance indicator for business development would be profitability, which directly affected Tencent Cloud's previous business model. In the stagnant cloud services market, in order to compete for market share against Alibaba Cloud and Huawei Cloud, Tencent Cloud often engaged in loss-making sales through methods such as "one yuan bidding" and "overall subcontracting".
However, the shift towards profitability as the goal will render all of these sales strategies ineffective. A middle manager from CSIG said in an interview with 36Kr, "The bosses don't have that much patience anymore. They hope CSIG can run faster and stop losing money all the time."
Tencent Cloud's blockchain business, which belongs to Tencent Cloud's business, was also greatly affected by these layoffs. Insiders told BlockBeats that over the past two years, Tencent Cloud has held almost weekly Web3-themed salons internally to discuss how to replicate new technologies from the Web3 field onto consortium chains and innovate in combination with the domestic environment. "But Tencent's internal Web3 efforts haven't been very successful, and they haven't made anything out of it. When the layoffs came, many of these departments were also downsized."
Online salon related to Tencent Cloud's blockchain
However, Tencent Cloud's blockchain business was not completely shut down.
In February of this year, Tencent Cloud hosted the first Web3 Global Summit "Tencent Cloud Web3 Builder Day" in Singapore, with well-known native encryption projects such as Scroll, Avalanche, and Sui attending the event. The theme of this conference was "Accelerating Web3 Success". Yang Baoshu, Senior Vice President of Tencent Cloud International, stated at the event that Web3 is the new iteration of the Internet, and Tencent Cloud sees its future and has confirmed partnerships with Ankr, Avalanche, Scroll, and Sui.
During this period, Tencent Cloud announced its support for global Web3 ecosystem development and launched the "Metaverse-in-a-Box" Web3 one-stop solution, mainly targeting the development of on-chain metaverse. However, according to sources familiar with Tencent Cloud's Web3.0 business, Tencent Cloud is equally unable to compete with Alibaba Cloud in the Web3 field. "The so-called 'Metaverse-in-a-Box' is just Tencent Cloud providing you with a set of Web2 tools, and everything else needs to be built by yourself. In addition, there are gaps in performance and usable enterprise scenarios."
Despite facing growth bottlenecks, Alibaba Cloud still holds a very strategic position within the Alibaba ecosystem. In March of this year, Zhang Yong, Chairman and CEO of Alibaba Group, took over as Chairman and CEO of Alibaba Cloud Intelligence Group. The practice of having a group chairman also serve as a business CEO is extremely rare not only for Alibaba but throughout the entire history of major internet companies.
In comparison, Tencent Cloud's strategic position in the overall Tencent architecture is far inferior to Tencent Games, which can be seen from the significant difference in market share between Tencent Cloud and Alibaba Cloud. "Most Web3 projects would like to cooperate with Tencent, but what they are actually interested in is Tencent Games, which is drastically different from Tencent Cloud. However, Alibaba is much better in this regard, as it has the largest number of enterprises in Asia and offers a richer range of business touches and "toys".
Take Avalanche as an example. Although they announced a partnership with Tencent Cloud in February, most of their activities in the following months were carried out in collaboration with Alibaba Cloud. In May, Avalanche also collaborated with Alibaba Cloud to launch the competing product "Cloudverse" of "Metaverse-in-a-Box".
Observant individuals will notice that major domestic cloud service providers venturing into Web3 has become a new trend. This year, Huawei Cloud held Web3-related summits in February and August respectively, announcing the provision of technical services for Web3 projects. Insiders told BlockBeats that the main consideration for these major companies is still to "leverage small resources to tap into the huge returns of overseas markets".
Cloudverse promotional poster
In addition to PCG and CSIG, Tencent's investments are also shrinking.
"Around 2020, when Wu Jihan's Bitmain went public on the US stock market, Tencent approached me, hoping to help me go public," a veteran practitioner in the mining circle told BlockBeats. "Around 2020, 'mining stocks' were very hot, and it was common to see Tencent's investment in the mining circle, including Shengda Games that Tencent later invested in, where one of its data centers mainly focused on mining."
But since last year, Tencent's strategic investment in Web3 has been shrinking. Apart from the $200 million financing in March for Immutable, Tencent's strategic investment has not announced any other investments in the Web3 sector. According to BlockBeats' multiple sources, Tencent Games and Tencent Cloud's strategic investment teams still look at some Web3 projects, but rarely make any moves. The same is true for investment entities associated with Tencent.
Insiders told BlockBeats that there are many investment companies owned by Tencent executives in Nanshan, Shenzhen. In the past, they actively sought out projects, but recently they have been talking less about Web3 and instead focusing on the AI field. "These companies' funds come from Pony (Ma Huateng) and are controlled by Tencent executives." In the context of tightening global liquidity, many USD funds are facing difficulties, not only in Web3 and AI, but also in fundraising in all industries. "Of course, it cannot be said that they don't invest in Web3 at all, because for compliance reasons, sometimes even if they invest, they won't make it public."
In addition to Tencent Cloud, Photon's Web3 research and development is also one of the few departments within Tencent that is still paying attention to Web3. Insiders told BlockBeats that this department mainly focuses on infrastructure, but the business is mostly in the research stage, waiting to slowly lay out once the company and policies allow.
In the eyes of many former employees, Tencent currently does not see a high cost-effectiveness for Web3. One reason is that the market is not large enough, the second reason is the lack of clear regulatory direction, and the third reason is that the industry's labor costs are not low enough. "Big companies often do not actively innovate, they only follow and then use their resources to enter together. When this industry has a benchmark product, I believe many traditional manufacturers and big companies will enter the market."
"Tencent is very conservative about Web3, and this conservatism is mainly manifested in the top-level decision-makers' qualification and alignment with domestic policies. In this matter, Tencent is content to follow the trend." At the 2021 Tencent Employees' Conference, Ma Huateng mentioned the need to "lose weight and build muscle, and use bullets in key battles," brewing the next trend or battle.
In Ma Huateng's view, Web3 will not be Tencent's next trend.
Tencent employees don't want to wait
In June of this year, Sparkle announced the completion of a pre-seed financing round led by Folius Ventures, followed by being selected for the 6th Binance accelerator. This is a Web3 astrology application with built-in GameFi and SocialFi elements. In August, the project released the first batch of free Genesis NFTs using the ERC-6551 standard, and the trading volume on the first day soared to second place on the OpenSea trading list.
Sparkle's founding members were former employees of Tencent who participated in the incubation of Mirage Core from scratch. "After Mirage Core shut down, everyone started to start their own businesses one after another. There are 5 teams that I know of that came out of Mirage Core, including those working on virtual humans, SocialFi, and those in the process of fundraising," an informed source told BlockBeats. The former head of the department where Mirage Core was located, Wang Shimu, has also started a Web3 business.
Along with Tencent's PCG, CSIG, and many other internet giants, Web3 has seen many Web2 teams join since the end of last year and the beginning of this year. During the Web3 event in Hong Kong in April of this year, many former Tencent employees discovered that there were more than just themselves from the goose factory who were starting Web3 businesses. The presence of goose factory employees could be seen in many project briefing documents. "During that time, projects coming out of the big companies were able to secure funding more easily. Even projects that should not have been invested in based on normal logic were able to get money. Investors are also betting that they can produce the next product like StepN," said the informed source.
"Goose Factory Mob"
BlockBeats found that many projects with a "Tencent lineage" are combining "financial technology + gaming" to start Web3 ventures.
For example, as mentioned earlier, the founding member of Matr 1 x Fire, Hang, comes from Tencent's financial technology sector, while the co-founders and many development members come from Tencent's gaming division. The same combination can also be seen in the project PunkCode, the "blockchain leader" of Tencent's blockchain division. Cai Yige, who once explored the blockchain field in Tencent's financial technology sector, is the co-founder, while Guan Zhiyuan, the former head of Tencent's eSports market communications team and a founding member of the King of Glory market team, is also a co-founder.
Among the two business lines within Tencent that have had the most frequent contact with blockchain and metaverse, it is the people who have come out of here to start Web3 businesses. Among them, those from Tencent's gaming division mostly do so out of interest in the industry and a desire for exploration, while those from Tencent's financial technology sector do so more due to spatial compression within the business department.
BlockBeats has learned from multiple informed sources that a lot of people from the Zurich Chain team have also entered the Web3 business, with the most well-known being the Web3 equity aggregation platform VIP3. In August, VIP3 announced the completion of a $2 million seed round of funding, with participation from IOBC Capital, Ankr, and other institutions. Currently, VIP3 has established equity partnerships with mainstream cryptocurrency platforms such as Binance, HashKey Exchange, and OKX.
Interestingly, in the list of projects collaborating with VIP3, there is the Web3 game Mahjong founded by Brice. "At the time, the founder of Mahjong, the founder of VIP3, and we had ideas for some projects while we were at Tencent, and we have been in touch ever since," a Web3 entrepreneur told BlockBeats.
Some Web3 Tencent entrepreneurial projects refer to each other as "brother teams" and often organize meetings and exchanges to find viable collaboration opportunities. There is not only one "Tencent Web3 Entrepreneurship Group", which is used not only to solve deposit and withdrawal issues, but also often has related recruitment and job-seeking information. "Now there is already a feeling of a small alliance, and friends even joke that we should bring out a Tencent to work on Web3 DAO."
Tencent Web3 Entrepreneurship Group
In terms of the "off-site team building DAO" matter, it seems that Alibaba's projects are not lagging behind either. During the upcoming Token 2049 event, the Side-Event (A 3 Summit) of A 3D AO has attracted the participation of many entrepreneurs from large factories and domestic and foreign VCs. The initiator of this DAO organization is several entrepreneurial projects that emerged from AntChain, including ZAN, a technology brand supporting compliant Web3 products and services under AntChain.
According to BlockBeats, many Web3 entrepreneurs under Alibaba come from high-level executives of Ant, with quite a few being at P10 level or higher. However, in terms of the number of people, "Alibaba Web3" falls behind "Tencent Web3". BlockBeats has learned that the current number of members in A 3D AO is about 50 to 60, while Tencent's Web3 Entrepreneurship Group already has over 500 members.
Tencent Curse?
It is worth noting that many Tencent entrepreneurs in Web3, when talking about their entrepreneurial experience, will mention a concept similar to the "Tencent Curse", which indicates that some teams may encounter difficulties in adapting. "Some teams that transition from Web2 to Web3 may be completely clueless about how to establish contact with users when they first enter the field, and end up in a state of working in isolation."
According to BlockBeats, there are three main groups of people who have left Tencent and are involved in Web3 development. The first group includes those born in the 1980s and 1990s who have been exposed to Bitcoin and the blockchain industry early on. They have a strong technical background and focus more on infrastructure. The second group consists of younger individuals born in the 2000s and even the 2005s. Many of them entered the industry during the bull market in 2021. Although they may have limited professional skills and work experience, they actively participate as moderators in various Discord communities and have a good understanding of industry trends. The third group consists of teams transitioning from Web2 to Web3. They have stronger product capabilities and are conscious of doing things well, but they may not have a strong understanding of crypto-native concepts. The group most susceptible to the "Tencent curse" is the team transitioning from Web2 to Web3.
For Tencent, 2015 was an interesting time. During this period, services such as Alipay, Tenpay, and various companies' exploration of new businesses, including blockchain, were just beginning. People who joined Tencent before and after 2015 have significant differences in their product thinking and methodologies.
During this period, large companies were in an expansion phase, and many new businesses required manpower to explore new territories. New employees quickly accumulated a mature set of product methodologies. "For example, Pony Ma often said, if you are a product manager, you need to collect 1000 pieces of user feedback, follow 100 user blogs, and conduct 10 user surveys every month, etc., which may seem trivial but are crucial for effective product research. By identifying user pain points and incorporating them into the entire product design."
Insiders told BlockBeats that product managers who joined Tencent before 2015 had a solid foundation, and many Web3 projects that are now considered champions were created by these experienced product managers.
However, after 2020, Tencent's various platform products had become very large in scale, with user bases reaching tens of millions or even billions. During the Web3 entrepreneurship era, product managers who joined Tencent during this period were prone to fall into the trap of platform thinking.
Due to the reliance on Tencent's high-traffic platform products such as WeChat and QQ Music in many scenarios, most Tencent product managers tend to choose a large and lucrative direction at the beginning of their entrepreneurial journey. "But Web3 operates differently from Tencent's traditional business model. Tencent's model is more like collecting one dollar from 100 million users, whereas Web3 is a high-value product model that may only need 1000 users, each contributing 100 dollars," an industry insider told BlockBeats.
Of course, having the perspective of a large company is not without its benefits. "It means that when you start a business, you won't be like a purely entrepreneurial company. You will have a framework that allows you to avoid many pitfalls, which is a great advantage because Web3 products themselves often lack user experience and design rationality." It is because of this advantage that many teams are able to quickly adjust and adapt during the initial stage.
In addition to the product methodology, Tencent's advantage in product detail control and crisis response is gradually becoming apparent. This can be seen from the Matr 1 x Fire and Mahjong Meta teams mentioned at the beginning of the article. "Behind every detail and micro-operation that you can see and can't see, a lot of effort has been put in. Even if you have good potential, if you don't have these product capabilities, you may not be able to catch it," Hang told BlockBeats. On the day of the open test of Matr 1 x, the number of registered users exceeded the team's expectations, and there was a server crash. However, the team solved the problem within an hour and immediately restarted the server. "If the repair time exceeded three hours that day, all the new users would have been lost."
In the current Web3, the demand for product details from users does not seem to be high. But this is mainly because Web3 is still in the stage where product experience and logic need to be emphasized. In the early stages of the industry, the market tends to be more operation-oriented. A senior observer told BlockBeats, "Tencent is not an operation-oriented company, it is a product-oriented company. In Web3, there is mainly investment, but what is scarce is consumption. And to build a consumption scenario, you must first have good projects to offer."
Perhaps the era of the Web3 "Tencent gang" is coming.
