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. They are in Tencent and Huawei. Amid a backdrop dominated by twenty-somethings wearing the company’s trendy hoodies and handing out well-designed merchandise, the two Chinese tech giants appeared somewhat out of step with their more formal corporate banners.
They are next to engineers, marketers, and business developers deeply rooted in staking, where individuals pledge their crypto assets, such as Ethereum, to protocols in exchange for returns. The borrowed assets are later used to validate transactions on blockchains that implement the “proof-of-stake” method.
Last year, several Chinese tech giants, including Alibaba, Tencent and Huawei, popped up at crypto events in different corners of the world. In the hope of carving out a market share in the new web3 space, they appear for these events either as official sponsors or claim a more discreet presence as attendees.
The participation of Chinese tech giants in crypto is located at the crossroads of web2 and web3 thanks to their country’s widespread ban on cryptocurrency trading and initial coin offerings. In most cases, these tech companies are touting their computing resources to web3 startups in a way that’s not too different from how they sell cloud services to companies in more established tech verticals.
Cloud costs for companies building or leveraging decentralized networks are understood to be negligible. It is common for a “mid-sized” web2 business to spend over $1 million on cloud computing, but a company considered mid-sized on the web3 may spend only low hundreds of thousands of dollars, many attendees said the event.
Yet the limited ticket size hasn’t stopped Chinese cloud providers from getting into crypto. As the underdogs in the global cloud market, Chinese companies are more proactive and welcoming to customers because they lack brand recognition, especially in the West. As such, they must compete by offering cheaper – or better – services.
Besides providing cloud infrastructure, Chinese companies are also involved in areas that are more removed from their core products and put them in competition with crypto-native companies. That includes building blockchains for business use – most Chinese tech companies have avoided the public blockchain sphere where tokens play a key role due to the country’s ravages of crypto.
Some players also offer node-as-a-service business. Blockchains, which are decentralized databases that store and encrypt transaction data, are run on distributed nodes. These nodes, however, can be expensive and complicated to maintain, so companies like Huawei offers a node hosting service for developersan attractive solution to businesses that want to build decentralized applications but lack the technical prowess to do it themselves.
Tencent and Alibaba, which are the first movers among Chinese technology giants in the web3 space, have also distinguished themselves with respectable projects to raise their reputation in the industry.
Tencent, for example, has formed partnerships with public blockchains such as Sui and Avalanche as well as the Ethereum-scaling solution Scroll.
Alibaba, on the other hand, has partnered with Aptos, a blockchain created by former Meta employees, to boost its name in the web3 world. In a joint announcement today, Alibaba Cloud and Aptos Foundation said they will co-host hackathons using the Move programming language in the Asia Pacific region.
So far, web3 has barely made a dent in the Chinese tech giants’ top line, but these companies recognize the potential of the emerging industry and understand that they cannot afford to reject the opportunity, even in the face of significant fluctuations in the market and the collapse of major players such as FTX.