Rhythm BlockBeats news, on December 19th, Coindesk interviewed Mable Jiang, the executive director of Multicoin Capital, and asked her to talk about the different investment concepts of Chinese and foreign users due to cultural differences as one of the heads of investment institutions. As a research-driven crypto fund that has been established for three years, Multicoin Capital has a solid logic in laying out infrastructure and exploring potential projects.
The following is the original content translated by Rhythm BlockBeats:
The information and cultural gap between China and the United States is huge. As a Chinese citizen who lives in Hangzhou and also works for an investment company headquartered in the United States, I have the privilege to experience this firsthand.
In the encrypted market, information is divided into two across the Pacific Ocean, and operable information cannot be transmitted as fast as data packets on optical fibers. Although you may be familiar with various western social channels: Telegram, Twitter, Discord, Medium. But in China’s social software, such as WeChat, Weibo, Bihu and other channels, a completely independent crypto universe exists and runs. This is just the crux of the problem. In addition, cultural, time zone and language barriers have also exacerbated the lack of overlap between these two markets.
How information flows, how the relationships and bonds between parties are different, how different social norms generate friction, and different consumer behaviors, all these factors combine to form a unique cryptocurrency market structure in the United States and China.
Looking to the future, Chinese culture’s high demand for interpersonal trust, preference for mobile user interfaces, WeChat information flow and “pragmatism” will continue to be maintained. However, with the increase in cross-cultural communication channels, crypto operators in China and the United States should be able to understand the nuances between the two cultures and market their services in another market more effectively.
Understanding trust
I have observed that one of the most important differences between China and the United States is how market participants build and develop mutual trust. Chinese people prefer to trust people they know or who can interact directly, while Americans tend to trust brands.
In our investment paper written for dForce, a decentralized financial super network headquartered in China, I pointed out that one of its unshakable moats is its local business contacts and distribution channels. Yang Mindao, the founder of dForce, is a respected influencer in the local community. Because of his important position, he is able to establish strong relationships with key players in the Chinese crypto ecosystem. Maintaining a personal relationship with the person in charge of the local Chinese community, encryption operators and key distribution channels is an unquantifiable but undeniable advantage.
The DeFi agreement is not a business. They are, at least in theory, unlicensed and leaderless organizations. Nevertheless, Chinese users still hope that the chat room can provide customer service, with real people who can explain in real language how these protocols work. This is why senior employees or founders of platforms such as Binance, Huobi and OKEx often appear in the WeChat group to answer customer questions.
These trust requirements uniquely affect the way you do business in China. For example, in the United States institutional brokerage business usually refers to three separate lines of business: loans, trading and custody. Unlike the United States, most prime brokerage companies in China emphasize loan and asset management services.
Few major cryptographic institutions in China provide custody as an independent service because they know that Chinese people prefer to manage their own private keys rather than delegate (trust) them to others. This is the function of healthy and often suspicion in Chinese culture. China’s “giant whales” (those who hold large positions) will strictly protect all their assets, sometimes even only on their phones.
On the other hand, in the United States, many cryptocurrency institutions not only entrust their funds to custodians supervised by the Securities and Exchange Commission (sec), they actually need to do so. They do not want to take the risk of guardianship by themselves, because in their opinion, the “system” is more trustworthy. If Chinese “whales” entrust funds to quantitative trading companies, once again, Chinese users rely on “not your keys, not your coins,” because Chinese culture contains higher trust requirements. Entrepreneurs need to understand these subtleties in order to most effectively compete on a global scale. They usually only authorize the exchange API to the trading team, not allowing them to keep it directly.
Once again, Chinese users are more convinced of the concept of “Not your key, Not your Coins” (no private key coins are not yours), because Chinese culture contains higher trust requirements. Entrepreneurs need to understand these subtleties in order to most effectively compete on a global scale.
For these reasons (and many other reasons), I usually try to help our non-Chinese portfolio companies hire people who speak the local language to connect with users and potential business partners on an interpersonal level.
Understand user preferences
User behaviors and preferences in different markets vary greatly, and these preferences have led to the localized product strategy of leading companies in each region.
In China, smartphones dominate the use of the Internet. Even some of the most complex derivatives transactions are executed on smartphones. This is in sharp contrast to the situation in the United States and other Western countries. In the United States and other Western countries, traders prefer to log in on the computer.
For a considerable number of Chinese people, the mobile phone is their first computer and the only computer. Because users prefer (and rely on) mobile interfaces, these mobile applications will naturally compete with each other for user retention. Under such pressure, the most successful apps have grown into super apps, such as WeChat and Alipay, allowing customers to solve all their problems in one place.
Although encryption technology is a borderless phenomenon, user behavior is still largely affected by the entrenched user behavior in the Web 2.0 era. For example, Asian exchanges are more likely to become super applications that provide cross-product services. Binance is a good example; in the past two years, the company has launched a “blitzkrieg” and continued to expand its business, from basic spot and futures trading, to more complex options trading, to new betting services, mining Pool and fiat currency OTC trading applications. Binance tries to provide all encrypted financial services.
Coinbase is another typical representative, reflecting the western business strategy, launching custody, Prime, Pro and retail to provide different business lines and products.
Understanding user preferences and positioning remains a powerful differentiator. This will not change in 2021. Entrepreneurs need to localize strategies in China and the United States.
Understanding the flow of information
Platforms such as Twitter, Discord, Telegram, and Medium in the United States welcome permissionless, anonymous online participation and (relatively) cross-platform free flow of information. In the United States, the main place for encrypted information exchange is Twitter, which is no secret: users can comment publicly and freely follow anyone they like.
China is very different. The main platform is neither Weibo (Chinese version of Twitter) nor Bihu (an encrypted local discussion forum similar to Medium). Instead, it was on WeChat. As a heavyweight application, WeChat’s information flow is closed. This makes WeChat a micro-world derived entirely from internal information. All communication processes are completed in WeChat, WeChat conversations, WeChat embedded hyperlinks, WeChat Moments and so on.
Therefore, the obstacle to building a community in China is even greater, because everyone must use WeChat, and it is not easy to form a large WeChat group.
E.g:
The maximum number of WeChat groups is 500;
The QR code has a validity period;
When the group has more than 200 people, people cannot join through QR codes, and the team leader needs to pull people in manually.
But on Twitter, anyone can easily follow or cancel others. In a WeChat group, especially those with less than 100 people, members are facing social pressure that everyone will “leave the group”. Some influential people in China even monetize their “private domain traffic” by charging a fee to enter the group, which gives their members a special sense of group (and creates the perceived cost of leaving).
However, WeChat’s closer binding relationship creates a more level playing field for giant whale users, institutions and retail participants. In the United States, a “thought leader” who has hundreds of thousands of followers on Twitter does not necessarily follow all his followers, so he or she cannot see all the feedback. This one-way relationship effectively divides the boundaries between cryptocurrency influencers and professional institutions and retail participants.
However, on WeChat, representatives of institutions and retail companies usually fall into the same group. This “flat” setting basically realizes two-way communication between professionals and retail investors.
Projects trying to market in China or the United States must understand these differences in information flow. In China, the media is controlled and influenced by contractual relationships. In the United States, the media “relies on strength to win.” “As encryption technology becomes more and more important, more communication channels will emerge, and the structure of information flow will continue to be fragmented.
Understanding pragmatism and idealism
Arthur Hayes of BitMEX joked that good marketing to Chinese users can make any token look promising. His joke is not entirely a joke; it reflects the deeper reality of the crypto capital market.
Although Vitalik gained huge support in China in the early days of Ethereum, today, compared with the United States, Ethereum’s extreme proliferation is declining in China. This is in sharp contrast to the cryptocurrency Twitter, where Ethereum’s maximalism is enthusiastically promoted.
“The products and agreements they are building are becoming more and more local, but also more and more global.”
Next year
Entering 2021, crypto entrepreneurs must realize that the products and protocols they are building are becoming more and more localized while also becoming more global. The United States and China are obviously the two most critical markets. Winning these two markets means unprecedented success.
Two years ago, the idea of listing in the United States and China at the same time was unimaginable. Today, entrepreneurs absolutely must formulate and execute unique strategies for the United States and China, otherwise they risk being left behind by the market.
Although there are more and more channels built between China and the United States, the cultural moat and user behavior I described above show no signs of substantial changes in the short term. As companies plan to allocate capital next year, they hope that the recruiting team can understand and appreciate the opportunities brought about by cultural differences, and regard the distance between China and the United States as a unique advantage that can be used instead of an obstacle to global expansion.
Such a cultural bridge is easy to describe, but difficult to build. The winning strategy will be unique and difficult to replicate: no single template can guarantee the constant or growth of market share.
Original Title: “Bridging Cultural Gaps in 2021: Crypto in China and the US”
Original source: Coindesk
