Conflux, one of China’s earliest homegrown public blockchain projects, has quietly built momentum over the past six years. With its unique positioning at the intersection of technology innovation and regulatory compliance, it stands out in the global Web3.0 landscape. Recently, Liu Honglin, founder of Shanghai Manqin Law Firm and a long-time observer of China’s blockchain ecosystem, visited the Conflux Tree-Graph Research Institute in Shanghai for an in-depth discussion with Yuan Jie, co-founder of Conflux.
The two-hour conversation covered a wide range of topics—from governance structure and market strategy to security incidents and Hong Kong’s evolving crypto environment. What emerged is a clear picture of a project maturing beyond hype, focusing on sustainable growth, real-world adoption, and strategic resilience.
This article distills the key takeaways from that dialogue, offering insights into CFX’s current status, ecosystem development, market-making strategies, Hong Kong expansion plans, and responses to recent security challenges.
The Relationship Between Conflux Foundation and Tree-Graph Research Institute
One of the most frequently misunderstood aspects of Conflux is the relationship between the Conflux Foundation and the Shanghai Tree-Graph Research Institute.
Legally, they are entirely separate entities. The Conflux Foundation is a non-profit organization registered overseas, while the Tree-Graph Research Institute is a government-supported, non-profit research body based in Shanghai. There is no formal ownership or hierarchical link between them.
However, functionally, the dynamic resembles an “open-source client” model:
- The Tree-Graph Institute acts as the primary technical contributor, handling core protocol development and R&D.
- The Conflux Foundation funds this work through donations and grants, effectively playing the role of a sponsor.
This separation allows Conflux to maintain technical independence while benefiting from stable domestic research funding. Notably, the Tree-Graph Institute also participates in national-level projects—such as those led by the Ministry of Industry and Information Technology (MIIT) and the 0G (ZeroGravity) distributed storage initiative—providing it with consistent operational income.
In essence, this dual-track model enables Conflux to navigate complex regulatory environments while advancing cutting-edge blockchain innovation.
Founding Team Roles: Clear Division of Responsibilities
Clarity in leadership has been critical to Conflux’s longevity. The founding team has established a well-defined division of labor:
- Yuan Jie: Focuses on commercialization, business operations, and identifying emerging market opportunities in Web3.0.
- Long Fan: Manages domestic government relations, ensuring alignment with Chinese policy frameworks and securing institutional cooperation.
- Wu Ming: Leads core technology research, tackling advanced cryptographic and consensus challenges.
This分工 (division of labor) ensures that each co-founder can focus on their strengths—technology, policy, and business—while collectively steering the project through both technical and regulatory complexity.
BTC L2: A Strategic Pause
In late 2023, during the Bitcoin ordinals boom, Conflux explored launching a Bitcoin Layer 2 solution. While initial efforts were promising, market dynamics shifted rapidly.
With declining interest and underwhelming performance from existing BTC L2s, the team made a tactical decision to pause development on this front. This does not signal abandonment but rather a reallocation of resources toward more viable opportunities.
Yuan Jie emphasized that staying agile in exploring new trends—while knowing when to step back—is essential for long-term survival in Web3.0.
Funding and Market Making: Stability Amid Volatility
A common concern among investors is token liquidity and price performance. Here's what’s happening behind the scenes:
- All early institutional investments in Conflux will be fully unlocked by mid-2025.
- The foundation has secured additional strategic capital from undisclosed partners, ensuring strong financial health—Conflux is not facing funding pressure.
On market-making:
- Previous collaborations with firms like DWF were terminated due to misaligned operational styles.
- Conflux is now pursuing partnerships with mainstream market makers across multiple jurisdictions.
- These new partners are expected to do more than just provide liquidity—they’ll also run on-chain nodes, contributing directly to network decentralization and ecosystem health.
This shift reflects a deeper vision: treating market makers not just as traders, but as active participants in the network’s infrastructure.
Ecosystem Positioning: Targeting the Chinese-Speaking Market
After six years in the space, Conflux has redefined its competitive strategy.
Initially, like many chains, it tried hosting global hackathons and attracting developers with grants—a model used successfully by Ethereum and Solana. But over time, they realized this approach lacked differentiation. Many projects built on Conflux eventually migrated to chains with stronger marketing or capital backing.
So Conflux pivoted.
Their new focus? Becoming the preferred compliant blockchain for Chinese-speaking entrepreneurs.
Rather than competing globally on hype, Conflux leverages its understanding of local regulations to offer a secure, high-performance, low-cost platform tailored for Web3 builders in Greater China and Southeast Asia.
It’s not about nationalism—it’s about pragmatic niche positioning. With few major public chains led by Chinese teams remaining, Conflux fills a crucial gap.
👉 See how regional blockchain ecosystems are reshaping global Web3 adoption.
The goal is clear: remain competitive in global market cap rankings over the next 4–5 years while patiently waiting for macro conditions to align.
Responding to Hacker Attacks: User Protection First
Security breaches in ecosystem projects have raised concerns. In response, Conflux took immediate action:
- Actively assisted users in filing police reports.
- Engaged directly with major exchanges to track stolen assets.
- Preemptively reimbursed users who lost less than 2,000 USDT, even though the attack targeted third-party dApps, not the core network.
For larger losses, recovery depends on exchange cooperation. Still, this proactive stance demonstrates a commitment to user trust—an increasingly rare quality in decentralized ecosystems.
BSIM Card: Bridging Blockchain and Telecom
One of Conflux’s most innovative offshoots is the BSIM (Blockchain SIM) card, which integrates wallet functionality directly into a mobile SIM chip.
Key updates:
- R&D is complete.
- Pilot programs are running in two Chinese cities.
- Cost-effective data plans make adoption accessible.
- Rollout timing depends on telecom partners—state-owned carriers move cautiously.
Yuan Jie optimistically expects meaningful progress by end of 2025—but admits delays are possible.
If successful, BSIM could become a mass-market gateway to Web3, especially in regions where smartphone penetration is high but crypto literacy is low.
Regulatory Outlook: Mainland China vs. Hong Kong
Mainland China
No near-term relaxation of crypto policies is expected. Given current economic conditions and capital control priorities, unrestricted crypto activity would pose systemic risks.
Hong Kong
Hong Kong represents a strategic testing ground for China-backed Web3 innovation. However:
- Most traditional financial institutions remain观望 (on the sidelines).
- Trading volumes for spot Bitcoin ETFs and licensed exchanges remain modest.
- Real participation comes largely from mainland-affiliated firms (e.g., Harvest Fund, Southern Fund), not Western institutions.
Still, opportunity exists—especially in Hong Kong dollar stablecoins.
Hong Kong Dollar Stablecoin: More Than Just Settlement
Stablecoins generate revenue through:
- Transaction fees (friction costs ~0.1%)
- Interest from underlying asset reserves (e.g., Tether earns ~$400M/year with <80 staff)
For HKD stablecoins to succeed, they must go beyond traditional finance use cases. They need to become:
- Native trading pairs on crypto exchanges
- Widely accepted payment tools for SMEs
Conflux’s Hong Kong partners are preparing compliant applications and aim to be among the first issuers. The goal? Use HKD stablecoins as a springboard for broader on-chain financial innovation, not just cross-border settlement.
Breaking the Web3.0 Bias Against Chinese Projects
Yuan Jie candidly acknowledged a persistent industry bias: Western-founded projects often receive higher valuations and easier fundraising access. Meanwhile, Chinese teams—even with superior tech—are frequently overlooked.
Domestic VC interest in pure-play Web3 projects has waned since 2023. As a result, many Chinese entrepreneurs are turning to hybrid models, integrating blockchain into AI, supply chain, or fintech solutions—not as the core product, but as a differentiator.
This pragmatic pivot increases survival odds in a tough climate.
Frequently Asked Questions (FAQ)
Q: Is Conflux centralized due to government ties?
A: While the Tree-Graph Institute receives government support, it operates independently. The Conflux network itself remains decentralized and open-source.
Q: Can CFX rebound in value despite low hype?
A: Long-term value depends on adoption. With improved market-making and real-world use cases like BSIM cards, fundamentals are strengthening—even without viral attention.
Q: How does Conflux differ from other EVM-compatible chains?
A: Its edge lies in regulatory foresight and focus on the Chinese-speaking market—offering compliance-aware infrastructure that few competitors provide.
Q: Are there plans for global expansion beyond Asia?
A: Yes—but cautiously. Growth will follow regulatory clarity and partnership readiness in target markets.
Q: Was reimbursing hack victims sustainable?
A: For small claims (<2K USDT), yes. It was a trust-building move. Larger recoveries rely on ecosystem collaboration.
Q: Will BSIM cards work outside China?
A: Potentially. The concept is scalable; international rollout would depend on telecom partnerships abroad.
Conflux may not dominate headlines—but it exemplifies quiet resilience. By prioritizing compliance, long-term sustainability, and real utility over short-term speculation, it positions itself not just to survive, but to thrive when market tides turn.
For developers, investors, and policymakers watching the evolution of Web3 in regulated environments, Conflux offers a compelling case study in strategic patience.