Entrepreneurship: How Xunlei's Lei Chen pivoted to blockchain
Xunlei has had a wild year. Once a video-sharing network, the company pivoted to blockchain after introducing a virtual token — the Link Coin — in October.
Its Nasdaq-listed stock increased sixfold, only to fall 40 per cent less than a month later after Link Coin came under scrutiny from China’s finance regulator.
But the man behind Xunlei’s splashy entrance into the cryptocurrency scene says he eschews China’s rough-and-tumble tech culture.
“As a manager of a company, you need to have a very steadfast personality,” Lei Chen, Xunlei’s chief executive, comments drily as he reflects on the events of the past year.
Mr Lei, 44, has a distinctly restrained presence. He speaks in measured tones and with the intense focus of a programmer. Unlike many crypto entrepreneurs, he wears suits and ties to work.
Xunlei’s rapid transformation from video company to crypto pariah reflects the unpredictable nature of China’s tech scene. Mr Lei is known as the single-minded enforcer behind Xunlei’s blockchain makeover, but he still sees his role as the voice of moderation.
New tech, he says, can be dangerous. “The bad guys always figure out a way to use it first,” he says.
Nor does he see an end in sight to the battle against abuse. “This challenge of combating speculation will always be a problem. As soon as you take preventive measures, the other side will come up with new ideas to overcome them.”
Xunlei was established as a file-sharing platform in 2003. Less than seven years later, it became one of the world’s most popular torrenting tools, before switching to video streaming to monetise the content being uploaded — sometimes illegally — on to its site.
Mr Lei became Xunlei’s chief executive in November 2014, only months after the company listed on the Nasdaq. A former software engineer in the US for Google and Microsoft, he was fascinated by the applications of blockchain attracting attention in the US and Europe. He immediately commissioned Deloitte to help the company examine the viability of a new business model based on the technology.
By 2015, Xunlei was selling servers that allowed users to pool and rent out idle bandwidth capacity to others. The move reflected Mr Lei’s beliefs — ingrained from his stint as chief executive of Tencent’s cloud computing division — that global internet demand could be satisfied through networked servers, rather than corporate hosts.
“The bandwidth used by companies will always be vastly exceeded by that of individual users,” he says.
To incentivise users to rent out their unused space, Xunlei allocated virtual tokens to reward those who did. The tokens could in turn be traded with other Xunlei users in exchange for other Xunlei services.
In October 2017, they began offering the questionably named Wanke Coin, a blockchain-backed token. (Wanke Coin was then renamed Link Coin.) Such was the frenzy over bitcoin at that time that Xunlei’s stock surged 250 per cent within two weeks on the back of the launch.
The shift from video streaming was timely. Starting last year, Chinese regulators ramped up policing of “inappropriate” online content, targeting viral video platforms on prominent sites such as Sina Weibo and Jinri Toutiao.
At the same time, Wanke Coin quickly became one of the most-traded virtual tokens in China. By November, the intense speculation had drawn the ire of regulators who had banned bitcoin trading the month before.
Xunlei quickly banned trading of Wanke Coin on other platforms and introduced anti-money laundering measures, but it is still facing a class-action lawsuit filed by investors, who allege the company issued false information that affected the stock price. Xunlei has denied Wanke Coin was ever a bitcoin-like cryptocurrency or portrayed as such. The company is contesting the claim.
As Mr Lei, buffeted by both praise and criticism, watched Xunlei’s stock rise then fall, he says he reminded himself to stick to his plan: “Leadership requires putting oneself through the mill time after time.”
He says Xunlei’s critics fixated on the company’s market cap as a way to measure his success. “Stock price does not have much value to a company. A company only needs a high stock price during two or three times, such as when they are raising capital,” he argues. “Any innovation business will be controversial early on, because many people will not recognise its value.”
These days, Mr Lei is working on OneThing Cloud, a multifunctional internet server which can “mine” or validate transactions for Xunlei’s virtual token. His utopian enthusiasm for disrupting existing internet architecture remains unabated.
“The future I see is that every individual becomes more and more powerful,” says Mr Lei. “The computing resources will be controlled by a plurality, not a small group of companies. Because computing power is concentrated in the hands of many users, users will become more and more respected and it will be difficult for them to be recklessly used by a big company.”
Those dreams could run up against another hurdle — technology restrictions between the US and China as trade tensions worsen. Mr Lei says he is reconsidering entering the US market. Long term, however, his vision has always been global.
“Blockchain will let the user connections become increasingly diverse and free, and the demarcations between countries will in practice not be that important,” predicts Mr Lei. “[High tech] is reliant on ideas, new business models, the flow of information with users connected through the internet, and tariffs cannot block the ability of people worldwide to go online. The force of technology cannot be avoided.”