By Alex Daish
When Mark Zuckerberg announced in October 2021 that Facebook was rebranding as Meta to reflect its growing investment in the metaverse, many looked on in confusion and amazement, asking what was this dystopian-sounding sci-fi universe he referred to, and what would that mean for the human race?
Those inside the technology, meanwhile, rolled their eyes: Notions like the metaverse and Web3 are long-established concepts, only just rolling into the public consciousness in recent years before taking the world by storm in 2021.
Understanding Web3 principles
To some degree, Web3 is just a rebranding aggregation of crypto, blockchain and virtual reality. It’s a conscious move away from the murky world of crypto—which is often cynically characterized as a Wild West of drug dealers and scammers—showing how the technologies have matured and increased in utility as they continue to soak up more money and attention.
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There’s more to Web3 than just hyperbole and hideous ape jpegs: Scratch the surface and you’ll find a group of vibrant, blue-sky optimists discovering, experimenting and remixing each other’s ideas and technologies.
There’s one main guiding principle that collectively drives them, and that’s the potential of new decentralized tech stacks to create novel network effects. Web2 was characterized by a winner-takes-all model.
Many early founders and VCs have long feared the potential “kill zone” found adjacent to the products of the FAANG behemoths. Web3 is different. There’s a totally new ownership dynamic, and the ability to port your data between Web3 projects via your wallet means that the killer Web2 network effects no longer apply.
It can be hard to get used to the occasionally impenetrable lingo and frenetic speed of Web3 hangouts like Twitter and Discord. It’s good, however, to get familiar with the essential ideas that underpin blockchain technology itself.
First, it’s a tamper-proof log of prior events. Secondly, it’s trustlessly distributed and enables the easy compensation of participants. Finally, the rewarding of early adopters and other contributors that allow Web3 players to take on spaces previously too close to the FAANG kill zone while enabling entirely new ones.
Further reading
The success stories so far
Understanding these fundamentals allows you to understand some of the early examples of Web3 success stories. Braintrust is one such company, a user-owned talent network competing with the likes of Fiverr. It’s already seen freelance talent jumping ship from places like Nike and NASA, drawn in by the appeal of sharing in the growth of the entire organization.
Arweave has had a similar impact: It’s a distributed data storage system taking on the likes of Dropbox and AWS, and is now one of the most widely used Web3 applications.
Rabbithole is one company I like to point out, demonstrating a truly novel and utilitous Web3 application. It has adopted a fresh take on gamified edtech by rewarding users for learning about and trying out existing Web3 tools. The key—it’s all done on-chain to prove how far down the “rabbit hole” you’ve gone.
Looking to expand into Web3?
Many existing organizations, like Facebook—sorry, Meta—will now look to get into Web3. For these companies, you have three routes.
Acquire. Use your capital to purchase Web3 applications, just like Nike when it bought NFT studio RTKFT.
Partner. Build relationships with Web3 projects and incorporate them into your existing product, like how New York City worked with Protocol Labs to integrate Filecoin’s system into its tech stack to share public data more widely.
Experiment. Try out novel uses of Web3 technology, like London agency Protein has by creating its own social token to incentivize the building of its unique Web3 community of experts and creators.
Building in any nascent space isn’t without risk, but this is amplified in Web3. Most technologies typically follow a standard adoption S-curve. But the incentive structures of the blockchains that are so key to Web3’s ability to grow their networks and hypercharge growth, mean that high-quality projects often share the same pyramid scheme-style features of trashy crypto scams. It’s unfortunately a feature, not a bug.
While the lack of regulations is currently allowing for rapid development and growth, in the long term, the space needs more oversight to be widely adopted. There’s also significant resistance to blockchain’s environmental impact; you only need to see the pushback against popular brands’ cryptocurrency or NFT partnerships to see the debate around energy usage rumbling along. We’re still waiting for ethereum to move to the more energy efficient ‘proof of stake’ mechanism—until then, expect to see further pushback, and make your own informed choice.
It’s no surprise that Web3 is often described as the Wild West. If you’re brave enough to venture out into this new digital unknown, expect to meet bold adventurers, dangerous bandits and brave lawmakers on your journey. There’s gold in them hills. Hope you find it.
Alex Daish is a venture designer at leading company builder Founders Factory, which recently launched FF3, a new knowledge sharing community exploring the power and potential of Web3.
Illustration: Li-Anne Dias
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