Our Definition of Web3 Will Evolve

What is web3? Movements are often defined after-the-fact, not prior, yet web3 is already being thrown around despite its lack of mass adoption. It’s a term coined to categorize a group of software and platforms operating on blockchain technology. But it’s not simply new technology that’s led to the new terminology, the technology has also brought on new behaviors and a new ethos.

Jack Dorsey, founder of Twitter and CEO of Square, has been a vocal critic of Web3, which he basically sees as venture capitalist-funded scams. But this isn’t so cut and dry because he’s a huge proponent of Bitcoin. So much so that he’s working on a project he’s calling Web5, which is essentially building out software and platforms on top of the Bitcoin network.

It’s distinct from what people are currently calling Web3 because there is no interest in ownership of the internet like there is with the Web3 crowd, but it’s similar in that it’s interested in a decentralized and permission-less infrastructure.

In his recent book The Network State, Balaji Srinivasan, former CTO of Coinbase, dedicates a chapter of his book to a process he calls decentralization to recentralization. He argues that decentralization favors insurgents and centralization favors incumbents. Decentralization increases volatility while centralization offers stability. Throughout history movements of decentralization like the American revolution and other revolutions throughout the world eventually led to centralized states. Accordingly, the current decentralization that web3 advocates are celebrating will eventually centralize.

When we zoom out, innovations in Web3 seem like simplistic versions of things that are much more complex and systematized in their current form. Take the idea of DAOs where communities are relying on code based algorithms to determine organizational decisions. They are essentially replacing law and decision making with code. Laws have a great deal of grey area that allow for negotiation and interpretation. Code does not. DAOs introduce distributed voting mechanisms which are already required and intricately developed for public companies. Personally, I think this is one of the most exciting spaces in Web3, but we are years away from anything that will come close to working better then the current corporate structures.

All this to say, we are still in the early days of the technology and all the ideas that currently fall under the bucket of Web3 will evolve.

Frictionless (AI generated)

Reduction in Onboarding Friction

Web3 has two huge barriers for mass adoption — participation requires people to create and secure their private and public keys and it requires converting fiat money to cryptocurrency.

This friction point is there at the beginning and many that make it past this point don’t properly secure or keep track of their credentials. In light of this challenge, there is a growing trend of organizations to simply bypass these requirements. Companies are allowing users to simply create [stopping point] a standard username and password to log in to apps that allow them to purchase NFTs. This strategy makes sense for larger brands who have an interested audience.

On the back end, there is a wallet with the standard public and private key that is set up for the user and that data is stored with the platform. In some cases, the customer is never aware that they even have a public key and they usually don’t have access to their private key.

Instead of receiving a set of words or their private and public keys, they can just create a standard username and password. In some cases, they don’t even need to see their assigned public key to interact with their NFT or cryptocurrency.

YellowHeart allows you to buy tickets in the form NFTs without needing to set up keys. Kreatr, a Flow based NFT marketplaces, allows artists to sell their work as NFTs or prints as if it was just another e-commerce site.

This isn’t completely foreign in the crypto space as all of the cryptocurrency exchanges like Coinbase and Binance also require creating a username and password instead of a wallet. However, as soon as you want to send a cryptocurrency to another platform, you at least need to learn about your public key.

Additionally, there is a growing adoption of allowing users to purchase NFTs or other crypto assets directly with a credit or debit card with new crypto payment infrastructure. This allows people to interact with Web3 through a familiar and seamless process, however they don’t get the full Web3 experience.

While the hype of NFTs have drastically come down since the beginning of this year, I expect people will remain curious and purchase NFTs through this time for many different uses.

While this experience is not a true Web3 experience, it is an entry point. From this point on, it will be up to the specific platform to further educate and provide the capacity to their users for moving their assets to a true crypto wallet. This allows people to progress at their own pace with less friction.

Draftly is another organization exploring this new path. Their platform is for sports fans to buy collectibles as NFTs. The average sports fan and the average crypto techie are worlds apart, yet NFTs are such a natural fit for a community that’s already enthusiastic about collectibles.

I expect that we will continue seeing much more of this over the next few years.

New rails (AI generated)

Payment Rails

Crypto payment rails are probably the most practical use of blockchain technologies. Many companies are in a race to create payment rails either through utilizing lightning networks on Bitcoin or other low cost blockchain networks to allow for everyday transactions at a fraction of the cost of the standard credit card fee charged by the Visa, Mastercard, and others.

But it’s not just an interest for credit card payments, there’s also real possibility in bank transfers. Imagine transferring funds internationally instantly with miniscule fees. Or not having to worry about that time period where money leaves one account and arrives in another. Usually, there’s a gap and in many cases that gap can take multiple days where funds just disappear. That sounds arcane in the world of crypto. This use case still has a ways to go, because it will require new regulations, rethinking our whole financial infrastructure, and likely will need government issued digital currencies.

Saturated marketplace (AI generated)

Marketplace Saturation

Another trend that will continue is the launch of new NFT marketplaces. Individual artists and brands will be launching their own marketplaces, if they are not already doing this. Building your own marketplace is pretty easy these days and while there are a few with a head start and robust communities, it’s still early and there are many challenges that still need to be addressed.

I expect NFT marketplaces to be as prevalent as e-commerce sites one day. Right now, anyone can build a website and sell products with few hurdles, NFT marketplaces will have that same ease. But NFTs are a much more malleable medium than goods bought online. And that means we’ll see a diverse variety of solutions. Think about platforms like Artblocks and FXHash that are made specifically for generative artists to mint unique algorithmically generated pieces.

Web3 in physical space (AI generated)

Web3 Hardware

Solana Labs introduced a Web3 phone. Since announcing, HTC and Polygon have also shared intentions of creating a Web3 mobile phone. The cell phone race is only getting started, I don’t expect Apple or Google to directly be involved with this anytime soon, but because the Android software is open source, Web3 phones for the time being will likely be Android based just as these two examples are doing.

The other side of hardware will be other forms of network technology. Blockchain relies on peer-to-peer networks and much of that is supported by individuals running nodes. It also includes cryptocurrency miners across the globe who have more advanced computing capabilities, but if this is going to scale to one day replace our current high functioning internet, we’ll need web3 native hardware in the mix.

Helium is attempting to decentralize internet access through hardware miners that also broadcast an internet signal. While I’m less familiar with hardware needs and use cases, Web3 has presented a new paradigm of interactions and that will certainly have implications beyond code.