Making the case for Web3

The Web3 market seems to move in waves of enthusiasm. A surge of ideas and optimism, followed by a slowdown, and then the cynics and skeptics beat it back.

This happened first in fintech, where blockchain cut its teeth on DLT and cryptocurrencies. Decentralisation would sink the banks, smart contracts would make regulation irrelevant, and crypto would displace fiat.

Except it didn’t, it isn’t, and it wont.

Fintech moved on from decentralised finance to embedded finance. The new unicorns on the block were utterly dull consumer lending propositions. Life returned to normal.

Left in the sand, as the water washed back out, were a few companies who had figured out how to apply this technology to a real problem: cross-border transactions in low-infrastructure environments like Africa. Eversend, Kotani Pay, Chipper Cash, and AZA Finance are a few examples.

To this day, those companies are my go-to example when someone asks that all-too-easy question: “So, what’s a real world application of blockchain technology which actually makes sense?”

Fortunately, not many people ask me for a second example, because that seems tricky.

Those companies were left on the retreating edge of the fintech wave, and we’re now deep in yet another wave with NFTs.

Again the sand is starting to slip out beneath our feet.

The question is, which way is the tide heading? Which companies will survive the cycle? What’s left when it’s over?

the tide is coming in

Provided more progress is made than is lost, as long as the surviving companies have more impact than the lost capital, we can say that the tide still appears to be coming in. The momentum will sustain, and there will be another wave – even if it’s a little slower, and goes a little less far.

Anh-Tho Chuong Degroote thinks that the next place to look is infrastructure. The ‘AWS and Microsofts’ of Web3, the Polygons and Alechemys. These are, theoritically, the platforms which may make Web3 a more accessible and fruitful environment for future entrepreneurs.

I suspect she’s right, but it’s a bit of a ‘double or nothing’ bet.

Do we pump capital into infrastructure in the hope that it solves the issues holding Web3 back? Or do we just discover that there were no problems to be solved in the first place?

Is Web3 a land of solutions in search of problems?

Let’s presume that the next wave for Web3 is infrastructure. It would unfortunate timing for NFTs, which would have benefitted from the infrastructure existing, but also they’ve helped to spur a significant amount innovation and new capital.

In the most likely scenario, we end this wave with a few well-funded technology companies who have made building and operating on blockchain technology much easier. That’s not a bad outcome, but I don’t think it’s going to drive much energy back into the market either.

There’s still the sword of Damoclese hanging over Web 3.

the tide goes out again

The more you pay attention to this ecosystem through the lens of value for end users, the clearer the problem seems: It is the macrocosm of a startup which has neglected product-market fit in favour of building exciting technology. The pursuit of traction through features and performance, with the blind-refusal of nay-sayers and false prophets.

Each new major advance produces that dopamine hit. Companies are born, funded, and die. Millions are made and lost. But each time, the water goes back out, and takes all but a few with it.

The truth is simple: Web3 needs to make sure that the tide keeps rising, and the only way to do that is to look at the lasting success stories – and produce more of them. The companies with sustainable, growing revenue, who are building their audience outside of the Web3 tent.

Those companies all have one thing in common: they have adequetely identified and addressed a real-world customer need. The promotion and sale of their solution had everything to do with the outcome for the user, and nothing to do with the underlying technology.

Something to consider, when evaluating Web3 projects: if you strip out all mentions of the technology, does it still seem attractive? Does it solve a problem?

Through answering this question more often, with better answers, the case can start to be made for Web3.

Eliminate the hype.

Lucrative ideas are not always good ideas.

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