Earlier this week, web3 Studios released their ‘Digital Identities Report‘, sharing a variety of opinions and predictions on the future of identity and social interaction in a ‘metaverse’ environment.
There is more than fifteen years worth of fascinating sociological research on virtual worlds and digital identity. You would not know that from reading this report.
It simultaneously presents web3 worlds as an entirely new concept that is being shaped by a new generation of ‘web3 thinkers’, while also positioning Roblox as an example of a metaverse.1
I’ve written about this before. Specifically in regard to web3 enthusiasts ignoring the incredible groundwork down in science fiction and games, and more recently on how metaverses are fundamentally a non-technical social proposition.
Mostly those arguments have addressed the general web3 discourse on Twitter, wishing it was better informed about the existing groundwork in this field.
It’s a deeper issue when companies (selling web3 products) collaborate with web3 influencers (mostly NFT shills) to produce a report that is essentially a sales catalogue – but frame it as some insightful look at the social aspects of virtual worlds.
We’re all supposed to rub our chins, and ponder this brave new world of identity in a digital environment. Once we buy one of their avatars, of course.
So, here (and in the corresponding Twitter thread) I wanted to share a few genuinely good papers on the sociology of virtual world and digital identity:
If you are genuinely interested in building the future of social interaction online, there is an absolute wealth of information available to you. It is well covered ground – thanks to genuine experts, who often spent years immersed in virtual worlds as a part of their research.
Stretch your legs, take a wander outside of the web3 bubble.
I’ve been labelled a ‘Web3 skeptic’. If you’ve read any of my other content here, you’re probably just confused about how I feel. So, let me clarify:
Much of the capital that has been poured into Web3, to date, has been wasted. Too many get-rich-quick schemes and half-baked ideas. We need to do better. Specifically in demonstrating the practical, tangible benefits of the technology.
It’s difficult (as Marc Andreessen will attest) to pin down a solid Web3 use-case. That doesn’t mean we’re wrong, it just means we are early.
In the 90s, it was so fun to play with the internet. The online chat rooms and messaging boards. Email. Browsing the internet. Audio files. Much of this tech was half-baked back then, so it was hard to see what they’d be used for. This is where I think we are with Web3.
If a person believes that Web3 really is the future of the internet, then they should be able to articulate the (theoretical) gains, right?
That hasn’t really been the case up to now. So let’s try, beginning with a use-case I discussed with someone in the thread linked to Elizabeth Yin’s quote:
The Ticketing Use-Case
You cant suggest reinventing an industry without looking at the pros and cons of how it operates today. Too many suggested Web3 use-cases fly in the face of reality because the fundamental research hasn’t been done.
And let’s face it, for this example that means one thing:
Ticketing in Web2with Ticketmaster
There are a number of well written articles1 which cover why Ticketmaster is a behemoth. They are worth reading, particularly for perspective on how many competitors Ticketmaster has crushed over the years.
I’ll attempt to summarise the key points here. First the strengths:
Venues love it
Ticketmaster was the first ticketing platform to revenue-share with venues that adopted their solution, offering a percentage of their service charge. They also make sure that venues are paid promptly, if not in advance, reliably.
Artists love it
When you are the defacto platform for ticket sales, you build up an incredible database of customers, and a wealth of data about their preferences and demographics. If you want to make sure an event is sold out, Ticketmaster is the way to get that done.
Consumers tolerate it
Tickets going on sale for a major performance are an IT nightmare: a huge number of users, all at once, trying to complete a relatively complex transaction. The ability to scale capacity to accomodate for demand is key, and Ticketmaster has proven it does that well.
Now the weaknesses:
Venues suspect they could do better
If you are reliably selling out your venue, because it’s the best in the area and you’ve built something great, you might start to wonder if you really need Ticketmaster.
You may get a fraction of their service charge, but if you ticketed your own events you would secure a bigger percentage and build up your own customer database.
Artists could absolutely do better
Let’s say you are a tremendously popular musical artist with a global fanbase.
Wouldn’t you LOVE to be able to own all of the data related to your fans? Wouldn’t you like to own all of that traffic? Maybe build a ticketing system that made sure die-hard fans were looked after, and scalpers had a harder time? Offer them a fairer price, from which you extract a bigger percentage?
Customers deserve better
We could focus on the massive legacy tech stack, and how slowly Ticketmaster moves with updating their platform to provider a better experience, but the obvious choice here is the service charge. As a consumer you are quite frequently paying double the actual ticket price for a sub-par service.
So, with all of that in mind, how can Web3 offer a clear improvement on the ticketing experience – for all three stakeholders in the process?
Ticketing in Web3
It seems clear to me that no Web3 solution can compete with Ticketmaster on its own terms. It is too well embedded in the industry, and offers the lowest-risk outcome for the major stakeholders: venues and artists.
The only way forward is to present an entirely new model for ticketing, focused on the key values offered by Web3 technology: decentralisation, privacy, security.
An open protocol for all stakeholders
It seems reasonable to start by assuming that neither the venue or the artist should ‘own’ ticketing, nevermind an external corporation. There is too much value that is being controlled by just one party in a multi-party transaction.
We can imagine that a Web3 implementation of ticketing would begin in a fairly standard manner: a user signs up by connecting with (or setting up) their wallet, adding as much additional information (name, email, etc) in that flow as they are comfortable sharing.
This registration could happen at the point of sale when buying a ticket, or earlier, when joining a band’s official fan club or a local venue’s online community – with the usual membership incentives.
The created/connected wallet would then serve as that individual’s identity for any band, venue or ticket seller which was built on this technology.
I want to go see Metallica
To play out a scenario, let’s say this user wants to attend the 2024 Metallica tour at the Birmingham NEC Arena.
A) They could visit the Metallica website and connect their wallet on the tour page, which would highlight the tour dates in their area, and allow them to purchase directly.
B) They could visit the Birmingham NEC website and connect their wallet on the event calendar page, which would higlight events which fit their preferences and history.
C) They could visit any number of other websites that have this platform integrated – be they local event pages, Metallica fan groups, niche metal communities, or big national event agencies.
In each scenario, a small percentage of the ticket price is awarded to the originator of the sale.
The next part of the transaction will be based on whatever terms have been agreed between Metallica and the NEC.
The NEC get 100% of ticket revenue until the venue rental is paid off.
The NEC gets a percentage of revenue until their costs are covered.
The NEC gets a fixed percentage of total revenue.
The NEC rental is financed in advance, against the future revenue of ticket sales, based on historical sales performance.2
The remaining ticket revenue is sent to Metallica, with the option of doing a further division to secondary stakeholders such as logistics companies, catering agencies, supporting acts, charities etc.
Crucially, both the NEC and Metallica are able to capture data from the transactions, monitor how well an event is selling in real-time, own their own part of that promotion and the revenue it yields, have optimal cashflow, and build a better understanding of their audience.
Long term, the NEC could reward some of their most regular event attendees with early access to ticket sales, discounted tickets, or perks in the venue like free drinks or VIP section access.
Metallica could build a database of its fans worldwide. Which fans always come to see them when they are in town? Which fans have travelled the most to see them around the world? Which fans have been following them for the longest? Again, there are obvious opportunities here for Metallica to reward true fans with early access to sales, discounts, exclusive merchandise, meet and greets… etc.
From the perspective of the user, they build a closer relationship with the NEC, being rewarded for their patronage, and they enjoy a sense of recognition from Metallica for their loyalty. They also get much more fairly and transparently priced tickets, and a super experience as a buyer/consumer.
Conclusion
A system like this would need to build significant momentum to compete with the incredible momentum of Ticketmaster, but there are enough network effects (and existing incentives to provide a better, more fairly priced alternative) that it certainly has the potential.
There are also much deeper and more thought-provoking possibilities when you start to consider how else this platform could be integrated into other platforms and services, or where else it could be relevant in its application.
Tom is a bona fide expert in virtual worlds, and I recommend reading the whole article.1
Through his work, he has spent a tremendous amount of time in Second Life, the most notorious of the non-game virtual worlds, including two years doing field-work for the book ‘Coming of Age in Second Life‘.
The bottom line in his article for Fast Company is that meaningful immersion is achieved socially, rather than technologically. It is not about VR headsets, it is about networks of relationships.
If you have spent any time at all in environments like Second Life, or close equivelents in the MMO genre like Utima Online, World of Warcraft or EVE, that sentiment should ring true.
None of those games have cutting-edge graphics or VR capability, but they do have immensely strong social dynamics. They are compelling, immersive experiences because you are in a living world, populated by real people. That they act like real people is important, whether they look like real people is not.
Put yet another way:
A cyberspace is defined more by the interactions among the actors within it than by the technology with which it is implemented.
The social environment of virtual worlds stands in stark contrast to platforms like Facebook. Virtual worlds enable authentic relationships, whereas what we refer to as ‘social media’ today largely trivialises relationships by reducing them to basic forms of engagement.2
That social element is the mainstay of retention for games like World of Warcraft. It is not uncommon for an individual will maintain their subscription because of the community (their circle of friends, their guild or clan mates) and the strength of their identity (recognition, reputation, notoriety) they have built in relation to the story of the world.3
Three pillars for virtual worlds
If you examine the social dynamics which drive virtual worlds, there are three critical factors:
Identity – Individual expression.
Community – Relationships.
Story – Context and purpose.
That trio ecompass absolutely everything required in a successful virtual world. Not graphical prowess. Not VR. Not financial incentives. Not elaborate mechanics. Importantly, while all three factors are critical, both community and story are dependent on identity.
It is difficult to overstate just how important that concept of identity has become in the relatively narrow context of virtual worlds. How crucial it is to their success, and how much it contributes to a rewarding player experience.
There’s no reason for it to stop there. If you were able to design your personal identity from the ground up, in a more expressive (or more discreet) format, ignoring norms and conventions, why wouldn’t you? This concept is destined to spread further, as our online life diverges from our offline life and we gravitate towards the format which best fits the context.4
What we’re circling back to is the question of identity in ‘the metaverse’; how these principles for individual virtual worlds apply to our entire virtual existence: what will identity look like in a Web3 world?
Put another way: what do the concepts of Identity, Community and Story look like at a meta level which spans multiple projects, platforms and mediums?
How can a ‘metaidentity’ enable a new model for the web?
What form does a ‘metacommunity’ take for Web3?
Could there be a ‘metanarrative’ for this new context?
There’s an interesting semantic argument here, about whether metaverses are virtual worlds. I’m personally of the opinion that ‘the metaverse’ is a more nebulous description for whole digital aspect to our existence, centered around our digital identity. Virtual worlds are more specific sandbox environments for exploration and socialising in a digital environment. [↩]
Anecdotally, I know at least 3 couples who married after meeting in an MMO. I’ve never heard of anyone getting married after meeting on Facebook. [↩]
It is also not uncommon for that virtual identity to persist outside of the game, both across other mediums and also for many years after the game servers my close. [↩]
For people whose status, credibility or legacy is rooted in their real identity, they may choose to continue using their real identity as their digital avatar. For others, there is an increasing trend to invest in a cross-platform virtual identity. It was evident in the gaming communities of the early 2000s, and it is perhaps even more common today amonst Web3 enthusiasts. [↩]
There are five straight-forward questions with which you can quickly evaluate a startup pitch, combining the strength of a proposition with its delivery.
These questions bear some some resemblance to the Scorecard Method of startup valuation, which focuses on qualitative measures for early-stage companies, but with an additional focus on quantifying the market need.
I have applied this approach to screening accelerator applications, but it can be used as the first step of evaluation in any pitch process.
For the sake of simplicity we can score each of these on a scale of 1 to 5.
1) Severity of Problem
This is a question that can vary significantly based on the market you are looking at. Emerging economies tend to have more of a focus on the (high scoring) primary problems, which is why they’ve been able to better resist economic downturns.
1 – Micromobility, dating apps, rapid delivery (esp. red ocean)
5 – Access to water, energy, core financial services (esp. blue ocean)
2) Strength of Solution
Simply, are you providing a way for people to better cope with a particular pain, or have you managed to cure it in a complete and lasting manner?
1 – Solution alleviates the problem
5 – Solution eliminates the problem
3) Scalability
There’s almost always a focus on the size of market. TAM, SAM and SOM will feature in virtually every startup pitch deck. What’s often overlooked is how easy it is to scale into that market. Regulatory barriers, poor infrastructure, or corporate customers who move slowly are always a threat.
1 – Infrastructure or regulatory requirements, long sales cycles and onboarding (esp. in small markets)
5 – Web or mobile based product that is available on-demand to the entire target market (esp. in large markets)
4) Profitability
In many markets a poor product will win if it is just slightly cheaper than a better product. This kind of price suppression can be a killer for otherwise solid businesses. Similarly, some problems require costly solutions like agent networks, physical touchpoints, or a highly involved sales and customer service capability.
1 – Low margins (high CAC/CRC/COGS, low LTV)
5 – High margins (low CAC/CRC/COGS, high LTV)
5) Team
This is the hardest part of a pitch deck to quickly evaluate, and requires the most additional research. LinkedIn, interviews, papers, Glassdoor… the number of potential resources extends as far as your willingness to do the research.
1 – No obvious fit for the problem being solved, by education, experience, or personal background.
5 – Exactly who you imagine should be tackling this problem, with a combination of both motivation and ability.
Conclusion
At the end of this fairly rudimentary process you have a score out of 25 which should give you a very broad overview of the potential of this business. It is intended to quickly take a list of some hundreds of pitches down to the 20-30 you think are worth a closer look.
At that point you can then start looking at some of the more granular data:
What is a metaverse? Is it a metaverse, or the Metaverse?
Ask most people these questions and they’ll picture ‘Lawnmower Man’ style scenes of people strapped into virtual reality rigs, flying through digital 3D environments.1
That has very little to do with what a metaverse is.
The term metaverse simply applies to the digital mirror of our non-digital lives. Our digital social networks, our digital assets, digital communities we participate in, etc. Right now this reprsents a fairly heavily fragmented set of services, but one of the goals of metaverse is to tie these together with a unified and decentralised approach to identity (and, through the associated wallet, finance).
This is where we start to look at what a metaverse could be, and the direction that is likely to take. The first phase of this is the intense competition that is beginning to emerge around who provides that identity service.
Mark Zuckerberg expects 1 billion users on his metaverse offering, each spending hundreds of dollars a year on virtual goods.
But what are these virtual goods that he projects will be making hundreds of billions in gross revenue for Meta? What is it that has driven such interest in this space from VCs?
This is the bottom line:
The metaverse, as we go deeper into digital identity, digital communities, and digital spaces, has an ever-incresing potential to host digital representations of existing industries.
Metaverse fashion brands. Metaverse real estate. Metaverse banking. Metaverse celebrities. Metaverse tourism. Metaverse consumer goods. Metaverse employment. Some of these exist in some form already. Many more will exist soon.
On its own, that is very obviously a MASSIVE opportunity for industrial growth beyond current parameters and understanding.
Then you consider that in this world, where everything is digital, there is a cost of goods which is close to zero. There are not the normal forces at work which influence price. In fact, indications are (from our primitive experiments in Web3) that price is even more closely connected with status than it is in the real world. Even then, the cost of a product failing due to being overpriced will be negligable.
It could well become a sea of gamified microtransactions which would make something like the Diablo Immortal controversy seem utterly benign.
This is what is at stake: the future of our digital economy. The digital mirror of the real world, which has its hooks in us through every I/O in our envionment – which are already countless, and increasing.
It is incredibly easy to imagine this as a paper-thin veneer of decentralisation and ‘creator economy’ hype over the top of a behemoth of corporate ownership and private interests.
The only way to avoid this is for Web3 to stop obsessing about the price of monkey jpgs, and to start building decentralised products and services which are resistent to the powerful gravity of centralisation.
Given the history of why web1 became web2, what seems strange to me about web3 is that technologies like ethereum have been built with many of the same implicit trappings as web1. To make these technologies usable, the space is consolidating around… platforms. Again. People who will run servers for you, and iterate on the new functionality that emerges. Infura, OpenSea, Coinbase, Etherscan.
If the endgame for Yuga Labs (creators of the notorious Bored Ape Yacht Club) is essentially a Web3 videogame, and that does appear to be what signs point towards, it seems like an opportunity to examine the closest Web2 equivalent and see what can be learned.
Bungie, who were acquired by Sony at a $3.6B valuation in February, seem like a reasonable comparison; not too far off Yuga’s $4B valuation from their Andreessen Horowitz-led raise in March.
Bungie are responsible for building a few monster IPs. The most well known is Halo, established in 2001 and owned until 2010.
Halo: Reach, their last title in the series – and not even their best seller, sold roughly 10 million units. However, while Halo helps illustrate the great legacy of Bungie, and the depth of their portfolio, it’s not that title that provides the interesting comparison.
Their more recent IP, Destiny, is a better example – as a ‘virtual world’ online role-playing game.
Destiny 1 had around 30 million account holders. Destiny 2 has around 38 million, and the annual revenue from that title alone is estimated at $100-500 million.
Yuga Labs has…
BAYC: 10,000
MAYC: 20,000
BAKC: 10,000
Otherland: 200,000
That’s a theoretical maximum of 240 thousand account holders (people who own NFTs, though some may own multiple) producing a gross revenue of $138 million in 2021.
You have to be incredibly bullish about Web3 to believe that Yuga Labs has earned a higher valuation than Bungie – based on those numbers. Or perhaps that Yuga is capable of doing something, thanks to NFTs, which Bungie is not?
Where can we look for an answer to this?
Is it the fact that Yuga Labs is able to ‘leverage their Web3 brand’ to build a ‘transmedia IP’ spanning games, TV series and movies, etc?
Unlikely. Bungie is also doing that with the Destiny IP.
So what is it that drives the Yuga Labs valuation to such lofty heights, in such short a time? They have certainly yet to prove that they can provide value beyond their core audience of NFT holders. In fact, most of that value is stored in the theoretical value of those NFTs.
Beyond that, what is Yuga Labs offering? A wealth-gated community of crypto bros?
I’m sure it’s a valuable network, and the events they host are wild, but does it indicate a scalable business model? Not so much.
So is Otherside a virtual world designed exclusively for Yuga Lab’s community of NFT holders? Or is it for everyone?
If it’s for everyone they are competing on Bungie’s terms as a more traditional video game experience, and it seems like might struggle to be competitive there – even with the vast treasury.
If it’s just for NFT holders, even if that pool grows in future, it isn’t clear how well that idea scales or what kind of further monetisation it will allow.
You cannot call yourself a futurist if you aren’t also a student of other great futurists. The best of them, in my opinion, are science fiction writers.
The inspiration for much of my writing lies in science fiction, and how it connects back from the future to today’s innovation. It is a thread which connects my professional and personal interests in how technology and capital interact.
A credstick is a small pen-like device which can be inserted into various machines to transfer funds, much like a credit card. In 2070, credsticks are a primary method of transferring funds with no paper trail.
Shadowrun is a video game franchise that dates back to 1989. An original science fiction IP set in 2050 and beyond.
Credsticks are used as the primary economic tool in the game, storing and tranferring digital currency. There are certified (tradeable) and non-certified (personal use) credsticks. There are grades which reflect the maximum credit level. There is detail about how they are used in a spectrum of cases and transaction types.2
The way these devices fit into the world, the role the play in the economy, and the manner in which they influence behaviour, is fascinating. It’s a fleshed-out, believable and practical vision for what money might look like in the future.
I’ve spent a lot of time listening to people in the financial technology industry (former bankers, consultants, cryptocurrency enthusiasts) talk about their vision for the future of money. It’s not usually quite as thought-provoking, or perhaps even as realistic, as the alternatives presented in fictional worlds like Shadowrun.
Their vision tends to be constrained by the idea that today’s conditions (financial regulation, technical limitations, human preferences) will persist. Or that today’s agendas (promoting blockchain, disintermediation, globalism) will be tomorrow’s.
We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.
Sometimes you need to wipe the board clean and reimagine these systems and structures from scratch, to see what the future may hold. Change your context entirely.
Start from somewhere else, with a different perspective.
This is where science fiction comes in.
It isn’t obvious if you look around at the moment, but the important conceptual work on what a metaverse might be, and how it may function, has been quietly going on for more than fifty years.
If you read Tad William’s Otherland series, first published in 1996, you are likely to find the ideas profound, if not prophetic. Particularly on the cultural, social and personal influence of virtual worlds.
The technology involved in Tad’s vision may seem a bit far-fetched, but ultimately that doesn’t really matter.
In the end, if [science fiction] is any good, it’s never about the machine. It’s always about the human relationship with it.
What matters is the people. What does their life look like? What’s the cost of this future to them personally, and to society, in contrast with our here-and-now?
That focus on the human consequence over the specifics of the technology is precisely why there is so much we can learn from science fiction. It doesn’t matter if it’s a blockchain or a computer powered by ants3, what matters is the impact on people.
Good science fiction is an incredibly powerful tool for making bets on what the future could look like4, by allowing you to step into the mind of a person whose day-job is to focus their creative energies on exactly that question. Free of agendas and preconceptions.
It was of great interest to me when the Web3 and metaverse enthusiasm started to spin up. It’s a topic with mind-bending potential, and likely represents the next great technological leap we will take. Fertile ground for science fiction.
Looking around at how people in adjacent industries were conceiving this new virtual world potential, two things became clear:
There is very little familiarity with the history of the games industry. MUDs, MMOs, virtual worlds, etc. People are taking fairly routine ideas and presenting them as ‘the next big thing’.
There is even less familiarity with what has been written about these ideas before. Virtual worlds, “metaverses”, have starred in science fiction IPs since around 1964.
Both of these points are frustrating.
The first represents the reality of the technology behind virtual worlds today, and our capability in the near future.5 It also covers the history, and the most sophsticated examples of online communities. Most of the great case-studies, and much of the learning about human behaviour online.
The second represents the potential, and the consequences. The fully thought-through visions for what a virtual world might look like, how people might interact with it, the dangers, the opportunities, the broader consequences for society… everything. How people are likely to respond, long term, to the emergence of a genuine metaverse.
In my previous entry I talked about the need for Web3 to find product-market fit. 90% of that work is understanding the human component. The needs and the priorities.
The disregard of science fiction and the games industry feels like another example of Web3 enthusiasm bypassing the crucial human factors in the fervor for technological advance.
What better way to design the internet of the future, and everything it entails, than to use great works of science fiction to look back on the present?
Don’t forget that humans are at the centre of it. Not technology.
If you’ve been wondering about the name of this blog, this is the connection – at the intersection of fintech, web3 and science fiction. [↩]
There is even a comical difference, in this fictional world, between US credsticks and the European implementation, the Europäisches Bargeldloses Zahlungsmittel. [↩]
I have a long-term investment thesis which is basically ‘which of these companies would thrive in Otherland‘s vision of the 2080s’, which boils down to Meta, Apple, NVIDIA and Disney. [↩]
Whether or not it exists on a blockchain is irrelevant, and any immersive, 3D virtual world certainly wont. [↩]
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?”
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.
Consider NFT/Web3 projects as startup investments, except the only fundraising mechanism is equity crowdfunding and we’re ALSO the customers.
It incentivises piling into the biggest project, as investors, users and advocates, because ‘making money’ beats ‘better ideas’.
Of course in typical startup investment, incentives are better aligned to the point that seeking out smaller, more innovative companies can be more profitable than backing the obvious picks.
That is not the case in Web3, yet. Smaller, better projects are dying of starvation. The giants in Web3 are all promising that they will generate money for their investors, yet their only source of capital is those investors.
If you’re scratching your head right now, don’t feel bad.
Fairly simple. Web3 projects need to consider two things:
1) Providing a way for investors to eventually cash out which doesn’t kill the project.
2) A way to replace those investors with customers which offer the project sustainable growth. This creates and recycles capital in the ecosystem which can then be deployed elsewhere, supporting other projects.
Investors would be more likely to take smaller bets, rather than piling all of their capital into the frontrunner.
A virtuous cycle that supports innovation. There aren’t many Web3 projects I can find which have this « investors ♻️ customers » conversion figured out.
@fringedrifters is a frontrunner – I’m excited about what they are working on, and the use-case for NFTs they are building.
