There are many indications that the bubble has burst. As we all know from history, though, a burst bubble isn’t the end of the story. It’s the start of a new one. 

Blockchain has already been through two interesting epochs, and we’re on the cusp of a third. I break these epochs down into three stages: the Crypto era, the Web3 era, and the Abstraction era. As we approach the abstraction era, the role of blockchain technology will continue to morph and evolve in ways that have major implications for consumers and investors alike. As an investor in businesses leveraging the technologies and philosophies of crypto and web3, I’ve never been more excited about the opportunities ahead of us.

Epoch 1: Crypto (2009-2018)

The primary focus of Epoch 1 was cryptocurrencies, predominantly Bitcoin. During the first epoch, there was significant energy around the technological innovation represented by the blockchain. Additionally, if you were serious about crypto during this time, you held Bitcoin in a wallet you created—not on an exchange. 

A defining belief of this epoch was, “Not your keys, not your coins.” That belief persists, but subsequent epochs and the future of the blockchain will challenge it in ways both great and small. 

Tokens existed and trading happened during this epoch, but these were the early days. Most people getting into crypto bought into the philosophy of self-sovereignty and planned to hodl to the moon.  

The idea that we might be building a new internet hadn’t fully taken hold, although some of the signs were emerging. Protocols began springing up and issuing native tokens, promising ambitious technology roadmaps and quick riches. To access the opportunities of what would come to be called Web3, many crypto holders sacrificed security for convenience and got rekt in the process.

This epoch began when the genesis block was minted in 2009 and ended with the ICO boom and bust in 2017-8.

Epoch 2: Web3 (2018-2022)

Then we entered Epoch 2, which was a period of wallets and exchanges, massive speculation, and spectacular financial collapses. This epoch was characterized by the proliferation of decentralized finance (DeFi) and non fungible tokens (NFTs), along with a boom in crypto adoption. 

During this period, real business applications built on the blockchain began to emerge, though were overshadowed by the narratives centered on DeFi and NFT trading. New platforms and ecosystems emerged, with Ethereum as the poster child for programmable blockchains, Uniswap and ConsenSys’s MetaMask as leading examples of decentralized applications (dApps), and a host of centralized exchanges emblazoning sports stadiums and buying Super Bowl ads to bring the masses into Web3. 

However, during this epoch, users had to jump through a ton of hoops to interact with those platforms and ecosystems, creating new risks in addition to the empty promises of sham projects. 

The process we put up with is amazing, and faintly ridiculous when you break it down:

• First, sign up for an exchange account (FTX, Coinbase, Crypto.com, Binance—pick your poison)
• Connect your bank account to your exchange account
• Wait a couple days for your account to be funded
• Purchase a token (ETH, SOL, etc.)
• Install a browser wallet (MetaMask, Phantom)
• Send your token to the address on your wallet. Now, to do this, you have to click on the wallet, get the address, copy and paste it into your exchange, then press “Send” and hope you got it right—because if you didn’t, that money is gone forever. A lot of money was lost to fat finger mistakes during this step (to say nothing of exchange failures, scams, and speculation)
• Refresh over and over until the token shows up in your wallet
• Now you can use Web3: go to a website, hit “connect wallet,” sign a transaction, convert it and stake it, play a game, and so on

If you ever needed to convert that token into currency, you had to reverse this whole process: sending the token back to the exchange (after you find your wallet address in the exchange…which, by the way was never really yours, but commingled with everyone else’s), selling it, eating the fees, and then withdrawing the money—which could take days (if the exchange was allowing withdrawals at all!). 

This—this clunky, unwieldy, error-prone process—this was what we all got so excited about? In some ways Epoch 2 was really built for and by the winners of Epoch 1. It was designed for people who already held crypto in a wallet at a low cost basis. It was funny money, not fiat money.

While the main focus of activity (and media attention) went to NFTs, a long tail of other use cases appeared during Epoch 2, including DeFi and play-to-earn games. It would be easy to say that the constant meltdowns and scams are what caused the end of this epoch, but it’s more than that. The process simply sucked, but it was a necessary part of a technological evolution that will bring us to an epoch of abstraction. 

Epoch 3: Abstraction (2023-?)

The next evolutionary phase of blockchain technology, the third epoch, begins now. Epoch 3 is all about abstraction, and will usher in the next billion users (who will actually be the first billion, seeing as the first two epochs brought in fewer than 100 million people). 

We’re already seeing this shift occur: In the previous phases, much of our energy and attention went to cryptocurrency; we assumed the exciting part about the blockchain was how it enabled self-sovereignty and decentralized finance. 

There are two ways to think about the coming evolution of blockchain technology: as akin to the mobile evolution, or as akin to the cloud revolution. With the mobile evolution, users could only benefit if they had access to a mobile device, some level of technical skill, and a willingness to make behavioral changes. Hardcore crypto types might say that so far, we’ve aligned with the mobile revolution. 

The cloud revolution, on the other hand, was a natural evolution of technology and the internet: Everyone’s on the cloud now, often without even realizing it. The end user doesn’t know or care how the cloud works, and you don’t need a new device, new technical skills, or new behavior to use the cloud. The cloud simply operates in the background, streamlining your experience. 

In Epoch 3, the exciting thing won’t be currency; it will be the underlying technology: The blockchain itself. The fact that we can do things in a fast, secure, decentralized, and resilient way is the true game-changer for the future, and its effects are going to be widespread and largely invisible to the end user. Going forward, most people who use crypto to buy something may not even know it. 

It’s already happening: On OpenSea, you can now buy an NFT with dollars. In fact, that’s becoming their primary call to action. A third-party service cuts all those clunky steps from Epoch 2 so that the end user can make their purchase with a single click, rather than laboring through the whole complex process themselves. That’s the abstraction era in action. 

Another example is Reddit, whose “Collectible Avatars” (notably not called NFTs) have been downloaded by 4.3 million people since September, more than the entire 2.5 million wallets with NFTs prior to September, according to Nansen. 

“It’s not about NFTs. It’s about the use case. A ticket, access, experience, loyalty. The tech and Web3 terms need to fade into the background,” says Mathew Sweezey, Co-founder of Salesforce’s Web3 Studio.

Think of it this way: No provider boasts to their prospective end user about the cloud—the end user doesn’t care where information is stored or what the technological underpinning looks like. They just want a great UI and the knowledge that their information is stored securely. We’re seeing the same type of evolution with blockchain technology. 

The future of the blockchain is one in which the next billion crypto users won’t hold Bitcoin, Ethereum, or any other fungible tokens. They’ll use fiat to purchase goods and services, and that fiat might be exchanged for tokens somewhere on the back end. 

For example, if I’m going to Italy, I don’t start gathering up a bunch of Euros ahead of my trip. When I get there and sit down in a restaurant, all I care about is eating my pasta and drinking my wine. I’ll pay with a credit card and my dollars will get converted to Euros. If the back-end technology uses the Solana blockchain to do the conversion and it converts my fiat to USDC and then to EUROC, saving the merchant forex fees, fantastic. 

I don’t need to know how the technology works: I’m still paying with dollars and the restaurant is still getting paid in Euros. The blockchain technology that enables this seamless transaction doesn’t need my attention, it just works. 

Put simply, the blockchain is going to become infrastructure. Just as no one really talks about “the cloud” anymore, we won’t talk about “the blockchain” either. We won’t need to know or care which blockchain our purchases are stored on. Starbucks announced they will begin issuing customers “stamps” in their Odyssey loyalty program on Polygon, yet no one ordering a PSL will ever need MATIC or care.

Some readers might be hearkening back to Epoch 1 and saying, “Not your keys, not your coins.” There’s still a pervasive belief that if you’re not self-custodying your assets on a hardware wallet, you’re subject to the same centralization risk that’s been at the center of catastrophe after catastrophe. 

Here’s what I have to say to that fear: In the late ‘90s, there were about 30 million AOL users. Currently, MetaMask has about 30 million users. The technology is changing and it will continue to change—and improve. In MetaMask, you already have the option to export your keys if you want to go and play in another sandbox. 

That option won’t disappear in the abstraction era. You’ll be able to export your assets and take them with you, including into self-custody. Most users probably won’t, because most users probably won’t care. 

Predicting the Future

This future has implications for investors as well as consumers. During Epoch 2 and its Web3 focus, venture capital often looked like investing in crypto. In the abstraction era, we’ll be investing in great businesses and technologies, instead—most of those will just happen to be built on the blockchain. 

Many funds used to call themselves “cloud” funds or invest in “mobile;” now, those categories are native to almost any new technology. Similarly, in five years or so, there won’t be a distinction that a fund is a “Web3” fund, because where the technologies or philosophies of cryptocurrency or Web3 make sense, they will be used by the best businesses, and everyone will benefit. Abstraction is coming, so any companies building into the ecosystem of “connect wallet” should take caution and figure out how to make it easier to onboard new users. Huge companies like Stripe and Coinbase are investing heavily in their APIs, and startups like Peaze, Axel, and Biconomy are making it incredibly easy to web3ify any business. The next billion crypto users are coming, and they won’t even know it.

The short history of brand marketing in Web3 is not an auspicious one. While some projects have produced immense success, most have been total flops. Take the case of Warner Bros. and Nifty’s, which partnered to launch Matrix avatar NFTs in December 2021. The launch was, to put it mildly, glitchy: Site crashes, failed purchases, and confusing rules. Community members—some of whom waited in faulty lines for more than a day only to wind up empty-handed—were understandably furious. While Nifty’s responded with great communication and a free “glitch in the Matrix” NFT, their rough start should encourage other brands to think deeply about their own Web3 plans.  

Against this backdrop, how should brands proceed as we look ahead to 2023? Over the last TK months, we worked with some of the leading minds in the brand marketing ecosystem to identify the most important factors brands should consider before entering Web3. Topping the list was customer experience.  

To be sure, Web3 has been a pretty bad experience to date. If marketers plan to build in this space, they have to keep the customer experience front and center. That means the entire customer journey, not just a single moment on it. Based on our work, we identified four imperatives to create exemplary customer experience in Web3. 

1. Make it easy.

As an initial step, brand marketers should focus on ensuring an easy experience to earn consumers’ trust: 

• Allow for payment with both fiat and crypto;
• Allow for purchase with & without a crypto wallet;
• Ask for their email address; most people will give it. (If you’re not collecting emails, clearly state where you will post updates, and where they can go to ask questions);
• Follow up via email post-purchase explaining the benefits and how to activate them; and 
• Ensure there is a way for customers to get support and that those agents are trained to answer crypto-related questions.

Consider custodial wallets. Most consumers don’t have their own wallet, so you need to give them one. If you choose a custodial wallet, make sure you support them if issues arise. Also consider what methods of payments you will accept. 

If you’re looking to sell to your existing market, it’s likely consumers will use fiat currency rather than crypto. You’ll need to ensure you have a solution that allows for that. You’ll need to have clear channels of communication for service. Train your service team on the new product and how to service products before you sell them. Finally, be sure you deliver on your promises. Many projects have large roadmaps with big milestones. Your roadmap’s size doesn’t matter—what matters is: do you deliver on it? 

2. Think beyond commercial projects. 

The new technical landscape has caused a major stir, especially since the radical sums of money and the opportunities they have generated are often confusing for brands, consumers, and the market. Protocols are valued in the trillions, while single NFTs are selling for amounts in the millions. Despite the massive revenue windfall these projects have created, not all projects need to be commercial.  

As Brendan Lynch, global EVP of enterprise & revenue for Ticketmaster said, “Ticketmaster partnered with clients to deploy millions of NFTs to fans. These live-event NFTs enable richer fan experiences and engagement.” Those NFTs weren’t sold. They were given to fans as part of the experience they purchased. This is an important point. While the majority of the brands look at NFTs as a source of quick profit, Ticketmaster is treating them as key to richer customer experiences. 

Free NFTs can also have a significant effect for brands as a data play, rather than treating NFTs solely as a commercial opportunity. Each NFT must be held in a wallet, which means the brand will have access to wallet IDs. Wallet IDs, in turn, will allow brands to see associated metadata, such as other purchases, social graphs, and more. As we move into a post-cookie world, the data consumers carry in their wallets will become a reliable and verifiable source of first-party data that can be used to power brand experiences.

3. Don’t discount product and market fit.  

The market for digital goods is small yet diverse, and it follows many of the same dynamics of any other market. For a product to thrive, there must be a solid product and market fit. To ensure just the right fit, start with the end customer and work backwards into a strategy, says Maaria Bajwa, partner at Sound Ventures. .” Your product and go-to-market methods will vary greatly if your target customer is a well-versed Web3 participant or a general customer who is not a technologist. Both are served by Web3, but in quite different ways. 

Web3 natives, for example, value the technology. These participants want to buy NFTs, join Discord communities, and take an active role in Web3 development. They want the financial gain and ownership possibilities, but they also want to work with a brand to create the future. A general customer might simply want to buy a virtual good they can wear in a metaverse, own a piece of art, or show off a digital collectible. 

Ticketmaster’s Lynch suggests brands keep in mind “what consumers find value in and find valuable.” There is a lot of talk about Web3 primitives, or core foundations of the movement, but general consumers do not care about these. Brands must use Web3 technology to create a product, service, or experience that consumers want, need, or desire. It’s not enough to simply draw on a piece of paper, call it an “NFT,” and sell it.

Ellen Degeneres launched a collection of NFTs which sold 68 total units—in a market where most projects were selling thousands in seconds. The difference was that her NFT collection had no obvious value for potential buyers. In comparison, the other projects had clear roadmaps, vibrant communities, and were more than just a jpeg. 

Many brands are approaching the idea of product/market fit from a different angle and bringing their customers along the journey with them. This provides an enormous advantage over previous web approaches because, by working with their customers from the start, brands can leverage customers to help create and market the product, provide co-ownership to those customers as payment, and ensure that there is a product fit for the market. Brands from Adidas to Gucci are using Discord communities to listen to and get product direction from their super fans, while Web3-native brands like BFF and CPGClub are working with their communities to create brand new consumer products. This new approach makes traditional focus groups—often used to gain similar data—as obsolete as a payphone. 

4. You don’t necessarily have to build a community. 

Community, collaboration, and co-ownership are key elements of the Web3 ethos. This ethos often shows up in Discord communities where a mix of builders, super fans, and regular customers converge. Communities are powerful and working with them to collaborate and co-build your project can be critical for its success. However, there are some caveats to consider.

Building and maintaining a Web3 community is hard, costly, and time-consuming. Communities are always on and require significant investment in moderation and setup. However, not all projects require a community. Projects like Tiffany’s “NFTiff”, for example, simply extend the value of other communities through collaboration, rather than creating an entirely new community. This over-the-top utility allows a brand to leverage an existing community for mutual gain; for many brands, collaboration is an ideal strategy, as it removes the cost of owning and managing a community.

In the case of NFTiff, Tiffany’s didn’t create a new NFT project; instead, they added value to an existing Cryptopunks NFT project. The NFTiff was only offered to Cryptopunk NFT holders, allowing Tiffany’s to create a custom piece of jewelry based on holders’ “Punk.” Their collection of 250 items sold out and netted them over $12 million—without investing time, energy, and resources into building and maintaining an entirely new community.  

Just as airlines extend the value of military service by giving service members early access to board flights, brands can extend the value of communities in similar ways. You can grant special access, privileges, and discounts to projects as a way to engage those communities and add value. One way to think of it is this: a project is just another touchpoint in a broader consumer ecosystem that could drive brand value.

Brands can also simply buy into communities to become a part of an existing project or join a community rather than build one. If you decide your project needs a community, ensure you budget for staff and technology, and have a plan in place for how you want to use them.

“Just like in Web2, ‘community’ has been an overused word with a lack of understanding or definition,” Dan Gardner, founder of Code and Theory, says. “Instead of just assuming you need it or adding it as an arbitrary label, make sure it’s used with intention for the optimal outcome.”