What Web3
Got
Wrong
The media cycles surrounding the 2017 ICO explosion and the 2021 NFT craze put the spotlight on web3 and made every CEO ask how their company could be in on the action. We’ve seen the world’s biggest brands, from Starbucks to Nike, invest heavily in web3. But even with the massive media hype and brand activations, web3 hasn’t caught on with the general consumer.
So what will it take for these technologies to finally find traction? The first is a shift from Asset Class to Experience Layer, and the second is a shift from On-Chain to OmniWeb.
A shift from Asset Class to Experience Layer
Most consumers only understand web3 through a simple number, and that is generally the price of Bitcoin. Web3 has unleashed a new asset class on the world, which has driven all of its hype to date, and is one of its biggest barriers to mass adoption.
Most consumers are afraid of crypto. It is hard, complex, and scary. Even when new applications make it easy to ‘on-ramp’ into crypto there is still the radical volatility of the asset class. Beyond these issues is the basic fact that most consumers don’t care about asset classes.
The focus of web3 as an asset layer is also problematic for brands. Most brands are now holding off on creating web3 tokens (NFTs) due to the unknown regulatory environment. They simply don’t want to be creating assets as that will likely classify them as a financial institution, taking them away from their core business and opening them up to a massive new world of regulation. The tiny market that would even care about these assets doesn’t even come close to justifying the risk of additional regulation.
A new asset class is good but comes with a large set of issues to drive mass adoption. To reach the masses we have to focus on what they care about. Consumers care about experiences. They want them to be faster, easier, and better. Web3 can do that!
Web3 can create a world where logging in is obsolete. A new study commissioned by Nordpass found the average person has over 100 passwords to remember across their digital lives! Yes, there are password management solutions like Nordpass or Onepassword to make this easier, but those are band-aids to the real problem. Identity is centralized and not extendable. Web3 can easily solve this by leveraging a tokenized identity layer where verified credentials are held by consumers. This could grant them instant access to services and could eliminate the need for logging in altogether, even eliminating the need for downloading the app in the first place.
This is not a “password solution” but rather a new way of verification. Apps use passwords and usernames as a way of proving you are who you say you are. Tokens can do that. Tokens can prove you are who you say you are, and services can use them rather than making users create a new username and password. Those tokens can also carry data, eliminating the need for the app to store data. Rather the consumers bring their data with them.
Beyond just being an easier way to log in, web3 can eliminate the need for apps and the creation of new profiles altogether as the tokens themselves can execute functions.
Imagine you have a car token given to you when you purchased the car. Now let’s say you want to do something with your car. From starting it to renting or selling it. Each of those would require at least one other application to be downloaded, a new profile to be set up, then have to manage all of those apps. This is how the web currently works, but in a tokenized (web3) world the tokens can be the applications themselves.
Progressive brands like Karma have already done this for their high-end electric cars. Each car is given a token, and that token is added to your wallet. You then open the token and execute these functions from there directly. No need to download another app, or sign up for a new service. Want to sell the car? Click a button in the token, put in your terms, and then simply pick where you want to sell the car. All of your information from your terms to the car’s data and history is then sent to those marketplaces, and you interact with them through the token itself. Making selling a car easier, faster, and more trusted as the data is all verified.
The biggest barrier to this kind of implementation of web3 technology is the focus on web3 as a new asset class rather than an infrastructure to help provide better digital experiences. We have expanded the aperture of how we think about tokens. Tokens are not just assets, they are also stores of data, and enable a new world of frictionless digital experiences to take place.
A shift from On-chain to “OmniWeb”
Web3, past being a speculative financial asset class, also has another big problem: the blockchain. The blockchain is a powerful database able to solve “double spend,” a potential risk to cryptocurrency in which a user might be able to spend the same digital currency twice. Through consensus mechanisms and the recording of transactions on a ledger, blockchain solves this flaw, enabling blockchain-based systems to be a transaction layer of assets and allowing for crypto to even exist. It’s a big deal! Despite this powerful feature, putting things on-chain comes with many issues that stifle the adoption of web3.
Putting things on-chain makes transactions public. This is good for solving transparency in financial situations, but it’s bad for a lot of other general use cases. For example, brands don’t want their entire customer database visible to their competition. Additionally, blockchains are not as fast or scaleable as other databases. Blockchains are designed to be a transaction layer, and they are great at that. They are not great at storing a lot of information. So a slow, public, and expensive database has very limited use cases, and most brands and consumers find it too scary to engage.
Web3 has to embrace a hybrid world where both on-chain and off-chain tokens work together. I call this “omniweb architecture,” where on-chain tokens can be extended via off-chain code and off-chain tokens can be leveraged by on-chain and off-chain applications.
Off-chain tokens, better known as “attestations” are exactly the same as the on-chain token – verifiable, decentralized, trusted, and programmable – however they come with the added benefit of no wallet being needed. They’re also private and are not seen by regulators as an asset. They can unlock the value of web3 with none of the hassles.
For example, Taylor Swift could issue an off-chain token to all of her fans who follow her on Twitter, Spotify, and have been to a concert in the last year. Smart Token Labs is an Australian web3 startup that I currently advise and which is currently working on this technology. Their CMO Brent Annells believes that fans want new ways to connect. “Fans want to be rewarded for being fans but in a way they value. They don’t want to be paid or have a digital asset they can sell. They want access and to be recognized by the artists as fans,” he said.
Verified fandom allows fans and artists to unlock a new era of fan experience.”
With modern web3 technology, there is no digital wallet and no new login required for the fan to receive the credential, just an email. Now the fan can prove anywhere that they are a top fan of Taylor Swift and new experiences can be unlocked. For example, brands can give rewards to fans directly on their site, and ticket sales can now be gated to allow superfans to get first dibs. In both of these situations, the token, not backend databases, is the integration point. This makes new experiences easier and faster to create and allows consumers to derive greater value from their online data.
Not all things require a blockchain, but all things can be better when leveraging web3 ideas and technology. Off-chain tokens are web3, and a great way to create new experiences that are frictionless while delivering on the core values of interoperability, decentralization, and ownership. For us to drive mass adoption we have to think past just on-chain and look towards an omniweb world.
The entire current conversation about web3 is focused on the financial aspects of the technology, and mostly that is simply the token prices of Bitcoin. This limited view is too scary to consumers and brands. When we let web3 fade into the background and leverage it to create better experiences both of those fears go away, and a greater value can emerge. To do this we also have to reduce the complexity of the experience, which means embracing off-chain tokens to expand on these use cases and further reduce consumer friction.
By shifting the focus from web3 as an asset layer to an experience layer, and embracing a wider understanding of web3 technology beyond just the blockchain, we can deliver to consumers truly what they want: a better digital experience.
Do you agree with this?
Do you disagree or have a completely different perspective?
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