We live in uncertain times. Covid is still a problem, the war in Ukraine is still going on four months later, the destabilization of Europe has distorted the global balance of power, leading to a global crisis. Supply chains are under pressure, natural resource prices are skyrocketing, the gap between the rich and the poor is widening, and the never-ending dream of globalization seems to be coming to an abrupt end. The new word in the media these days is hyperregionalization, some people have seen it, but most people haven’t.
At the same time, currency overruns, especially during the Covid-19 pandemic, have allowed inflation in the EU and the US to increase at an unprecedented rate. Global economic growth is weakening, creating challenges for investors, incumbents, and of course global markets, with the Nasdaq down 25% and the entire cryptocurrency market down ~70% from their respective ATHs. For many critics, this means the end of the “hype” surrounding the Web 3.0 vision.
In fact, this vision has only just begun. We are witnessing the birth of a new technology that reshapes the way digital businesses operate, giving these ecosystems the assets we call cryptocurrencies. Owning a cryptocurrency asset is like owning a stock in a growing ecosystem, upon which successful projects create real-world value, thereby generating revenue and profits. But as these ecosystems unfold, there are of course challenges to overcome and trust to build. As such, they are more volatile as an asset class than others that have been around for decades.
The current market situation for Web3 is unique as the crash was also caused by the systematic failure of some of the relevant market movers (Terra LUNA, Celsius, Voyager). The misconception that arises from these crashes is that DEFI has failed. But this conclusion is completely wrong. What has failed is centralized finance, where start-up banking entities like Celsius are overleveraged. Decentralized financial protocols work very well and continue to be built, and misunderstandings are part of the innovation cycle we are in. Industry events and macroeconomic downturns have put enormous pressure on the industry. But despite these market conditions, in June 2022, the Web3 ecosystem has seen unprecedented growth over the past 13 years, with a CAGR of 270%. This current pressure will continue to cleanse the market, and successful projects will be stronger than before. I am convinced of this for the following reasons:
1. If we assume that the Internet will not disappear, then it will continue to evolve – become Web 3.0.
2. Despite the downward trend in valuations, the fundamentals have not changed, and Web3 adoption continues to follow the pattern of the early Internet.
3. The value proposition of the Web3 business model is clear.
4. A lot of talent has flowed into the industry, and they see the industry’s challenges as huge opportunities.
Over the past 7 years, Web3 adoption rates have followed the same pattern as Internet adoption rates in the 1990s. If this trend continues, the report predicts that Web3 users will reach 1 billion to 1.5 billion by 2027. That’s at least a five-fold increase from today’s estimated 200 million or so users. If the medium-term vision unfolds, it is expected that by 2027, 10% of the world’s GDP will be carried on public blockchain technology. This will be a $13.4 trillion market, and tokenization will play a key role in the unfolding of this vision.
Tokens: A new way of thinking to unlock great potential.
Web2 enables user-generated content, but at the cost of the platform monitoring that content. Centralized platforms are the definition of the current Web 2.0 era, and for good reason. Platforms like Amazon, Facebook, Ebay and Twitter are the answer for businesses entering the market in this internet age. The vast majority of the value goes to the platforms, not the users. They combine some intermediary services and justify their charges in this way. It is important for them to invest heavily in sales and marketing to generate leads and retain customers, and we know that one of the fundamental challenges of the internet is marketing. In Web2, ownership and value don’t play a big role.
Web3 promises to be a trustless, transparent ecosystem with as few middlemen as possible. and. It introduces the concepts of ownership and value. Web3 intends to be an Internet of Values, not just an Internet of Information and Communication. The way to achieve this is called a token. Tokens change the logic of digital commerce, they can represent scarcity, they can represent a measure, they can represent a reward. By purchasing tokens, customers become part of an ecosystem.
Platforms like OpenSea and Coinbase do exactly that. They’re not selling the tokens themselves, they’re offering access to the ecosystem and community – that’s their product.
As the technology is just beginning to show its potential, only a handful of players can currently test this argument, but we still have some startling data on hand. In the content industry, Web3 has proven to be better for creators than Web2. I have laid out the mechanics of NFTs for the content industry in a previous article, and these numbers demonstrate the gist of this logic. As A16z’s recent cryptocurrency report points out, the Web3 platform is significantly less used than today’s internet giants. OpenSea has a usage rate of 2.5%, compared to 30% for the Apple Store, 45% for YouTube, and almost 100% for Facebook, Twitter and Instagram.
“When the big tech companies have a higher adoption rate than the Mafia, you know something is wrong with our economy.”
If you look at the income generated by different sources, NFTs provide a whole new way for creators to make money directly with their fans. In 2021, the average compensation per creator on OpenSea is $174,000, compared with $636 per artist on Spotify, $405 per channel on YouTube and 10 cents per user on Facebook. What do these numbers tell us? Web3 is small, but it is very powerful. For the content industry, NFTs are a new business logic that brings the concept of copyright to the digital world and ultimately rewards creators and rewarding their communities.
The concept of Web3 fundamentally challenges the way businesses currently operate, and even the way they go to market, because it shifts priorities. The traditional way to get started is to invest in traditional marketing to attract and acquire new customers. Tokens provide a new approach where the core developer team does not need to spend capital on these traditional tools, but can use tokens to bring in early adopters. The reason they joined was the underlying reward mechanism. Early token holders will be rewarded for their early contributions when network effects are not yet evident or starting – for developers, but also for community managers, investors, partners and other types of supporters. Tokens make early contributors evangelists who bring more people to the network. This community mechanism makes early users of Web3 stronger than traditional business developers or salespeople of Web2. Therefore, tokens can be viewed as equity with governance capabilities. When you buy a token, whether fungible or not, you join a community. In the future, tokenization upends the strategy of online mornings.
When it comes to ecosystems and tokens, I often hear the following questions:
“How do I know which ecosystem will win? What if I buy ADA, ETH, and AVAX, but use Algorand’s ecosystem?”
The answer to the ecosystem is the same as the answer to the business model. There is no one-size-fits-all solution, but there are frameworks that can be built. We should not forget that cryptocurrencies are the stem cells that incubate their own ecosystems. Therefore, their respective architectural ways may provide advantages for some and disadvantages for other use cases.
I like the way Andreessen Horowitz’s Maggie Hsu describes it in an article on Web3 Mindsets, Tactics, and Metrics: “The biggest shift in mindset is from planning to being a gardener”.
Web2 companies are guided by a top-down vision, with the founders (and to some extent investors) taking full responsibility for defining the vision, developing the team, planning and executing the vision.
In Web3, the founder is the gardener. They create space for ideas to grow and help nurture products they consider successful. They provide the initial governance structure, usually in the form of a white paper, but ultimately, the founders optimize for the usage of the protocol and the quality of the community. These ecosystems are much less hierarchical and more democratic, and as a result, there are more participants fighting for the success of a given project. There are many projects, many DAOs that make the concept of distributed ownership a reality.
Let’s look at the example of the publishing industry. Will physical books disappear? I personally doubt it. Books are magical things, they use language to create the world. Reduce your pain and give hope, education, manipulation, inspiration and comfort. Books create a sense of adventure, or a sense of calm, and the tool that books use is language.
“Language is the first Metaverse. When I speak to you, you create a world in your mind, and a book is like a token that provides access to the new world you create in your mind”, Jamiel Sheikh.
Not only does this phrase have philosophical implications, it also has some relevant business implications that should be considered. Are there any substitutes for books? Sales of e-books are declining globally, while the market for physical books appears to be fairly solid. People will always read books, and even for Web 3.0 enthusiasts like me, I don’t think the core business of the publishing industry will be negatively affected by Web 3. But the potential for alternative, additional creativity and the resulting revenue streams is enormous. Authors are often thought leaders, peers, icons, and coaches, people to look up to and learn from. All of these assets are part of the community. Web3 can be a huge marketing opportunity for the Metaverse, offering alternative experiences, but the DAO dictates how the story continues — the community decides that.
Future business leaders will face many challenges, but one task they should definitely tackle is understanding the potential impact of Web3 on their bottom line, and just as importantly, understanding the potential opportunities that may arise.The solution should be to focus on the ecosystem, and those that provide the right ecosystem for their industry have a unique opportunity to disrupt themselves, as well as their competitors.
At the end of the day, if today’s market movers don’t want to fall behind or become attached, they have no choice. This is crystal clear: OpenSea and Coinbase, to name a few, are strong Web3 brands. Has internalized the potential and stepped on the door of the content industry.
They may have the technology, but as of today, the competitive advantage comes from the community that has it, the people who know how to create and curate the business, and tokens are the key to unlocking the huge potential. If these players build their ecosystems according to the needs of creators, there is a chance that they will be better in a few years than they are now.
Tokens are indeed changing the world. In Web3, successful tokenization lays the foundation for nearly every business model imaginable. Audius imitated Spotify, Sorare and TFC imitated EA, Livepeer imitated youtube, Compound imitated large banks such as JPMorgan in a sense, decentralized messaging services such as KIN imitated Whatsapp, and innovation is increasing.
Will they all exist forever? of course not. But like the ecosystems they build, some of them will. Those surviving projects and early entrants will get the biggest piece of the pie.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/token-is-swallowing-traditional-business-models-why-believe-that-web3-will-change-the-world/
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