Web 3, the metaverse, crypto, bitcoin, Layer 1, protocols, blockchain, NFTs, Zuckerberg, Meta, Bored Apes, Crypto Punks, Ponzi scheme....
You’ve heard all of these at least 786 times in the last 6 months.
Are you early? Are you late? Should you even care?
I must start off by saying I might just be on the threshold of being an idiot, and I’m not technical at all, so even though I’ve listened to hours of podcasts and read many blogs on these topics, I still only have a very surface level understanding.
With that said, I meet startups every day as a profession, and having met over 1000 in the last 2 years, there’s a certain subconscious and conscious understanding of trends going on. I could write 500 pieces about the different learnings, but one trend that comes up often is the unfairness of the current system for the Creator. I’ll refer to the Creator with an ‘uppercase C’ in this piece as the person who seeks to monetize a blog, their music, their art, their skills, their ideas, their influence etc. This really can be anyone. Currently, the world is set up for organizations to take anywhere between 50% to 90% of the financial benefit away from these Creators. For example, on Spotify, creators get *only* up to 20% of the financial benefit.
The current system is broken.
So let’s take a step back and define some of the terms. Disclaimer here is that any definition or idea I give here is an amalgamation of learnings extracted from people who *actually* understand the space, and I highly recommend you follow them on social media,subscribe to their newsletters and listen to their podcasts if you want to explore more - including Naval Ravikant, Chris Dixon, Balaji Srinivasan, Tim Ferriss, Vinny Lingham and Packy McCormick.
Also, I’m going to give overly simplified views of everything, because simple mental models may effectively describe up to 80% of these ideas. But it’s definitely worth digging in more to get the full picture.
To start off, I heard a simple explanation of the difference between Web 1, Web 2 and Web 3 from Tim Ferriss that stuck with me:
Web 1: Read (Dominated by Microsoft)
Web 2: Read + Write (Dominated by Facebook, Twitter, Instagram etc)
Web 3: Read + Write + Own
Web 3 is dominated by no-one. It is decentralized. It cuts out the middleman organization that seeks to own your data. Web 3 is an internet that is owned by users and builders, and digital tokens are the currency that facilitates it.
Web 3 is all about value and control given to you, and to me, and to all Creators, builders, users. No longer is Facebook using your data against you. No longer is Spotify benefiting from Adele’s latest song. No longer is the “poor struggling artist” a thing. In theory at least.
It’s going to take a while to get there. At the moment the user interfaces are mostly atrocious (by everyday user standards). There are countless applications being built upon different layer 1 blockchain protocols. We could talk a lot more about layer 1 protocols, but for simplicity, these are essentially “the operating systems” of Web 3 - Ethereum is currently the biggest, and other growing ones include Solana, Cardano etc. The smartest developers around the world are being increasingly attracted to work on Web 3 and are building on top of these “operating systems”, and it’s just a matter of time until we see applications as easy to use as the apps we have on our phones now, but fully decentralized.
Now let’s take a look at NFTs. Non Fungible Tokens.
It has been so interesting to see one side of the world so excited about them, and the other side saying “lol people are buying Jpegs bro”.
The beauty of NFTs is that they look so simple. Phase 1 of NFTs is ridiculous monkey Jpegs. But under the hood, there is so much going on. This is my understanding:
NFTs are programmable web pages / digital certificates, which can have an infinite number of properties that apply to the owner/s. For example, you could buy an NFT of an ape, but within that, there can be specific rights that apply uniquely to you as the owner of that digital certificate. This could be sell-on commission rights for if/when that NFT is sold in future - ie. The creator makes money every single time that NFT is sold on; that’s pretty exciting for the Creator world. This could be the right to attend community events with fellow owners of that NFT. This could be exclusive access to discounts of related products or partnerships of that NFT.
We are seeing a sense of belonging to a community associated with NFT purchases. Jungle Cats, a project on Solanarts, attract people who are passionate about animal conservation - A person buys a Jungle Cat NFT - in exchange the Creators contribute to conservation NGOs, and the buyer of the NFT becomes part of an exclusive Discord community where the passion of animal conservation is a central discussion topic. If they happen to sell their Jungle Cat NFT, they can benefit financially above and beyond the sense of belonging to the community, but it’s not necessarily a “buy to sell” trader mentality only.
NFTs can facilitate building a community unlike we’ve seen before. Giving extrinsic and intrinsic ownership of a piece or a full asset. Then, if that asset is sold on, the original Creator can benefit every single time a transaction happens with in-built commission. To reiterate an earlier point - this is significant because the current model is for a Creator to take a tiny commission (1-20%) commonly, and only once off. As a piece of digital art propagates around the ecosystem, everyone benefits, the community grows, Kevin Kelly’s idea of “1000 true fans” becomes more powerful than ever.
Then there’s NFTs in gaming. In the old world, you buy a piece of armour, a weapon, a skin, or cool outfit for your character etc, and it has no real value outside of that game. The value is only really the value you place on it by virtue of playing that game. It’s basically just us pretending the game has value and the things within the game have value, because it’s fun.
In the new Web 3 world, those gaming elements will be NFTs with real financial value associated with them. In online games, there could be the ability for players to create NFT weapons, outfits etc, and sell to other players. You’ll be able to trade these elements with others, and the original Creators will benefit financially each time. This will facilitate an in-game economy with real-life financial benefit. In this idea, this is a closed system just for that one game. But where this gets really interesting, is where interoperability comes in - where you can buy an outfit for a character in one game, and carry that across into another game. This is where game NFTs will have real-value.
Now let’s talk Metaverse. Where we place real life value on the virtual experience.
NFTs are going to be a key catalyst to the metaverse, and having interoperability between different virtual experiences will be key to this. Zuckerberg with Meta may want a closed metaverse (where Facebook essentially “own” the virtual world), but consensus thinking is that’s not a good thing. Consensus thinking is that would be, well, kind of terrifying. We want an open metaverse - where there are countless creators of virtual experiences, and these virtual experiences are interlinked and shared and where you keep the digital assets (NFTs) you buy and use them across the open metaverse (with the option of selling on, allowing yourself and the original Creator to benefit). You buy a digital Louis Vuitton for your avatar (NFT, which can also give you exclusive access to their launch events), and you keep it with you everywhere you go in the digital world - and you keep the social status that comes with it.
It’s going to take quite some time until we live in a Ready Player One-esque metaverse, and I don’t know that we ever want to / should. But I see a world in which digital assets take on similar importance to physical assets. In this new world, Creators win, and there are countless exciting possibilities that are not dystopian.
So this is where we are now…
Bitcoin opened everyone’s eyes to a world where digital currency could have a real use case.
Now the world is trying to figure out how we can give digital assets a real use case.
Blockchain protocols are increasing in speed, decreasing in cost, and becoming more attractive for world class developers to develop upon.
Covid has catalyzed the world into living the majority of our professional lives online, in virtual rather than physical meetings.
Gaming has progressed to the point where world class gamers are getting paid and revered as much as world class sports players. And the business model of gaming is shifting away from up-front buy to in-game purchases.
The world is fed up with Facebook, Google, Microsoft, Apple, Spotify etc using and owning our data, and keeping Creators from experiencing the value that they deserve.
And now. We’re in a transition period. A convergence of trends.
We’re in a period where Web 3 has come alive. Where decentralization is here to bring all of these concurrent trends together. As Naval Ravikant has said, where Creators can get real financial value instead of “likes” and “hearts” only.
It’s an uncomfortable moment. Something big is bubbling under the surface. As difficult to describe as the internet was in the 90s.
I believe we’re still very early.
Overall, I’m very hopeful and excited about this progression.
Let’s buckle in and enjoy the ride.
