What is Web3, and why will it struggle?

What is web3?

The best description I’ve heard for web3 was “private ownership of your content and property that can be distributed and consumed directly from peer-to-peer.”

To quickly put this into perspective for those just learning about web3, if you tweet on Twitter, you do not own the tweet, Twitter does. But if you were to publish a tweet on a web3 version of Twitter like Twetch, then you would be the owner of your content, and therefore, you can profit off of your content and distribute it—or not distribute it—however you please.

These days, many companies are calling themselves web3 companies. To be honest, after having conversations with web3 companies, I usually walk away more confused than I was at the beginning of our talk. More often than not, this is because even though they use a blockchain protocol, coin, or token, token, nothing about their business is really web3.

From my experience, this is because web3 has become the new way to say “we are a company using a blockchain” instead of being the way to communicate the properties of your business and the services it provides. Connor Murray, the founder and CEO of Britevue, agrees.

“Web3 is just a meme at this point. As far as I can tell, web3 just refers to signing onto a platform with a crypto wallet,” said Murray.

“There is so much more that we can do to transform the internet into a secure p2p version of itself,” he added.

Many people, including myself, would agree with Murray, but that begs the question:

What does a business need to do for it to actually be a web3 company?

Core features of web3 businesses

Web3 businesses and platforms give their users complete ownership of their data, don’t have advertisements, allow content to be distributed directly from peer-to-peer, have enhanced data security and privacy, and have monetization mechanisms. This isn’t an all-encompassing list, but it captures some of the core features of legitimate web3 businesses and services.

“Freedom of choice, property ownership over the things you create, and money intertwingled all the while; this is what the next evolution of the web looks like,” said Billy Rose, the CMO of Twetch.

“The future of the internet is not just having a connected wallet in an app, it’s signed data on the blockchain where users have full control and ownership over everything they create online—and the ability to monetize that,” he added.

In web3, the blockchain aspect of your business model does not need to be visible, but it should be a core component of the product or service your business is building. Additionally, a significant pillar of a web3 model should be user empowerment. This concept is directly in contrast to “web2” models, where tech giants have 100% of the power and control over a user’s destiny and data.

Tech giants typically use their power over users to turn a profit. For instance, Facebook makes money via advertisements on its platform and by selling user data. But in web3, both advertisements and the enterprises taking ownership of your data are non-existent. That being said, businesses and service providers will need to rely on other revenue streams to keep their companies afloat.

“A business that runs on micropayments can be profitable from day 1 by taking small fees for every transaction that happens on the platform,” said Rose.

“Companies can also enable users to monetize their data footprints and take a cut,” Murray added.

Currently, most web3 companies rely on brokerage fees from their users to generate revenue. Others keep certain features and access on their platform behind a paywall and require users to make a one-time payment before the user can access the feature for an infinite period of time. It’s important to note that both of the revenue streams mentioned are directly reliant on the number of users a platform or service has and the user’s demand for the service or features being offered. These models are the most prosperous at scale but may not be enough to keep companies afloat without a massive userbase.

Fighting tech giants

In most instances, there is more value in web3 for consumers than service providers unless the incentives for users create a positive feedback loop in which the service provider benefits greatly monetarily due to scale.

Users are attracted to web3 services primarily because they allow them to make money while using the internet, but also because of the decentralized, privacy/security first, advertisement-free properties associated with web3—but will that be enough to win the war?

On a global scale, the group of people who are anti-tech giants and everything that comes with it is a loud minority. Most people don’t care that big tech is arguably oppressive and using their data, while some are just happy to use cool platforms that let them easily connect with their friends, families, strangers, and people they admire.

Digital assets and blockchain created the ability for a variety of new business opportunities, yet, people keep taking existing businesses and putting them on chain; in most cases, that isn’t revolutionary, and it doesn’t lead to any gains in efficiency.

As long as that trend continues and the new businesses that pop up do not solve significant problems that exist or make the lives of consumers and businesses significantly better in any way, shape, or form, Web3 companies are going to find it difficult to pry away the massive userbases that are loyal to tech giants like Facebook, Instagram, and Twitter and get them to use the pseudo-decentralized apps that sort of use a blockchain that they like to refer to as web3.

web3 has not been invented yet, only some of the tech needed to accomplish it. So anyone talking about web3 right now is full of shit.

— Bitmonkey (@MrBitmonkey) July 24, 2022

Watch: The BSV Global Blockchain Convention panel, Web3 and BSV Blockchain

https://www.youtube.com/watch?v=RzJsCRb6zt8&t=29945s