Now Is the Time to Make Sure Web3 Doesn’t Just Become Web2 with NFTSby@davematli
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Now Is the Time to Make Sure Web3 Doesn’t Just Become Web2 with NFTS

by MatliApril 22nd, 2022
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So far blockchain technology has had a mixed record of decentralization. All of the old-school hodlers can look at the ability of besieged Ukrainians to raise funds from around the world and rightfully pat themselves on the back. And the Russian freelance coders who've been dodging taxes by getting paid in crypto for the past five years now seem suddenly prescient as the Ruble collapses in value overnight. But the quiet and rapid adoption of blockchain to decrease currency exchange & money transfer costs and streamline supply chains has largely been implemented by banks and mainstream companies, who have not passed the savings on to customers. Even DeFi, which is decentralized and has exploded in popularity, driving new adoption, faster technology and better UX is still mainly used by crypto daytraders to trade with one another, not the mainstream world of business owners or individuals who use loans from traditional banks. As Facebook becomes Meta and big tech and big banks rapidly jump into the crypto space, it becomes important for Web3 companies that are built on decentralization to get the support they'll need to attract outside users and investment dollars before the vision of Web3 simply becomes Facebook3. Here are some key projects to consider – and some criteria to keep in mind. Whatever we invest our time, effort, money and talent into now should align with the world we want to see in 5 - 10 years... or we'll all have to wait until Web4 to get another chance at it.
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Web3 is about to disrupt a bunch of industries that mostly have no clue what’s about to happen… but it’s no guarantee that it will be as decentralized as advertised.

So far blockchain technology has had a mixed record of decentralization. All old-school hodlers can look at the ability of besieged Ukrainians to raise funds from around the world and rightfully pat themselves on the back. And the Russian freelance coders who've been dodging taxes by getting paid in crypto for the past five years now seem suddenly prescient as the Ruble collapses in value overnight.

But the quiet and rapid adoption of blockchain to decrease currency exchange & money transfer costs and streamline supply chains has largely been implemented by banks and mainstream companies, who have not passed the savings on to customers. As any company with a fiduciary responsibility to shareholders would do, they’ve used the technology to reduce their expenses while billing customers the same amounts as they did before. You can expect more of this as__clearinghouses__ and banks experiment further with crypto. If you have any doubt about where this is going, just look at the management team and board members of Goldman Sachs-backed Circle and it’s clear that centralized traditional finance is already fully on board with crypto.

But what about DeFi? That’s decentralized…

Certainly, Web3 optimists can look at the boom in DeFi over the past few years and point to the obvious increase in the adoption of peer-to-peer lending and borrowing outside of traditional banks as a key achievement. This is from an awareness and adoption standpoint – and even from a technological and UX advancement standpoint; but are these staked crypto loans being used by people in your neighborhood to open a new pizza joint? Or pay for a kid’s college education? No.

They are mainly used by crypto daytraders to increase their leverage on speculative trades with other crypto daytraders. The infrastructure has been built for wider, decentralized adoption, but the actual users of the system are the same crypto insiders, technophiles, decentralization idealists and speculators that were there before. If your mom still doesn’t get it, it’s not mainstream and any crypto idealist needs to be realistic about this.

We’ve been here before

That is not to say that Web3 can’t or won’t be decentralized. It’s merely a modest warning that it will require the purposeful adoption of some technologies over others to guide the eventual adoption of blockchain technology by mainstream audiences.

For those old enough to remember, Web1 and Web2 were both envisioned to be utopian knowledge-sharing revolutions that would free people from the constraints of large corporations, media and governments as well. Craigslist and Wikipedia are the surviving species from these early idealist eras… and sites like Github are probably their Web2 descendants.

But we all know what happened.

In a space with no regulation, the deep-seated caveman instincts of humans were freed of constraining Enlightenment ideas such as “human equality” – and even ancient religious constraints such as “treat others how you want to be treated.” Monopolies thrived, throttling smaller companies. Bullies shouted down disagreeing viewpoints, stalking and threatening dissenters.

Racists and pedophiles created forums to amplify their obsessions. The desperate and the dishonest were empowered to extort any person or company they could outwit with almost no repercussion and a low likelihood of being caught or stopped.  And a sociopath who founded his company by stealing it from the people who hired him to do the coding became the owner of the most powerful publishing and communications platform that has ever existed… with predictable results.

What’s at stake

All I’m saying is this. Facebook has changed its name to Meta – which, aside from being a lame rebranding tactic after years of bad press, is also a clear indication of Zuckerberg’s intent to own the metaverse like a real-world James Halliday.

And how does one monetize the metaverse?

Digital products and NFTs are already growing exponentially within gaming. If NFTs are the future medium of exchange within immersive or virtual worlds, it is very clear that Big Tech has no intention of sitting on the sidelines while decentralized versions of marketplaces, virtual worlds and content licensing platforms form organically.

Even now, the biggest NFT marketplace in the world, OpenSea is a private company, not a DAO. The NFT creators who have driven its exponential growth – widely marketed as proof of the coming Web3 wave – have as much power over its governance as the musicians on Spotify have. And if there were any doubt left, according to Uphold’s Unboxed newsletter, “Meta's total fee for sales made through the Meta Quest Store… [is a] whopping 47.5% all-in, after including hardware platform fees and partner Horizon Worlds' sizable taste.” Compare that to OpenSea’s 2.5% take – or even Apple’s App Store 30% cut and you can see Zuck is not playing around here.

And why should anyone expect Spotify or YouTube or Getty Images or any other content licensing & monetization platform to do nothing while a decentralized version of its marketplace forms and drains away their customers and artists? Just as video game makers like Sega are realizing that they can make their own interoperable NFT products that can be ported between games without needing ImmutableX or anyone else, we should expect that other platforms ripe for NFT disruption will likewise discover that they can get all the benefits of the NFT economy without decentralizing anything.

Consciously building decentralization into Web3

Okay, enough of the dark side. Believe it or not, I’m not at all pessimistic about decentralization, but the time to impact how this ecosystem develops is now. For a short time, the technology is still too insular to have been adopted yet, which means there is time for the Web3 idealists, visionaries, technologists and yes, even the hustler-speculators to shape how it develops.

There are some key nascent technologies in the space that deserve your attention… not just for their potential speculative value, but for the type of Web3 that could exist if we decide we want it to. Projects are built to be decentralized and to truly shift platform ownership, profit-sharing and governance to the users and value-creators of the platform.

This is not at all anywhere close to a comprehensive list. I have a day job and kids so I can’t spend all day researching this stuff, but you should – and add anything you think is worth checking out as well.

The point is that non-crypto dollars and people will flock to existing marketplaces and products with followings. So it’s important to support projects that are decentralized before the gates fly open and everyone just ends up in Facebook3 because that’s where everyone else seemed to be.

Octopus Network

  • Yes, I am submitting this article to the Octopus Network writing contest – which is why I first heard about this project (point for you Octopus marketing team!).

  • BUT, it’s a great project – very much like Polkadot or ImmutableX in that it aims for making interoperability a normal part of the crypto sphere since I think we can all agree non-crypto people are not that interested in what token does what and just want applications that are simple to use.

    • What makes it particularly interesting is that it is built to be something like an incubator for Web3 startups. Everything they’ve built is about reducing the startup capital required to bootstrap a new company – making it possible to rent instead of build all of the expensive proof-of-stake/work security that makes the blockchain valuable and scale it as needed. Contrast this to the current method of spending millions of dollars to build, launch and gain enough adoption of a new token for it to have any real security or liquidity and you can see that this throws the doors wide open to a LOT more scrappy entrepreneurs with crazy and/or visionary ideas.

    • My one tip is to skip the website, which I found baffling and jargon-packed (I’m not an engineer, just a crypto marketer & UX person), and read the white paper. It spells out in plain English what the vision is and why they built it. (Sorry - point taken back from the Octopus marketing team).

  • DEIP (built in the Octopus Network - Near protocol)

    • The NFT space is awash in hyperbole about the creator economy… but so far most of what I’ve seen are really expensive animated gifs. Clearly, I’m not the target audience.

    • This is why I find DEIP so interesting. It is aimed squarely at disrupting the IP, licensing, and rights management industry by creating a drag-and-drop marketplace for copyrights, trademarks as well as other non-tangible assets with real-world value (ie: actual copyrights, not an animated gif of a cat).

    • This could not only disrupt the massive rent-seeking industry of IP attorneys, licensing agents, talent managers, and creative artist agents as well as Web2 content marketplaces but make the barrier to entry for unknown talents extremely low as well. This could drive an explosive creative marketplace of talented nobodies getting royalties and licensing deals. You could imagine whole product licensing, stock video, image and sound marketplaces and even decentralized streaming networks being built on top of something like this (someday). This medium post has a good explainer.

  • Immutable X (on Ethereum)

    • A competitor to Octopus that has built a Layer 2 onto Ethereum to address the high gas fees and other technical issues that are barriers to entry for new businesses. To be clear, while there are some voting rights with their token, this is not the fully decentralized web3 idealist project that Octopus, Solana or Cardano are. However, its technology and service offerings, much like Octopus’ are built around helping Web3 companies launch. The main upside here is that it’s built on Ethereum which has a much larger audience built-in than other protocols….

    • I guess the whole point of interoperable systems is that they can exchange tokens easily so it’s unclear if this advantage will turn out to matter that much to future mainstream users. If you flip a light switch in the US or one in France you don’t really care whether it’s running on AC or DC power; you just care that somehow it works. The opportunities for digital product makers could be huge within the gaming space with this platform as part of its technology makes adding royalties to NFTs simple and it’s already got its own well-known NFT games.

  • Audius – and Solana

    • Audius, the Web3 competitor to Apple Music, Spotify, and other Web2 music streaming services is growing rapidly. It’s also truly decentralized, which has made it bump up against technical scaling issues within Ethereum, so it’s announced a move to the ultra-fast and very inexpensive Solana system.

    • This is a great case study of how nascent Web3 companies that start within accelerator-like platforms can scale to compete with Web2 user experience as they grow. Solana may turn out to be the enterprise-grade version of Web3 infrastructure needed to compete at scale with the no-lag UX that users have come to expect from their apps.

  • Avalanche

    • One of the most exciting – and hyped – players in the space, AVA Labs, just raised a lot of money to keep the Avalanche ecosystem growing rapidly. Another Ethereum competitor, Avalanche has attracted attention in the crypto developer space because it claims to be the fastest smart contract platform, that’s both eco-friendly and adaptable to the transaction volumes and speed common in current securities trading.

    • Its token model is fully non-custodial and is built to avoid winner-take-all fees as Bitcoin has and gas-per-transaction costs like Ethereum have. Although it currently doesn’t seem to have the supportive incubator-like system that both Octopus and Immutable have, for sophisticated and funded teams of pros this platform could truly replace incumbent financial systems if it lives up to the hype.

  • Cardano and SingularityNET

    • If you want to freak out about how fast things could get out of control, this post by SingularityNET (and actually pretty much anything from Singularity) about their move to Cardano is a great place to start. Cardano positions itself as the most academically-accredited Ethereum competitor with verifiable security and environmental cred. They don’t talk about NFTs or games. They talk about the future of humanity… and how important it is to marry blockchain and AI before AI, which is currently controlled by a handful of people, runs the world (or at least the entire financial system).

    • Critical to this will be AI’s inevitable role in content moderation in the future. It’s clear what’s happening now is not working, and also clear that the stakes of getting content moderation wrong can foment insurrections, wars and ethnic cleansing. In this context, I think we’d all prefer decentralized AI content moderation governed by users to the centralized ones we have now.

      This enterprise-grade focus on decentralized technology is a critical part of any realistic plan to maintain anything more than a cosmetic version of democracy for the future and deserves support.

  • Spectrum.AI

    • While not a crypto company, independent AI companies like Spectrum Labs can act as a critical stepping stone to decentralized content moderation (see the bullet above for why this matters if you skimmed it). No one really trusts the current Web2 social media platforms to moderate content properly when their financial model is still built around driving engagement for ad views. They can hire as many ombudsmen and make as many Ted Talk speeches as they want, but until their revenue models are no longer built on keeping people scrolling as long as possible, you can count on algorithms that continue to promote content that makes people angry, self-righteous and outraged because it keeps them on the page longer than cute kitten posts do.

    • By using science-driven third-party AI content moderation tools, community platforms can begin to separate themselves from the conflict of interest inherent in policing their own platforms until a fully decentralized system emerges. Given the importance of this, and its immediate impact on daily headlines, there’s no time to wait for a perfect solution and companies like this can buy some time.

  • Rarify

    • I just learned about this company that has just closed a round of funding from Pantera to build a system of APIs to make it simple for non-crypto businesses to easily integrate NFTs (and potentially other blockchain products) into their existing businesses. If it works as advertised, this throws open the doors for Web2 companies to add NFT digital products into their existing eCommerce stores, games, marketplaces, etc without having to hire blockchain engineers.

    • An advancement like this could lead to the very rapid adoption of NFTs since Rarify figures out all of the crypto mechanics in the background so end users can just use their normal fiat-based credit cards as they’ve always done and not have to figure out how to buy crypto or research what a wallet is and how to set it up separately.

There are (probably) thousands more great companies doing interesting things that, if adopted broadly, could help the transition to Web3 live up to its potential. These are just a few I’ve read about recently, but the point is not to start day trading these specific tokens but to build on, invest in or grow applications that reflect the values you want to see in the world 5 or 10 years from now.

The current crypto community is, for better or worse, the early-adopter base whose attention and investment will help define which platforms get outside capital and mainstream user adoption in the next few years.

If you don’t want to live in the Zuckerverse, please consider carefully which companies you invest your money in, provide your talent and expertise to and trade your sweat equity to build. We’ll all have to live with it until Web4 comes along.

Disclaimer - The only token I own mentioned in this story is ETH at the time of writing.

This story is part of the Web3 Writing Contest hosted by The Octopus Network in collaboration with HackerNoon.

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