Why Build in Web3 #nigeria | #nigeriascams | #lovescams


Today’s dominant internet platforms are built on aggregating users and user data. As these platforms have grown, so has their ability to provide value — thanks to the power of network effects — which has enabled them to stay ahead. For example, Facebook’s (now Meta’s) data on user behavior helped it fine-tune its algorithms to a point that its content feed and ad targeting were dramatically better than what competitors could offer. Amazon, meanwhile, has exploited its broad view into customer demand to both optimize delivery logistics and develop its own product lines. And YouTube has built a massive library of videos from a wide array of creators, enabling it to offer viewers content on almost any topic.

In these business models, locking in users and their data is a key source of competitive advantage. As a result, traditional internet platforms typically do not share data even in aggregate — and they make it difficult for users to export their social graphs and other content. So, even if users grow dissatisfied with a given platform, it’s often not worth it to leave.

But all of this might be changing. While it’s hard for newcomers to challenge “Web 2.0” companies like Meta on their own terms, now companies — working in what they’re calling a “Web3” model — are proposing a novel value proposition. Despite all the public conversations around the metaverse and various hyper-financialized NFT projects, Web3, more than anything, is a fundamentally different approach that some developers have agreed to. It’s based on the premise that there’s an alternative to exploiting users for data to make money — and that instead, building open platforms that share value with users directly will create more value for everyone, including the platform.

In Web3, instead of platforms having full control of the underlying data, users typically own whatever content they have created (such as posts or videos), as well as digital objects they have purchased. Moreover, these digital assets are typically created according to interoperable standards on public blockchains, instead of being privately hosted on a company’s servers. This makes the assets “portable,” in the sense that a user can, in principle, leave any given platform whenever they want by unplugging from that app and moving — along with their data — to another one.

This is a major shift, which could fundamentally change how digital companies operate: Users’ ability to take their data from one platform to another introduces new sources of competitive pressure, and likely requires firms to update their business strategies. If a platform isn’t creating enough value for its users, they might simply leave. And indeed, in Web3, new entrants can explicitly incentivize power users to move to them — for instance, the NFT (for “non-fungible token”) trading platform LooksRare recently launched through what’s called a “vampire attack,” rewarding people for switching over from the dominant platform OpenSea.

But at the same time, the dynamics of Web3 are less zero-sum, which means a platform’s overall value creation opportunity can be bigger. Building on an interoperable infrastructure layer makes it easy for platforms to plug into broader content networks, thereby expanding the scale and types of value they can provide their users. A Web3 art gallery, for example, can bootstrap off the artwork users have already created on the blockchain, rather than requiring them to upload art to the platform directly.

This can be a valuable approach to sourcing content even for established platforms. Twitter recently introduced a feature whereby users can show NFTs they own in their profiles; Instagram is working on something similar. And for new platforms, the ability to integrate pre-existing digital assets can be critical in resolving what’s called the “cold-start problem” — the reality that it can be challenging for a platform to get momentum early on because of a lack of initial content.

Moreover, the infrastructure layer means that the costs associated with creating user trust are much lower in Web3. Managing digital assets on public ledgers makes it clearer which assets exist and who owns what, which was previously a struggle on the web. If a digital artist, for example, claims that a new artwork is limited to 489 editions, then prospective owners can verify that on the blockchain directly — without needing to trust the artist themself, or having a gallery or other intermediary provide such an assurance.

This trust framework extends to the software that runs Web3 platforms: key operations can be encoded on the blockchain in “smart contracts” that are auditable and immutable. This makes it possible for a platform designer to commit upfront to certain design features, such as pricing rules, royalty agreements, and user reward mechanics.

All of this means that — at least in theory — it can be much easier to launch a product in Web3. Even an unknown entrepreneur can build products that plug into an existing network without permission from an established platform. Indeed, taken to the limit, in Web3, users sometimes have no need to trust the company (or people) behind a project; rather, they just have to trust the code itself. Some recent fundraising campaigns supporting humanitarian aid efforts in Ukraine, for example, have been run through smart contracts that automatically transfer all funds received to the Ukrainian government or associated charities; this means donors can trust that their funds will be used properly even if the campaign organizers are completely anonymous.

Of course, given the early financial use cases of Web3 and the high volume of transactions, a number of bad actors have leveraged the hype to orchestrate scams. Many of the Web3 experiences today were designed for tech-savvy power users, whereas ordinary users might have only a limited understanding of what an app or platform can actually do, much less be able to vet source code to verify that it functions as described. There’s a long way to go before Web3 technology is safe and accessible to the average consumer.

Furthermore, plugging into an existing network in practice doesn’t mean you can automatically unlock an engaged user base that wants to stick around. Just as in all entrepreneurial ventures, it’s essential to build a product that solves for a true user need. But once you have solved a user need, leveraging established networks through Web3 makes it much easier to deploy and scale.

Making platform backends open and interoperable enables compounding innovation and incentivizes direct investment in building the infrastructure layers. For example, koodos — a Web3 service that lets people create collections of things they love from across the internet — is building shared infrastructure that any network can plug into and improve. (Disclosure: Esber cofounded koodos and Kominers provides market design advice to the company.)

Sharing infrastructure means that apps can focus on building great experiences, driving towards a greater emphasis on platform design as a source of competitive advantage. What an app has understood about its market manifests in its user experience and interface — and so even in Web3, user insight will continue to differentiate consumer apps.

Web3 platforms also have the potential to unlock a novel and especially powerful form of network effect through community engagement and social cohesion. Ownership of digital assets fosters a sense of psychological ownership that can make consumers feel so invested in a product that it becomes almost an extension of themselves. A platform’s users literally become “fans” who form a bond through the shared platform experience — similar to how fans of a sports team or obscure band see themselves as a community.

An Adam Bomb Squad NFT owned by one of the authors (Kominers); image reproduced here with permission from Bobby Hundreds.

For example, The Hundreds, a popular streetwear brand, recently sold NFTs themed around their mascot, the “Adam Bomb.” Holding one of these NFTs gives access to community events and exclusive merchandise, providing a way for the brand’s fans to meet and engage with each other — and thus reinforcing their enthusiasm. The Hundreds also spontaneously announced that it would pay royalties (in store credit) to owners of the NFTs associated to Adam Bombs that were used in some of its clothing collections. This made it roughly as if you could have part ownership in the Ralph Lauren emblem, and every new line of polos that used that emblem would give you a dividend. Partially decentralizing the brand’s value in this way led The Hundreds’s community to feel even more attached to the IP and to go out of their way to promote it — to the point that some community members even got Adam Bomb tattoos.

Another example is SushiSwap, which is a “fork” of the decentralized finance platform Uniswap — meaning SushiSwap’s underlying algorithms are a clone of the code that Uniswap published. The main difference is that SushiSwap set up a strong brand and community, alongside an active and ongoing reward system for users that drove higher user engagement and positive sentiment about the platform; this then enabled it to quickly emerge as a successful competitor to Uniswap.

More generally, sharing ownership allows for more incentive alignment between products and their derivatives, creating incentives for everyone to become a builder and contributor. The underlying technology standards also enable every Web3 company to be built on top of. This means the community around a platform can co-create in a way that’s much less adversarial than in the past and with more derivatives in circulation — making the platform ecosystem grow even stronger.

In the short-run, this model gives up some share of consumer surplus to the builder or creator. But because the builders get more, they’re strongly incentivized to invest and grow the total pie for everyone – which means that in the long run, Web3 should raise consumer surplus as well.

In sum: Web3 has the potential to unlock a more valuable internet for everyone. New companies can build on Web3 infrastructure to create communities around their brands and product concepts much more easily than in previous iterations of the web. And even established platforms can leverage these forces by plugging into blockchain-based content networks and giving their users some ownership over their data. All of this means that the next era of the web will likely look a lot different — and more open — than the one we’re living with today.





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