Alan Vey, leading tech entrepreneur and blockchain expert
Most businesses rely on the infrastructure of the Web to scale their operations and innovate. As the next iteration of the Web, known as Web3, steps into the spotlight, businesses cannot afford to overlook its potential in creating new revenue opportunities and enhancing their operational efficiencies. Forward-looking CEOs are already preparing to incorporate Web3 applications into their operations. For example, 53% of C-level officers identified blockchain as a crucial part of their organisational infrastructure in 2020 while 60% of CIOs expect to adopt blockchain technologies in the next three years.
To avoid the term ‘Web3’ being thrown around as a meaningless buzzword, it is important to start by defining it. And to do that, we have to take a look back into what has come before, tracking the evolution of the various Web iterations.
Web1 was ‘READ’, access data that was hosted on the network. The second phase, Web2, added ‘WRITE’, which enabled user-generated content to be shared via apps like Facebook, Instagram, and Twitter. The third iteration, Web3, added ‘OWN’, offering users the ability to truly own in a digital context and not just have a digital representation of physical ownership.
The hyperbole of the metaverse and why DAOs are the real MVP
With the defining aspects now established, we can start to see how the exciting technologies being developed within the paradigm of Web3 have the potential to bring a wealth of opportunities for businesses.
Currently, it would seem that for many businesses, the metaverse is the biggest talking point regarding Web3’s potential. Such is the hype surrounding metaverse, which can vaguely be described as virtual reality environments where users can interact much like in Speilberg’s ‘Ready Player One’ adaptation, that Facebook not-so-coincidentally rebranded itself as Meta. The social network giant has already invested $10bn into metaverse projects though we have yet to experience the disruptive transformation it has been touted to deliver.
So rather than add further hype and speculation to the metaverse, it is better to look at a Web3 case study that has proven immensely successful – Decentralised Autonomous Organisations (DAOs). Often referred to by their popular acronym, DAOs encompass what a Web3 business would look like. What separates DAOs from traditional corporate structures is that, as its name suggests, they are decentralised and completely autonomous. Rules and protocols of any given DAO are encoded as algorithms, represented by Smart Contracts (i.e., computer programs that run on the blockchain), and set by members of the DAOs.
This novel way of running an organisation has proven to work well. Take, for example, the Bored Ape Yacht Club (BAYC). Massively popular among crypto aficionados, BAYC is a set of 10,000 limited NFTs that resemble images of commercial apes, each with different traits. BAYC has achieved success both in the crypto and in the mainstream, generating a total trading volume of $1.6B so far. Yuga Labs, the company behind BAYC, is valued at $4bn.
Even as the crypto market faces one of its most challenging periods, BAYC NFTs have impressively held their value. The large-scale NFT DAO project continues to attract talent away from smaller blue chip projects and retain its user base, demonstrating the robustness of its community-led organisation.
Traditional companies can learn a lot from BAYC’s success. Although DAOs are set up in a way to remove complete control from a few select people in an organisation, this act is immensely empowering to those who contribute to the DAO as it gives them a firm stake in the organisation, fostering true loyalty within an engaged community.
This concept can be taken even further in the future where one may consider Network States amassing sufficient resources and individuals to enter into negotiations with Nation States to achieve high-level objectives around legislation, etc.
NFTs are still an exciting way for brands to engage with their audience
We mentioned NFTs in the previous section in regard to BAYC but what exactly are NFTs and why have they become the ‘killer application’ for blockchain technology?
An exciting byproduct of blockchain technology, NFTs enable brands to create value through scarcity and reward loyal customers. The reason why BAYC NFTS are so sought after is precisely due to their deliberate paucity.
If blockchain meant nothing to the average pedestrian before, it can be argued that it was NFTs that finally propelled the technology into the imagination of consumers. It did not take long before dozens of celebrities, from Snoop Dogg to Bella Hadid, launched their own NFT projects. Big brands like Nike discovered much success with NFTs with the sports conglomerate having made $185 from the sales of its NFT collectibles from the additional royalties.
If the potential value of blockchain technology was not clear before to businesses and consumers, then NFTs not only made it clearer, but it was an effective showcase of how blockchain technology can be used to create a strong sense of community between brands and their followers.
NFTs are truly unique because they are built on a blockchain ledger, the exclusivity and scarcity are inherent, attaching value to them. While the hype around NFTs has since lessened, there most certainly here to stay and businesses will find new ways to utilise them to encourage further interactions and investment from their consumers.
Decentralisation can be a powerful business transformation
NFTs have been an amazing showcase for blockchain and Web3’s potential for businesses but it should not overshadow the many other ways that Web3 technologies can be applied. Blockchain technology is a general-purpose tool with many functionalities and a strong facilitator of creating digital scarcity or providing secure value exchange.
The distributed ledger technology, which is the core component of a blockchain and enables items that live in the ledger to be truly immutable, can solve a multitude of pain points. Anything from improving audit traits for things like cargo tracking for the aviation industry to securing ticketing in the events industry, blockchain enables organisations to become decentralised.
But how would businesses benefit from decentralisation? While not every business will be naturally suited to adopting a decentralised model, for those that can implement it, it will allow them to share the functionality of the business across multiple points. For example, rather than having single data storage in one place, they can invest in multiple data storage points, reducing overreliance on a single data centre, and thereby improving efficiency.
Yet it does not have to be all or nothing when it comes to adopting blockchain. Businesses can adopt ‘permissioned’ instances of networks – meaning they benefit from the speed, security and interoperability of a blockchain while maintaining full control over all transaction activity, and actually enhancing its anti-money laundering capabilities for example.
The era of Web3 is upon us and businesses need to be investing in it now
The Web3 technology is developing at pace: NFTs are one of the strongest-holding assets in the current challenging economic landscape, countries are turning to CDBCs among global political turmoil and even the sustainability concerns around blockchain technology are eroding as major blockchains like Ethereum make significant reductions to their environmental impact. It is only a matter of time before businesses will be able to purchase ‘blockspace’ where businesses can rent flexible, interoperable and secure space on the blockchain that is specifically tailored to their shifting needs for security, availability, and latency.
Businesses that don’t want to be left behind when the era of Web3 fully comes into its own, should already be exploring how blockchain technology could improve their operations. A smart business invests in its future and the future is most definitely Web3.