What Problems Does Web3 Solve?
Delivering Trusted Web3 Business Strategies Straight to Your Inbox
As the longest bear market in crypto history churns on, even the staunchest believers start to question what they're doing here. Perhaps the naysayers are right, that blockchain technology has no real use cases, and it’s just the domain of cybercriminals, hackers, and scam artists.
Certainly building amidst all the regulatory fear, uncertainty, and doubt is challenging, made all the more so since politicians have decided to turn blockchain technology into a political football, kicking us through the uprights in an attempt to score points with their constituents and the mainstream press. It’s enough to make many of us consider throwing in the towel. And then we breathe, remember that it’s fundamentally about the technology, and go about our day.
In this week’s editorial, Bankless Consulting co-founder Ryan Anderson writes about why he’s still here. To answer that question, Ryan asked himself: “What problems does web3 solve?” For one, it enables a growth-oriented economic model that is more efficient, sustainable, and accountable. Ryan believes blockchain technology “allows us to create a system that balances public good with economic growth, fosters competition, and entitles artists, creators, and entrepreneurs to the sweat of their brow without the need for a parasitic intermediary.”
For Ryan, web3 is built upon the foundations of decentralization, digital ownership, and community, and he understands that these “building blocks of web3 can fundamentally transform how we engage with commerce for the better — provided we recognize their potential and the roles they can play.”
If you need to better understand the potential of this technology, how these web3 fundamentals can benefit your business, come join us on a Web3 Discovery Sprint. You might be out of breath when you finish, but you’ll be much closer to the podium than when you started.
What Problems Does Web3 Solve?
Author: Ryan Anderson
When I was first exploring this space, one of the main criticisms of web3 was that it was a “solution in search of a problem.” In some ways, that criticism was fair. Sure, web3 enabled digital ownership, but the most valuable thing people owned was a bad drawing of a monkey or a pixelated face. Even the most fanatical among us has to admit that we were hardly splitting the atom.
As the prolonged bear market ramps up the pressure on builders from "intense" to "crushing," and as politicians exploit our industry as a wedge issue to frighten the uninformed into believing that crypto is nothing more than scams and criminality, it's easy to feel disenchanted. Stripped of the reality distortion field created by 100x investments, unlimited VC funds, and the ability to amass large communities with just a single tweet, what’s left over is the unrelenting glare of reality. The collapse of the crypto markets last year brought the harsh light of day, like the lights coming on at a club when the party's over, and made it impossible to ignore the challenges that lie ahead.
But the truth isn’t all ugly. Beneath the discarded NFT projects that never minted out and the fractured DAOs that crumbled under infighting and bruised egos lie the very foundations that initially drew us to this industry: decentralization, digital ownership, and community. These building blocks of web3 can fundamentally transform how we engage with commerce for the better—provided we recognize their potential and the roles they can play.
What Problems does Web3 Solve?
For the blockchain to have any lasting relevance, it needs to be adopted by organizations — and not just by big corporations, but governments, public institutions, small businesses, and startups alike. In order for this to happen, there needs to be a strong business case that goes beyond the idealistic notions of web3 proponents. Businesses typically avoid taking risks solely based on ideology, but ideals like decentralization, ownership and trustlessness are often held up as self-evident virtues of the blockchain, without any explanation of the value they provide to either end of the transaction.
Decentralization creates opportunities
Decentralization is the mantra of web3, which makes sense given that the blockchain's primary feature is its decentralized ledger. However, amidst all the talk of decentralization, we often neglect to answer the question, "but who cares?"
Competition plays a critical role in our economic system. It is the driving force behind innovation, and efficiency. However, in recent decades, power over the internet has increasingly become centralized by large corporations, severely limiting consumer choice. Social media platforms have created significant societal problems while keeping users locked in, unable to switch platforms because they cannot take their social connections with them.
As more and more of our life becomes represented by rows in a database, the more dangerous it is for those databases to be hidden away from us, completely out of our control.
Unlike a centralized database, the blockchain is a public good. It offers a way to store information, whether that’s community votes or the data that defines our digital lives, in a manner that remains accessible to the services we use, while keeping it within our control. Our data can still belong to us while creating enormous opportunities for small businesses to claim a share of the trillion-dollar pie currently being devoured by a handful of insatiable billionaires.
For tech businesses, the blockchain enables the permissionless build on top of existing structures without worrying about a capricious CEO suddenly pulling the plug on their business model. For customers, it means the freedom to choose how they interact with their data without committing to a specific company's database. It means that we can interact with one another digitally, without our interactions being mediated by a single corporation.
Ownership is a necessity of digital life
We all regularly interact with digital goods, but do we own them? In most cases, the answer is no. The ebook you bought from Amazon? That’s Amazon’s property - you’re just borrowing it. The songs you stream from Spotify? They were never even stored on your device. Artwork? You can right-click and save anything on the internet, but do you own it?
In a world where any digital media is just a VPN connection and a magnet link away, a critical distinction of ownership is the willingness of consumers to pay for something. This could be because you want to support an artist you love, seek the prestige associated with purchasing something rare or expensive, or simply because you were raised not to steal, even if they're fungible copies that can be cloned instantly by anyone.
Ownership also implies a right of transaction. If I buy a toaster, I can sell that toaster to my neighbor. The toaster company can't stop me from doing this because I have physical possession of the item. On-chain goods similarly allow for resale in secondary markets or directly to another person, which reduces the economic risk of purchasing something. If I get sick of an album or find myself never watching a film, I can recoup some of my initial cost of purchase.
Paying for digital content has always been a challenge, partly due to the psychological barrier of paying for something that you might already have access to, however legally, and partly because it's never been possible to distinguish between those who purchased something and those who merely downloaded it. Media and tech companies combated this with DRM and locked-down marketplaces, which resulted in media piracy becoming a standard practice for many. On-chain media offers a different solution, a global marketplace where files may be accessible to anyone, and those who desire to own the content can do so.
If you run a massive media company, you’re probably not convinced. But, for the thousands of artists that media and tech companies feed off of, ownership of digital goods opens up a huge opportunity that was closed off by centralized corporate marketplaces. Just when the internet empowered every musician to publish their work globally, it also eliminated the ability to sell directly to fans. Web2 democratized production and distribution, but web3 has democratized the tools of commerce.
An untrustworthy world requires trustlessness
There is another significant issue with transacting on the internet: trust, or more accurately, the lack thereof. Many businesses achieved unicorn status by merely facilitating transactions, by acting as trusted intermediaries between service providers and consumers. Airbnb, Uber, Paypal, eBay, and Etsy are just a few examples. Their success, in hindsight, isn't surprising — they were the security guards ensuring our rides and bedazzled jean purchases were safe.
The problem with transactions is that they require trust. In the physical world, that trust is mitigated by laws and social contracts, and the fact that physical crime usually requires force. Even entering into a legal contract requires trust because if one party fails to uphold their end of the bargain, being compensated for that breach of trust is often expensive and time consuming.
In contrast, the smart contracts underpinning much of what we do on chain rely not on promises but on code. When FTX blew up and most creditors were left with a fraction of what they were owed, DeFi protocols were made whole, because the smart contracts provided no other option.
The ability to trustlessly transact on-chain is a massive opportunity for businesses to unseat large intermediaries and create connections directly with their customers. Loans don’t require banks, insurance policies can be managed by decentralized platforms, and supply chains can be traced through blockchain technology. The removal of intermediaries not only streamlines processes but also reduces transaction costs and enhances security.
Toward a More Equitable Future
While economic headwinds may mean disaster for companies who got caught up in the hype and are building also-ran “X but on the blockchain” businesses, organizations that focus on the real opportunities to serve their customers that web3 unlocks will be the driving force behind transforming web3 into simply “the web.”
That's why Bankless Consulting has made it our mission to help businesses identify those opportunities and leveraging them to the fullest extent. We believe this technology is not only good for business but also good for people, as it allows us to create a system that balances public good with economic growth, fosters competition, and entitles artists, creators, and entrepreneurs to the sweat of their brow without the need for a parasitic intermediary.
A web3 world is a creative one, where business models have the opportunity to succeed or fail based on their own merit, rather than existing at the pleasure of the top of the NASDAQ. It's a world where transactions are as safe and simple as posting a video, and where people, not corporations, own their identities. And it is more likely than ever that it will be driven by businesses the world hasn’t heard of yet.
Ryan Anderson is a brand and marketing strategist and founding member of Bankless Consulting.
🎙️ Early Podcast
A Podcast About Web3 Business from Bankless Consulting
Early Ep. 11: Nimit Sawhney: Identity Authentication and Voting Access
In this episode, Dside and Nimit Sawhney discuss voter access, identity proofing, the security of blockchain voting, and the possibility of its global adoption in the near future.
Nimit Sawhney is the co-founder and CEO of Voatz, a platform built on the idea that voting should be easy, secure, and accessible for everyone. Voatz is looking to revolutionize the way the world votes. The app gives users access to a voting system that is completely functional on tablets and smartphones by combining elements of remote identity proofing, biometrics, and blockchain technology. End-to-end verifiable and accessible remote voting is now an option thanks to this technology. Nimit's areas of expertise span mobile software development, cryptocurrency development, cybersecurity, and public policy. He co-founded Voatz in 2015 and the platform has since been used to run over 117 elections at the state, county, university, and organizational levels, serving over 2.2M voters.
Web3 Business Developments
Curated News on Recent Blockchain Adoption and Innovation
How Blockchain Can Make Government Work Better For Citizens
Author: James Cirrone
🔑Insights: We often talk about how blockchain technology can be used to build better businesses, but the same can be said for governments. San Jose Deputy City Manager Rob Lloyd envisions the use of blockchain technology in voting systems, while also highlighting its potential in managing digital identity and record-keeping.
The biggest barriers to adoption is the recent decline in trust in electronic voting after the last US presidential election and public hesitancy towards cryptocurrency. University of San Francisco Professor Jonathan Reichental suggests shifting the narrative to focusing on blockchain technology and highlighting the following advantages:
Enhanced voting systems: Blockchain technology can provide secure and transparent voting platforms, ensuring voter anonymity while maintaining an immutable record of votes cast.
Improved identity management: Self-sovereign identity (SSI) management on the blockchain allows for streamlined authentication processes without requiring personal information, thus protecting citizens' privacy.
Increased efficiency in record-keeping: Blockchain's decentralized and secure nature makes it suitable for maintaining records, such as marriage certificates, in a digital and easily accessible format.
Reduced bureaucracy: Digital identity solutions on the blockchain can simplify citizens' interactions with government services, enabling authentication through a single system rather than requiring multiple logins and credentials.
“[With] self sovereign identity management, we don’t ever have to get concerned with crypto and yet, we’re using the very best of blockchain technology. We can get authenticated without the recipient knowing personal information about us.”
Jonathan Reichental
How to Buy an NFT and the Core Reasons Why
Author: John Gilbert & John Lee Quigley
🔑Insights: The NFT market continues to evolve with marketplaces working to increase adoption and lower barriers for traders. By offering unique ownership records, NFTs provide businesses with innovative monetization models, brand marketing opportunities, and enhanced customer loyalty. This technology also enables a more equitable future and offers businesses creative ways to engage with their audience and diversify their offerings.
New monetization model: NFTs offer a novel revenue stream for artists and businesses, as they can create, sell, and trade digital assets with unique value and ownership records.
Brand marketing and engagement: By creating and selling NFTs, businesses can increase their brand visibility, engage with their audience, and foster a sense of community around their products or services.
Enhanced customer loyalty: Offering exclusive access, rewards, or privileges through NFTs can help businesses build customer loyalty, as token holders may feel a stronger connection to the brand.
Innovative use cases: NFTs can be employed in various ways beyond art, such as proof of attendance, reputation building, and exclusive access, enabling businesses to explore creative applications and expand their offerings
Sports Illustrated Embraces Ethereum for NFT Event Tickets
Author: Andrew Cohen
🔑Insights: Sports Illustrated Tickets (SI Tickets) has introduced Box Office, an NFT ticketing platform built on the Ethereum scaling solution Polygon, aimed at smaller community events. Box Office offers a lower fee structure than competitors like Eventbrite and allows ticket holders to transfer their NFTs to secondary ticket platforms for resale. SI will split resale revenue 50-50 with event organizers and performers, allowing creators to benefit from secondary market sales. The platform aims to create mass-market adoption of NFT ticketing without requiring users to have extensive knowledge of blockchain technology or digital wallets.
Lower fees: SI's Box Office boasts a 20% lower fee structure compared to Eventbrite, making it more cost-effective for users purchasing tickets.
Enhanced fan engagement: Box Office NFT tickets can be equipped with exclusive content such as photo and video highlights, collectibles, personalized messages, promotional offers, and loyalty rewards, enhancing the event experience.
Easy resale and revenue sharing: Users can easily transfer their NFT tickets to secondary ticket platforms for resale, and event organizers and performers receive a 50% share of the resale revenue, creating a more equitable system.
“You always get paid when your ticket sells, but you don't participate in the resale of that on the secondary market—but that's what changes here. We’re splitting 50-50 with our partners. They’re gonna get 50% of the resale revenue. For the events that have resale value, this is one of the great advantages of NFT ticketing. That's why I really do believe that this will become the standard as we go forward.”
SI Tickets CEO David Lane
Venmo Shakes Up Crypto World With Exciting New Transfer Feature
Author: James Morales
🔑Insights: Venmo is set to roll out a crypto transfer feature in the coming weeks, allowing users to transfer cryptocurrencies between Venmo wallets, PayPal accounts, and external wallets and exchanges. This move brings Venmo up to speed with its rival, Cash App, and marks a significant milestone in mainstream adoption of cryptocurrencies. The straightforward user experience aims to attract users to the new feature, leveraging the popularity of the PayPal and Venmo brands. The introduction of the Bitcoin Lightning Network has facilitated faster, cheaper transactions, making it an attractive option for commercial Bitcoin payments and borderless decentralized payment systems.
Enhanced functionality: Users can now transfer cryptocurrencies between Venmo wallets, PayPal accounts, and external wallets and exchanges, expanding their options for managing crypto assets.
Mainstream adoption: As a popular payment app, Venmo's crypto transfer feature can help normalize crypto payments and contribute to wider adoption of cryptocurrencies.
User-friendly experience: Venmo's straightforward user experience makes it easy for people to use the new feature, allowing them to identify recipients with wallet addresses or unique identifying QR codes.
Increased convenience: With this feature, millions of Venmo users can now easily send assets like Bitcoin to their peers, streamlining the process of transferring cryptocurrencies.
Competitive edge: By offering crypto transfers, Venmo keeps pace with rival apps like Cash App, maintaining its position in the mobile peer-to-peer (P2P) payments market.
Web3 Discovery Sprint
Do you want to know how web3 tools and technology will improve your business?
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