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The Moving Target That is Web3
To say that the Web3 industry is moving fast is an understatement. It's evolving exponentially.
If you're looking seriously at Web3 opportunities and strategy, you need to ensure you have both near-term and long-term objectives in place. Many of the projects and protocols that are all the rage now, were but glimmer's in their founder's eyes a few years ago, when the Web3 ecosystem was dominated by a handful of projects and major use cases.
When I first started working with blockchain technology in 2016, blockchain and cryptocurrencies were the dominant themes, with the main public protocols people were paying attention to being Bitcoin and Ethereum. In enterprise, it was all about Ripple, R3 and Hyperledger.
Back then it was easy to keep up with everything that was happening, the communities were smaller, bitcoin and ether only cost around $600 and $12 respectively. You could keep up with the majority of what was happening with these protocols via GitHub, Reddit and Twitter.
The enterprise focus at this point was on private-permisisoned blockchains, where consortia of companies would be spun up to build out proof of concepts (PoCs) using the technology and they would demonstrate how the distributed ledger technology could be used for use cases such as the securities settlement, transport of goods along a supply chain, or the digital fingerprint of documents.
Many of these early PoCs were highly technology focussed, in part simply to prove that this novel blockchain technology could do what was claimed. Hence they often included the obligatory view of the blockchain, which was usually multiple terminal windows representing different nodes on the network, each showing the same hexadecimal on the screen which was the proof of a key activity or event taking place on the blockchain. Sometimes this was dressed up in a UI, but the hexadecimal string remained king.
Back then, in the public blockchain landscape, tokens were gaining more and more traction on Ethereum, and the initial coin offering (ICO) craze was starting to gather momentum before it really took off in 2017. If you were watching from the sidelines, you could see that ICOs had the potential to change the fundraising model for companies with these nice tokenised offerings, but the complete lack of regulation and multi-level marketing tactics used by some of these projects was a big red flag as far as this being a more generally applicable model for businesses to adopt any time soon.
However, it was during the start of this ICO boom that all of a sudden there were a lot more people and projects that started entering into the Web3 landscape. By the end of 2017 over $6bn had been raised by ICOs across hundreds of projects, and this gold-rush to digital assets resulted in an explosion of information in the form of white papers and new projects being launched with ambitions of becoming the next Bitcoin, Ethereum or even Facebook for Web3.
Much of the noise around ICO activity, was exactly that — noise, and for many of the folk focussing on the protocols themselves, it didn't change a great deal as these ICOs were happening on top of Ethereum and were based on ideas captured in white papers and the marketing of those ideas. However, it was during this time that many of the projects that many of us are familiar with now started being built out — Polkadot, Solana, Cosmos, Compound AAVE and CryptoPunks to name a few. Whilst NFTs did make a splash due to CryptoKitties clogging up the Ethereum network, it was all highly experimental.
Following the collapse of the ICO market and entering into the digital asset bear market, the dedicated Web3 teams used this time as an opportunity to keep building out their various protocols and projects. In the meantime, those businesses with the tenacity to continue to invest in blockchain technology got ever close to significant production deployments. On both sides of the fence — from the Web3 BUIDLers to corporate innovators, the world of Web3 still felt relatively contained and manageable to keep on top of. After all, many of the hyped projects during the ICO boom had fallen by the wayside, and apart from a dedicated few, people were happy to continue to double down on Bitcoin and Ethereum technology.
The next major turning point was in the DeFi summer of 2020 when a number of projects came to fruition. Compound Finance released their governance token and yield farming took off. Alongside other protocols such as Uniswap and Circle's USDC, investors started flocking to DeFi applications and finding new ways to obtain returns on their digital assets.
DeFi emerging as a segment in its own right started adding fuel to the fire, and finance folk started to take note. Here were brand new opportunities for yield unlike anything that had ever existed before and traders, hedge funds and others started jumping into this new ecosystem.
Interest in cryptocurrencies started also to grow significantly during this time, with significant price appreciation convincing many who had been on the sidelines for a number of years to jump in, and helped bootstrap more and more dedicated venture capital funds for Web3 technology.
This growth shone the spotlight on many of the established protocols but also brought with it many individuals who wanted to join communities around them. Some of them felt like they'd missed the boat with the likes of Bitcoin and Ethereum decided to start looking at the up and coming protocols such as Polkadot, Solana and Avalanche. With the combination significant ecosystem, VC funds and talented individuals, more and more could start being built out, further accelerating the overall Web3 ecosystem.
Alongside all of the interest in protocols, we also saw NFTs cross the chasm and become a mainstream feature of Web3 with everyone from fine art auction houses like Southeby's to household names like Serena Williams, Snoop and Eminem obtaining NFT collections worth hundreds of thousands or even millions of dollars.
Facebook announced their plans to rebrand to Meta and focus on building out the metaverse which generated a surge of interest in Web3 companies focussed on the metaverse and gaming too such as Axie Infinity and Decentrland.
The end result is we find ourselves now in a situation where the Web3 industry is evolving at an exponential rate, making it impossible to keep up with, even on a per-protocols basis the communities are so much larger than they once were.
This rate of change is a great thing for Web3 and those that are managing to capture some of the value being generated as it grows. But it does create some challenges for companies trying to keep up. For this reason, it is important with any Web3 strategy to have at least two. One of these is focused on building out products and services based on where the industry is right now. The other should be looking 2-3 years down the line of where we may be and planning for this.
No one in their right mind would have predicted the explosion of NFT profile pictures last year, or DeFi, or even cryptocurrencies. But the point is that by embracing Web3 now, you are setting yourself up for the best possible chance of capturing some of the upsides of this industry as it grows. Especially as the work being done now is going to be sowing the seeds for success which will be reaped a few years from now.
If the past can tell us one thing, it's that the future Web3 landscape is probably going to look very different to how it does right now. Some of today’s revolutionary ideas will become the platforms of tomorrow, and you want to ensure you’re ready to embrace them with open arms.