What’s the first thing that comes to mind when someone mentions Web3? Is it the wild swings of cryptocurrency? Or perhaps the millions of dollars spent on the most basic JPEGs sold as NFTs?
The reality is most people look at Web3 and the metaverse as an unknown domain at best or even a scam that swindles millions out of their hard-earned money. Perhaps if those advocates, evangelists and experts did a better job educating the public on what Web3 is and what are its benefits, misconceptions would lessen. I call these misconceptions because no trusted source would tell you that Web3 is not the future of the internet, that ship has sailed. The only remaining question is how long before Web3 becomes the default state of every experience.
Before we start discussing Web3 successes and failures, I will level set what Web3 is, and more importantly, what it is not.
Internet Evolution: Web1 vs. Web2 vs. Web3
When the internet started to swim more in the mainstream in the 90s, most websites and experiences were static and consumable only. That meant users were able to enjoy the web by viewing content only (web pages, images and videos). This is a period that is widely known as Web1, read-only.
Web1 lasted about a decade, until the mid 2000s, when the concept of user generated content led the way to create Web2. To date, Web2 is still the most dominant type of user experience, where ordinary users publish the content we consume like images, videos and text. Sites like Facebook, Twitter, YouTube, TikTok and Reddit became the most visited locations on the net.
Just as Web2 swept the internet off its collective feet and took over as the default type of user experience, Web3 is starting to show similar signs of maturity. In addition to the read/write norms of Web2, Web3 adds an element of ownership. Now users can own their experiences in an authenticated way that cannot be imitated. With the emergence of Blockchain technologies, Web3 enables a new wave rooted in cryptocurrencies, NFTs and DAOs.
Related Article: Designing Diversity, Inclusion and Accessibility Into Web3
What Is Blockchain?
Blockchain is an algorithm that has unlocked the world of Web3. Think of it as a distributed database that can record transactions in a way that makes it nearly impossible to corrupt or hack.
The simplest way to understand how it works is to think of every transaction as a collection of data that includes a code linked to the transaction before it in the chain. This way if any record is manipulated or deleted, the chain would be broken, and the ledger is exposed as fraudulent.
A critical characteristic of this algorithm is that it is completely distributed not centralized. This means no one source can be accessed to manipulate, the chain is stored and verified in a wide network of nodes making it near impossible to hack. This feature of blockchain has proven very useful where security is paramount, like cryptocurrency.
What Is Cryptocurrency?
Cryptocurrency is digital currency built on blockchain technology. The biggest difference between cryptocurrency and physical currency is the former is maintained by a decentralized system using blockchain and the latter is managed by a central entity like a bank or a government.
Cryptocurrency has become essential when dealing with transactions in the metaverse so much so that some metaverses have created their own currency for digital transactions. The most common and popular cryptocurrency is Bitcoin, but it is hardly the only one. There are thousands of cryptocurrencies in existence, making them a pretty popular way to purchase tokens like NFTs.
Related Article: 2022 Blockchain and Cryptocurrency Reality Check
What Are NFTs?
NFTs stand for non-fungible tokens, but it is nothing more than a record on a blockchain representing authenticity and ownership of “something." Almost anything can be minted as an NFT because what the item is doesn’t matter; what matters is how to verify its authenticity.
The most common form of NFTs is JPEG images minted as collectables. These NFTs have garnered much hype for the obscene sums of money that was being spent on them.
Another common form of NFTs that is becoming very popular is POAPs (Proof of Attendance Protocol). These NFTs can be used as tickets to events, proof of event attendance, bragging tokens or even access passes for exclusive experiences.
The most common problem voiced with regard to NFTs is for an image to cost anything, let alone millions, where anyone can take a screenshot of it for free. This is a prime example of Web2 thinking. You are not buying the image, you are buying verifiable ownership of that image. The best way I can relate this concept to other arenas most would understand is thinking about the difference between buying the original La Joconde versus a good copy. Surely the price difference will be astronomical even though only a handful of experts in the world will be able to tell the difference between the two.
What Is the Metaverse?
To begin defining what the metaverse is, we must first understand that the term is not accurate. In fact, there is no one metaverse but a collection of virtual worlds each considered their own metaverse.
Moreover, a metaverse doesn’t have to be rooted in Web3 or blockchain technologies because frankly, metaverses existed way before those technologies were realized with games like “The Sims” and “Second Life” in the early 2000s.
Additionally, metaverses do not have a dependency on cryptocurrency or require virtual reality, such as games like “Fortnite” and “Roblox." Having said that, there is an intersection between metaverse and Web3 with a reliance on blockchain technology and leveraging cryptocurrency as well as NFTs. Two popular examples of these metaverses are Decentraland and The Sandbox.
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Successes Within Web3 and the Metaverse
Despite the recency of Web3 and metaverse technologies, there have been a lot of unique and trailblazing success stories within them. In this case, success shouldn’t be measured by Web2 standards or business return-on-investment (not yet).
As Web3 evolves and improves, smaller gains will lead the way to bigger returns. For now, we don’t have nearly enough data to start defining hardened ROI indicators. Instead, we need to focus on use case adoption and feasibility versus immediate financial returns to a business. For the moment, Web3 and the metaverse are not about mass adoption but rather the small, yet well-funded, populous that has completely bought into this future.
Here are a few examples that have been received well:
- Sony: In a recent collaboration, Sony and Theta Labs spawned NFTs that can be viewed using Sony’s SRD (Spatial Reality Display), a perception of 3D without a 3D display by using an eye tracker.
- GameStop: This legacy retailer announced to launch a massive NFT marketplace platform called Immutable X that sells NFTs for in-game assets. This Ethereum-based crypto platform will undoubtedly include a substantial collaboration that leverages the many gaming relationships and partnerships GameStop already has in place.
- Roblox & Gucci: Modeled after a real garden in Florence, Gucci launched a limited time virtual garden in Roblox where users can try and purchase digital items. Those items are wearable in other Roblox experiences and are deemed as hot commodities and collectables in the community.
- Roblox & Nike: Like Gucci but more permanent, Nike built and launched Nikeland in the Roblox metaverse. Users can try, purchase and sport their latest digital Nike apparel and accessories to reuse across the Roblox world.
- Roblox & Hyundai: Last year Hyundai launched a metaverse experience dubbed Hyundai Mobility Adventure. Within this experience, players will be able to play with Hyundai cars, robot solutions and other concepts.
- Decentraland & Tommy Hilfiger: Tommy Hilfiger participated in Decentraland’s Metaverse Fashion Week back in March. Interestingly, Tommy Hilfiger’s collection on this platform was both digital and physical merchandise that can be purchased directly from the metaverse.
- Fortnite & Balenciaga: Last year, the ultra-popular battle royal game Fortnite collaborated with the luxury fashion house Balenciaga by creating inspired player skins inspired by authentic Balenciaga merchandise.
- Fortnite & Disney: For years, Fortnite helped market new Disney Marvel and Star Wars releases with characters, dances, skins and even themed LTMs (Limited Time Modes). Examples for this are as recent as Moon Knight, Doctor Strange and as far back as Infinity Wars and The Mandalorian.
- Fortnite & Just about everyone: Besides Disney and Balenciaga, Fortnite has collaborated with many brands, sports, games and artists like: DC Comics, NFL, Marshmello, NERF, John Wick, Stranger Things, Nike, IT, Travis Scott, Tenet, Rocket League, Ghostbusters, J Balvin, God of War, Halo, The Walking Dead, Predator, The Terminator, G.I. Joe, TRON, Alien, Tomb Raider and dozens more.
It is clear from these examples that most of the initiatives are no more than 2-years-old. This type of short timeline makes it difficult to assess and examine large sets of data to help define the return on these investments. Maybe years from now, we will have a much better measure of the ROI on Web3 enterprises.
Having said that, failure is much easier and quicker to ascertain. Here are a few examples:
Failures Within Web3 and the Metaverse
Expectedly, even though Web3 and metaverse technologies are maturing quickly, they are still in their adolescence. That means running into a lot of trial-and-error campaigns where some end with a whimper. Despite the collaborations mentioned in the previous section, large metaverses have been declining at a steady rate over the last six months like Decentraland, The Sandbox and Axie Infinity. In fact, hundreds of Blockchain-based games have all but disappeared like EOSKnights, Prospectors and CryptantCrab.
Overall, it seems interest and conversation around Web3, metaverse and NFTs have dropped sharply since January. According to Google Trends, NFTs interest has dropped by 73%, metaverse by 76% and Web3 at a much lower 9%. One can conclude from those numbers that even though interest in the hype of NFTs and metaverse has declined significantly, the interest in their underlying technology of Web3 hasn’t been as affected.
Related Article: Metaverse, Web3 to Converge: 4 CX Changes Marketers Can Expect
What Should Brands Do Now in Web3 World?
Seeing the wild swings of Web3 and the metaverse, brands must be frustrated if not downright terrified of getting into this volatile and unstable world. I don’t blame anyone from being hesitant of this new wave, but everyone must understand that a version of this is our future. The key factor for brands to consider whether to invest now or wait depends on their model and customer journey. Some Web3 use cases have been vetted enough producing a blueprint to trust more than others:
- If you are a brand that is associated with Games, Software or Electronics, like GameStop or Sony, there are a lot of interesting ways you can incorporated Web3 technology into your customer journey.
- If you are a luxury brand with a known name like Balenciaga, Gucci or Asprey, then you can count on NFTs for ownership, authenticity or even POAP.
- If you are a brand with subscription or transactional user journeys like Forbes or Tesla, then you should invest in incorporating crypto as a secure method of payment.
- If your brand has intrinsic value and you want your customers to express loyalty or even fuel your collectors like Nike and Tommy Hilfiger, you can offer your users that experience in the metaverse.
- Even if your business is unique and not exposed to the metaverse to date like travel and hospitality or logistics, you can still explore leveraging Web3, NFTs and the metaverse to help your customers preserve their experience with your brand. In a recent brainstorming session with my team, they came up with pretty interesting ways around these types of experiences.
No matter the use case you decide to explore, creativity and usability are two important qualifications for a successful campaign with Web3. But the most important qualification is telling your story in a clear and understandable way. A way that is true to the future of Web3 but can still resonate with the current Web2 crowd. This is easier said than done because just as translating jokes from one language to another, seeing Web3 technology through Web2 eyes often falls flat.