Despite the world seemingly going up in smoke around us, innovation always seems to find a way. The latest and greatest in innovation appears to be Web3, which is closely tied to the metaverse.
But how did we get here, where have we come from, and what do we do about strategy? Let’s have a look.
As the world goes crazy for cryptocurrency and the Metaverse takes shape, so too does a new iteration of the World Wide Web. So for any brand in 2022 and beyond, it’s critical to understand the latest trends and platforms coming to life before our eyes.
Web3 was a term first coined in 2014 by cryptocurrency Ethereum co-founder Gavin Wood. However, it didn’t start to gain traction until 2021, when crypto enthusiasts, tech companies, and venture capital firms took it and ran with it.
But that still doesn’t explain what it is.
The concept behind web3 is that it stands for a new form of the internet which involves decentralisation, blockchain technologies, and token-based economics. It has been described in the past as an invention that would build financial assets into almost anything you do online – effectively monetising the very use of the internet.
One of the key components of the concept is decentralised finance, where users exchange currency without the involvement of any bank or government. This is critical as it ties in with the Metaverse theory that users will be free to own parts of the internet as well as not being regulated by any organisation.
The other critical part of web3 is who owned it. Literally. One of the complaints against the traditional World Wide Web as we know it is that a handful of centralised bodies own it, deciding what should and shouldn’t be allowed. Web3 solves that problem as it is built and owned by its users.
But if we have web3, what about web1 and web2? Let’s take a look.
The earliest incarnation of the internet, web 1.0, was a read-only format. Websites were owned by companies, and users rarely produced their own content. Instead, creators were usually developers who built websites that were mainly text or image-based and were static file systems rather than databases. This all occurred between 1990 and 2004 before we moved on to web 2.0.
Web 2.0, or web2, is the internet as we currently know it. This is the interactive and social web, where you don’t have to be a developer to create or contribute to the internet. This period of the internet began in 2004 when social media first appeared on the scene.
The other critical development in web2 was the use of advertising online, and a handful of large organisations dominating most of the traffic on the internet. So while users could contribute to the internet and be creators, they didn’t own a slice of it or benefit from it directly.
How brands are dipping their toe into web3
Much like the Metaverse, web3 relies heavily on blockchain, NFTs, and cryptocurrency. That means virtual products, hybrid products and distributed ownership. Let’s dip our own toes in and take a closer look.
Web3 products are already popping up left, right, and centre in the form of NFTs (Non-Fungible Tokens), Roblox avatars, and game skins. Virtual products are paid for by cryptocurrency, but with digital assets purchased, the price is higher still. Game items, music, films, and avatars are controlled by the companies that created them, including how they work in virtual environments.
However, whereas it can be hard to transfer the use of a product from one platform to another – think one film to another platform – virtual products are yours to keep virtually, and you can move them between applications.
A classic example of virtual products is Ralph Lauren partnering with Roblox in 2021 to sell virtual winter sportswear. However, the sportswear could only be worn in the Roblox environment and nowhere else. There is an element of exclusivity about web3 that brands are fighting hard to compete on – luxury is everything.
Hybrid products involve companies using Web3 to enrich real-world products with digital information. For example, information about a product is recorded as a smart contract on the blockchain. This could be the product’s origin, supply, production, and design. The reason for collecting this information is to make the real-world products more collectable because of their uniqueness, and the data can prove authenticity, preventing counterfeiting.
For example, sports trading cards are currently being sold in the US as collectable NFT cards. The trading cards include clips of iconic moments, specific artwork, game stats, unique serial numbers and other details.
Distributed ownership is an interesting form of ownership within Web3. It refers to multiple customers sharing ownership via the blockchain instead of selling one item to one customer.
It’s an odd one for those not invested or interested in blockchain, cryptocurrency or the Metaverse. Customers can own shares in, say, an iconic item of clothing worn by a celebrity and make a profit by selling their share…but they’ll never actually own the item.
However, by offering the chance for consumers to purchase as a collective, they can negotiate lower prices. It’s also a great way for brands to gauge interest and insights into buyer demand.
Deregulated decentralised fun…is that a good thing?
As well as owning your assets on Web3, the theory behind the new format of the internet is that it will be entirely decentralised. This means that instead of being owned by intermediaries or a handful of organisations, ownership is evenly distributed between its builders and users.
The Decentralised Autonomous Organisation (DAO) is another concept from the Web3 world, describing a collective bonded by rules coded into blockchain. A good example of the DAO in action could be a DAO-based store, where the prices, details of who would get pay-outs, and much more would be held on the blockchain. Shareholders in the DAO would be able to vote to make changes.
But is this a good thing?
Some say that, by being decentralised, the platform will be deregulated. So doesn’t that involve more risk for the user and brands? So the short answer is: potentially.
At this early stage, no one really knows for sure how this will pan out or what it means for safety. Still, we do know that some governments (including the UK government) are attempting to create legislation that will allow them to have some control over interactions on Web3.
Some argue that with every member in a network having a copy of the same data in the form of a distributed ledger, no one has to trust anyone else. If the data becomes corrupt or altered, the community will reject it, so no one will both trying to in the first place.
Where’s the Metaverse in all this?
Whilst it all sounds similar – blockchain, cryptocurrency, decentralisation – the metaverse acts slightly differently to Web3. The term metaverse is the next format of the internet’s front-end. The metaverse will be a far more immersive and social version of the internet as we know it, using VR and AR to allow us to interact and react to features within the platform.
In terms of Web3, the metaverse can be seen as the interface that allows us to interact and engage with the web3 assets and features we’ve discussed in this article. You can use Web3 without the metaverse being present (think cryptocurrency), but experts think that the metaverse technology will be the driver for the way these new technologies impact our lives.
Web3 and strategy - it’s simpler than you think
Strategy for Web3 might actually be more straightforward than you think. If we treat the strategy in the same way we would a physical product, we’ll have a good grounding. As with a metaverse strategy, brands must think about their purpose on Web3, what they are trying to achieve, and what value they will add.
As with any product, brands have to be sure about the problem they will solve by dipping a toe into the world of Web3. Whether through NFTs, the metaverse, or other crypto-based features, brands must be clear on the position they hold in their customers' minds. Whatever they decide to do, there must be an element of relevance to their strategy. If a brand is diving in for the sake of it, it’ll soon be found out as irrelevant and a commodity.
Further, what are they trying to achieve? Is it a fad or a trend they’re jumping on? Trying to achieve a return on investment is the challenge with anything Web3 or metaverse related, so the strategy must have a clear end goal and stepping stones to get there.
Finally, what value is the brand adding? One of the best ways to add value within Web3 and the metaverse, and indeed in any arena, is by offering value and creating a community. This leads to outstanding customer experiences, which are not to be sniffed at and are the bedrock of successful brands.