I’ve been thinking* a lot about how to describe or define the ‘feeling’ you get when you see some Web3 projects, or crypto-software. ‘Embedding economics’ (as per the tweet below) is getting close to the idea that lies at the heart of why I think it will be very powerful in the years to come which is perhaps a little different to the other takes out there at the moment.
But first, a quick story. Recently I was around a table of all very early Aussie crypto nerds – my friends! They all got into the hacker-anonymous-ethos[1] of early crypto potential (aka. not into speculative currency trading) and were all drawn to the true decentralisation promise.
I asked them if they thought crypto would re-define money. Their answer surprised me. They said no. This surprised me because 1) they had mostly seen the rise of various blockchains since day one, 2) they participated and developed and consulted on lots of very interesting projects 3) they had made (magical internet) money.
Me, a long-time crypto observer and now recent participator and investor now believe they’re wrong. I think that when full integrated crypto broadly will come to redefine our relationship to what ‘money’ means.
Embedding economics
I came across a tweet recently in which I think sums up the sentiment nicely – with web3 the main wide-appealing factor is that you can ’embed economics’ within software. This is unlike anything before – web2 or typical software today. Transferring economic value, e.g. money, requires you to ‘bolt on’ economics. Not embed it into the product and application.
Embedded economics means that you can create and own value (centralised or decentralised doesn’t seem to matter to general users but have their own dynamics) natively within software.
A brief history of bolt-on business models, a quick timeline
Another way to think about this is the first business models in software businesses really just explored you ‘offline–ownership business models’ e.g. license as there was no real internet to enable innovative business models. The pre-dot come era.
The second wave had the benefits of the internet and explored while I’ll loosely call ‘subscribing business models’ where consumers AND businesses could subscribe to get value – wether it be advertise (pay per click) or monthly payments for Netflix or chat clients. You could call this the post 2000 (dot come bubble) era. In many ways this trend is still playing out and will continue to play out for more decades to come in as fiat currency is still dominant.
During this second phase we got financial system (mostly?) online but there was a key component missing – transferring value within pure software context was still missing.
Enter crypto and phase three. Now with a way to store value in software in way that is secure and validated and native to software we can unlock lots of new types of biz models that previously were too hard implement.
Some quick example ideas (Blot-on vs embedded – will flesh this out more as it should be more then just a centralised vs decentralised aspect)
- Offline/independent compute vs Blockchain/DAP
- eBay vs Zora
- Shutterstock vs NFTs
- Archives vs Arweave
- Coinbase vs DEX/UniSwap (?)
Let me know your ideas for others!
Notes
[1] The three crypto pillars are: Decentralisation, anonymous/transparency, Immutability (enables the store of value).*This is a work-in-progress.
