top web3 narratives from 2021 ๐๐ถ๐
Welcome to the 32 friends who have joined us since last Thursday! Join the 125 creators, students, early career professionals, founders, executives, and more focused on learning and empowering each other on web3 concepts by subscribing below.
I am experimenting with how to build this newsletter. This is is how I am currently thinking about it:
Anchor the newsletter on an email Iโll send out Wednesdays recapping the week in web3 (stay tuned)
Send emails doing a deep dive on a topic (e.g. like this one)
Share relevant updates for the community we are building (trust me, the Discord is coming soon)
The goal of this piece is to recap important web3 narratives from 2021. Historical context is important and by studying the past you can better predict the future. Iโll analyze three noteworthy concepts from this past year but have listed plenty of others for you to learn about below.ย
Here is todayโs roadmap:
NFTsย
Coinbase IPO
Web2 Takes Noticeย
Honorable mentionsย
P.S. If you are new here, take a look through this web3 starter guide to get up to speed.
1) NFTsย
NFTs are confusing. The term stands for โnon-fungible tokensโโ what a terrible naming convention. When was the last time you used the word โfungibleโ in a sentence? Web3 can feel distant because of terms that are not grounded in day-to-day language. Web3 needs a new CMO ๐ .
NFTs clicked for me when Chris Dixon described it as the new web page. As Dixon shared in a podcast (that I can no longer find), when the web page was invented by Tim Burners-Lee in 1991, people described it as a digital brochure.
โImagine if you could put a brochure on the internet!โย
In reflection, this definition of a web page was limiting. The โweb pageโ is the foundation of our internet today. Iโm writing this on a Google Doc (a web page). Iโm going to post this on Substack (a web page), and then maybe share it on LinkedIn or Twitter (a web page). We no longer think of the web page as a piece of new technology. Chris believes that this is how we will view the concept of an NFT in the future. It will be with us wherever we goโa foundational piece of infrastructure in the new web.
โImagine if you could own a piece of the internet!โย
Like this quote, there are numerous attempts at defining how NFTs will impact the internet in the future. For the most part, these answers are still unclear and will be shaped by the next generation of developers and creators. For now, letโs define what NFTs are and what their impact was in 2021.
It is helpful to differentiate between fungible and non-fungible tokens (source):
Fungible tokens are interchangeable (e.g., the US dollar, Bitcoin).
Non-fungible tokens are unique (e.g., art, music, domain names).
There are many different types of NFTs. Below are a few concepts to read up on:
1/1s like Beepleโs $69M pieceย
In-game NFTs like Axie Infinity
Digital Real Estate like Decantraland
Music NFTs like this Weeknd collectionย
Collectibles like NBA Top Shots, Sorare, and Artblocks,
Profile Pics (PFPs) like Cryptopunks and Bored Ape Yacht Club
And more Iโm forgettingย
So what?
NFTs can be tough to wrap your head around. Out of all of the NFTs I have purchased I am net negative in dollar value, but still happily own them. These NFTs become your digital identity. Me and Chain Runner 2905 are homies - so much so I have made it my Gmail profile picโฆ
Have fun with NFTs but try not to put too much money into them. The underlying technology behind them is interesting and it will seep its way into how the internet will operate in the future. Below are a few more pieces of advice as you dive deeper into NFTs:
If you are a creator, an artist, writer, or musician, Iโd encourage you to explore how you can earn some extra money using NFTs.
If you are a consumer tech executive, founder, or VC, creators will flock to the platforms where they can broaden their reach AND monetize their work. Thinking through how you can embed the ability for creators on your platform to monetize their work through NFTs will be beneficial for the long-term defensibility of your platforms.ย
If you are investing in NFTs, know that most of them will go to 0. Like the ICO boom in 2017, the important projects persist, the remaining will go away. If you still want to play around, have the perspective of a fan looking to support a creator rather than the perspective of an investor.
If you are anyone else entering into NFTs, have fun! Try not to be dismissive of projects that donโt make sense to you. See how active the communities are behind the project. Metrics to track how active a community includes the number of mentions on Twitter and activity in their Discords. Itโs also helpful to vet projects based on if reputable people are backing the projects.
2) Coinbase IPO
Coinbase is an exchange where you can buy and sell cryptocurrencies. For many, it is their first exposure to crypto as it was for me.ย
Coinbase was the first crypto-affiliated company to enter into the public markets this year. This event made people view crypto as more โgrown-upโ. Institutions could now invest in crypto through $COIN. Talent flocked to the company. Many smart junior friends have joined Coinbase, and the number of senior exec hires they have brought over from Google, Facebook, and others have been remarkable to see.
One lesson Iโve learned at LinkedIn is that observing the flow of talent towards or away from companies can help predict the probability of success for the business. Intuitive yet overlooked.
Coinbaseโs IPO made many employees wealthy. These employees will look to deploy the capital back into the industry that made them successful, continuing to grow the entire web3 ecosystem. As of March, there were already 20+ companies started by former Coinbase employees, including the VC firm Paradigm who competes with Andreessen Horowitz for deal access to the best web3 startups. Coinbase also has the most active corporate investing arm in tech. Take a look at their portfolio hereโitโs STACKED. The money they have generated from the IPO, alongside the most recent crypto bull market, has been deployed into growing their product suite and the entire crypto ecosystem.
So what?
Coinbase is positioned to be the next generation of FAANG-like companies. I would not be surprised to see their valuation 10-20x from todays ~$50B. Like FAANG today, I can also imagine Coinbase being under increased scrutiny from regulators as the crypto industry grows in the coming decades. Their hands are in every sector of the industry, and their product roadmap is diverse and wide-reaching.
If you are interested in learning more about Coinbase, this Generalist article is great. With this in mind, below are a few more actionable pieces of advice when thinking about Coinbase:
If you are new to crypto, buying your first set of tokens on Coinbase is a good place to start.
If you are a creator, Coinbase will also be launching an NFT platform in the coming quarters. Stay tuned to how that will roll out, as it will bring a significant amount of new buyers into the market.
If you are looking to work in crypto, Coinbase may be your place to go.
If you are a web3 startup, having Coinbase employees in your network is important for potential investment opportunities.
If you are a public market investor, putting money into Coinbase is less risky (albeit correlated) than investing in specific tokens like BTC, ETH, or SOL.
3) Web2 Takes Notice
โDisruptive technologies bring to a market a very different value proposition than had been available previously. Generally, disruptive technologies underperform established products in mainstream markets. But they have other features that a few fringe (and generally new) customers value. Products based on disruptive technologies are typically cheaper, simpler, smaller, and, frequently, more convenient to use.โ โ Clayton M. Christensen, The Innovator's Dilemma
Every web2 company exec has heard of Clayton Christensenโs book The Innovatorโs Dilemma. The premise of the book is the following:
Incumbents are focused on their existing customer base and generating decent profits.
Due to the incumbentโs size, there are niches within that customer base (e.g. customers that spend less $$) that may not be served as well.
This leaves room for a smaller company to enter the market and focus on the specific niche that the incumbent is not prioritizing.
It starts slowly, but over time, due to the speed of execution for the smaller company, they begin to take market share from the incumbent.
Eventually, the small company gets larger, and the cycle begins again.
2021 was the year this book was picked up off of the bookshelf. It was also the year every C-level Exec asked their Corporate and Business Development teams to run an analysis on this market to see how they can a.) take a piece of this growing pie and b.) make sure they do not get disrupted by web3 native companies.
Here are just a few examples:
Twitter: Launched โProject BlueSkyโ with the goal to create a decentralized social media protocol that they hope other social media companies will leverage. They have set this team up into two divisions: 1.) The team focused on what Twitter could look like decentralized and 2.) how to embed crypto products (e.g. tipping, NFT authentication, etc) into their existing roadmaps.
Meta/Facebook: Rebranded to Meta, created the Diem Association, and have continued pushing to enable Metaverse applications. The most telling is the creation of the Diem Association. Facebook, through their distribution ofย >2B users globally, can capture market share specifically through their payments business.
Reddit: Working to convert usersโ karma points into Ethereum-based (ERC-20) tokens. Their goal is to onboard 500 million new crypto users in the process.
Microsoft: Lead a $27M investment in an NFT studio.ย
TikTok: Launched their first creator-led NFT collection.
Adidas: Collaborated with Cryptopunks, Bored Apes, and others on their NFT launch.
Nike: Bought a virtual shoe company.ย
There are plenty of other investments into web3 from incumbents. A lot will be a flash in the pan, some of them will be incredible wins.
So what?
I believe web2 companies can be the bridge for their user base to explore web3 technologies (e.g. tokens, NFTs, etc). In terms of scale, web3 is tiny (~350-400M users), compared to the broader internet today (~4.5B users).
It will take one of these large incumbents to push a successful product to market with embedded web3 technologies to help bring the next wave of users into this space. I expect continued investment and exploration from incumbents in 2022.
I believe web2 will disrupt itself more than the web3 community believes. In the process of this, they will capture more market share from users looking to use cryptocurrencies, NFTs, etc. These web2 companies are not old behemoths like finance companies that were founded in the early 1900s. Founders and executives lived through rapid disruption of web1 and web2, how can they not see web3 coming?ย
This will be an interesting one to watch. Below are a few more actionable pieces of advice when reflecting on this topic:
If you work at a web2 company, spend time studying how web3 business models and features can be embedded into your existing product roadmaps.
If you work at a web3 company, spend time interacting with web2 employees and leaders to understand what success looks like at scale.ย
If you are a creator, explore using web3 products to give you a sense of what you may be missing on large web2 social platforms.
Honorable mentionsย
China Bans Bitcoin Mining
Opensea Becomes Go-to NFT Marketplace
Bitcoin Continues to Get Loveย
Infrastructure Bill & Cryptoย
Jack Dorsey Criticizes Web3
Constitution DAO
Dogecoin & Stonks
Plus so much moreโฆ.
P.S.S. Thank you to my beautiful and patient sister Taruni who helped me edit this piece. If you are reading this, donโt worry, I promise to send you payment in Ethereum once you set up your wallet ๐.
If you feel compelled to share any other stories from this past year you think I should add, feel free to hit reply or DM me on LinkedIn or Twitter. If you want to talk shop about web3, feel free to find time here.
Till next time,
Jay ๐
Great summary
Love this Jay. Of ALL the various routes to learn. Where are you putting focus?