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Hey Everyone,
Happy New Year! 🎉 Welcome back, and I hope everyone had a wonderful holiday.
It’s been almost two years since I started Digital Native, and I’m excited for another year of writing about how tech and culture intersect. If you’re new here, check out the Digital Native Discord community—we chat about interesting trends, share job opportunities, and generally just hang out. In fact, I’ll be hanging out in the aptly-named #hangingout voice channel later this week. See you there!
With that, on to this week’s piece…
Most People Won’t Know Web3 Exists
Back in the 90s, the cryptographer Nick Szabo coined the term “smart contract”. In a 1997 paper, he wrote that smart contracts “combine protocols with user interfaces to formalize and secure relationships over computer networks.” Put more simply, a smart contract is a self-executing contract with the terms of the agreement between buyer and seller embedded directly into the lines of code.
To explain smart contracts, Szabo used the example of the humble vending machine.
In a vending machine, the rules of a transaction are programmed into the machine. You select a product by pressing a number related to the product that you want. You insert money. If you insert enough money, the machine spits out the product. Programmed rules execute a transaction.
Smart contracts act similarly, and they’re foundational to Web3. By building rules directly into code, smart contracts remove the need for intermediaries to facilitate transactions. Vending machines allow you to get snacks without a merchant present; smart contracts allow you to do all sorts of things without a banker, accountant, lawyer, or other intermediary present.
Web3 became one of the buzzwords of 2021, and as we enter 2022, it’s positioned to go even more mainstream. Perhaps an early contender for the Oxford Dictionary’s “Word of the Year”?
In media coverage, “Web3” is fast replacing “crypto” as the catch-all term for a decentralized, secure, and user-owned internet. This is, in my mind, a good thing: Web3 connotes progress and innovation, whereas crypto connotes complexity, speculation, and a dozen other negative associations that have (unfortunately) calcified over the past decade and now threaten to derail the movement. Web3 may be a necessary rebranding.
But here’s the thing about Web3: most people will never know it exists.
The reason for this is that while Web2 was a frontend revolution, Web3 is a backend revolution. In other words, Web2 reinvented the things that people interact with, while Web3 reinvents the plumbing behind the scenes. This isn’t to say that Web3 won’t be an equally important movement—it will transform every industry and reshape outdated power structures. But the people and companies and organizations that succeed in Web3 will succeed because they abstract away complexity.
People, for instance, don’t need to understand how crypto mining works or to recognize a mining rig. In fact, it’s probably better to hide this stuff in the background:
And the average person won’t understand blockchain, or fungibility, or stablecoins. They won’t need to. Most people today don’t understand HTTP, the Hyper Text Transfer Protocol developed in 1989 that powers the World Wide Web, and yet they rely on it every day.
This is why the vending machine is such a good analogy. Most people don’t understand how a vending machine works, and yet the average person spends $62 at a vending machine each year. People don’t need to understand the inner-workings—unless, perhaps, they’re a vending machine repairman. (The analog for our digital world might be a smart contract engineer.) But people understand enough: you put money in and a can of soda comes out. That’s all that matters.
Today, Web3 has yet to “cross the chasm”—we’re in the “early adopters” phase of the technology adoption lifecycle. Despite doing $14 billion in transaction volume in 2021, for instance, OpenSea has only ~250K active buyers and sellers; 70% of volume comes from just ~20K people. Ebay has 183 million buyers.
To go mainstream, Web3 needs to become accessible to the everyday person. One way to achieve this is through easily-understood metaphors that abstract away complexity. I’ll give two examples that I often use, both from Shermin Voshmgir’s excellent book Token Economy.
💳 Metaphor #1: Web3 wallets are like, well, wallets.
Your Web3 wallet is your portal into the world of Web3. At its simplest, your wallet is a piece of software that lets you send and receive crypto securely, without relying on a third party. You might use MetaMask on Ethereum, Phantom on Solana, or Terra Station on Terra. To access the Web3 world, people will need wallets.
Thankfully, a “wallet” is a familiar concept—and Web3 wallets act in familiar ways. Just as your physical wallet contains your driver’s license, your gym membership, your Costco card, and other signifiers of your identity, your digital wallet contains your digital identity. Just as you open your physical wallet to show your identity when you’re carded at a bar, you open your digital wallet to reveal your digital credentials online. For instance, I flash my MetaMask wallet when I buy something on OpenSea.
Your wallet contains two types of keys: a public key and a private key. Public keys are comparable to an account number; they can be freely shared with anyone. Private keys, though, are (surprise!) private—you can think of them as a PIN that you and you alone should know. But Voshmgir uses an analogy I prefer—this brings us to our second metaphor:
🔐 Metaphor #2: Public keys are like a padlock.
Imagine I want to send you a message, but I don’t want anyone to intercept it. I ask you to send over a padlock (unlocked) and for you to keep the key. I put my letter in a box, lock it with your padlock, and send it back to you. Only you, with your key to the padlock, can open it and receive the message. The padlock is the public key; your key to the padlock is the private key.
People understand these concepts intuitively. There’s nothing new about them. But today’s Web3 solutions are lacking. MetaMask, for instance, was initially built with developers in mind. Despite having over 20 million users, it is far from intuitive. The products that win in Web3 will remove all complexity. In order to onboard billions of people to Web3, products need to be painstakingly simple and beautifully elegant.
Beyond specific metaphors, there are broader concepts that are familiar to the public and that will help demystify Web3.
Take decentralization. “Decentralization” is an intimidating word. Humans gravitate to centralization. People like the idea of someone being in charge; when framed wrong, decentralization might communicate a loss of control. Instead, decentralization should communicate a gain in autonomy—more power and money flowing to the people, rather than to the gatekeepers. I often think of a Vitalik quote:
Whereas most technologies tend to automate workers on the periphery doing menial tasks, blockchains automate away the center. Instead of putting the taxi driver out of a job, blockchain puts Uber out of a job and lets the taxi drivers work with the customer directly.
The idea of “removing the middleman” resonates with people. “Power to the people” resonates with people—this is one reason ConstitutionDAO was so successful (about half of donors to ConstitutionDAO’s $47 million haul created a Web3 wallet for the first time in order to donate). But these concepts still have drawbacks. People might ask, what happens if I want to file a complaint? There’s no Uber customer service rep to talk to. These are issues that need to be worked out, and my view is that full decentralization will be rare. Instead, the world will be more decentralized but there will still be some degree of centralization; again, most people like for someone to be in charge and are willing to pay a small fee for convenience and reliability.
Another concept that is widely understood is that of scarcity. People might not understand what non-fungible means, but they understand when something is rare or unique. Any gamer understands scarcity in a digital world. Gamers spent $54B on digital items in game economies last year, which will grow to $74B in 2025. In fact, Fortnite players interact with both de facto fungible tokens (V-Bucks, the currency in the game) and non-fungible tokens (skins for their avatars).
Well-understood concepts can be extended to other parts of Web3. People understand the concept of an investment return, for instance; approaching tokens through this lens may be helpful for some. People also understand access, and tokens that behave as tickets to gated content or events will drive further mainstream adoption.
DAOs, for their part, are more easily understood as communities or democracies. DAOs behave like democracies. Most DAOs have very low “voter turnout” (as we do in the real world) and are even gravitating to representative democracies. People trust other people—designated authority figures, viewed as more “informed”—to make the call. Most people don’t want to read lengthy proposals and make decisions; that’s human nature. The community for the DeFi protocol Yearn recently proposed a decentralized governance system that lets $YFI holders elect committees for budget control, for the development roadmap, and so on.
When people approach Web3 not as an inscrutable blackbox with confusing words (“Ethereum”, “blockchain”, “fungibility”) but as a set of easily-understood concepts (“scarcity”, “access”, “community”), they become more open to this new paradigm. Products need to lean into simplicity.
Back in the 90s, the web was similarly inscrutable. Your everyday person had no idea how to access it. Then AOL came along. AOL’s slogan was “So easy to use, it’s no wonder it’s #1.” AOL abstracted away complexity with a user-friendly interface.
Jarrod Dicker and Jonathan Glick recently wrote:
Ted Leonsis, whose company Steve Case acquired in 1994 and who led many of these moves, once said: “I spend most of my time dumbing things down.” There’s no more famous and appropriate example than the audio that rewarded users who logged back into the service again and again. In three simple words, it proclaimed the payoff: “You’ve got mail!”
The natural question is: what will be the AOL for Web3?
The opportunity is massive. At its peak, AOL had a market cap of $350 billion in today’s dollars. (Unfortunately, it ultimately sold for about 1% of that 😬.) What will be the analog for crypto, the killer product that makes onboarding to Web3 so obvious and simple and accessible that billions of people do it?
Ultimately, Web3 needs two things: 1) accessible products, and 2) killer use cases. The winning companies will have both.
Last year saw massive leaps forward. NBA Top Shot, for instance, catapulted NFTs into the mainstream. I can’t find the source, but I remember reading that something like 50% of people who bought a Top Shot NFT didn’t know they owned an NFT—they just wanted to “own” that collectible sports moment in digital form.
What happens when owning a Top Shot NFT goes beyond collecting? What happens when owning a Steph Curry moment comes with a signed jersey? Or when owning a LeBron James moment gives you courtside Lakers tickets? These will be breakthrough moments for Web3.
I wouldn’t be surprised if the term “NFT” fades over time, replaced by the more approachable “digital asset”. (That said, NFT might be too deeply-ingrained already.) Or eventually—far down the road—we may just say “shirt” or “house” and let the context reveal whether we’re talking about a physical item or digital item.
From the “accessible products” perspective, better wallets are a good starting place. Intuitive wallets with multi-chain functionality will go a long way to pushing this movement forward. From the “killer use cases” perspective, music and gaming are good bets. Both are poised for major inflections in 2022.
2021 was an important year for Web3, with huge progress made on all fronts. And yet, most people still don’t know what a blockchain is. What’s important is that that’s fine—they don’t need to, and they likely never will. The vast majority of people will never know that they’re interacting with a blockchain, as the complexities are hidden beneath beautiful and familiar interfaces. Heading into 2022, that’s the opportunity to go after.
Sources & Additional Reading
Token Economy | Shermin Voshmgir (lots of great metaphors and deep dives into tokenomics and DeFi)
Infinite Machine | Camila Russo (the story of Ethereum—reads like a novel)
America Onchain | Jarrod Dicker and Jonathan Glick
A Taxonomy of Tokens | Patrick Rivera
Messari’s Crypto Theses for 2022 | Ryan Selkis
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