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Web3 is upon us and it’s spreading like wildfire. The world is no longer waiting to see how a blockchain-based future will emerge and penetrate more than the crypto bro lottery. A decentralized layer of web infrastructure is impacting how business is executed, how finance is handled, how charities fundraise, how art is being bought and sold, and how brands are marketing.
If you’re a business owner wanting to dive into Web3 while witnessing the rapid pace of crypto, DeFi and NFTs, you might find the landscape a bit intimidating, or you might be unclear about Web3’s vital importance. As the operator of the crypto and blockchain venture studio, Thesis, I’m here to break down the differences between Web2 and Web3 for you.
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When the tech industry ushered in Web2 apps, programs and platforms, these tools enabled and amplified user-generated content. People began seamlessly interacting with other creators across the globe. The experience was fresh, thrilling and held utopian promises. But along the way, cracks started showing in the armor, both on the technical side and from a business and social standpoint.
Audit and Secure
Case in point: A plethora of Web2 products have been built with minimal to zero regards for ownership or privacy. A classic scenario may unfold like this: A founder has an idea for an app and said founder wants people to test the app. So this founder builds the interface with a little bit of functionality, but not all the buttons work, which is totally fine from the perspective of the founder. This entrepreneur mainly wants to see how users respond to the product — if they’re hungry for more and, of course, if they’re willing to pay for additional features.
However in the Web3 era, if a founder puts a product out there that’s half-baked and a potential money leak, a community will call out any oversight as a huge disservice to them. In other words, Web2 culture revolves around a fail fast, fail forward ideology, while Web3 culture brings deliberate attention to auditing and security.
Because of Web3 standards, decentralized financial products and platforms need to iterate in a way that makes security paramount. Products are expected to operate like a digital banking system that includes privacy and fail-safes that are tested repeatedly. This revolves around a “security by design” approach that’s cross-examined by third parties before public release.
Share Your Code
In Web3, it’s best practice to give your customers full access to your codebase and not release any smart contracts until they’ve been fully audited. Think of it as a gated release mechanism that ensures you and your team are administering the proper QA.
A crucial question we ask ourselves at Thesis is, how do we release clean products and clean code, so that our community can understand what we’re building? Why should you do this? It all comes down to community.
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‘Live and Die’ With Your Community
Web3 products live and die by their community. Here’s what I mean by that: In a centralized business model, it’s a company’s job to extract as much value as possible from its customers, community and users. Businesses add features to extract more profit.
In Web3, the expected collective mindset of an organization is to provide value, rather than extract it. One way to do this is through DAO (decentralized autonomous organization) governance. When your community members believe in your project, as token holders, they’re able to use their tokens to vote or collaborate.
By creating a native token that enables your community to stake or take part in governance, your community moves to the same side of the table as your founders and can voice their belief in your mission and your product.
Get Your Brain out of Web2
It’s important to note that there are plenty of Web3 startups functioning more like Web2 companies. If a Web3 product isn’t open-sourced, it’s not entirely Web3. In order to encourage innovation in the industry and in your community, showing your code and being as transparent as possible is of the utmost importance. A principle in Web3 is to provide innovators with what they need to potentially make what you’ve created even better.
Additionally, if a company’s business model is centralized — meaning they don’t have a way to distribute value to their users and are instead taking money from them — they’re functioning with a Web2 mentality. Genuine Web3 organizations and products democratize technology, innovation and ability. The competition in Web3 is driven by the desire to be more giving, collaborative, transparent and user-friendly all while recruiting top talent.
All that being said, Web2 isn’t to be thrown away either. It has purposes, particularly in allowing innovators to experiment, fail fast and learn from their MVP mistakes. Web2 is also less complex with regard to regulatory and fiscal implications, which I’ll share in another piece.
Ultimately, as a global tech community creating Web2 and Web3 projects, founders and builders need to collectively agree on the right use case for each approach. That way, we can all navigate this bold new world where the two can harmoniously coexist.
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