Since 2021, the internet giants have entered a stage of stagnation after a decade of brutal development. Over the past decade, people have grown accustomed to the giants expanding into new industries with their capital and technological advantages, but now hearing more about them tends to be layoffs and cuts to nonprofit business units. At the same time, Web3 has grown in popularity and has become the new narrative of the crypto movement. Web3, the next-generation Internet aimed at subverting the over-centralized Web2 platform, is attracting the attention of Internet companies looking for the next technological wave.
A16z, one of the most influential crypto VC funds, defines Web2 as social platforms such as Facebook, Twitter and WeChat, where users can only “read and write”, while Web3 is a blockchain-based Internet that allows users to “read and write” Read, Write and Own”, which means users can own digital assets they create as well as part of the network infrastructure.
At present, despite the sluggish crypto market price performance, more and more influential investors and entrepreneurs in the Web2 industry are starting to get involved in Web3, most of them are veterans of the last wave of Internet innovation, with tens of millions of users Built a fintech, e-commerce or social media application. Web3 is now being forced into a reset moment due to the sluggish crypto market, which is actually a good time for Web2 entrepreneurs to enter the playing field and use their expertise to power Web3 applications towards mass adoption and real-world economic activity.
Web2 to Web3 Migration
The optimism surrounding the traditional internet economy has waned markedly over the past year, from a drop in market value to mass layoffs. Internet companies are very anxious about regulations and policies, so the idea of ”code is law” advocated by the blockchain community seems particularly attractive to them, and smart contracts on the blockchain appear more transparent and secure to them. Some domestic Internet companies are actively exploring NFTs, which have received less regulatory attention as it appears to be just a cultural and entertainment business.
Social video network Bilibili launched its Cheers UP NFT series in late April and added an NFT tab to its international version of the app that connects to users’ Metamask wallets; food delivery platform Ele.me also launched Focus NFT series of traditional Chinese cuisine; Tencent invested in NFT platform Immutable X overseas; TikTok and Immutable X cooperated to launch NFT collection (Tiktok Top Moments). Investment funds backing the winners of the domestic internet economy are also now betting on Web3. Neil Shen, founder of Ctrip and an early investor in Meituan Pinduoduo, also led Sequoia China to invest in blockchain gaming giant Animoca Brands.
The above are just a few examples of public investments, and many more individuals and family offices are quietly backing Web3 startups behind the scenes.
Doubts about Web3
Web3 advocates creating an Internet that serves the interests of users and builders better than Web2. Venture capitalist and thought leader Chris Dixon believes that “Web 3 is an internet owned by builders and users, cleverly built by tokens.” But the recent market turmoil has exposed the gap between the narrative and current reality that has left many Web2 startups doubts and doubts.
At the same time, Web2 entrepreneurs are well aware of the problem of excessive centralization. For example, taking China as an example, the entire Internet ecosystem is dominated by super apps such as Alipay, WeChat, and Meituan, which hold most of the user data through countless online activities. At the same time, user acquisition is also one of the main business challenges faced by Internet companies, which often spend billions of dollars to acquire and retain users in the form of advertising, giveaways and social marketing.
The data concentration of super apps and the skyrocketing user acquisition costs have made it difficult for innovative companies to emerge in the past few years, and made super apps the object of antitrust supervision. This is also how many Web2 entrepreneurs are inspired by the idea of building on a decentralized web and turning users into stakeholders.
However, most existing Web3 applications have yet to realize the vision of benefiting users at scale. The collapse of Luna, which claims to create a decentralized currency for a decentralized economy, is a blow to the entire crypto industry. Even the blockchain games that many hope to bring mass consumers to Web3 have failed to demonstrate that people like them for reasons other than token incentives. Although there seems to be a lot of news about the sky-high transaction prices of virtual world game assets such as Sandbox and Decentraland, as of April this year, the daily active users of these two games are only about 1,000, which cannot be compared with mainstream Web2 games at all.
Web2 entrepreneurs can be called experts when it comes to identifying product-market fit, and when they look at current Web3 applications, it’s easy to conclude that current Web3 applications are still in the hype phase, which also means that the industry It’s early days and has huge potential.
Immigration from Web2
The recent slump in many crypto assets has once again exposed the risks of token-driven financialization, and also clarified the need for Web3 applications to find use cases and problem-solving in the real world economy, which happens to be the foundation of Web2 enterprise success.
As the crypto market experiences a bull run between 2020 and 2021, Web3 proponents are confident that Web2 applications will eventually be replaced. But as the market turned bearish, they began to realize that the advantages of Web2 applications such as Paypal, YouTube and Tiktok being widely used in current daily life are still huge.
Despite the skepticism of Web2 businesses about Web3, there is still no other narrative as grand as Web3, a decentralized internet that combines the interests of builders and users. Especially for domestic enterprises, the license-free and globalized nature of Web3 also makes it a rare field free from geopolitical interference. Mass adoption of Web3 will not bypass the booming Asian market. Asian Web2 companies have extensive experience building Internet products at scale, with killer apps that can compete with global giants. Some of the most promising crypto use cases, such as digital wallets and virtual entertainment, are also familiar territory.
The migration from Web2 to Web3 also presents an important opportunity for crypto-native teams. Web2 businesses and investors need to seek partners to master blockchain infrastructure, complex token economics and dynamic communities run by DAOs. Since 2021, the domestic crypto community has migrated to Southeast Asia due to the ban, and many traditional financial talents have also migrated to crypto finance for better development.