Step Into Web3: 4 Questions for Businesses to Consider
Web3: Is it a tangled web we’re weaving? Who’s the spider and who’s the fly?
Actually, it doesn’t have to be tangled or sinister at all. However, it is essential for businesses — and individuals — to understand the building blocks of the next phase of the internet. It’s shaping the business world, and we can prepare now for the internet of the future — one that is more decentralized, more user-owned and, in many ways, wide open for exploration.
Darden Professor Dennie Kim addressed such questions in the paper “The Promise of a Decentralized Internet: What Is Web 3.0 and How Can Firms Prepare?” Here, he answers four questions about the opportunities and pitfalls of Web3.
Q. It seems that we are in an intermediary period. What do you see as the next step of Web3 as it becomes more accessible and widespread?
A. At the most fundamental level, organizations need to develop or acquire the capability to understand publicly used blockchain technology and how to write smart contracts — software code set to run automatically once predetermined conditions are met — or develop applications for the blockchain. There are already numerous examples of well-established brands that have partnered with blockchain-based development teams or built those teams in-house to create Web3 applications. Budweiser, the pharmaceutical startup Modum, Adidas and McDonalds are some that we cite in the paper.
Another hallmark of the growth of Web3 is a “connect wallet” button in the upper right-hand corner of more and more websites, with which users can connect cryptocurrency wallets. In some ways it’s no different than logging into your account or saving credit card information. In other ways, it is completely different because the cryptocurrency account is on the blockchain and is user-owned. We are so used to logging in with Apple, Facebook or Google accounts because it is so convenient. But we do not own those accounts or their data — that is all company-owned. On Web3, the wallet function will look similar, but the individual user will own the account and can grant or revoke access to a website or app at their discretion.
Q. What can companies do to prepare for the next steps?
A. If companies want to gain exposure to the network of users that are active on blockchain platforms like Ethereum, it can be as simple as providing content that is Web3-enabled, that uses cryptocurrency and blockchain technology. It is really interesting from a business standpoint because all of the information on public blockchains is accessible to anyone with an internet connection and a computer. For example, it is possible to easily collect data on all users (identified by their “wallets”) that have interacted with a given Web3 application or smart contract. Companies — or individuals — can then target those users without having to purchase data, and users can choose whether to interact or not. In Web2, that sort of user or market intelligence is much more difficult to obtain and can be an important source of competitive advantage.
It is also important for organizations to really understand the cultural shift among people who are developing and using Web3. I think it is very similar to the stakeholder approach that we use at Darden, which argues that companies should not just account for shareholders as the primary stakeholder, but also for customers, employees, the wider community and the environment. Web 2.0 was all about user-generated content, but all those benefits really flowed to the platform owner instead of to the user. In Web 3.0, users seek more power and ownership over the content they create — even if it is just their own data. I expect that this cultural shift will fuel the emergence of new business models. Thus far, the dominant design requires users to relinquish their personal information and privacy in exchange for free or “freemium” services, which means that software and tech businesses chase scale at all costs to harvest more data. There is no law that states that this is the only way that an internet business can grow. However, moving away from this mindset will require creativity and strong values.
Q. What do you see as the most likely pitfalls or places where human error can be introduced?
A. In a new industry like this, especially one that touches many aspects of people’s lives and is tied to things that have financial value, there will always be some friction. In the case of Web3, I think it is particularly important for businesses to work closely with their compliance and regulatory teams when planning for new products or deciding their overall strategic direction. Changing regulations affect strategy so much, and the rules of the game in Web3 will evolve over time as individual users, businesses and governments adapt.
Scams are also one of the biggest pitfalls right now, especially for individual users, since it is such a new industry. One advantage of blockchain technology is that users own their information, but the downside of that is that there is no fallback if someone is scammed. You cannot file a claim with the blockchain; it is not an organization in that sense. Predatory and malicious behavior happens on all platforms, of course, but we have less regulation and awareness of it on Web3, so we need to be extra careful. That said, the early days of the internet and the early days of social networking and media were also a bit of a wild west. What’s different today is that the speed of information is so much greater that there will be far more early adopters and far more “bad actors” that are looking to take advantage of others.
Q. Big picture, what else should people know?
A. With the economic downturns in the cryptocurrency market and the look of the economy in general, there has been an overall feeling of doom and gloom, but it has been interesting and exciting to see that there is still this fervor around wanting to develop applications and new ideas for Web3. That spirit of excitement could be resilient through a rough economy, with a movement toward wanting to build community and build things that reward us, the users, more directly.
I think that cultural mindset — building things that create and share value for more people — is an important shift in our world right now, and it’s one reason I’m so excited about Web3. It is also a good fit with our overall mission at Darden. Building organizations that work for all stakeholders and create value in communities — that’s what we’re all about.
Dennie Kim co-authored “The Promise of a Decentralized Internet: What Is Web 3.0 and How Can Firms Prepare?” which appeared in Business Horizons, with Alex Murray and Jordan Combs, both of The University of Oregon Lundquist College of Business.
