William Mougayar

On Tech, Business, Society.

Is Web3’s Culture and Technology Enough to Expand the Blockchain Market on Their Own?

The core blockchain sector should reevaluate whether they believe they can independently onboard the next millions or billions of consumers. 

I relate to a section from Gavin Wood’s Polkadot 2023 Roundup.

“…the failings of certain individuals who seem to think the messaging and marketability of Web3 can be successfully divorced from its technology and culture,” was Gavin’s explanation for the crypto winter.

Although I agree with the first paragraph about the “failings of certain individuals,” I don’t think the mismatch between Web3 culture and marketing messaging is to blame. 

Rather, there’s a mismatch between the go-to-market strategy of the Web3 culture and the realities of customer adoption. 

Web3’s technology and culture have been challenged in their own ways pertaining to their messaging and marketability. More than ten years into the birth of this industry, we still can’t point to a mainstream-class application with millions of daily or even weekly active users (not counting exchanges or wallets).

Web3 is reaching a wall in terms of user expansion because of subpar user experiences, as I’ve previously written, We Need Web2 User Experience To Get Us to Web3, Not Blockchain Protocols

There is too much attention on the infrastructure players, yet they aren’t the ones that will ultimately own the consumer experiences.  

Most L1 blockchain infrastructure teams are relatively small businesses (at the most, less than 250 in headcount). It is very difficult for them to wage multiple battles at once. First, they are fighting each other for mindshare and marketing messages to get attention. Second, they are continuously focused on herding people to develop and evolve their technologies. Thirdly, they must work very hard to draw in developers and users to reach significant adoption.

It’s difficult to execute all three parts well unless the surrounding ecosystem has expanded significantly to the point that, in the event of the central entity’s disappearance, the ecosystem as a whole would continue to advance with little to no harm. 

Few infrastructure protocols are as (organizationally) decentralized as the ethos they evangelize to be enabling. Except for Bitcoin, most Foundations (or Labs) organizations continue to act as the main locomotive that pulls the whole train forward. Perhaps Ethereum comes in a close second due to the ongoing self-effacing nature of the Ethereum Foundation, whose role has shrunk considerably in relative terms compared to what the ecosystem is delivering.

Since adoption is the one factor that matters in terms of success, let’s return to it.

So, how will the remaining millions (and billions) of users be drawn to crypto and the blockchain? 

Within the current landscape of Web3 apps, the mainstream user will be hard-pressed to get excited and take on current Web3 apps like duck to water because there is too much of a jump to get into crypto with both feet and expect to figure things out. 

Consequently, we shouldn’t be disparaging app efforts posing as Web2-first. When paired with a Web3 aftertaste, Web2 apps make a delicious appetizer. 

I’m excluding “users” that speculate on cryptocurrency prices because, for many of them, central exchanges will give them user-friendly capabilities.

Infrastructure developers currently dominate the blockchain industry, but to attract application-first developers, we need to increase the number of developer-friendly services available.

Web3 and Web2 need each other. Let’s admit it.

The Web3 culture and technology have given us an incredible vision. But they need help in realizing it. 

We Need Web2 User Experience To Get Us to Web3, Not Blockchain Protocols

To unleash blockchain’s creativity, awkwardness and quirks in the Web3 user experience must be fixed.

There is a joke in tech circles that “if the user experience is bad, it must be Web3.”

While the focus on incorporating blockchain technology is a priority, there is a growing concern that, in the pursuit of this innovation, valuable lessons learned from Web2 in terms of user interface (UI) design are being overlooked. This oversight is hindering the broader adoption of this new technology. 

Web3 should embrace proven user experience (UX) practices from Web2 rather than reinvent the wheel, ensuring a more familiar and user-friendly transition into the next phase of the internet. If they don’t, they risk alienating mainstream consumers and creating products accessible only to a small, tech-savvy niche of crypto natives.

Years have been spent painstakingly creating fluid and understandable user interfaces for Web2 and mobile applications. It has been demonstrated that clarity and simplicity deliver engaging and productive user experiences. These principles have resulted in billions of users flocking to social media platforms, content destinations, travel services, streaming venues, and e-commerce giants. 

The allure of Web3 espouses a radical departure from the norms of established Web paradigms. However, the shift to blockchain technology, decentralization, and cryptographic ownership should not come at the expense of user experience. 

Here are three reasons why Web3 needs more Web2:

  • The average user prioritizes usability over blockchain technology. Complex onboarding processes, jargon-filled interfaces, and lack of intuitive navigation hinder adoption and alienate them.
  • Familiarity with Web2 interfaces fosters trust and engagement, enhancing comfort and security for users entering the Web3 space, promoting further exploration and engagement.
  • Simplicity and clarity are key for promoting accessibility to a wider audience. Web3’s decentralized nature is innovative, but its user interface doesn’t have to reinvent the wheel. 

Amidst the majority of Web3 apps that have no chance of gaining mainstream adoption, there is a new generation of apps that are not so smitten by Web3 geekiness and prioritize Web2 ease of use instead. Here is a sample.

In the dining category, Blackbird looks like a restaurant loyalty app to the user. Somewhere in its technology structure, blockchain magic enables unique, non-transferable badges (NFT-based) that users earn as a visit counter. There is also a private cryptocurrency akin to airline miles that can be exchanged for restaurant perks, all with very little transaction friction.

In decentralized finance (DeFi) where apps tilt on crypto nerdiness, Prime is a cross-chain prime brokerage service that lets users deposit, borrow, repay, and withdraw cryptocurrency across 8 different chains seamlessly. This sounds like a boring trait in traditional finance because currency fluidity is taken for granted (though at the cost of a lot of inner friction). In the blockchain world, Prime represents an advanced level of tucking-in interoperability across blockchains while hiding it from the user. 

In social media, Warpcast looks almost exactly like Twitter (now known as X), but behind the scenes lies a social network protocol with a few web3 features such as blockchain-based identity, encrypted authentication, and decentralized data that the casual user need not worry about unless they want to. The initial experience is very mainstream Web2, while the platform gently surfaces Web3 snippets. 

In the sports fantasy world, Silks lets you take ownership of a jockey, a horse, and land for your stables. The most interesting aspect is a synthetic 1:1 linkage from your fantasy (NFT) horse to a real one that could be racing at the Kentucky Derby, Belmont Stakes, or other known races. No one else owns that relationship. You can follow the real horse’s activity via a virtual stable dashboard on Equibase. When the horse wins, your account is credited 1% of earnings, automatically deposited in your (crypto) wallet. 

In messaging, Converse is a simple messaging application with embedded wallets. Users create any number of accounts, and a crypto wallet automagically appears, enabling you to send/receive cryptocurrency or even collect event tickets. Converse flipped the traditional crypto wallet model by embedding it inside a messaging app, elegantly and without obfuscation. 

In the money transmission field, several new apps are vying to replicate Venmo’s popularity with a fresh approach. Among them are Beans, Code, and Sling. Even Coinbase has entered the fray with the simple thought of generating a special link that can be shared across messaging apps to enable stablecoin transfers. 

What is common to all these lighthouse examples is a voluntary design goal to not force the user to geek out on Web3 from the first encounter. Rather, Web3 is hidden and appears at the right moment, allowing the user to get their feet wet before deciding to venture further. 

Blockchain purists might disagree with this approach by stating that everything must be decentralized from the get-go. They argue that, if you sign on with Google credentials, for example, you’re defeating the purpose of decentralization.

However, the counterargument is grounded in user experience best practices: let users take Web3 in incremental doses. Small, familiar ones first, bigger ones later.

If we want early adopters to invite their friends into Web3, we need to let them ease themselves into it by tucking crypto features under a Web2 veneer. You don’t typically get too many first chances. 

By prioritizing user-centric design, Web3 can truly revolutionize the internet experience, making it more accessible and intuitive for everyone.

In the long run, the popular blockchain protocols that we know today will be little more than stepping stones for developers. They are not legitimate consumer on-ramps. The true on-ramps will be user-friendly apps that will bring in millions of users.

A version of this post was publised in Fortune Crypto, These Web3 companies are embracing Web2 principles to reach users more interested in restaurant rewards than blockchains.

Beyond the Blockchain Infrastructure Layer Wars: Embracing the Interoperable Future of Apps and Services

“Technical people don’t ask the right questions.”
– Henry Kissinger (1923-2023)

In blockchain technology, a heated debate persists surrounding the efficacy of various infrastructure layers. On X (formerly known as Twitter), proponents of Ethereum (ETH) and Solana (SOL) have been engaging in a ‘pissing contest’ debate, arguing over the merits of their respective platforms. [Here are two links to such discussions: Link1 and Link2]

These infrastructure layers are simply a means to an end, and this debate overlooks an important vision and fundamental aspiration: to become a global interoperable network of blockchains with Apps and services on top. This vision transcends the limitations of individual platforms, fostering a cohesive environment where applications and services can operate seamlessly across diverse protocols.

ETH, SOL, L1s/L2’s: Stepping Stones for Developers, Not Consumer On-Ramps

While leading blockchain protocols such as Ethereum or Solana play crucial roles in the blockchain landscape, they primarily serve as developer tools, enabling the creation of innovative decentralized applications (dApps) or augmenting Web2 ideas with Web3 capabilities. 

However, blockchain protocols do not directly cater to mainstream consumers. Instead, they serve as the foundation upon which consumer-facing applications will emerge. The applications, not the underlying blockchains themselves, will act as the real on-ramps for consumers, via user-friendly interfaces and intuitive experiences.

Moving Beyond Pointless Debates

The ongoing debate between vocal Ethereum and Solana enthusiasts often delves into technical minutiae and pedantic discussions over ‘degrees of decentralization’, transactions finality speeds, scalability factors, fees, validators conditions, governance methods, etc. These debates, while intellectually stimulating, tend to forget the overarching success factor for blockchain technology: to empower individuals to become regular users of blockchain-based applications.

Prioritizing User Experience and Market Reach

As blockchain technology matures, the focus of discussion, attention, and activity should shift from infrastructure layer ‘turf wars’ to cultivating a rich ecosystem of user-friendly applications that are interoperable across the patchwork layers of the underlying infrastructure. These applications will target diverse market segments, providing tangible benefits and exceptional user experiences.

Revisiting Blockchain’s Core Principles

We should not lose sight of the fundamental principles of blockchain technology amidst the noise of the current landscape. Blockchain’s inherent value lies in its ability to facilitate peer-to-peer transactions while eliminating the need for unnecessary central intermediaries. At this point of maturity, all leading blockchain protocols effectively achieve this core objective.

Beyond the above core principle, blockchain technology also encompasses mechanism design and smart programming logic as another blockchain ‘first principle’ of sorts. While each protocol approaches this aspect differently, most have demonstrated this capability. 

Consumer Indifference to Blockchain Infrastructure

The average consumer will ultimately care less about the underlying blockchain infrastructure powering their applications. Instead, they will prioritize functionality, convenience, and a seamless user experience. 

The field remains wide open for imaginative mainstream consumer applications. These applications may operate on diverse blockchain platforms or even transcend blockchain entirely, utilizing the technology’s underlying principles without explicitly exposing it to users.

Let me illustrate with two examples I’m familiar with.

To the user, Blackbird looks like a restaurant loyalty application. Tucked somewhere in a corner of its technology architecture, you will find blockchain technology in the form of unique, non-transferable certificates (NFT-based) that users earn as a status symbol reflecting their customer loyalty activity. Also, in there, you will find a private currency equivalent to airline points, except that rewards gained are redeemable for restaurant perks with very low levels of transaction friction.

In the field of decentralized finance, Prime is a cross-chain prime brokerage that allows users to deposit, borrow, repay, and withdraw cryptocurrency across 8 different chains seamlessly. This sounds like a banal feature when compared to traditional finance where interoperability is taken for granted (albeit with a lot of friction). That said, Prime represents the leading edge of where interoperability exists in blockchain technology.

Let’s Embrace Interoperability and Innovation

Blockchain ecosystem players should move beyond the infrastructure layer wars and embrace a more collaborative approach. Interoperability between blockchains is paramount to achieving the shared vision of a global, interconnected infrastructure. Applications developers should focus on building innovative applications that cater to diverse consumer needs, while infrastructure layers should continue to evolve and adapt to support this growth. 

Ultimately, the success of blockchain technology hinges on its ability to empower individuals through user-centric applications that deliver tangible benefits.

The future of blockchain is about the applications that empower users rather than the battle between different layers.

Re-Thinking DAOs as an Evolution of Coops

We should stop trying to force DAOs to exist based on their current path of evolution if they want to be a positive part of the blockchain future.

There is no doubt that most DAOs from the cohort that mushroomed during the 2020-2022 period are floundering, or being very loosely successful. 

Yet, some pundits continue to profess a type of analysis that obscures instead of enlightens. Machiavelli for DAOs: Designing Effective Decentralized Governance struck me as a very unrealistic opinion about how to design decentralized governance by espousing Machiavellian principles. 

One of the biggest problems is when we see DAOs as a lever to eliminate the need for human management. This is a naive and misguided assumption. No organization can run on autopilot, and DAOs are no exception. Even when you inject the strong community component that is always part of DAOs, communities also need to be managed with human intellect. In fact, DAOs can be even more difficult to manage than traditional organizations, due to their decentralized nature and the diversity of their shot-gun stakeholders.

We need to stop trying to force decentralized organizations as a panacea for something that doesn’t need it. And we need to be realistic about what’s viable. 

There is validity in rethinking the way we design and implement DAOs towards more simplicity, not complexity. We need to move away from the idea of DAOs as completely autonomous organizations, and instead think of using DAO constructs as a complement that espouses the novelties of blockchain and cryptocurrency. Maybe DAOs are meant to be a complement to something else but not an entirely standalone thing. 

I don’t mean that we need to throw the whole concept away. There are some very good embedded ideas, at the high levels:

  1. Decentralization is a good anti-single point of failure.
  2. Automation with embedded smart contracts does bring operational efficiency. 
  3. Community/user voices with decision-making influence have their benefits. 
  4. Giving back parts of the economic gains to participants that contributed to wealth creation is the right thing to do.

The “autonomous” part in the DAO vocabulary is perhaps the most misleading, misguided, and certainly the weakest part of the equation. 

Management by committee, delegation, or populist votes is a terrible idea. Conflating blockchain consensus mechanisms with human decision-making is blasphemy against human intelligence and decades of sound management practices. 

Voting on decisions, when you have an economic or ideological stake, is not a bad idea, even if it’s only a directional vote that could influence a future decision, but thinking that this is sufficient for running organizations or projects is a naive assumption. 

On the regulatory side, being “autonomous” doesn’t absolve an organization (or its instigators) from the rule of law as set by governments or regulatory authorities. 

Maybe DAOs could be applied when there is predictable repeatability, no issues, no surprises, and when a given system is stable. These difficult simultaneous conditions narrow DAO’s applicability field tremendously. 

The cooperative (Coop) corporate business model is the closest to the DAO concept. I think the industry should work more diligently to extend and adapt the Coop model instead of trying to push DAOs as we know them today. 


Source: https://coopcreator.ca 

Platform cooperatism is a concept that was recently introduced. It is described as “businesses that sell goods or services primarily through a website, mobile app, or protocol.”

This article, ‘Staking’ Identities: Looking at the Practicalities of Transforming DAOs Into Co-ops looks at the similarities between DAOs and Platform Cooperatives.

We can draw a lot of inspiration from the cooperative Coop model. At their core, coops are businesses that are owned and democratically controlled by their members. That happens to be the primary goal of DAOs, which is why the match is worth exploring seriously.

By combining the best of DAOs and the best of coops, we can create a new type of organization that is democratic, equitable, and resilient.

12 Things the Crypto Industry Needs to Get Right

It’s going to take a long time to get back on track

It’s the end of summer and return to work or school for many people. Crypto has had a boring summer, no matter how you cut it. In terms of prices, we’re pretty much where we were 90 days ago, roughly. (See chart below)

However, beyond that quantitative metric, the industry malaise will continue as long as we have a hostile US regular (the SEC). Sadly, the crypto industry has a lot of headwinds to fight through. Every bit of good news is quickly tempered by regulatory realities.

The non-US market that wants to shrug off the SEC is not so immune to what happens in the US. The US is still that locomotive engine that needs to go full speed to power the rest of the industry. So, we can’t just depend on the rest of the world to pave the way on its own.

What could lift things permanently is a lot of things:

1. SEC change of regime and / or change of rhetoric

2. US Congress passing some law(s)

3. Bridges working seamlessly between L2s & from Ethereum to non EVM chains (eventually it should be just “VM”,- the blockchain as one virtual machine)

4. Many more consumer apps with a dead-easy mainstream user experience, leading to millions of committed users that use these apps daily

5. Spot ETF products for Bitcoin & Ethereum (a few of them)

6. Lower gaps between promise and reality for any new / existing blockchain projects (ie lower the hype)

7. No extraordinary bad actors for a full year (ie no significant scams or security exploits)

8. Moving the conversations away from the technical realm that currently dominates (speeds & feeds won’t matter much, but interoperability & user experience will matter). Degrees of decentralization debates are overdone.

9. Players consolidation at the L1 level which is Ground zero (there are far too many competing & non-interoperable L1’s & that works directly against much needed network effects) [related to #3 & #9]

10. Established companies adoption of blockchain / crypto not in an opportunistic way, but more fundamentally

11. Emergence of better / newer / more (human) role models in the crypto space

12. Crypto techies that can better explain the business aspects and applications of what they are building; less tinkering, more useful tech. We also need more no-code tools to put in the hands of non-tech users.

Of course, all these points are being worked on. That’s the good news.

The bad news is that it will take a while to get there as these aren’t going to be realized overnight.

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