Back in the 90s, crypto expert Nick Szabo coined the term "smart contracts." In a paper published in 1997, he wrote that smart contracts "combine protocols with user interfaces to make relationships in computer networks more formal and secure." In short, smart contracts are self-executing, and their buyers and sellers The terms of the agreement between them are embedded directly in the line of code.
Szabo explained smart contracts using the example of a simple vending machine.
In vending machines, the trading rules are programmed into the machine. You press the numbers, choose the items you want to buy, and put in the money. If enough money is put into it, the machine will spit out the product. The written rule thus executes a transaction.
Smart contracts work on a similar principle, and they are critical to Web3. Write the rules directly into the code, and the smart contract can be traded without going through an intermediate link. Vending machines allow you to buy snacks without going through a vendor; smart contracts allow you to get anything done without going through a banker, accountant, lawyer, or other middleman.
Web3 is a hot word in 2021, and it will become more mainstream by 2022. Maybe it can become an early contender for the "Word of the Year" in the Oxford Dictionary?
In media reports, "Web3" is rapidly replacing "crypto" (encrypted currency) as the general term to describe a decentralized, user-owned secure network. This is a good thing in my opinion: Web3 connotes progress and innovation, while crypto (cryptocurrency) is associated with complication, speculation, and a dozen other negative associations that have (unfortunately) fallen apart over the past decade. Being solidified could derail the sport today. Web3 may be a necessary rebranding.
But here's the thing about Web3: most people will never know it exists.
The reason is that Web2 is a front-end revolution, while Web3 is a back-end revolution. In other words, Web2 reshapes the interface that people interact with, while Web3 rebuilds the mechanism behind the screen. That doesn't mean Web3 won't be an equally important movement -- one that will revolutionize industries and reshape outdated power structures. For individuals, companies, and organizations to succeed in Web3, they must be able to abstract away its complexity.
For example, one does not need to understand how cryptocurrency mining works, nor do they need to know about mining equipment. In fact, it might be better to hide these things in the background.
The average person doesn't understand blockchain, fungibility, or stablecoins. They don't need to know either. Most people today don't understand HTTP, the Hypertext Transfer Protocol developed in 1989 to power the World Wide Web, yet they rely on it every day.
That's why a vending machine is a great metaphor. Most people don't understand how vending machines work, but the average person spends $62 a year on them. People don't need to understand the inner workings -- unless they're a vending machine maintenance guy. (To draw an analogy in our digital world, they might be smart contract engineers.) But people know enough: you put money in, and a can of soda comes out. This is enough.
Web3 has not yet "crossed the chasm" - we are still in the "early adopter" phase of the technology adoption cycle. Although OpenSea has a transaction volume of $14 billion in 2021, it only has about 250,000 active buyers and sellers; 70% of the transaction volume comes from only about 20,000 users. Ebay has 183 million buyers.
To become mainstream, Web3 needs to be easily usable by ordinary people. One way to do this is to abstract complex concepts with accessible metaphors. I'll give two examples that I use often, both from the excellent book Token Economics by Sherman Washgill.
Analogy 1: Web3 wallets are like real wallets.
Your Web3 wallet is your gateway into the Web3 world. In its simplest form, your wallet is a piece of software that allows you to send and receive cryptocurrencies securely without relying on third parties. You can use MetaMask on Ethereum , Phantom on Solana, or Terra Station on Terra . In order to enter the Web3 world, people need wallets.
Thankfully, a "wallet" is a familiar concept — and Web3 wallets operate in familiar ways. Just as your physical wallet contains your driver's license, gym membership, Costco membership, and other identities, your digital wallet contains your digital identity. Just like when you swipe your card at a bar, you need to open your physical wallet to show your identity, and you open your digital wallet online to show your digital credentials. For example, when I buy something on OpenSea, I flash my MetaMask wallet.
Wallets contain two types of keys: public and private. The public key is equivalent to an account number, which can be shared with anyone at will. However, private keys are (unexpectedly!) private—you can think of them as a password that only you know. But Washgill uses a metaphor that I like better — and this is our second metaphor:
Metaphor 2: A public key is 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 me a (unlocked) padlock and you to keep the key. I put my letter in a box, lock it with your padlock, and post it back to you. Only you, with your padlock key, can open it to receive messages. The padlock is the public key; the key to your padlock is the private key.
People understand these concepts intuitively because they are nothing new. But what is lacking today is a solution for Web3. For example, MetaMask was originally designed for developers. Even though it has more than 20 million users, it's far from intuitive. Products that win in Web3 must remove all complexity. For billions of people to use Web3, the product needs to be extremely simple and elegant.
Beyond specific metaphors, there are some broad concepts familiar to the public that will help demystify Web3.
Take decentralization as an example. "Decentralization" is a daunting word. People embrace centralism and the existence of those in charge; decentralization can convey a state of loss of control if expressed incorrectly. But instead, decentralization should convey a sense of autonomy — that more power and wealth flow not to the gatekeepers, but to the people. I often think of Vitalik's words:
Most technologies tend to automate repetitive tasks at the periphery, but blockchain automates the center. Blockchain will not put taxi drivers out of work, it will put Uber out of work, because taxi drivers can work directly with customers.
The idea of "removing the middle man" resonated with people. “Power to the people” resonates with people — and it’s one of the reasons why ConstitutionDAO has been so successful (approximately half of the $47 million in donations received by ConstitutionDAO created their first Web3 wallets for donations). But these concepts are not perfect. People may ask, what if I want to make a complaint? I can no longer speak to Uber's customer service representatives. These are all issues that need to be addressed, and my view is that full decentralization will be an isolated case. Instead, the world will remain somewhat centralized while being more decentralized; again, most people want someone to take responsibility for things and are willing to pay a small fee for convenience and reliable service.
Another widely understood concept is scarcity. People may not understand the meaning of non-homogeneity, but they understand the scarcity or uniqueness of things. Any gamer understands scarcity in the digital world. Last year, gamers spent $54 billion on digital items in the gaming economy, and this spending will grow to $74 billion by 2025. In fact, Fortnite players are interacting with both physical fungible tokens (the in-game currency V-Bucks) and non-fungible tokens (the avatar’s skin).
The easy-to-understand concepts can also be extended to other parts of the Web3 domain. For example, people understand the concept of return on investment, and it might be helpful for some to see tokens through that lens. People also understand the concept of access, and tokens as tickets enable people to access content or activities that have a threshold, which will promote its further mainstream application.
DAOs, for their part, are more understandable as communities or democracies. DAO implements a democracy-like system. Most DAOs have very low "voter turnout" (like we do in the real world), and it's even more like a representative democracy. People trust others—designated authorities who are considered more “visionary”—to make decisions. Most people don't want to read lengthy proposals to make a decision, it's human nature. The community of the DeFi protocol Yearn recently proposed a decentralized governance system that allows YFI holders to elect committees for budget management and planning development.
When people stop using obscure words ("Ethereum", "blockchain", "fungibility"), and stop thinking of Web3 as a mysterious black box, they treat it as a set of easy-to-understand concepts ( "scarcity", "access", "community"), they will be more open to this new model. Products need to move closer to simplicity.
Back in the '90s, the web was just as elusive. Ordinary people simply don't know how to access it. Then AOL came along. AOL's slogan is "Easy to use, No. 1." AOL removes complexity with a user-friendly interface.
Jarrod Dicker and Jonathan Glick recently wrote:
Ted Leonsis, who led many of these campaigns, and whose company was acquired by Steve Case in 1994, once said, "I spend most of my time keeping things simple." One of the most apt and famous examples is Audio that rewards users for returning to the service again and again. It announces the reward in three simple words: "You've got mails!" (You've got mails!)
A natural question is: what will be the AOL of Web3?
The opportunity is huge. AOL's market cap at its peak was $350 billion in today's dollars. (Unfortunately, it ended up selling for about 1% of its value.) What would be the AOL of crypto? It will be a killer product that will enable billions of users to choose Web3, and this process should be logical and easy.
At the end of the day, Web3 requires two things. 1) Easy-to-use product 2) Killer use case. Winning companies will have both.
Significant progress has been made in the last year. For example, NBA Top Shot pushed NFTs into the mainstream. I can't provide the source, but I remember reading that about half of the people who bought the Top Shot NFT didn't know they owned the NFT - they just wanted to "own" that collectible sports moment in digital form.
What happens when owning a Top Shot NFT represents more than just collecting? What happens when having a Stephen Curry 'moment' is all you need to get a signed jersey? Or getting tickets to a Lakers game when having a LeBron James "moment"? These will be the breakthrough moments of Web3.
I wouldn’t be surprised if the term “NFT” fades over time, to be replaced by the more comprehensible “digital asset.” (That being said, the term NFT may have grown entrenched.) Or eventually—much later—we might just say "shirt" or "house," letting the context reveal whether we're talking about physical or digital items.
From an "easy-to-use product" perspective, better wallets are a good place to start. Intuitive wallets with multi-chain capabilities will go a long way in fueling this movement. From a "killer use case" standpoint, music and gaming are good candidates. Both will see a major turning point in 2022.
2021 is a big year for Web3, with significant progress on all fronts. However, most people still don't know what blockchain is. Importantly, that's enough -- they don't need to know, and they probably never will. The vast majority of people will never know they are interacting with a blockchain, as its complexities are hidden beneath a beautiful and familiar interface. As we go into 2022, that's the opportunity we're going for.
Catherine
Kikyo
Weatherly
Anais
Joy