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From the perspective of the development history of Web 2.0, what new business models can Web 3.0 bring us? If Web 2.0 represents the virtual digital mapping of the physical world, Web 3.0 is the first time that the economic system is embedded in the underlying code, endowing native digital assets with real value. Whether it is for enterprises, users, or investors, the roles have started to be exchanged.

The future impact of Web 3.0 will have great significance, but the question is, which business model will provide the latest and sustainable value for today's economy?

Web 1.0,image description

Evolution of web 2.0 and web 3.0 business models, - Source: Fabric Ventures

Before delving into the ecosystem promoted by Web3.0, let's first take a look at the successful business models brought to us by the Web2.0 era. When it comes to successful cases in the Web 2.0 era, what I have to say is the development stage of Google from 1988 to 2002 before it went public in 2004:

In 1999, although Google had good traffic, they were still looking for a suitable business model. Google's main investor Mike Moritz (Sequoia Capital) once said, "We really couldn't find a suitable business model. For a while, we felt very hopeless."

In 2001, Google's revenue was $85 million, compared with rival Overture's $288 million, as the CPM-based online advertising business was in decline after the dot-com bust.

In 2002, using Overture's advertising model, Google launched the AdWords Select product: this is Google's own search advertising product based on pay-per-click and bidding.

Two years later, in 2004, Google obtained an 84.7% share of the entire web search business, and obtained a valuation of US$23.2 billion through an annual revenue of US$2.7 billion.

After four years of hard work, small changes in the business model put Google on the right track and became one of the most valuable companies in the world.

• Review the business model of the Web2.0 wave

content area

• The earliest version of the online content field was only reflected in the digitization of existing newspapers and books, but now Rome (Alfonso Cuarón, a self-made network drama) has received 10 Oscar nominations through the subscription streaming giant Netflix.

consumer market

• Amazon started out as an online bookstore that no one thought would be profitable, but it has now evolved into a commercial behemoth that encompasses everything from gardening equipment to healthy food to cloud computing infrastructure.

open source software

• The development of open source software initially started as an interest, and it was hoped that the software would become a publicly available product for free. Now the entire Internet is running on open source software, and it has created a market value of 400 billion US dollars every year. Among them, Github was acquired by Microsoft for 7.5 billion U.S. dollars, while Red Hat provides services for Linux, with an annual revenue of 3.4 billion U.S. dollars.

Software as a Service (SaaS)

• The unbelievable point of the early stage of Web 2.0 includes: After completing a large amount of infrastructure investment, people can complete business software through a browser and obtain economic benefits from it, and most of the B2B business systems now run on the SaaS model.

sharing economy

• It used to be hard to believe that anyone would be willing to take a stranger’s car or rent out a spare room to travelers, but now Uber and AirBnB are the largest taxi operators and accommodation providers, but they don’t own any cars or assets.

Although Google and Facebook experienced super-fast growth initially, they didn't have a very clear plan for increasing revenue. Now the online advertising model has proved to be very suitable for them, and they have already obtained 58% of the global electronic advertising revenue (the total amount was 111 billion US dollars in 2018), which has also become the main business model in the Web2.0 era.

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Emerging Web3.0 business models

Looking back at the development of Web 3.0 in the past 10 years, the initial business model tends to be repetitive or scalable, or simply replicates the Web 2.0 model. While there is still some skepticism about the viability of most of these business models, smart industry builders will keep going and build extremely valuable models over the next few years.

• By exploring more mature Web3.0 business models, we can understand how these models will increase value in the following time.

• Issue native assets

• Hold original assets and build a network

• Speculation Tax (Trading Platforms)

• Pay pass

• Burn Token

• work pass

• other models

Issue native assets

Starting with Bitcoin, Satoshi Nakamoto used Proof of Work to create the first fully open peer-to-peer network. This business model is based on its native asset: BTC. It is a provably scarce digital asset used for block reward payments to miners. Other projects including Ethereum, Monero, and ZCash have followed this path, releasing ETH, XMR, and ZEC.

• These native assets are necessary for the entire distributed network architecture, and are also very meaningful for network security: by giving enough incentives to honest miners to provide hashing power, as the price of native assets increases, fraudsters will attack The cost will increase; at the same time, with the increase of network security, it will also lead to more people's demand for this asset, thus further increasing its value and price.

Hold original assets and build a network

Therefore, many early-stage companies entering the crypto asset industry have a goal: to make their networks more successful and valuable. Their final business model is often: "By increasing the value of their native assets, thereby building the entire ecosystem."

• While the idea was a perfect fit for these companies, the business model was difficult to replicate in the industry's earliest stages: the tears and blood involved in starting and sustaining a company would be difficult without enough stakes to generate exponential returns. To achieve success, however, this relationship cannot be reversed. For example, it is obviously very unreasonable for any other business model other than the central bank to understand its business purely as relying on holding a large amount of dollars.

Speculation Tax on Primary Assets

• At the current stage, the business model of the first generation depends on the financial infrastructure of these native assets: trading platforms, custodians, and derivatives providers. These are all based on a simple business goal: to provide services for users to trade these assets. Now, many trading platforms are already multi-billion asset-level companies, and they have no monopoly characteristics for the time being: they provide users with a simple trading environment and increase the value of the underlying network. The open and permissionless nature of these underlying facilities prevents trading platform companies from gaining a monopoly position by providing "specific services", but their liquidity and brand also provide trading platforms with a defensible moat.

Payment Type Token

• With the rise of token sales, projects related to payment tokens in the blockchain space are gradually emerging: this will create a two-sided market and allow these tokens to be used for any payment behavior. As the economic value of these networks increases, so will the demand for such limited-issue payment tokens, and thus the value of these tokens. Although the value of this type of token model is still controversial, the transaction fees for users have increased significantly. Fees that could be paid in ETH or DAI in the past now require both parties to pay additional fees. While this model was widely used in 2017, its friction-inducing properties have rapidly removed it from the forefront of development over the past 9 months.

Destruction Type Token

• Enterprises and projects based on the benefits of the community may not always be able to directly bring the benefits of the pass to the pass holders. Some projects use the method of repurchasing the pass from the open market and then destroying it. The reduction in the supply of certificates, thereby promoting the increase in the value of the certificate. However, some people say that this type of buyback is not equivalent to an equity buyback, because no dividends are paid at all, and the "income per token" is always zero.

Work Type Token

One of the current business models in the cryptoasset network is work-type tokens: this model will focus on the way the network generates revenue for providers, thereby reducing transaction fees for users. Work tokens require service providers to mortgage a part of the original token assets to gain the right to obtain income from the network. One of the most powerful aspects of this type of token model is the ability to be both sweet (rewards for work) and red flags (collateral is repossessed). In addition to ensuring the security of the network by incentivizing service providers to contribute to the network (since service providers have staked token assets), they can also be evaluated by providing predictable future cash flows to service providers collectively. In simple terms, such tokens can be valued based on predictable future cash flows, which can be modeled based on assumptions about network pricing and usage.

• There are many other models that are being explored and are also very worthy of attention:

• Dual-token model: the price of one of the tokens will fluctuate, and the other token assets will serve as stable coins for more efficient transactions.

• Governance tokens: These tokens allow holders to influence transaction fees and development priorities, as well as decide whether to fork.

• Tokenized Securities: Electronic representations of existing assets (stocks, commodities, invoices, and real estate) whose value is based on an underlying asset with a potential premium for divisibility and borderless liquidity.

• Transaction fees for obtaining functions: To improve functionality (such as scalability and privacy, etc.), pay a small amount of transaction fees.

• Provide UX/UI services for the agreement, and charge a small amount of referral fees and commissions.

• Network specific services: now include staking service providers, CDP managers or market management services, these will charge an additional fee (subscription fee or a% of revenue)

Liquidity service providers: operating in applications without a revenue-generating business model, some automated market maker service providers can only obtain income by providing liquidity.

As the value of these new business models gradually emerges, we can clearly see that for traditional venture capital, the roles of investors and capital have reversed. Capital itself evolves into a native asset in the network and has a specific role. From passively participating in the network to actively promoting financial investment in the network (such as computing power or liquidity), to directly promoting the network through various operating models (such as governance or CDP risk assessment), investors need to The new organizational structure of the centralized network needs to be repositioned.

If we look back at the past, we explored the Web1.0 and Web2.0 ecosystems to find a suitable business model, which also created the current technology giants. At the same time, we will not ignore the fact that the Web 3.0 era will still have a difficult journey in the short term, but once a mature business model is produced, the network will become incredibly powerful: the decentralized network needs Minimized trust, so individuals and businesses can transact with each other without relying on and finding third-party intermediaries.