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, Author: Wendy Xiao Schadeck, working for venture capital firm Northzone, Compiler: Lone Bird, published with authorization.

The term "Web 3.0" confuses me a lot at one point, as it implies that we're all about building an "upgraded" web, and that there seems to be a huge plan to convert all users to Web3. on this brand new network.

It feels like predicting the future, but as a VC, I don't feel like doing that kind of thing. On the contrary, if we want to do our job well, we must listen carefully to the opinions of builders and users, constantly search for various information, and based on these inputs, use brainstorming methods to propose what we may see and what will happen in the world in the future Some "guess" about some changes.

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Technology Life Cycle Application Curve in the Web 3.0 Era

This is a bottom-up and iterative process, and these "conjectures" are often contradictory and dynamic. But for me, Web 3.0 is definitely not a single version - I believe this idea will be more acceptable to everyone.

In fact, when I embed our investment philosophy into this emerging theme, I first focus on a basic principle, that is: the underlying infrastructure, that is, the protocol, will gradually evolve into the driving force of the next-generation network paradigm. In my opinion, Web 3.0 is more efficient at coordinating certain types of work than centralized corporations, with less loss of value.

Of course, we have to admit that it's a bit premature to talk about any topic of end-user value.

In fact, this has always been a question that Web 3.0 cannot avoid: Compared with products in the Web 2.0 era, what new value does Web 3.0 provide end users?

Admittedly, many builders in this field were initially attracted by the early ideologies of privacy, decentralization, and self-sovereignty, which some mistakenly believed to be value orientations. However, for the average end user, they will not adopt these new technologies for these reasons.

Looking at the past few years, we have seen more and more "user-centric" builders enter this ecosystem and make this ecosystem full of vitality and hope. Generally speaking, the biggest feature of technological innovation is its ability to connect some isolated points through incremental compounding.

In recent years, I have been paying close attention to Web 3.0, and at the same time I am also studying some extensions of the Web 2.0 era, including e-commerce, big health, financial technology, and developer tools, etc. However, in the past six months, I suddenly discovered that the value propositions of the fastest growing Web 2.0 startups were "naturally" possessed by the early Web 3.0 startups.

These signals indicate that the value proposition that Internet users are actively looking for is already "ready to go" in the Web 3.0 protocol. Of course, this is not enough to say that we are "crossing the chasm", but at least we have begun to see the "bridges" being built.

community product

source:https://www.cnbc.com/

We've learned that many of the most successful companies in the Web 2.0 space are those that have gained recognition from users because of their community. The Peloton community is called fans by reporters as "Cultish" (similar to "Holy Church"). It is not unreasonable that many die-hard fans are proud of Peloton tattoos. (Chain news note: Peloton is a fitness equipment and media company headquartered in New York, established in 2012. Peloton, which relies on the "content + hardware" profit model to quickly break through, has become a learning object for many fitness products, known as "fitness field of apples")

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source:

Ebullient, supportive yet competitive fans, led by celebrity mentors including celebrity actor Hugh Jackman, Olympic champion sprinter Usain Bolt and even billionaire Virgin Group founder Richard Branson, A strong product effect has been formed, and it is far beyond the kind of fanaticism of previous generations of spinning bicycles. Now, Peloton has 1.4 million paying users. Users need to pay a one-time payment of US$2,245 to purchase an advanced bicycle. Now they can also pay in installments, paying US$58 per month for a total of 39 months.

Like Peloton, Glossier (one of the most well-known Internet beauty brands in the United States), MongoDB (a database based on distributed file storage), and our invested company Na-Kd (an online shopping website in Sweden), etc. To a large extent, they rely on their respective communities, and then improve their products in various ways.

The help of the community to the enterprise is that the community can provide functional value, such as content production, product development, marketing, customer support, open source code, and more subjective value, such as a sense of belonging, sense of purpose and social status, etc. After acquiring users, the community also provides a good retention mechanism. It allows users to relate to their interests, and the company can have more interactions with users, while paving the way for more profits in the future.

Rebecca Kaden from Union Square Ventures USV wrote a great article on this, and Jeff Bussgang from Flybridge wrote a great article on How to Make the Community Your Moat. More importantly, this scale effect of the community is compound, and it is difficult to replicate for those "new players" who want to get on the table.Web 3.0 protocols can power communities in a way that Web 2.0 companies cannot. One of the reasons many communities struggle to scale is because they often rely on an arcane set of rules that are hard to define, articulate, and even hard to enforce. The community is likely to be led astray by some bad actors, and if the managers of the community cannot correct the direction quickly, its product experience may be "destroyed" forever. For example, Chatroulette, the pioneer of video chat (Chain News Note: This is a random video chat website written by a 17-year-old high school student in Russia at home for two days) because the control speed of a small number of "exhibitionist" users is not fast enough. ruined.

In addition, the community is also facing the "tragedy of the commons" (chain news note: The Tragedy of the Commons, proposed by the American ecologist Garrett Hardin in the "Science" journal in 1968), because the community is a public product , once a resource is freely available to all, its utilization becomes very inefficient because people behave "selfishly". By codifying and enforcing a set of rules to govern these commons, Web 3.0 protocols can make communities stronger and scale faster.

For the theory and solutions of the tragedy of the commons, you can refer to this article:

Revisiting the Conundrum of Open Community Governance: Why is Commons Governance Difficult to Realize?

Specifically, the Web 3.0 protocol allows more participants to directly participate in the game. By continuously adjusting the incentive mechanism of the community, it can clearly define the boundaries of group activities, make behaviors more transparent, and provide a solution to various disputes. Provides a practical and effective means.

Let's set aside the above discussion for now. It is undeniable that from the perspective of the evolution of the entire network and the scale of deployment, the Bitcoin network can be said to manage the global value store, or the Bitcoin network is equipped with global digital currency sharing resource pool.

At present, there are countless "mining" hardware in operation around the world. Power plants around the world are providing enough power for the Bitcoin network, and have never guaranteed a computing power of 100K PH/s. It is said that the power consumption of the Bitcoin network Already used as much as the whole of Australia. Some community members have also established their own companies, and they continue to "Amway" the "benefits" brought by Bitcoin technology to the public. Members of the Bitcoin community also use labels such as "HODL" and "(Bitcoin) maximalism" to reinforce their "circle" culture. Of course, they never forget to "market" themselves.

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The Bitcoin Guy: Bitcoin players are using various means to market

Financial product

In Web 2.0, we're starting to see companies adding features like payments, money management, or more complex financial features into their products. Moreover, in the traditional financial industry, these financial services have always been relatively independent, and even many product experiences will be ignored, but often these services always bring great troubles to users.

For example, when you take a taxi to work, you need to apply for a credit card first, then swipe the card, then manually retrieve the receipt, take a photo and save it, and finally enter the company's expense system. The driver collects the fare calculated by the taxi meter, then enters the total amount of the fare into the credit card machine, pays by swiping the card, and then saves the other half of the paper receipt, enters this part into the account, and waits for a few days , the money will be processed through the taxi fund system, and finally will be transferred to the driver's bank account, and a considerable part of the money will be withdrawn as a handling fee. The main reason for this very fragmented and poor user experience is because of this extremely complicated payment and clearing process.

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Payment process, source: Finix Blog

Therefore, when Uber created a taxi service, it brought users a "seamless" experience that many people did not expect at all. We no longer have to think about how to pay and how much we should pay. The driver can also see the income of this order directly in his bank account. Of course, this is also one of the core reasons why companies like Uber can win the market, especially as "payment" has become a very core part of the product experience.

The ultimate payment experience can help you create a very successful product. Your customers may have different needs and pain points, including any needs related to cash flow, such as helping restaurants manage cashiers (Toast, a mobile POS payment company), repaying commercial loans through bank cards (Square, an American mobile payment company), issuing some Employee benefits (Starbucks), simplified cashier model (digital signature service DocuSign), automated reconciliation (corporate expense management Airbase), instant payment to drivers (Uber), etc.

If an enterprise has its own payment system, it can customize some capital flow usage plans to help solve the specific needs of customers. In this "product is king" world, creating a first-class payment experience is a top priority at the strategic level.

Pat Grady, Partner, Sequoia Capital

Klarna, which we invested in, was one of the first companies to help e-commerce companies establish "Dianrongdai" (chain news note: a service that helps users apply for instant loans) and a "try before you buy" checkout experience. This has helped the company win more than 80 million users worldwide and become one of Europe's largest tech "unicorns." This helps users avoid the hassle of finding a business loan based on some form of personal collateral, which of course matches users' spending history. Not only can it ensure that merchants receive cash in advance with almost no risk, but the company can also earn more money.

Faire is a handicraft wholesale platform. The company uses artificial intelligence and predictive analysis to predict which products will be out of stock, so as to make procurement and inventory management more efficient. They provide customers with a "no inventory risk" form of financial services . This model is also one of the key value factors that helped Faire grow from a YC start-up to a tech unicorn in just 2 years.

Thanks to its long 60-day payment terms, merchants can see if an item sells before taking out an advance payment. If you can't sell it, you can return it for free. This sounds simple, but for small stores, how to raise working capital for huge wholesale orders is one of their biggest obstacles, because the core task of small stores is to operate a large number of dynamic and easy-to-sell products.

In the past, whenever small shop owners encountered capital turnover problems, they had to go to traditional banks for loans, and traditional banks usually cannot cover the risks of small businesses, so shop owners are likely to use their own fixed assets as collateral for loans . For e-commerce platforms, such as Faire, because they have all the data of small shop owners, they can make almost certain judgments about the risk and sales ability of customers. At the same time, Faire also has the ability to deal with large platform suppliers, which can force these platform suppliers to share part of the risk. So in many ways, Faire is more capable of providing some credit loans to its customers, and making this work a core product feature to provide to these merchants. (Chain news note: similar to the small loan service provided by domestic Taobao for merchants)

Likewise, Amazon and Shopify are experimenting with similar working capital financing for their merchants.

However, to provide financial services in Web 2.0 products, enterprises need to "deeply cultivate", or to have very in-depth cooperation with banks, precisely because too "deep" cooperation may affect each other's interests , so a lot of "friction" may be introduced in this process.

While the Web 3.0 protocol has built-in financial services, enterprises and banks can continue to build on the basis of other existing protocols, and provide more complex financial services, extracting native rates of return from the native capital pools in each protocol.

Of course, in addition to typical on-chain transactions, there are also technical implementations of various types of payment services, from allowing video streaming companies to provide micropayment functions for each unit of video transcoding (chain news note: Livepeer is doing Things), to allow two people to reach a value exchange agreement, set it to a state that will only be executed when something happens (Chain News Note: What Livepeer is doing), and when paying for a subscription, share a certain amount with the publisher Proportional income (chain news note: what Unlock is doing). All of these transactions do not require a centralized institution to take any risk or extract any value from the transaction.

For example, MakerDAO issued about $200 million in mortgage loans in the form of collateralized debt positions in the first year of product launch, while Lending Club took five years to issue $250 million in mortgage loans. Maker maintains the price of the stablecoin in the form of collateralized debt positions, so that other apps can try to let users use this cryptocurrency pegged to the value of the US dollar; dYdX and Compound have borrowed about 50,000 tokens in the past 30 days, About $270 million in mortgage loans were issued, which provided strong support for margin trading and lending apps.

To their users, many of the business models in these protocols look similar to Web 2.0-era APIs (as explained by a16z's Jesse Walden). These protocols abstract traditionally very complex financial products, enabling smaller innovative companies to provide complex financial services without raising large amounts of capital.

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data product《The State of API 2019》

In fact, many companies in the Web 2.0 era are discovering and producing more "portable" data, and these data can achieve cross-application intercommunication. For example, when we use many App products, we can register directly through WeChat or Alipay accounts, without having to enter our various identity information.

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As more and more enterprises transform to the microservice architecture, various APIs have begun to proliferate, because we can decompose a single application into smaller components, which will generate more data feedback and integration. Node. This also means that enterprises begin to have more ways to monetize data streams, and it also means that the new generation of companies also have more ways to build on the original data foundation.

For example, Plaid, a fintech company acquired by Visa for $5.3 billion, and Truelayer, a company we invested in, both help banks share customer data with other applications (with user permission, of course).

In the past, fintech companies had to build a bespoke system in each bank a customer used to collect customer data and manage all sensitive information. Now, the new customer system can be easily connected to a very secure data source provided by each bank, and a series of value-added products can be built on this basis. We've seen a similar shift in healthcare data and employment data. Today, there are more than 50,000 public APIs, and more than 60% of the companies surveyed said that they have invested a lot of resources and manpower in public-facing APIs and surrounding infrastructure. (Data from "The State of API Integration Report 2019")

With the government's supervision of data privacy (information security) and consumers' attention to their own data security, companies have also begun to accelerate various protection and value discovery in the data field. Consumers hope that they can "disappear" from corporate data, or that companies have the right to use their own data only with their consent; companies like OneTrust, BigID, and our investment company Sourcepoint also It is helping companies to make consumers' data more convenient, fast, and portable, and to truly circulate data.

At the same time, enterprises must rebuild based on the display screens of various end users, which requires the "decoupling" of back-end data and front-end development. Hundreds of millions of IoT devices, mobile and web, all need to be displayed, and they all need to access the same data source through back-end services to ensure a unified customer experience. Tools like Firebase, Heroku, and Amplify help businesses build pluggable backend data storage services that can talk to frontend platforms through APIs. And companies like Gatsbyjs and Hugo help front-end developers quickly build web pages that can be plugged into these back-end services, thereby improving the performance and security of back-end services.

Just like after Web 1.0, the network layer of software development was abstracted, and with the rise of tools such as cloud computing, containerization, Serverless, and Jamstack, back-end services seem to be gradually abstracted.Although more data components allow more and more developers to quickly build customized, full-stack App, but at the same time, for them, browsing tens of thousands of public components and non- Standardized data sources will make them "daunting", and the cost of building new products will become very high.In addition to data services, Web 3.0 protocols can also provide other pluggable backend functions, such as computing, content management, file storage, content distribution, location services, and authentication services. However, in terms of performance, many functions are still in the early experimental stage, but when enterprises prepare to build network services, these abstract back-end services should be considered. Joel Monegro from Placeholder in an article called "

thin application

"The article explained in detail the reasons for doing so.

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This is a new beginning!

The blockchain world is full of endless "controversies" with countless "scams". In 2017, a large amount of capital began to pour into the cryptocurrency market, which unintentionally pushed forward the construction and repair of many important Web 3.0 infrastructures. But most people don't care about these basic tasks at all, and only a very small part will be paid attention to by the public.

However, it is a little heartening that after years of close observation, we suddenly found that the investment theme of Web 2.0 is quietly evolving into the direction of Web 3.0. In a sense, the two are beginning to converge, and perhaps we are already on the road to Web 2.5.