Three is the Magic Number: Understanding Web3 & The Platforms of The Future
A recap of Part 1 of a Web3 Webinar Series hosted by Benson Oak Ventures
Benson Oak Ventures launched its Web3 webinar series at the end of April with its first event “Three is the Magic Number: Understanding Web3 & The Platforms of The Future”. The event hosted three of our Web3 founders: Ouriel Ohayon from ZenGo, Ortal Tevel from Colu, and KC from Lemonade Social.
Benson Oak Ventures invests in early-stage B2C and Digital SMB and all things related to the creator economy via Web3. We have a core thesis around Passionware - tools and platforms that enable anyone to start, grow and scale a business.
We have recently launched Benson Oak Ventures 2022, extending our thesis of B2C and B2SMB into the new world of Web3 - specifically what we dub “Passionware” - platforms that enable anybody to literally be their own business.
As a moderator, I asked the panelists to help break through buzzwords and share their views on Web2 vs. Web3 while breaking down some fundamental concepts around ownership and NFTs to help viewers form their own thesis on Web3. We concluded with thoughts on how to enter the space and get exposure to Web3 projects.
As an early-stage investor, BOV invests in products that scale to mass market consumption, regardless of whether via Web2 or Web3. We think of these as distribution methods. Web2 relies mostly on "large platforms" for distribution (with trade-offs required around sign-up, data, privacy, and impact on chosen business models), while Web3 is all about direct access (ownership) and utilizes incentives for community building, orchestrated by a common token. These are different tools, depending on the underlying use case, that unleash new types of business models and community growth.
BOV invests in Web3 around three core themes -- (i) Web3 Passionware (ii) the Metaverse and (iii) “Blockchain & Brands”. All use cases where Web3 infrastructure and tools can act as enablers for new forms of creativity and commerce. Our panel today represents three use cases of utilizing Web3 to unlock creativity and commerce.
ZenGo is Web3 infrastructure with its MPC-based wallet enabling mass-market access to crypto tokens and NFTs as a gateway to Web3)
Colu - first Web3 protocol for urban commerce so citizens can take part in their cities both financially and via governance, essentially incentivizing local commerce
Lemonade Social - digital platform for creators to use the Metaverse to connect directly with fans through digital events and commerce
Keep reading for more on each project and how they define Web3 and utilize incentives to grow their community, as well as the role of NFTs and advice on how investors can get exposure to Web3.
Our Three Bullet Summary is:
Web3 is all about Shared Ownership. We OWN the product as opposed to Web2 where we ARE the product
Economies can grow exponentially when middle-men are removed and anyone can enter to participate, transact and contribute
Think of NFTs as an instrument, not just a bubbly asset, which enables shared ownership and royalties - a new way to generate and divide e-commerce among individuals (a.k.a “Me-commerce”).
1. Web2 vs. Web3 - Key Insights
Ouriel Ohayon -
“Web3 is a way to label what the crypto industry is about… more like a continuity of what was the Internet about from the first early days. And I think this is why the expression has caught on, because if you think about it, the internet in the first days - the first web - was about companies publishing messages to the internet, with very basic portals and publications, the period of AOL, etc. Then the second age - Web2 - became where the web could be programmed in a way that makes it usable by users; you can actually publish information, interact with it, and build applications as if it was just basic software. It was read and write. But what happened is that we were writing on behalf of third-party platforms.
With the establishment of blockchain, users get to enjoy the economical benefits of what is being built and what is being contributed. So it's a third phase - Web3 - where the ownership or the investment that you put into a protocol or in the service comes back at you in some sort of economical way.
And it's a true revolution. That's why it's called web3.
Ortal Tevel -
Most of all, Web 3 is about ownership and communities. Web3 is based on technology, but it really opens up opportunities for social change. It enables communities to exist and flourish without the centralized authority, by showing ownership, and the ownership makes people own their data, impact decisions, shape the community and share the success of the community.
So when you hold a Web3 token it's not just the money, it includes the ownership part as well, and the influence in the community.”
In terms of my thoughts on web3, I'm learning by building, so I'll quote some words from Naval Ravikant: ‘everyone is a communist, socialist or capitalist’. They're all three. The only difference is what circles are you in? So for example, for me, with my friends and family, I'm a communist. With friends of friends and extended family, I'm a socialist. With people I don't know, I'm a capitalist.
Web2 has much smaller circles of communism and socialism, and in Web3, the rewards are much more distributed among the people who are actually making the effort to help the platforms grow.”
As a panelist, my summary was
“Web3 is simply shared ownership.”
2. Company Brief and how they use Web3 incentives
ZenGo is the wallet that is being used for all things, crypto, including NFTs, which is the best way to represent it. One of the things that make us unique is that they are the only wallet and that is removing completely the problem of the private key management, which is a major headache and a big issue for security.
“It's just a mobile app that you can use instead of any other one. And you can do everything with it. It can handle your entities, you can buy crypto, you can sell crypto, you can swap crypto, etc” - Ouriel
As for ZenGo’s incentives and approach in web3, Ouriel shares:
“The number one purpose of a crypto wallet, which is not an exchange, it’s a different thing, it's a primary interface where first you have complete control of your assets. They are on-chain. They are controlled by you and by no one else.
The function of a wallet is not just to store your valuables is to interact with the services that you're going to use on the blockchain. So it's a sort of wrap between your digital ID, your purse, your digital valuables, and the interface that you're going to use to navigate through the web. And this is why crypto wallets are so essential because they represent all three at the same time.”
Colu offers a centralized city coin platform for local governments. The purpose of the city coins is to drive economic and social prosperity, and it does so by increasing civic engagement and rewarding residents for taking actions for the good of the community, such as shopping locally, supporting diversity, or promoting sustainability.
They are incubating a new project for decentralized city coins, they call it the Urban Change Protocol and this protocol is an open-source protocol in Web3 that will enable any urban community in the world to have its own coins which can encourage residents to take action, stimulate the local economy, and share ownership.
Colu is already working with 10 cities in the US, including Boston and San Mateo county. And can show real success in numbers on how city coins can impact communities. For example, in Akron, during the pandemic residents doubled their shopping volume with local businesses using a Colu's city coin platform.
As for Colu’s Web3 incentives, Ortal shares:
“The most important thing for cities is civic engagement. This is the major need for municipalities. They want to engage the residents, but it's not easy to encourage residents to participate in city initiatives. And there are many reasons why it's hard. So it's a primary goal for them because it's through civic engagement, that they could improve their city in so many ways economically and socially.
The ‘ownership’ in Web3 is what really enables cities to achieve the ultimate civic engagement and to turn residents into active stakeholders. When residents are getting incentives with tokens that are much more than just money, they are also much more engaged”.
Lemonade is a platform that empowers creators and brands to create token gated events, shops, and community engagement.
Lemonade is used by creators, mostly musicians and brands, in the brand space, it's mostly fashion or FMCG brands that need to engage with an audience through some kind of brand experience. So to give examples, so one of the reasons musicians prefer the platform is because they can collaborate with other creators or brands, and split revenues.
As for Lemonade’s Web3 Incentives, KC shares:
“The advantage we have is we give no money to Google and Facebook to advertise lemonade, so creators spend $0 on advertising. Creators bring communities and communities bring their friends and friends of friends, and monetization protocols allow creators to reward their communities. So essentially what happens is if you're in the Web2 world, you host your event on Eventbrite, then the ticket that you buy sends you an email that sends you on zoom to watch an event, and then you go check out different Shopify products on different Shopify websites to buy products.
Lemonade unifies the whole experience and brings it all together through a common token that gives platform ownership to users and creators.
Creators spend most of their time on operations rather than on actually creating. They have to manage five to six different platforms and then they have to compete on social media for attention, which is crazy.
So essentially they're not really spending a lot of time on the passion side or on the passionware. So how we build products is just adding time back to the creator or brand’s life so that they're able to spend more time on engaging their communities and building products and services that are actually needed.”
3. Role of NFTs in Web3 - summary, and quotes
NFTs - Non Fungible Tokens - are expected to reach as much as $35 billion in net sales volume by the end of 2022, compared to almost nothing in 2020.
NFTs can range in forms from art, collectibles, gaming, metaverses, sport, utilities, and others. Artists specifically value non-fungible tokens because they ensure the validity and uniqueness of the blockchain identity of their work.
In our event, the founders touched upon the different use cases of NFTs and their contribution to the Web3 space and ownership. All three founders agreed on its significant role in shaping and nourishing communities with it acting as a “key to access” these communities as well. We leave you with some of the main quotes -
“NFTs are keys to communities, any sort of community. So we all belong to communities, whether this is cultural communities, religious communities, sports communities, or professional communities, no one would discuss that this doesn't matter in life, belonging to community matters and an NFT is just a software representation of how we interact and benefit from that community. NFT is really the key to accessing communities that you care about. And it's done in a way that is represented through software, built on the blockchain.” - Ouriel
“NFT is the ticket to communities - to build communities and to belong to communities. We see NFTs mostly in art or JPEGs and so on, but NFTs could be a way to prove that you own a house.” - Ortal
“NFTs will become that underlying technology that gives you access to communities and experiences, and also identifies who you are.” - KC
4. How to get exposure to Web3 as an investor
As a panelist, I made the point
As venture investors in both Web2 and Web3, we do not get too caught up in the words. We focus on understanding the product and its use case. As for the ownership aspect, it is what you can actually get from contributing and just loving something. ‘I love my city. I love the community. I want to be part of a project and own it’, and as example, that’s why we invested in Colu’
The panelists shared similar views recommending investors still look at the same principles as traditional investing:
Does the team look capable enough to execute the idea and build a product or infrastructure in order to achieve it?
The value of the idea - is it something you agree with?
What are the incentives and possible ROIs
If you're an investor, apart from the values, you are looking to make a return for the risk you take. And depending on how early you invest, you could invest wide across categories or invest bigger amounts and go for the vertical approach. Then it is about teams and who is actually building - versus just hype.
Ortal, on how to get exposed and which projects to join:
"We should all search for the value and search for the community. For me, Web3 is all about communities and ownership. And the tokens in a way, reflect your belonging to the communities and the value in it and the utility you can do in these communities.
So in order to decide which projects to join, you need to search for the value and the communities that you enjoy. For example, it can start with the urban change protocol with the place you live and belong to this community. But there are so many communities you can belong to — art, to movements, supporting women or any other community in the world, of singers or their community. First, search for the value, and search for the communities that you want to belong to, and then you'll find the relevant projects for you."
If you’re interested to see the full recording of our first Web3 event, please reach out to email@example.com
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