Over the last two decades, we’ve seen what Web 2.0 can do. Our ability to share and deliver information straight to our fingertips has changed our world in ways we could have never predicted.
However, Web 2.0’s achievements have also been accompanied by several challenges. These centralized systems gave companies the power over individuals’ data. Publicly advertising its positive attributes of connection and personalization. In reality, this meant seizing ownership of data. And, by extension, the Internet.
Web 3 is disrupting this.
It has the potential to unseat the players currently sitting comfortably in the Web 2.0 suite.
Web 3’s prime differentiator is its ability to decentralize the ownership of data and to establish trust in a largely trustless world. The idea is that no single platform would own an individual’s data. Individuals would have complete control over their information and be able to move that information, whether personal or digital, wherever they want.
Better service. Better privacy. Better responsibility.
Innovation in Web 3 is more than just token prices and ownership of digital collectibles. The technology is driving commerce in digital-first platforms and worlds (think metaverse). It’s redefining ownership and tracking the authenticity of digital goods. And it’s helping companies and brands connect with their audiences like never before.
Sounds great right? Not just yet.
There are significant barriers to larger scale adoption of these types of platforms. Examples include, interoperability between token and chains, the safe and secure transfer of data between these programs, and creating better ways to bridge Web 2.0 and Web 3 solutions.
These obstacles provide an incredible opportunity for the next wave of entrepreneurs who can solve these challenges, and, as a result, bring the next cohorts of millions of users onto Web 3 platforms.
Which is why Fiat Ventures and Fiat Growth are actively investing and advising in companies addressing these issues. As digital asset prices go down, they pave the way for building in a less noisy environment. In short, now is the time to get to work.
Let’s take a look at some of the players in this space and how they are using Web 3 to not only change, but improve the game.
Brydge: Payments & Interoperability
The idea of Web 3 is exciting. The possibilities seem endless.
But it takes time to make big changes.
One of the long-standing hurdles for Web 3 is interoperability–the ability to seamlessly transfer value from one token on a specific blockchain to another token on a different chain. A decentralized system makes this even more of a challenge.
This is difficult to do today because it requires liquidity of tokens, partnerships with custody providers, and ongoing relationships with exchanges who can offer onramps and offramps to both fiat and digital assets.
Brydge is a Fiat Ventures portfolio company, providing the ability to accept any token, from any blockchain, in seconds, with a snippet of code. Think of Brydge as “Stripe for the Web 3 economy.”
Similar to how Stripe created a path for online merchants to connect with customers, Brydge will do the same with Web 3 platforms attracting customers to their ecosystem.
Emerging use cases include gaming and NFT platforms, who are building on blockchains like Polygon. These companies want to offer their own native tokens to customers without the overhead cost of managing liquidity and exchange relationships. Brydge’s simple snippet of code allows its customers to seamlessly offer rewards and tokens to a variety of existing custody and wallet providers.
There are several other use cases this technology immediately supports, but we anticipate that its impacts will expand far beyond what we can predict today.
3mint: Rewards & Customer Engagement
Digital asset rewards are nothing new. Web 3 companies have long offered “airdrops” and token rewards as a mechanism to drive demand for their ecosystems. However, we’re now starting to see traditional brands participate in these types of rewards as well.
As new digital assets, like NFTs, emerge, brands have an opportunity to change how they engage with their customers and how they give them ownership in both physical and digital goods.
Nike seized one such opportunity in 2021 when they launched “Nikeland” in the metaverse and acquired RTFKT Studios, a maker of sneaker NFTs, the following month. Nike’s president and CEO John Donahoe said the acquisition allowed them “to serve athletes and creators at the intersection of sport, creativity, gaming, and culture.” And their efforts paid off, literally. Nike has reported $185.3M in revenue since their launch.
Another company taking advantage of NFTs to engage their customers is Starbucks. The coffee giant is launching Starbucks Odyssey, where customers can purchase and earn digital rewards in the form of NFTs.
But their plans don’t stop there.
The company wants to create “unique experiences” with chain-agnostic digital collectibles, likely on a “Starbucks Digital Community Web3 platform.” They see the potential for using their digital presence to build community, and, ultimately, drive revenue.
Announcements, like those made by Nike and Starbucks, are creating a sense of urgency for all major consumer-facing brands to offer similar rewards structures to their customers.
The only challenge is that many aren’t native to Web 3 technologies. Which means the companies that want in, aren’t set up for custody, minting, and managing these types of processes.
Insert 3mint, another Fiat Ventures portfolio company, making it easy for any brand to engage with their community via Web 3 rewards. They offer an easier way to not just issue, but also manage, Web 3 loyalty programs through automated rewards mechanisms when customers hit predetermined milestones.
For example, say you’re using a Fintech product that allows you to save for retirement. Using 3mint’s toolkit, the Fintech rewards you with a digital NFT badge whenever you put away money for a six-month period of time—and 3mint takes care of the airdrop, the wallet that holds the NFT, and any subsequent interaction that NFT unlocks—completely behind the scenes
It’s a small mechanism that can drive real user behaviors today, while costing very little to scale tomorrow.
In the future, every single consumer-facing company will need to develop and manage Web 3-based rewards systems in both physical and digital environments. Companies like 3mint will be the platforms that help Web 3 businesses bridge these worlds.
Plum: Data, Aggregation and Transactions
In the early days of Fintech, emerging companies had a big problem. There was no easy way to connect banking information without contacting your bank directly and having Fintechs build a one-to-one relationship with each financial institution.
Then Plaid came along. Plaid created easy-to-embed APIs to securely move data between financial institutions. This helped propel early Fintechs into the forefront and today allows “all companies to build Fintech solutions.” And, as of their latest fundraising round in April 2021, the company is valued at $13.6B. Not too shabby.
The same challenge exists with hundreds of Web 3 crypto-focused companies trying to interact with thousands of Web 2.0 financial institutions. As Web 3 expands, this barrier has only grown.
The following diagram is only a small sample of the different integration points in Web 3 ecosystems that are hard to reach from standard Web 2.0 applications
Another Fiat Ventures portfolio company, Plum, is focused on bridging the gap between Web 2.0 and Web 3 organizations. They are focused on offering better ways to securely share information.
Early use cases include, supporting tax service providers who struggle to digest data from Web 3 sites and Fintechs looking to include Web 3 assets as part of their broader underwriting and credit risk practices.
Over time, companies like Plum will offer the ability to both share data and transact across these different platforms, opening up the intersections between these two ecosystems. In the future, this will enable “all companies to build Web 3 solutions.”
Focusing on the Future
To be clear, Web 2.0 isn’t going anywhere. It’s ingrained in our society, in our technology, and in our everyday lives. However, it’s on a collision course with Web 3 platforms, and it’s gaining traction.
And that traction is creating opportunities. For brands. For communities. For investors.
Like Web 3, our team at Fiat Ventures and Fiat Growth believes in disrupting the traditional financial system with innovative products, particularly when it comes to creating a more inclusive system. Not only is this the right thing to do, but it also expands the total available market considerably as new players enter the fold.
Moving forward we will continue to invest in the future of the intersection of the Web 2.0 and Web 3 worlds.
You’ve heard it before. And we’ll say it again: We invest in companies that are here for the long haul. And those companies are making a difference in the lives of the customers and users they serve.
To keep up to speed on our portfolio and investment thesis, subscribe to our newsletter by reaching out to our Vice President, Caitlin Keep (caitlin@fiat.vc).