Web3 must do three things in order to (really) take off

Web3 must do three things in order to (really) take off ...

Web3 is the next generation of internet that will revolutionize our everyday digital experiences. By leveraging cryptography and distributed-ledger technology, Web3 is laying the foundation for a user-owned and controlled internet.

The Web3 ecosystem is currently experiencing rapid development in terms of venture capital funding. There is a growing number of Web3 startups, whether it be DeFi protocols, NFTs, decentralized autonomous organizations (DAOs), play-to-earn (P2E) games, data storage, or social media services.

According to a DappRadar report, venture capital funds and investors have already invested more than $2.5 billion in blockchain gaming and related infrastructure in the first quarter of 2022, compared to the $4 billion invested in 2021 and the $80 million in 2020.

Another source, published on GitHub, claims that there are over 18,000 active Web3 developers who commit their code to open-source blockchain projects at least once every month. The real number is likely higher as it does not include the development work done on proprietary Web3 projects.

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Web3's growth has been unprecedented by all accounts. However, the company still has a long way to go before entering the mainstream-adoption phase.

There are three critical areas that Web3 investors, developers, and users must address in order to truly flourish.

1.Users must shift their mindset toward a user-owned system.

Users of the current Web2 as-a-service version of the internet are basically denied a voice in the future direction of the goods or services they purchase. In most cases, users and owners of the platform or service tend to be separate until said platform or service is listed in a public stock market, which allows for greater ownership access among users.

Shareholders are welcome to vote on specific initiatives, but ordinary investors are far from being the driving force of corporate change. Even after purchasing shares, the amount of decision-making power granted to smaller shareholders via ownership is relatively small, preventing them from taking a seat at the table with institutional investors or funds that have more power to influence corporate decisions.

Tokens enable early and decentralized ownership of the platform or service users enjoy. Existing users who previously benefited from near-zero ownership in private companies must become acquainted with the responsibilities of ownership and governance. They must grasp the magnitude to which they can contribute and influence the development direction of a product or service.

Even an average individual can become a member of the project's governing body by investing at an early stage, thus guiding the product roadmap in conjunction with the community. Decision-making processes become transparent, inclusive, and fair, qualities that do not normally exist in the Web2 ecosystem.

2.Investors must adopt a community-driven, collaborative, and participatory attitude.

Investors vie for a share of board seats and control in Web2 in order to ensure value capture and governance oversight.

Nonetheless, this strategy is less effective in Web3. Decentralized ownership is a key founding principle of Web3. Network effect can be enhanced by decentralized ownership among community members who may have multiple roles (user of service, investor, supplier, business partner) within the ecosystem.

3.Projects must think of a long-term strategy to attract users.

With token incentives, projects usually generate a lot of interest within a short period of time. It is without doubt that such campaigns attract users and liquidity providers immediately, which increases the key metrics that everyone evaluates.

Nevertheless, this approach has its drawbacks: First, artificially pumped key metrics driven by short-term incentives tend to obscure an accurate assessment of product-market fit, and second, over-expensing token reserve is equivalent to wasted market budgeting on items that don't really matter in the long run.

Instead, every project should create the tokenomics in a thoughtful manner. It is recommended to start allocating tokens only when projects have found the right audience that shares similar interests and goals.

Were still early is still a popular term, although it isn't a trope. It's simply because we're still very young. I hope that this article has provided some guidance for those of us who are working on the next generation of the internet.

LongHash Ventures' CEO and founding partner is Emma Cui.

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