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20 May, 2022

Web3 and NFTs: Slicing through the hype

Web3 technologies represent the next step in the evolution of how connected technologies influence the way we live, learn, work and play. But how did we get from Web2 to Web3?

As a CompuServe forum admin in the early 1990s, I witnessed the transition from hobbyist BBS (Bulletin Board Systems) to the dawn of the Web, yet I could never have predicted the Web’s total domination of daily life today. Beginning in late 2010s, Web2 was defined by social networks and the centralised influence of a cluster of companies. Search and social network giants like Google, Facebook (now Meta), Twitter, TikTok and more, reaped the benefits of this concentration of users, whose personal data they sell for very handsome profits.

The User is no Longer the Product

Centrally-controlled network services are free but the user is the product and their attention is the currency. Enter Web3, where users reclaim control over their data, engaging in commercial activities recorded in the blockchain, a write-only virtual ledger of all transactions that retains anonymity. Decentralised companies transact but do not own your personal data, unlike Google or Meta. For example, Ethereum, a cryptocurrency popular in the buying and selling of NFT, is “owned” by a community of members and not a single company. NFTs have grabbed a lot of media attention as one of the first Web3 technologies to gain traction, used in marketing campaigns by brands like Nike, Adidas, Burberry and Dalmore.

Non-Fungible Tokens are, at their heart, simply digital assets with ownership logged on the blockchain, thereby enforcing their scarcity. Burberry partnered with Mythical Games to let players purchase Burberry accessories in online games and transform them into NFTs that can be traded for money, like a physical item. Another fashion brand Dolce & Gabbana have issued NFTs that can be owned virtually or ‘burned’ in exchange for the actual apparel. A similar model has been adopted by spirits brands too, with Dalmore being a great example. In December 2021, Dalmore debuted its Decades No.4 Collection as its first NFT on BlockBar, a popular NFT marketplace for luxury wine and spirits.

Still the Wild West

NFTs may be grabbing all the attention now but the potential of Web3 is vast and mostly nascent today. OpenSea, the most popular NFT marketplace only has 3,00,000 active users. More seriously, lack of regulation and decentralisation creates an environment where scams and speculation are rife. With technologies that are still poorly understood by the general public and the horrendous environmental impact of cryptocurrency mining, Web3 is certain to encounter a backlash once the current hype cycle fizzles out.

Make no mistake though, the next cycle of interest is sure to uncover ingenious applications that are still just being imagined. This is how technology evolves – in fits and starts, hype and bust. After every cycle, we are one step closer to the killer applications that transform the landscape.

Tips for Marketers

What can marketers do today to get on the Web3 and NFT bus without crashing? Most important is to invest the time to learn the concepts and lingo. Web3 is primarily built on the blockchain, so understanding the crypto ecosystem and how the interconnected technologies work is a crucial first step. The NFT space is especially daunting, with lots of acronyms like DAO, DeFi and ETH, and jargons like gas fees, burn and floor that can be off-putting at first.

Studying the failures of others is a great way to learn as well, as there are no end of failures at this early stage in the land grab and brands are bound to make mistakes.

Join the conversation on Discord, Twitter, Reddit and the many forums out there where the communities gather. Building communities is an essential element of Web3, where members can exchange ideas, engage in transactions, inform and teach. Buyer beware – it’s still the Wild West.

Innovation sprints onwards, relentless and without regard for the fortunes of companies large and small. The heyday of Web2 may still be here but concerns around privacy and hegemony have driven a search for a new way of living life online, whether it’s about the way we work, live, play or learn. It’s an exciting time to be alive!