From the Internet to Web3 — The Evolution of Consumer-oriented Crypto Ecosystem and SocialFi
Produced by: LD Capital Research
Author:Blake
TL;DR
· The ultimate widespread adoption of any technology solution lies in consumer applications. A good solution will migrate from the lab to everyday life, and opportunities in consumer applications will explode as new infrastructure facilities mature.
· Loot-style assets focus on interactions between individuals and the overall ecosystem and emphasize value contribution. Do-to-Earn models focus on interactions between individuals and platforms as well as protocols where overall value contribution may not exist. However, Loot-style assets and Do-to-Earn models complement each other.
· SocialFi is a new paradigm driven by inter-user interactions and interactions between users and the ecosystem. Group behavior is socialization, and hence incentive mechanisms based on user ownership rights that promote socialization mark an important innovation in community building.
· Web3 is the next generation internet paradigm shift. The most significant characteristics are real user ownership, openness and fairness, inalterability and decentralization. Users simultaneously play the roles of co-creators, owners and beneficiaries, thus fulfilling the necessary conditions of the most effective dominant consumer market product.
Insights from the history of internet development
In order to comprehend the development of the crypto ecosystem and SocialFi, we must first review the birth and evolution of the internet.
In the 1950s and 60s, only closed intranets (such as ARPANET) and standalone machines capable of computation only were available in the market. After decades of development, the internet has extended from an abstract, standalone server-to- information matrix to the connection between local area networks. The internet has fully connected the dots, and has become a two-dimensional information structure on a global network.
The crypto ecosystem also observes similar laws of evolution in system engineering. For example, the tech stack behind Web3 and antiquated fundamental information protocols such as TCP/IP actually resemble each other much more than appearances suggest. Their architecture are both divided into basic architecture layer, middleware, upper layer protocols and applications. How the internet has evolved to connect the dots offers preview of how independent public chain ecosystems and their top layer protocols will evolve towards crosschain and aggregation protocols. This includes protocols proposed by leading institutions to coordinate the future development of public chains.
In the Web3 world, a number of multiple-chain DeFi and cross chain infrastructures have already emerged. Cross ETH Layer2 and cross Layer1&Layer2 protocols will likely transpire in the immediate future, eventually forming a General Layer2 and General Multi-Layers infrastructure applications.
The emergence of consumer applications
The ultimate widespread adoption of any technology solution lies in consumer applications. A good solution will migrate from the lab to everyday life, and opportunities in consumer applications will explode as new infrastructure facilities mature. Drawing lessons from the history of computer science and the internet, we have seen that large corporate infrastructure service providers such as Google, Amazon and Netflix revealed to the public how infrastructure facilities are implemented and capable of serving millions and even billions of users. They educated the public on how technology has changed everyday life in various industries and their everyday behaviors. Blockchain and crypto technology will evolve similarly.
Blockchain and crypto technology have already snuck into the daily lives of crypto natives, and have already touched the daily use of the internet at large outside of the crypto world. As some Web 3.0 venture capital firms have observed, “Blockchain-based internet is leading a new wave of in every corner of digital living, but only when users experience this through their most frequently used services and applications, will they turn their attention towards this inspirational infrastructure change. It is hard to see things clearly in the dark, but when these products and applications shed light, consumers will appear.”
Browsers such as Bravo, encrypted social media such as Status, NFT-based and ecosystem-based incentives social marketplace such as Calaxy, Metaverse platforms such as Decentralend and WilderWorld… These services and applications have already migrated slowly to internet consumers at large. Such users are slowly experiencing the direct and indirect impact brought on by blockchain and crypto technology through their most frequently used applications.
The evolution crypto industry paradigms
Over the past few years, a number of industry events have demonstrated that blockchain and crypto technology are slowly breaking industry barriers into consumer applications.
The first is NBATopShot NFT mystery boxes. At their peak, hundreds of thousands of basket fans line up for a few thousand NBATopShot NFTs. In the early Beta stage of the platform, due to low barriers to account registration and purchase, even the rarest Lebron JamesLegendary Level NFTs can be easily obtained in Drop events of primary markets, or in secondary bid-ask markets at very low prices.
In the early days hardcore NBA fans kept collecting at low prices. The passed a quiet period and gained a significant first-mover advantage against the massive number of users who moved into the market during the boom, both in terms of quantity and series completeness. Thus they profited handsomely. A single Lebron James Legendary NFT mentioned above sold for hundreds of thousands of US dollars at the peal of the market. Beforehand, both transaction volumes and users with a position rank towards to the top of overall NFT markets.
Another event took place in the GameFi space. Since 2018, Axie Infinity has quietly focused on blockchain gaming development for a number of years, even though most industry players believed that blockchain entertainment was an illusionary demand. Axie fused ecosystem-based incentives with gaming, realized the transferability of gaming asset rights so that players could receive real ownership rights and fair allocation of incentives.
In the past couple of years, players in Southeast Asian developing countries started earning more from gaming than wages from everyday hard work. Large numbers of low-income earners rushed into gaming ecosystems, and ignited the explosive growth of Axie Infinity. As similar economic models matured afterwards, player crowdsourcing platforms and even player unios have emerged. Even the likes of YGG have entered the ranks of leading projects.
The few cases above only demonstrated the efficiency at which consumers could be rapidly incorporated and industry barriers could be broken down. This implies native crypto projects and products could acquire customers and benefit from them at large scale in a short period of time as the internet once did. Many applications with the potential for large scale consumer adoption are yet to be discovered. Here we list a few more case studies similar to large scale internet customer acquisition in the native crypto ecosystems.
·Community driven stories
Loot NFT’s intellectual properties (IPs) originated from the community, which then organically developed gaming, avatars and other media based on those Ips. There is no institutional team structure or top-down vision. It is completely driven by Loot NFT holders and a community of supporters. As a bottom-up brand, its success stems from the community that supports it. Such community formation facilitates the identification and reputation of specialized products. Other similar ventures such as Legend Map are also based on a similar model.
·Mixed partnership and community driven platforms
The WilderWorld team comes from the pair of star fashion designer brothers known as Frank Wilder and Phoenix Wilder, and the one hundred-strong 3D animation design and blockchain engineering team behind them. WilderWorld positions itself as a 5D immersive virtual space. Its vision spans far beyond NFT issuance, and strives to create the next Marvel Comics in the decentralized world.
Through Metaverse + Marketplace + Cryptoartist Guid, WilderWorld brings the world’s top artists together and let them collaborate to create stories, characters, architecture, etc. True participants such as partners and NFT holders customize and develop the Metaverse. In Wilderworld’s Metaverse, we can find familiar names such as YGG、Illuvium、BossLogic、Jack Paul, who have already established themselves as partners.
·DAO based on specific activities or purposes
DAO created for specific missions carry a strong social nature. Examples include investment oriented FlamingoDAO, PleasrDAO, PartyDAO and The LAO; the governance focused NounsDAO；ConstitutionDAO, which focused on auctioning originals of the Constitution; IndexCoop, which focused on crypto Index product governance, etc. etc. Fundamentally, whatever the purpose, DAO is a form of consensus-based community.
·Curator networks and hunter economy
Yup is a decentralized social network made for curators. Users rate and collect content spread over Web2 and Web3, then curate the content based on a certain logic or theme. Visitors then can then consume and share the content based on the curation. Using blockchain technology and ecosystem incentive mechanisms, Yup created a curated, orderly Overlay content network with based on the Underlay content network that already exists on the internet.
Current Yup has already integrated with large scale social media platform, NFT marketplaces and new social media such as Twitter, SuperRare and Opensea. Users can easily begin their collection through browser plug-ins such as Mask and right clicking on their mouse.
By definition, hunter economy enables participants to gain hunter and curator status through a series of products. In the process, capital holders can obtain their favorite characters, brands and ideas. Yup is just one such hunter economics application in the Web3 world. That aside, 3D art galleries such as Oncyber, investment copycat trading application such as CPLCrypto, etc. all exhibit the features of hunter economy and social networks.
·Loot tokens and Do-to-Earn
Loot tokens signify a new asset class rather than Loot NFT or any other project named after Loot. The concept was introduced in a Medium article by Adams Cochran: “These tokens are ones that are earned for a “qualitative labor based contribution to a community” and in turn represent “a reputation, influence, stake or authority within that community” and “align the members of that community with incentives to continue to generate economic, non-financial, value for the community and not just the individual” which can “in turn create economic value and a mutual means of exchange with the larger tribe”. Most native crypto ecosystems adopt some characteristics of Loot tokens, but these characteristics are much more obvious in the crypto social media in the wider sense.
Do-to-Earn is a concept proposed by the present article. It is similar to Play-to-Earn in GameFi, Vote-to-Earn in governance systems, Invest-to-Earn in decentralized investment platforms, Buy-to-earn in NFT marketplaces (e.g. earning SuperRare, Pianity tokens based on NFT trading) and Trading-to-earn in Swap and other aggregators, i.e. air dropping tokens based on trades.
Loot-style assets focus on interactions between individuals and the overall ecosystem and emphasize value contribution. Do-to-Earn models focus on interactions between individuals and platforms as well as protocols where overall value contribution may not exist. However, Loot-style assets and Do-to-Earn models complement each other.
Moreover, new trends and sectors remain to be explored. Due to elegant storytelling and incentive design, such assets and Do-to-Earn models are naturally endowed to break out from the crypto world and acquire consumers as real users. SocialFi is a new paradigm driven by inter-user interactions and interactions between users and the ecosystem. Group behavior is socialization, and hence incentive mechanisms based on user ownership rights that promote socialization mark an important innovation in community building. We will continue to follow and participate in this development.
Web3 is the next generation internet paradigm shift. The most significant characteristics are real user ownership, openness and fairness, inalterability and decentralization. Users simultaneously play the roles of co-creators, owners and beneficiaries, thus fulfilling the necessary conditions of the most effective dominant consumer market product. We believe that with transfer of ownership rights, innovative interactive and contribution models will unfold. We eagerly await such a future.
Disclaimer
The information in this report comes from publicly disclosed sources, and the viewpoint therein is the for research purposes only, and does not constitute any investment advice. The viewpoints and forecasts only represent analysis and judgment as of the release date, and does not stay valid permanently. This institution and the author are not liable in any way to any losses incurred by deploying any of the contents in this report under any circumstances.
LD Capital is a leading crypto fund who is active in primary and secondary markets, whose sub-funds include dedicated eco fund, FoF, hedge fund and Meta Fund.
LD Capital has a professional global team with deep industrial resources, and focus on develivering superior post-investment services to enhance project value growth, and specializes in long-term value and ecosystem investment.
LD Capital has successively discovered and invested more than 300 companies in Infra/Protocol/Dapp/Privacy/Metaverse/Layer2/DeFi/DAO/GameFi fields since 2016.
website: ldcap.com
twitter: twitter.com/ld_capital
mail: BP@ldcap.com
medium：ld-capital.medium.com
