The big-but-not-Facebook-big companies of the social web, Discord, Reddit and Twitter, are giving crypto’s technology a much more serious look. That could mean the blockchain party will be much larger, soon.
The question is: will they be able to use their size and reach to take the decentralized web over? Or will they accelerate the growth of crypto native efforts such as Decentraland and Bored Apes in spite of themselves? Or will all of the old guard’s efforts at decentralization end up looking roughly as good in hindsight as AOL keywords?
The “Web3 Three,” Discord, Reddit and Twitter, are all making noises about embracing the decentralized web. The three companies have something like 300M to 400M users apiece. Whereas the latest count by ConsenSys puts Ethereum at 300M addresses, which would be far far fewer users. So if these companies go through with it, it could be, if nothing else, a major on-boarding event for crypto.
“I think there’s a direct analog to cell phones,” Brett Gibson of Initialized Capital, which is an investor in Reddit, told The Defiant in an interview. If big apps start giving people a good reason to get a crypto wallet, then it puts pressure on makers of computer hardware, especially mobiles, to compete by making wallets easy to use. “It’s not just that people have the wallets, it’s that having wallets becomes a relevant thing,” Gibson said. “Eventually it becomes relevant to Apple.”
The Three Webs
Let’s start by squaring away our understanding of what is changing: Web1 was the very early web, text pages and basic open protocols, very little money. Web2 is usually defined by social media and the internet on mobile: iPhones and Facebook, but also corporations monetizing online activity in every way possible, which has led to an advertising and surveillance economy that has made so much of the online world terrible.
We’re not sure exactly what Web3 is yet, but ownership will probably be much more distributed between users and builders (see for example all the airdrops of governance tokens since mid-2020). Also, the underlying data will be more open, with multiple entities building different businesses off the same underlying data sets. Now, any website can easily wire into Compound or Aave and let its users take out a loan from there, if they wanted.
This is completely different from Web2. No one can access Facebook’s data but Facebook. Until very recently, Instagram wouldn’t even let users post photo previews to Twitter. The internet feels open, but there are invisible gates everywhere.
The Web3 Three
So how are those gates starting to come down? Here’s what the three minor giants of Web2 are doing on Web3 so far:
Twitter. One of Jack Dorsey’s two companies was the first to make significant noises about Web3, with its announcement that it would authenticate the non-fungible tokens (NFTs) users put in their profile photo.
On Wednesday, the vice-president of engineering at the Cosmos-adjacent Interchain Foundation, Tess Rinearson, announced she would be leading a crypto team at Twitter. The announcement gave scant specifics other than the fact that she will be building a team, but she tweeted that “We’ll be exploring how ideas from crypto communities can help us push the boundaries of what’s possible with identity, community, ownership and more.”
Discord. Discord has only made a hint about what it’s up to. We know two things: its CEO posted a tweet that looked like it was considering using Metamask to handle user sign on. It’s also surveyed some of its users about incorporating NFTs (which led to something of a revolt).
Reddit. The front-page of the internet has probably done the most and been discussed the least. The company created a points system for a couple of large communities. Those points live on Ethereum layer-2, Arbitrum, now. There’s been rumors of this going even further with Reddit Karma becoming tokenized, but those rumors have not been confirmed by HQ (and the tweets they came from have been deleted).
Discord and Reddit declined to elaborate on plans further to The Defiant.
When you add it all up, it’s not a ton.
On the obvious level, “Discord integration makes complete sense, because lack of Web3 user authentication is a major vulnerability that scammers exploit on their platform,” Scott Lewis, a co-founder of Hyype and DeFi Pulse told The Defiant via direct message.
In other words, people can easily pretend to be someone they aren’t on Discord (this was also a big problem on Telegram for a long time). So Web3 authentication could improve user experience when it counts.
Web3 angel investor Santiago Santos, formerly of Parafi, told The Defiant he was the most optimistic about Twitter’s efforts. “I think NFTs have really struck a chord here and made crypto super relatable. The on-boarding flow has been put on overdrive,” he said.
And Gibson said he could see ways in which some of these companies could become Web3 infrastructure in ways that both help them and Web3. For example, if Twitter builds the best NFT authentication flow, maybe they would open it up for other sites to use it. Brayton Williams of Boost VC said that those three could be beside the point. In little-noticed news, Stripe added Paradigm’s Matt Huang to its board, which could signal that the company who has made payments easy all across the web will make crypto easy, soon, too.
Stripe allowed websites to integrate payments with just a few lines of code. What if it made buying a little crypto to access different Web3 communities just as easy?
But crypto loves to take one piece of news and jump to conclusions about the next. The natural leap to make: tokenization of all these sites is inevitable, which makes everyone anticipate giant airdrops to come.
Matti, of Zee Prime Capital, is skeptical that already giant entities need tokens. “When does the token stop making sense? Discord, Reddit…then Apple, Amazon…then Burger King?” he wrote in an email. “These retroactive aidrops to users are fundamentally a user acquisition tool.”
But the Web 3 Three and others like them already have a lot of users. Could tokens improve user stickiness? He argues we haven’t really seen tokens engender loyalty to a product yet.
And would these companies with established ownership structures want to give up a bunch of power in their companies to users by sharing control through a DAO?
That’s where Reddit might be onto something, though. It’s one thing to own the whole company and another to own what a user makes on its web site or application.
“Allowing users to own their ‘stuff’ online is so compelling from both ends. companies get more engaged users who spend more $$$ and users get ownership which means potential upside (and potential downside),” Andrew Steinwold, who invests in NFTs via the Sfermion fund said in a direct message.
Update (11/11/21 at 11:30 AM): This story has been updated to note that Twitter has hired a lead for its crypto team.