• Digital assets are the building blocks of Web3 and enable creators on the internet to monetize their contributions
• We expect Web3 applications to bring more monetary balance between dominant platform operators and their users
• The Web3 ecosystem of applications may provide the catalyst for the first billion digital asset users
Web3 has arrived – on-ramp to the first billion users
With digital plots of land selling for $2mn+, digital yachts selling for $650k and Gucci digital clothing for sale, Web3 has arrived. This expansive ecosystem of applications could provide the on-ramp for the first billion digital assets users and more, up from 300mn+ today.
1 The metaverse has captured outsized attention as potential users envision interacting virtually. Sales of digital land and collectibles have reached ~$1.2bn from ~85k unique buyers since 2020, but Web3 is so much more than just the metaverse.2
Web3 is an umbrella term that encompasses the shift from a centralized to a decentralized internet, where internet renters become owners. Even an eventual semi-decentralized internet is a win in our view. Web3 will look and feel like Web2 in its final state, but content creation, governance, trust and ownership will differ substantially.
Web3 applications have the potential to transform traditional industries, including advertising, browsers, finance, gambling, gaming, insurance, legal, messaging, music/video streaming, retail, social media, storage and venture capital. New applications and projects are launching every day, but mainstream adoption of digital assets and Web3 applications requires time and development, which we anticipate will occur over the next five to ten years.
Internet renters become owners
In Web2, individuals rent access to company-owned (centralized) platforms in exchange for personal data and ownership of their creations, but incentives change when platforms are owned by their users, instead of profit-maximizing corporations. An emerging Web3 ecosystem of applications where users generate content on community-owned (decentralized) platforms and retain privacy, ownership of their creations and profits is being built (Exhibit 1).
We expect Web3 applications to shift the balance of power and profits from platform operators to platform users and disrupt traditional industries through gradual market share capture as the transition to a semi-decentralized ecosystem accelerates. A fully decentralized, software-based economy is unlikely any time soon, or ever, but a company’s ability to profit from usergenerated content through rent-seeking will likely decrease