How to Design Web3 Business Models?
Web3 Principles, Paradigms and Revenue Models to create New Web3 Business Models.
👋 Web3 is evolving fastest with so many new paradigms, and the principles have changed versus Web2 businesses; this post helps you to understand the same and design Web3 business models.
💡 The internet disrupted incumbents across industries and gave birth to products and business models that did not exist before it.💜 Make something people want and will pay for. Web3 or Web2.Web3: New Principles
Here is a quick comparison of Web3 principles vs. Web2.
Web2: Free. You pay with your data. In most cases.
vs.
Web3: Open data access to all
———-
Web2: Untrusted Network
vs.
Web3: Trusted
———-
Web2: Closed network. Permission-needed ← Want to extend/build on top of any product.
vs.
Web3: Permissionless. Extend. Compose.
———-
Web2: Protocols Free. Platforms won't pay for the protocol.
vs.
Web3: Protocols paid. Platform pay for the protocol.
———-
Web2: Marginal costs tend to be zero.
vs.
Web3: A constant marginal cost. Blockchains have gas fees, and gas fees are constant for an interaction. Gas fees are different at different times.
———-
Web2: Search for customers.
vs.
Web3: Start a community & grow with them. Value-sharing.
———-
Web2: Corporate Governance
vs.
Web3: Community Governance & Corporate Governance too
———-
Web2: Access Local Market
vs.
Web3: Access to Global Market from Day 1
Web3: New Paradigms
We have never seen so many new paradigms previously in Web2.
NFT
DeFi & DeFi-model
Token
DAO
Protocols
Community-owned
X-To-Earn
Metaverse
Validator-as-a-service /Stake-as-a-service
Gas Fees
Soul-Bound Tokens
Decentralized Exchanges
NFT
Proof of ownership of digital assets on a blockchain protocol with unique identification codes.
DeFi & DeFi-model
Create alternatives to every financial service, including savings and checking accounts, loans, asset trading, insurance, etc.
By adding DeFi components to gaming, you can design very unique business models with multiple revenue streams among players, partners and the overall gaming ecosystem. Example: GameFi, ReFi, SocialFi and more
Token
Enforcing the use of a native token for any payments with and within your business.
DAO
Collection of individuals working together to accomplish a goal with a common set of regulations via blockchain technology.
Decentralized-decision making, distributed contribution, co-ownership and ability to live on without any one individual.
Protocols
Unlike platforms, protocols do not provide end-to-end market infrastructure nor do they internalize transaction policing and verification. Since protocols do not themselves provision market infrastructure or internalize transaction policing and verification, they need to set up the economic incentives for other ecosystem actors to provision these services. They achieve this by issuing tokens to reward desirable actions in the ecosystem. As the value of market activity in the ecosystem increases, the value of the token — tied to protocol usage — increases as well. Source - Sangeet Paul Choudary.
Protocols are self-sustainable.
Protocols free consumers from the lock-in enforced by platforms.
Community-owned
Community members become your first contributors. Your ambassadors and your critics too. Redistribute wealth and empower individuals.
X-To-Earn
Empower users to perform desired activities and reward them. Play to earn, Create to earn and more.
Note - Make it a great experience.
Metaverse
Collection of persistent virtual worlds, meaning that they constantly live and evolve. Offline <> Online <> Metaverse.
Virtual Goods. Virtual Experiences. Virtual Reality. Business Solutions and more.
Validator-as-a-service /Stake-as-a-service
Dedicated infrastructure and personnel to solely run validators for other people to stake their coins with.
Staking services where you deposit your own coins (e.g. ETH) for a validator but delegate node operations to a third-party operator.
Gas Fees
Computer power is required to execute transactions. Gas fees are paid for computer power.
Gas fees fluctuate throughout the day and week. When the network is congested fees are higher than when there is not much traffic.
Soul-Bound Tokens
Immutable Identity & Reputation. Represent “commitments, credentials, and affiliations”.
Decentralized Exchanges
Allow the users to use peer-to-peer (P2P) transactions.
Revenue Models
Some of the web2 revenue models will continue to work for Web3 but Web3 offers a whole set of new revenue models.
Web2 Revenue Models
Software-as-a-Service (SaaS)
Transaction Fees
Subscription
Sharing economy
Referrals
Pay per click
Web3 Revenue Models
Software-as-a-Service (SaaS)
Transaction fees
Subscription
Revenue/Income sharing - Split revenue among participants/community.
ICO/ IGO /INO - Coin offering /Game coin offering or NFT offering. Raise Funds with your own token/NFT.
Continuous funding - Raise funds on an ongoing basis with token/ NFTs. + Governance tokens
Curved bonding - Token available in a limited quantity (like Bitcoin), then each subsequent buyer will have to pay slightly more for it.
Tokenised securities - Digital representations of existing assets
Liquidity providers - For applications that don’t have revenue-generating business models. e.g. Uniswap
Exchange Business Model - generate revenue through trading fees
Capital gains - Rises in token value
Web3 Principles + Paradigms + Revenue Models = New Web3 Business Models
✅Apply the Web3 principles, paradigms and revenue models to design a whole set of new business models. 🌟Clay Christensen: A business model, from our point of view,
consists of four interlocking elements that,
taken together, create and deliver value create:
- customer value proposition,
- a profit formula,
- key resources, and
- key processes. Value Proposition =
Value Proposition from Web3 philosophies/practices
+ Your Unique Value offering to your users
The value proposition for Users from Web3 point of view:
Data Ownership - Users own their data. A single entity doesn't control /misuse data
Direct - Trustless and decentralized networks instead of centralized institutions, hence fewer intermediaries
Transparency - Know what the platform can do/does with you/your data
Uninterrupted - Data on distributed nodes
Value-generating - Be part of the creation (ownership), community and commerce
Your Unique Value offering to your users:
You must offer unique value to your users from your Web3 product, protocol and solutions, i.e., you can’t just rely on Web3 movements (or hype or trust) to assume value proposition.
Emerging Web2 vs. Web2 Examples
There are 100s of native Web3 Platforms, Protocols, Products and Solutions.
Did you find this post interesting and useful?
You can share this post
My newsletters cover Web3 ideas, projects, startups and innovations that I read, learn and coach.
You can subscribe to my newsletters.
References
https://future.com/how-composability-unlocks-crypto-and-everything-else/
https://mirror.xyz/nonem.eth/7V7-5Y_39sqC_B-Zkf5v-Cx_Ddc0XI7uJNExqozlQFs
https://artlabs.ai/blog/x-to-earn-the-new-income-models-of-web3/
https://mirror.xyz/cz911.eth/1aXMfVzwiy0FxmZn5ybZYwDEQSX60WxOfpZtzFW3EnI
About Santosh:
Co-Founder - Foundership - Web3 Launcher. Activating Founders & Builders Launch Web3 Startups with Coaching, Capital and Community.
Earlier - Founder & CEO - Explara (2008-2020) - First Few Event Ticketing & Membership Management Platform in the world.
Earlier - Software Product Engineer - BBC iPlayer, eBay UK and more.
Connect: Twitter | LinkedIn
Running a Web3 Startup? Ideating a Web3 Startup or Building a Web3 Startup? You will find a super community on Foundership Community!