Talking with Cryptonews, Justin Banon, Co-Founder of Web3’s decentralized commerce layer Boson Protocol, discussed why legacy brands dress up Web2 into Web3, and how the next bull run will separate ‘fake’ from ‘real’ Web3 solutions.
Commenting on crypto use cases and the potential for mass adoption, Banon opined that “Web3 commerce is poised to be the next killer application for blockchain, tapping into the multi-trillion-dollar market of real-world products and integrating them on chain.”
The Web3 allure has been “somewhat tarnished” recently due to the unfavorable media attention towards FTX and market downturns, he said.
Nonetheless, Web3 remains a revolutionary technology recognized by brands and consumers, and Web3-labeled innovations are still appealing to mainstream audiences.
Per Banon,
“As we transition from this bear market and approach a potential bull phase — anticipated to be driven by the forthcoming approval of Bitcoin ETFs, and the influx of possibly hundreds of billions into cryptocurrency — it’s evident that crypto is poised to gain widespread acceptance. Brands are eager to tap into this emerging, affluent, and cool market.”
True Web3 Companies Will Rise
Web3 commerce is still in its infancy, Banon warned.
Most of the applications we see are “not authentic Web3” – rather, brands have integrated blockchain technology, including non-fungible tokens (NFTs), but maintained the Web2 business models.
These implementations are missing the fundamental principles inherent to true Web3.
Also, ‘Web3 Washing’ prevents brands from benefiting from “some very special properties” of Web3:
- assets with Web3 hard property rights are programmable, having rules encoded in the underlying substrate – “think DeFi for commerce” – which introduces features such as enforceable secondary royalties on physical products and seamless global settlements;
- by utilizing open protocol standards on public blockchains, instead of private database proprietary formats, assets become interoperable, creating a global, digital marketplace for both on chain and real world assets;
- by building with authentic Web3 technologies, applications can be plugged together like finance and commerce ‘LEGO’, with hard tokenized assets flowing reliably across an extended ecosystem – “think DeFi across finance, commerce, and the whole Web3 economy.”
To consumers, Web3 commerce offers protection from economic exploitation, data misuse, and monopolistic practices, Banon argues.
He opined, however, that companies that are able to use the tech to its full potential will rise soon: the adoption of fake Web3 may continue short-term, but over time, he expects Web3 commerce to mature towards “real Web3.”
He argued that,
“As the next bull run unfolds, we will see the crypto community once again emerge as an affluent and financially active demographic.”
This demographic will choose real Web3 products as it understands and values the principles of Web3.
Subsequently, brands will be driven by their desire to access this crypto demographic and will implement real Web3 solutions.
Emperor’s Web3 Clothes
Current physical ‘Web3’ commerce implementations largely operate in a Web2, centralized manner, Banon explained.
Sellers mint an NFT, selling it with a promise of redeeming it for a physical item, mirroring fiat banknotes’ “I promise to pay the bearer on demand” pledge, he said, and added:
“This isn’t genuine Web3. These aren’t hard property rights; they resemble checks, payment cards, or vouchers. They’re vulnerable to rugpulls. If an issuer defaults, bearers face the legal system, which is slow, costly, and riskier than the automatic enforcement of Web3’s hard property rights.”
Even recent proposals, like NFT marketplace OpenSea‘s ‘redeemable standard’, don’t address these issues, he said.
What we are seeing is not a new phenomenon. In his book ‘The Innovator’s Dilemma’, Clayton Christensen writes that established companies often incorporate disruptive technologies into their existing business models – but they fail, as they overlook the changing needs of a rapidly growing user base and don’t take advantage of the tech’s competitive potential.
Brands are engaging in ‘Web3 Washing’ for a variety of reasons:
- legacy sellers often do not understand the true values and benefits of authentic Web3 commerce — a disadvantage that has historically been fatal for incumbents;
- a significant portion of current customers neither understand nor care about the nuances of authentic Web3 commerce;
- many sellers are following commerce patterns established for NFTs, thus overlooking the fact that physical Web3 commerce has its own set of hard challenges not addressed by digital Web3 commerce patterns.
And this is not all. According to Banon,
“Compounding these issues, there’s a burgeoning industry of Web3 agencies, NFT consultants, software providers, and NFT marketplaces. These entities, under the guise of expertise, are essentially promoting Web2 business models dressed as Web3 commerce, providing brands with narratives that are easy to digest and sell.”
Sellers – and this may be their biggest challenge – are not even capable of developing genuine solutions for physical Web3 commerce.
But, there is a solution: this challenge, Banon says, is surmountable through alliances with authentic Web3 protocols.