Web3 & the Metaverse

From crypto crashes to virtual fashion weeks, the topics of Web3 and the metaverse have been hard to ignore this past year. In this post, we will recap the definition of these concepts and review how they are impacting the consumer industry.
 

The future of the internet?

Before exploring Web3 and the Metaverse in more detail, it is important to appreciate that these new technological advancements represent two key and often overlapping concepts in the evolution of the internet:

1. The first is the notion of a ‘decentralised internet’ as opposed to one controlled by large organisations or governments. It is also commonly referred to as Web3; a technological and ideological shift that uses blockchain technology to democratise the internet and give users great control and ownership of their data.
2. The second is a more ‘immersive internet’, also broadly known as the metaverse; a vision of how the internet could seamlessly integrate deeper into our daily lives, blurring the lines between the digital and the physical.

The developments of both these trends and the growing interplay between them, is likely to have a powerful impact on how the internet is experienced, used and governed in the future.

Let’s explore some of these concepts in more detail:
 

What is Web3?

Web3 is a broad term used to describe the vast range of use cases and applications of blockchain technology. Here we cover four of the main sub-topics:
 

1) Cryptocurrencies

Cryptocurrencies are digital assets for which the transactions are recorded on a blockchain, which is a secure technology that runs on a peer-to-peer system that has no central authority.
 

However, the word cryptocurrency is misleading, as very few cryptocurrencies aim to be used as real-world currencies. Most are better thought of as tech stocks where the tokens represent a share in a startup or Web3 project and often come with governance or voting rights.
 

There are currently around 20,000 cryptocurrencies with use cases ranging from gaming and data storage to finance and charity donations (CoinGecko crypto categories). Think of cryptocurrencies mostly as a stock market for a thriving, yet nascent ecosystem of decentralisation-focused startups. However, as with any startup portfolio, whilst some projects will succeed, the majority are expected to fail over time as they search for product-market fit.
 

2) Non-fungible tokens (NFTs)

NFTs represent ownership of a unique digital asset recorded on a blockchain – as opposed to ‘fungible’ cryptocurrencies where all assets are interchangeable. To date these have typically been digital media like an image, movie or 3D rendering.
 

If a Bitcoin is like a £50 note, NFTs are like a signed pair of Air Jordans – tradeable, valuable and unique. To date, they have been of interest to sports fans, art lovers and collectors of all kinds – of both physical and digital goods.
 

However, beyond the hype phase of digital art collectibles, NFTs are increasingly focused on utility. Examples include ownership of in-game assets, membership of exclusive communities, authenticating access to events and holding ownership of high-value assets such as property. Expect the use cases of NFTs to develop considerably over the coming years as the ecosystem matures.
 

3) Decentralised Finance (DeFi)

DeFi refers to the creation of an entirely new financial ecosystem without reliance on centralised intermediaries like banks or brokers.
 

DeFi is completely permissionless by design, meaning that anyone can access these services anywhere in the world simply by connecting their digital wallet. The vision is to have freely accessible, cost-effective financial services for every global citizen, without any barriers of geography, wealth or government restrictions.
 

Removing intermediaries from the system can also eliminate the fees that finance companies charge, creating better value services for users. We are not only seeing DeFi being used to facilitate traditional financial services like borrowing and lending, but also to create entirely new ones such as self-repaying loans that can automatically pay back what has been borrowed via high-yield DeFi protocols.
 

However, the space remains largely unregulated, so scams and a lack of consumer protection are par for the course in the short- to medium-term.
 

4) Decentralised Autonomous Organisations (DAOs)

DAOs are a new form of organisational structure governed in a democratic and decentralised way.
 

They are like companies that run on the internet, but their rules are not governed by a central body or traditional hierarchy. 
 

Instead, decision making in a DAO is controlled by all members. DAOs create a limited supply of tokens which are used to vote. Any member can submit a proposal to change a DAO’s rules, which is then voted on and if a proposal gets enough votes, the change is executed.
 

Typically, DAOs have been created with the purpose to pool investments, or to form social clubs or communities. Emerging use cases like decentralised venture capital and fan ownership could be areas for brands to explore further.
 

What is the Metaverse?

The metaverse is a catch-all term describing a shift towards a more immersive web experience that brings together physical and digital worlds.  There is no single format, so the term metaverse refers to different layers of immersion; from interactions with screens, to augmented reality, to wearing VR headsets and haptic suits.
 

There is also no single metaverse; instead, there are multiple different platforms and experiences evolving as tech advances. Lots of companies are trying to create metaverses – from incumbent tech giants like Meta to crypto startups (such as Decentraland and The Sandbox) creating more open, decentralised versions.
 

Until recently, the metaverse has been predominantly used for gaming, advertising and virtual events, however brands are increasingly exploring community-building use cases and immersive shopping experiences.
 

Opportunities for Consumer businesses

Whilst the technology and use cases are still in their infancy, there are four key implications for Consumer companies. These represent exciting opportunities but will also require investment in new skills and capabilities:
 

1. Participation & Community

Web3 opens up new ways to form communities and engage with brands, placing increasing power into consumers’ hands and encouraging two-way relationships.

An early example is Gmgn Supply Co, a DAO seeking to disrupt the Consumer Goods industry by building community-led brands where members can shape product development, starting with breakfast cereal.
 

2. Transition from product to experience

Whilst many Consumer companies are focused on physical products, the wraparound digital services that sit alongside them could become just as important, elevating the role of experience to their business models.

For example, Grey Goose created a MetaVIP Lounge in Decentraland for the US Open, where you could mix virtual cocktails and even have the opportunity to win tickets for next year’s event.
 

3. The next generation of loyalty

There are a host of new loyalty and collaboration opportunities beginning to emerge, transforming how loyalty can be incentivised through tokens, experiences, and tradeable benefits.

Flyfish Club is an interesting example of this which poses a different take on a luxury membership network. It is an exclusive private dining club where membership is purchased through a limited number of NFTs, which will grant access to their New York City restaurant when it opens and other food experiences.

4. New commerce opportunities

A new form of more immersive ecommerce is emerging, creating the opportunity to enhance online shopping experiences and reinforce digital sales channels. Brands from Walmart to Samsung have bought virtual land in the Metaverse for users to explore their spaces and products. Many brands are now considering how NFTs and other digital assets can offer unique experiences for customers, open up new revenue streams and reach new customer segments.
 

Want to find out more? Speak to our Web3 Strategy team

If you would like to hear more about Web3 & the Metaverse, and the opportunities they could represent for your business, please contact our team below.