As the world anticipates the adoption and implementation of Web3, many questions remain about how it will affect businesses and individuals. However, one step marketers can take to stay ahead of the inevitable status quo disruptions and enhance current marketing strategies is learning about basic concepts related to Web3.
NFTs (Non-Fungible Tokens)
Web3 technology makes it possible to tokenize digital assets through the use of NFTs. Let’s start by breaking the term NFT down into words: NFT stands for Non Fungible Token. “Non-fungible” describes something that is not interchangeable for something of equal value, like if a hundred dollar bill could only be repaid by another hundred dollar bill, not by 5 twenty dollar bills. NFTs can legitimize ownership of a digital object because the holder of the NFT has an irrefutable claim to the asset that cannot be interchanged for another asset of equal value.
As it applies to marketing in a Web3 world, businesses, content creators and individuals will be able to use NFTs to grant irrefutable proof of ownership for things such as digital art, music, game data and assets, and more.
Many people in the computer industry envision the Metaverse as where the next iteration of web technology, e.g. Web3, will take us. In the simplest terms, the Metaverse will be an immersive, virtual reality where people can interact with other people and virtual avatars in real time, in both real and created spaces and experiences. It will be a virtual reality accessed by physical people in the physical world through the use of virtual reality headsets and hand controls, although methods for accessing the Metaverse will become more sophisticated as its use is defined. Though the Metaverse currently exists, development and adoption of Web3 technology will pave the way for more widespread use of the Metaverse.
In the Metaverse, people will be able to see and experience things that may not be possible in the physical world. For example, envision meditating from the top of Mt Kilimanjaro with people from around the world, fighting with a team of friends through an alien invasion, or attending a concert in London while sitting in your living room in Houston, Texas.
As it relates to marketing, the possibility of a metaverse opens up limitless opportunities. Imagine selling tickets to a live event in the metaverse, but now, instead of being limited to people in your geographic location, you can sell tickets to anyone in the world. And unlike current Zoom meetings and webinars, users will experience these events as if they are actually there in person. In the virtual world, people could demo a product, attend a class or performance, interact with a community of like-minded fellows, browse the shelves of your store, and so much more. And the metaverse, like the real world, will likely present opportunities such as digital billboards and interactive ads. Only time will reveal the ways businesses, creators and individuals will creatively market products and services within the Metaverse.
As one of the defining features of Web3, decentralization will benefit both businesses and users alike. Decentralization, in the context of Web3, refers to the way data and content is owned and regulated. In our current, dominantly Web2 world, a handful of search engines and social media platforms own and utilize massive amounts of individual users’ data.
In the Web2 environment, users have unwittingly handed over large amounts of personal data through the use of search and social platforms. Data gathered by these large companies encompasses personal details related to identity, social engagement, shopping habits, and even financial data. Though these companies have used user data to create convenient features like more meaningful, targeted marketing and saved payment information, for example, the idea of so much personal data being held and controlled by a small number of private companies has also triggered concerns relating to data privacy and security.
With the changes introduced by Web3 technology, not only will users have more control over their own data, but also businesses of all sizes will have the opportunity to reach users outside the influence of search engines and social platforms that have had a great deal of control over what information is prioritized and shared. Decentralization of control in the Web3 environment will return power to the consumers and creators and potentially make it easier for smaller, less powerful startups to gain traction. Decentralization will mean that no one person or entity can remove content or block access.
Many in the financial industry believe blockchain will revolutionize and completely change the global financial system. Blockchain is a shared database composed of small blocks of data chained together to show a history of transactions. Because data is recorded in many places and not one centralized place, it is virtually impossible to hack or cheat the history shown in the database ledger. This makes blockchain transactions very reliable and secure.
Popular blockchains, like Bitcoin and Ethereum, allow everyone to connect to the blockchain and transact on them. Some possible benefits of blockchain in business settings include things like improved supply chain logistics, more efficient accounting practices, decreased fraud, secure digital file storage and sharing of things like patient records and public records, and tighter security and fewer breaches. Realized benefits will vary by industry, but the possible applications are broad.
Cryptocurrency is digital currency intended as a medium of exchange that is not dependent on banks or the government to uphold or maintain it. Though some critics point out that cryptocurrencies have nothing backing it but the value people assign to it, proponents note that even the American dollar departed from gold standard backing quite a long time ago. However, cryptocurrencies are still relatively new, unproven and have suffered some notable collapses with trickle down consequences for cryptocurrency investors.
So why risk using cryptocurrency? People using cryptocurrency benefit from the ability to transfer coin instantly to anywhere globally at a much lower cost, avoiding hefty fees and lengthy transaction processing times. Cryptocurrency could also include programmable elements to support more complex transactions like conditional payments.
Though cryptocurrency is not yet widely used by individuals (currently estimated only 15% of Americans own/use cryptocurrencies), we do see institutional adoption beginning among companies like Tesla, Visa, Mastercard, and Paypal. In business settings, cryptocurrency is currently used to increase transparency in crowdsourcing and raising capital, create a more convenient and efficient payment of employees (especially when dealing with cross-border transactions), and add an alternative way to give employees share in a company. However, the success or failure of cryptocurrency and its myriad of applications remains to be seen.
Web3/NFT domains are unique, digitally protected domains based on the blockchain where owners can enjoy complete control and ownership of their site independent of the traditional internet. These domains can store information about users, but unlike Web2 domains, users can choose to keep private or share their information. Web3 domains can redirect back to Web2 websites or owners can create a completely Web3-based site. One big advantage of Web3 domains is that, depending on the platform, users will have the option of buying their domain outright without incurring yearly fees for hosting. For example, at Unstoppable Domains you own your domain for life. While, with ENS Domains you pay per year like current Web2 domains. Web3 domains can also function as a “username” for any cryptocurrency transactions, as a universal login for apps, and as the entity for creating and hosting additional websites. For businesses (and marketers) this means your business website’s functions can be much more than just a virtual storefront address with a greater level of security (thanks, blockchain!) and independence.
As with any new technology, change and evolution presents opportunities for the forward-minded marketer. As we anticipate the inception and adoption of Web3, we can feel confident and excited about the ways we can improve businesses and our lives through intelligent and thoughtful application of new technology. Web3 will hopefully provide what Tim Berners-Lee, a developer of the world wide web, envisioned as an intelligent, self-sufficient, and open Internet that employs AI and machine learning to function as a "global brain" that interprets content conceptually and contextually. But in the meantime, we can look forward to an interesting and ever-evolving marketing landscape.
For even more Web3 terms, see The Web3 Glossary.
“What are NFTs and How Do They Work?” by Michael Greshko, National Geographic