Searching for Web3's Novel Use Cases

When a group of people hold the same token, they are a network

When new technology emerges, the goal is to discover its novel use cases. Put another way, what can Web3 do that Web2 couldn't?

Most of us fall into the trap of applying new technology to old use cases. Here are a couple of examples from the history books:

  • The first TV shows were just filmed radio shows

  • The first websites were PDF brochures

Reddit's Community Points

Last year Reddit launched Community Points; just last week, they killed the initiative citing costs and regulatory uncertainty as the primary drivers.

On the costs side of the equation, I have no doubt that a centralized Web2 version would be cheaper to manage points. Reddit was using Arbitrum to create tokens, and while Arbitrum's costs are insanely low, they're still likely 10x more expensive than a web2 system.

So why then use Web3 when it costs 10x more?

Perhaps points are the wrong use case. Reddits goal was to reward contributors and a tokenized points system proved to be insufficient in their eyes.

But, what if tokens as loyalty and rewards are the wrong use case for Web3? I know that a lot of marketers are betting big on web3 loyalty so please don't throw rocks at me just yet. The question we should continually ask is, "what can Web3 do that Web2 cannot?".

Too often, when looking at Web3 loyalty programs, these programs struggle to answer that question. The primary answer is usually centered around "ownership". And I agree, digital ownership is a big deal. It is something that only Web3 can enable. Unfortunately loyalty programs at the core are not about ownership. They're about getting you to buy more of X, or do more of Y.

Ownership by itself, is also not enough. Ownership that provides utility that can be achieved with other technology is not enough. Ownership must enable new utility that can't be achieved with previous technology.

Tokens as Networks

Ownership of a digital asset on a publicly readable blockchain allows for the formation of new networks at extremely low formation costs.

Tokens as networks are a novel use case that is only made possible by Web3. When shifting the frame of reference from building a points system to building a network, the perception of web3's cost also changes.

When a group of people hold the same token, they are a network. They also own their place in that network. The creator cannot remove them from the on-chain network.

With layer two blockchains, the cost to deploy a 1 million person tokenized network is less than $1,000, if not much lower.

We need more Portals

The challenge with tokenized networks, especially those formed around people, is that there are very few ways to interact with others in the network—for now that is.

Portals allow us to view and experience the on-chain network. The earliest example of this is Discord—when someone decided to token-gate a server and thus, created a portal where those holding the same token could experience the network.

Soon there will be as many portals as there are websites.

This website is an example of a portal. Those who hold our Sky Club NFT can easily find each other in our member directory. What's novel about this use case is that any app or website could allow Sky Club NFT holders to find each other. This means that tribes of people holding the same token can move around the internet together and gather anywhere they'd like.

This use case poses a fundamental threat to web2 social networks. To illustrate, if every member of a subreddit holds the same token, the community might choose to relocate to Discord.

Reddit's Community Points program threatened to remove the need for Reddit itself because each sub-Reddit that participated had its own token.

Tokens threaten Web2's big walled gardens. Tokens are meant to be much more than loyalty points—they are networks.

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