The Prize for Owning Web3 Distribution Is Enormous. Here’s Why It Won’t Go to Big Tech

The reward for controlling Web3 distribution is substantial but becoming increasingly elusive for tech giants like FAANG. Despite their immense wealth and power, they have primarily thrived by providing auxiliary services, facilitating the shift towards a decentralized future. For instance, they’ve offered easy access to computational resources.

Engaging Web3 presents a complex issue and is not an ideal fit for businesses that heavily rely on data exploitation and advertising revenues to generate substantial profits. The “most pioneering corporations” are deeply ensconced in the quagmire of outdated business structures, partnerships, and offerings, their progress hampered by internal cultural adjustments and the pressure to deliver short-term returns to shareholders.

Big Tech’s indifference towards crypto is evident as they have kept quiet about how their open-source projects could be adapted for cryptocurrencies. Neither have they purchased significant stakes in base layer technologies by acquiring tokens, which come with governance rights that could shape the future direction of these projects. It’s intriguing to ponder what we should anticipate from established web giants, given their considerable influence over the global digital landscape and the value they derive from users versus creating value for them through crypto involvement.

As a researcher studying the blockchain industry, I’ve often come across the perception that despite its widespread presence and abundance of emerging talent, the market opportunity is not yet large enough to justify significant investment. The recent withdrawal of Facebook’s Libra project due to regulatory issues and the resulting $40bn net loss for their metaverse unit over the past three years further underscores this belief. Instead of focusing on becoming a distributor for Web3 users, they are attempting to innovate their product suite in order to continue generating over 95% of their revenue through ad sales. This approach is driven by a prevailing view among regulators that consumers may not be capable of managing their finances or protecting their own data effectively.

People have grown used to having their emails filtered to refine AI systems, and many consumers unconsciously accept the loss of privacy for the sake of convenience provided by tech giants like FAANGs. However, this acceptance doesn’t bring us any closer to implementing groundbreaking technologies such as blockchain that could significantly enhance people’s lives.

As an analyst, I would rephrase it as follows: The pressure to share increasing amounts of our intellectual property (IP) and business data with these institutions becomes more intense as the race for artificial intelligence (AI) technology intensifies, focusing on data differentiation. This could potentially mark a turning point where the balance of power shifts completely towards insatiable greed, potentially shattering existing boundaries.

In the future, the web’s evolution will not be dominated by a few large entities that stubbornly resist assuming a more subordinate role in serving users while wielding excessive power. Instead, a new breed of leaders is needed for the next phase of the internet – a generation of decentralized initiatives and emerging businesses that embody user autonomy and community management principles. These entities will play a crucial role in shaping the industry to align with the values of Web3.

Modern construction industry professionals are unwavering in their determination to regain control and resist exploitative Web 2.0 business models, operating systems, and app store restrictions. The goal is for decentralized organizations to take the lead role 10 years from now, replacing the FAANGs as more benevolent entities that provide services instead.

The danger to blockchain is that without a coordinated and effective global marketing effort, we could construct it but fail to attract an audience. However, if we team up with a distribution partner possessing sufficient reach, the creation of Web3 applications will become financially worthwhile. This, in turn, may encourage developers to experiment with innovative ideas, potentially leading to a significant reward that justifies the risks associated with developing for a marketplace that doesn’t exist yet. The importance of a single “killer app” diminishes compared to the significance of being the distributor who opens doors for developers to access a large user base.

Telegram’s fast growth

One well-poised incumbent is Telegram.

Creating a foundational blockchain and its accompanying community is a significant challenge that has only been achieved by a small number of players so far, excluding the cryptocurrency enthusiasts. The race to become a key player in this space has seen heavyweights like Coinbase launching BASE, FTX championing Solana, Facebook attempting Libra, and Amazon envisioning its own chain for NFTs. Impressive as their scalability may be, these new-age foundations will not secure victory based on technology alone. Instead, distribution and user engagement are the keys to scaling up; infrastructure is becoming increasingly accessible, possibly even approaching commoditization.

When developers discover attractive customer acquisition costs and a massive potential market in global adoption, the revolving door of opportunities in Telegram Mini-Apps may get stuck. Telegram Mini-Apps serve as an open space for new and burgeoning brands to launch crypto-integrated games and applications. This platform offers effortless authorization, crypto and fiat payment processing, and a self-contained environment for projects to incubate, fundraise, and promote themselves using the familiar Telegram user interface.

From a growth perspective, the US is significant for many of today’s leading apps, but not essential for global crypto adoption. Strategically, Telegram deliberately avoids the US market while targeting the unbanked population, which is more than four times larger than the US population. While this decision can be framed as socially-conscious, it may also stem from the regulatory uncertainty and the 2020 SEC lawsuit against the company. The potential for growth beyond US borders is substantial, with WeChat’s mini-program economy serving as an example. Since its launch in 2017, WeChat has amassed over 5 million mini-programs and reached $400 billion in annual transaction volume by 2021.

In the ongoing Web3 evolution, it’s becoming increasingly evident that the battle for dominance isn’t solely about technological advancements, but a profound reevaluation of power dynamics, control, and trust in the digital sphere. The distribution landscape in crypto is at a turning point as Web3 fundamentally contrasts with the commercial ethos and structure of Web 2.0.

Removing irreversible data ownership, relinquishing 30% App Store fees, and enabling AI training on one’s own data, while prioritizing portable identity and developer goals that benefit consumers, would significantly weaken Big Tech. Telegram’s role as a distributor and advocate for this shift is intriguing. Meanwhile, other tech giants grapple with defining their missions and determining whether to embrace the future’s protocols.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.