The web3 challenge
Fred Wilson recently wrote that when a new technology comes to market, we often look for "native" applications of that technology.
Why?
Because a "native" opportunity is one that did not exist previously and could not exist without the new technology. It's a green field for value creation.
He points to Albert Wenger's 2009 article on mobile native applications, where Albert highlighted the new primitives enabled by mobile smartphones:
- Location
- Proximity
- Touch
- Audio input
- Video input
This got me thinking, what are the new primitives enabled by web3?
On reflection, I believe they are:
Trustlessness
Never before have we had a shared state system where no single economic actor can shut down or deny services to another. This enables credibly neutral backends. Why is this important? Smart innovators only build on permissionless complementary assets, so innovation soars. Natural monopolies emerge around leading protocols, which are able to operate at lower cost and greater scale than web2 counterparts. This new abundance of trust collapses the cost of large-scale network coordination and enables new paradigms like composability and community IP.
Agency
Intermediaries are no longer required for ownership, transfer or service of digital property. This doesn't mean everyone will self-custody. Semi-custodial solutions using multi-party computing / oblivious transfer will emerge and provide the benefits of self custody with a web2 easy user experience. Today's gatekeepers will be forced to innovate as service provider lock-in and friction decline.
Financial i/o
Today, it's easy to go to any web site and spend money. We call this e-commerce. But it's not easy to go to any web site and get money. Web3 changes this. Multicoin Capital calls this bi-directional value flow. And it's available not just for money, but for all forms of digital value (even complex contracts). Web3 uses trustlessness and agency to enable standardized and open financial input and output, dramatically lowering the cost and complexity of financial transactions.
Just as it was with mobile, native web3 opportunities will emerge from the combination of these primitives more than any individual primitive alone.
Location and proximity were available on mobile for ten years with no breakout applications. Until iPhone, which made existing primitives easier to use and added new primitives, changing everything.
Howard Marks talks about the way investing perceptions often swing between flawless and hopeless. But "in the real world, things fluctuate between pretty good and not so good."
Generative AI is rocketing up to flawless.
Web3 and crypto has swung toward hopeless.
Neither is true.
To separate signal from noise, identify native applications that combine unique new primitives that did not exist previously or could not exist without the new technology.
The best investors aren't better at predicting the future.
They're better at seeing the present.