6 Things Small Business Owners Need to Know About Web3
August 16, 2022
Technology keeps advancing and small businesses often need to scramble to catch up. From the initial move to e-commerce to the emergence of social media, the rules of the game have constantly changed over the past 25 years. Now, a new version of the internet has arrived: Web3. Is your small business ready?
You've certainly heard some of the defining terms — blockchain, NFTs, the metaverse. With limited resources and finite bandwidth, business managers and entrepreneurs need to review the hype and decide whether the new functionality represents a fad or an opportunity.
Here, we'll look at the basics of Web3 and describe some of the potential it offers for your startup or small business. From there, you can determine if it's time to jump into this new technology.
What is Web3?
Business discussions sometimes (well, maybe often) get infused with jargon. You've probably heard the term "Web 3.0" thrown around, without realizing what it specifically entails.
From the name, it's obvious that it represents a new stage of the evolution of the internet. But what are its key features and how does it differ from previous iterations? To answer that, here's a brief timeline:
The original web that gained traction in the 1990s was epitomized by AOL and eventually conquered by Google. This brought people online for the first time and saw the foundations of e-commerce, with names like Amazon first coming to prominence.
Here, the internet stopped becoming an add-on to IRL commerce and became a hub of activity on its own. Starting in the 2000s, Web 2.0 saw the rise of social media giants, with Facebook representing the biggest force. Data became the key commodity in this stage and the cloud took over computing.
The latest iteration of online culture centers around blockchain. This reached public consciousness through the rise of cryptocurrencies, like Bitcoin. However, its applications have already pushed beyond this narrow application.
Cryptocurrency remains the most conspicuous Web3 technology. However, with blockchain as its core, the basic aspects of this market have carried over to other businesses.
Overall, Web3 is marked by decentralization. The original term was coined in 2014 by Ethereum founder Gavin Wood and it describes an attempt to provide a more democratic and a more transparent version of online interactions.
Web3 use cases for businesses
Web3 has had a tough start to 2022. One estimate put the losses attributed to the industry at a whopping $718 million in the second quarter alone. This has been led by a crash in the cryptocurrency market, including several high-profile failures, like Celsius and Luna.
Even with the recent setbacks, Web3 remains a burgeoning form of technology. Within the crypto space, Bitcoin and Ethereum have entrenched themselves in the broader financial discussion, notwithstanding the recent drop in value. These have also provided the basis for a major industry, with billion-dollar players like Coinbase and FTX.
The use cases for Web3 go well beyond crypto, however. Here are some other avenues where these techniques have contributed to business:
- Decentralized Autonomous Organizations (DAOs)
- Decentralized Finance (DiFi)
- Creator Economy
The potential of these segments has attracted many of the world's largest companies. Famously, Facebook changed its name to Meta Platforms to stress its focus on the emergence of the Web3-based metaverse. Elsewhere, video game retailer Gamestop has looked to capitalize by launching its own NFT marketplace.
Meanwhile, investments continue to flow into the sector. Venture capitalists M13, which has put money in firms like Snap and Lyft, recently announced a $400 million fund focused on Web3.
Investments continue to flow into the [Web3] sector. Venture capitalists M13, which has put money in firms like Snap and Lyft, recently announced a $400 million fund focused on Web3.
Benefits of Web3 for business
Sure, mega-corporations and VCs have their eyes on Web3 with hundred-million-dollar (or even billion-dollar) bets. But what does that mean for your startup? Is there a case for adding a Web3 component to your small business?
To answer these questions, it's important to look at the potential business cases for Web3. Here are a few benefits you can derive from this sector:
- Streamlined Collaboration: Through the use of applications like smart contracts, the process of working with other parties can become more efficient. In certain situations, these can provide the foundation of trust between far-flung collaborators.
- Improved Transparency: Blockchain technologies provide an open ledger of dealings, leading to increased transparency.
- Easier Cross-Border Dealings: One of the advantages of cryptocurrencies comes from its ability to skip the red tape (and costs) often associated with sending funds overseas.
- Automated Supply Chains: Automated contracts can remove bottlenecks and streamline the process of keeping inventory filled.
How to prepare your business for Web3
Whether or not Web3 functionality will help your small business will depend on your specific situation. However, if you're ready to explore the possibilities more in depth, it's crucial to have a workable plan. With that in mind, here are some things every small business owner should know about preparing for Web3 investments:
1. Research Your Tech Options
Going into any Web3 project, understand your options. Dig into the functionality of various technologies and how well they can conform to your business needs. From there, you can focus on the upgrades that can have the most impact on your operations.
2. Prepare a Web3 Budget
As part of your research, prepare a cost analysis. This should include the resources needed to develop and launch any Web3 initiatives. In addition, figure out how much will be required to support the features over the long haul.
3. Talk to Your Stakeholders
A transition to Web3 involves a wide selection of partners. Depending on the steps you plan to take, it can involve buy-in from both vendors and customers. As such, you should include them in the process of gathering information and keeping them informed of your progress.
Don't forget your employees as well. They will have to implement any Web3 innovations and incorporate them into their routines. As a result, you'll need to keep them in the loop as you proceed. Plan for extensive training and ongoing refreshers to streamline the transition.
4. Make a Controlled Transition
While Web3 has its value, a move into this sphere also comes with complications and drawbacks. You need to be aware of these downsides as well. Take them into account as you proceed.
In addition, consider the speed of the transition as well. Depending on your situation, it might be prudent to ease into the Web3 market. Start small, track your progress, and make further investments based on the information gathered.
5. Build Strong Partnerships
As a small business, you likely won't have the resources to manage a Web3 launch with your current staff. Because of this limitation, you'll likely depend on third-party vendors to produce and manage the offerings. Be selective in choosing these partners. Research your options and gravitate towards companies with reliable track records of success.
6. Manage Your Risks
The first half of 2022 showed that Web3 can be a risky endeavor. As such, you need to limit your downside. Understand the potential ways your investment could backfire and make sure problems won't undermine the rest of your business.
Deciding whether Web3 is right for your small business
Web3 is more than just hype. Rather, it represents a bundle of technical advances that will allow different forms of interactions online. As a result, this new technology can alter how you connect with your customers, deal with your corporate partners, market your product or service, and more.
[Web3] represents a bundle of technical advances that will allow different forms of interactions online. As a result, this new technology can alter how you connect with your customers, deal with your corporate partners, market your product or service, and more.
However, these benefits come with potential risks. As recent history has shown, the development of these technologies is never a straight line. Because of this dynamic, consider your options carefully. Use the information provided here to ensure your business is prepared to make the most of Web3, while still protecting yourself from potential downsides.