3 things we can learn from Web2 to help inform the next generation of communities 

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The blockchain burst onto the scene several years ago with the promise of a decentralized ledger system that could protect the identity of its users. This system also gave rise to new currency systems. And with that came a rash of people who were looking for quick ways to make money off these new cryptocurrency systems. 

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Some early speculators made lots of money very quickly, which only attracted more speculators and created more curiosity among the casual followers. We even gave these new companies and technologies a new mega-trend label: Web3. And just as quickly as it soared, the market for Web3 seemed to come crashing down earlier this year. 

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All of this seemed like a movie I had already seen in the early 2000s when many declared the Internet dead after a similar boom and bust of Internet company valuations. As an entrepreneur who survived those early Internet days and found a way to build a successful company, I remember how the headlines gave me pause about our efforts to keep building in the face of so many naysayers. 

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While the headlines underscored a market bust, each day I kept seeing growth in the number of consumers using these websites. It never slowed down. With the benefit of 20 years of hindsight, it is obvious to everyone that the early 2000s’ market correction was just a small speed bump to the disruptive power of the Internet. The smart money stayed in the game and focused on what consumers kept using.

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In many respects, I believe the same is true today with Web3/crypto technology. The key is to find the through line of technology that consumers crave because it enables new solutions that they need. In other words, it’s important now more than ever to find enduring product-market fit — not just high adoption triggered by a trend. As always, entrepreneurs must prove their products provide meaningful value for consumers.

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After the events of the last several years, people have increasingly lost trust in big tech, government, and centralized systems. In particular, the younger generation prefers to trust their peers over large institutions. I believe that the blockchain at the core of Web3 will usher in an era of decentralized systems that will enable consumers to create new networks and ecosystems that they can confidently build on because of the transparency of the system and the decentralized ownership. And companies that can deliver application value built on that system shift will be big winners.

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If we’ve learned one thing from studying markets, it’s that history frequently repeats itself. Despite overvalued stocks and challenging business models, consumers still loved using the internet. The web allowed them to connect with anyone, anywhere, and at any time. By embracing this, a new wave of internet companies was able to succeed where their internet 1.0 companies had failed. These businesses — like Nextdoor — uniquely harnessed the power of the community. 

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So what can we learn from these communities to help inform the next generation of Web3 companies? Based on our experience working with transformational Web2 companies, here are the three key learnings to keep in mind:

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1. Create motivations beyond money

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It’s often said that “the fastest way to find product-market-fit is to hand out $20 bills on a street corner.” While this sounds silly, many Web3 companies to date have been built on the premise of giving their users quick ways to realize upside. While this may look like product-market-fit, it’s hard to build a sustainable company this way. 

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If you look at the most successful online communities in Web2, very few incorporate any sort of direct financial incentives. They exhibit closed-loop ecosystems where the rewards and incentives are really only valid on the platform itself. For example, “likes” are a form of social currency. They matter within platforms like Instagram and Twitter, but they don’t directly equate to dollars. While some power users can profit from likes, most users don’t make a cent.

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For Web3 companies to successfully build communities, they’ll need to tap into motivations beyond money. This might be counterintuitive given the early focus on cryptocurrencies, but I believe human beings care more than just making money. They need purpose and a sense of belonging. 

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2. Small is mighty

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There’s a good reason that tight-knit communities cannot be built inside large companies. It’s almost impossible to develop a community with thousands of people right off the bat. For authenticity to thrive, you have to start small. Fostering true community often happens at the expense of growth at the beginning. 

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By promising upside, many Web3 projects grew so quickly that any sense of community was lost. Only communities that were initially kept small and exclusive — like BAYC — have been able to be successful. 

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The generation of Web3 companies will have to moderate growth so that they can build authentic communities.

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3. New form of trust

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Communities cannot exist without trust. Facebook started by verifying .edu email addresses. At Nextdoor, every user address was verified. Over the last decade, institutional trust is at an all time low. Decentralization promises to mitigate the need for one centralized power broker to be trusted. Instead the blockchain enables a model where transparency of activity allows the facts to replace a proxy for trust. 

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People have lost faith in large companies and institutions that have too often been shown to abuse their power. The next wave of successful Web3 companies will enable consumers to regain confidence in transparent systems. 

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That being said, there are ways to leverage decentralized models to accelerate trust. Verifying identity and ownership are both core principles within Web3. We believe companies that embrace these primitives and incorporate “trust building” behaviors into their products will win in the long run. 

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If you are interested in talking about how we can build the next wave of marketplaces and social platforms on Web3 platforms, let us know. We’d love to hear from you.

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