Web3 Use Cases Today and in the Future
Summary of Packy McCormick's Web3 Use Cases: Today and Web3 Use Cases: The Future posts
Packy believes that web3 has the potential to bring fast delivery, low prices and vast selection to financial markets and that it will eventually produce use cases that will justify all of the talent and venture capital that is being dedicated to crypto. He also believes that web3 will power models, networks and products over the next decade that will impress some of today’s biggest skeptics.
Right now, the crypto market is experiencing one of its biggest drawdowns ever as the sentiment shifts from exuberance to gloom. As prices crash though, Packy laid out some real use cases for web3 today and in the future in two different essays titled Web3 Use Cases: Today and Web3 Use Cases: The Future.
I summarized both of these essays in this post. To start off, here are two of my favorite quotes from his two essays:
“In the next few decades, I believe that web3 infrastructure will become the fabric of much of what we do online and in our financial lives. I also believe that the experiments web3 protocols are running in economic design, incentive alignment, and governance will jump out of the internet and impact ‘real-world’ institutions.”
“If I had to describe why I’m excited about web3 in one idea, it would be that: web3 allows for the most rapid iteration on new economic and governance models of any system humans have built. Every new app, game, and protocol is simultaneously a mini-experiment in economic design. Every DAO and even some NFT projects, like Nouns, is simultaneously a mini-experiment in governance.”
NFTs
According to Packy, “NFTs give physical properties to digital items, making them unique, ownable, and tradeable, in addition to digital properties like programmability and composability.”
NFTs are just used as collectibles today, but they could expand to other uses in the future.
OpenSea is the largest NFT market. The second largest NFT marketplace is Magic Eden which is based on Solana. Magic Eden has more than 60,000 transactions per day, according to Packy McCormick, and it also announced a new round of funding recently. The valuation was $1.6 billion and the funding occurred in the challenging market that we currently are in.
Volume on the largest NFT market, OpenSea, plummeted in June as per Exhibit A.
Exhibit A: Monthly Volume on OpenSea
Decentralized Exchanges
The use case of Decentralized Exchanges is that they create liquidity without the need for a middleman. The largest Decentralized Exchange is Uniswap which allows people to trade any pair of tokens with their wallet.
DeFi Protocols
DeFi Protocols are a way to lend and borrow without a bank sitting in the middle. Removing a bank from the process makes the transaction quicker and cheaper. Compound, Aave and Maker are protocols that make lending and borrowing against crypto holdings possible.
And these protocols have held up well recently whereas Celsius, a more centralized DeFi product, is struggling.
Jia is a company that is providing blockchain-based loans to businesses in developing countries. The borrowers get rewarded by repaying their loans with ownership.
Talent Marketplaces
Braintrust is a talent network that is owned by its user. It connects people with jobs at some of the largest companies like NASA, Nike and Porsche. A major benefit is its ability to prevent against extractive take-rates.
Exhibit B: Growth in BrainTrust’s Network
Decentralized Wireless Network for Internet of Things Devices
Helium is a decentralized wireless network that will have a 5G network coming soon. It works by allowing hot spot owners to earn $HNT tokens by letting the network use their hotspot.
Stablecoins
Stablecoins make sending and receiving money internationally better because it doesn’t involve a bank. Packy says he has Limited Partners from overseas who fund their commitments in his fund, Not Boring Capital, by using fully collateralized stablecoins because it is easier to send money this way.
Storage
Packy mentioned an article by Evan Conrad that gave a use case for cheap storage with Filecoin.
Use Cases in the Future
Jacob Horne’s essay Hyperstructures and Chris Burniske’s essay Protocols as Minimally Extractive Coordinators discuss a crytpo software that would be free to use forever and that anyone can build on top of. The rewards would go to the participants who build this infrastructure.
“Hyperstructures are crypto protocols that can run for free and forever, without maintenance, interruption or intermediaries. They are entirely on chain, and are public goods which create a positive sum ecosystem for any participants.”
- Packy McCormick
Jacob Horne and Packy had a discussion where they both came to the same conclusion that a lot of challenges in web3 could be solved by having a hyperstructure for each use case (liquidity, social, messaging, etc.). An example would be if the web3 ecosystem only used Uniswap for liquidity or XMTP for messaging.
Regenerative Finance
Regenerative finance is a way to prevent the common people from being on the receiving end of negative externalities. Some ideas in regenerative finance include data ownership, universal basic income, climate projects and new ways of doing lending. Not Boring Capital is already funding two climate projects for this use case called Toucan and Loam.
Decentralized Science
Sarah Hamburg discusses some possible use cases of Decentralized Science that include peer review, incentives and funding. She then mentioned ways in which the blockchain can be used to make this happen.
Here is what she wrote:
“Smart contracts [can be used] to mediate between authors and peer reviewers without going through the academic publishing industry.
· Incentivized communities might use tokens and NFTs to encourage scientific communities to share, review, and curate different resources.
· Combat censorship by storing data and information forever to avoid political interference.
· Blockchain-based funding models might use the public goods, DeFi, NFT, or DAO Legos to get projects funded, return value to the funders, and create self-sustaining scientific communities.
· Verifiable reputation to let anyone contribute science, peer review, or fund based on what they know instead of which institution they’re associated with.
· Ownership to let scientific communities own their work and the results of their work.”
Funding
Not Boring Capital uses a DAO to fund life science research and drug development. The reasons Packy mentioned for using a DAO instead of an LLC were because of the large global market that crypto has to offer, and because DAOs get the opportunity to vote on which new projects can be funded with the money they receive back.
Metaverse
The metaverse has been discussed a lot since Mark Zuckerberg mentioned it on Meta’s Q2 2021 earnings call. The value that crypto can give to the metaverse has to do with its ability to make digital items portable, interoperable across platforms, tradeable, composable and ownable.
Web3 Social
This use case could allow developers to build apps on the social network, as opposed to only the centralized party being able to build apps. It can help users foster a better relationship with their audience through ownership.
The example that Packy gave was if users could easily transport their followers from one social network to another instead of having to rebuilt the list from scratch. He asks an interesting question, “Would Twitter have created Spaces if Clubhouse users could have signed up for Twitter and easily transported all of their followers on Clubhouse to Twitter?”
Web3 Gaming
Play-to-earn gaming represents another use case. Axie made $79 million from play-to-earn gaming in 2021 when play-to-earn was booming.
Exhibit C: Axie’s Revenue in 2021 from Play-to-Earn Gaming
Decentralized Storytelling
Decentralized storytelling is trying to solve how content and intellectual property get funded and developed, and how fans can get involved in building the story. Decentralized storytelling could give fans the opportunity to help create the story and build the universe while owning their favorite characters.
Tokengated Commerce
This use case brings e-commerce to web3. It allows shoppers to use their wallets to transact at stores in web3. This is already happening at Shopify where they have four tokengating apps live.
Data Ownership and Wallet-Aware Sites
Vana is a portfolio company of Not Boring Capital that is allowing people to own their data and give access to it to others.