Entrepreneurship in Web3: The complete guide (DeFi, NFT, DApp, Play2Earn, Social Token, Metaverse…)
More and more people believe the next disruptive businesses will be built around blockchain in Web3. You’ve probably heard of the term, but do you really know what it means? Its scope? Its applications? I’ve been reading up on the subject for several months now, diving into resources from all over the world, calling experts from all markets, and most importantly, getting my hands dirty launching Web3 companies (Mobula, StaySAFU, Safetin).
The word Web3 is trendy at the moment, but very few resources address the micro & macro changes of Web3 business creation. This article aims to look back on the evolution of the web with Web1, Web2, and then the arrival of Web3. We’ll talk about the different learnings around business creation in Web3: What’s different about Web2 vs Web3 entrepreneurship? How to create & market your offer? How to manage the legal aspect? I’ve tried to paint a picture of the Web3 ecosystem and the best practices to enter it.
My name is Julian, co-founder of Web3 Island & The Secret Company, and this is the complete guide to entrepreneurship in Web3 (DeFi, NFT, DApp, Play2Earn, Social Token, Metaverse, etc.).
Launching or planning to launch your Web3 startup?
Receive the weekly Web3 entrepreneurship newsletter: Inside Web3 💎
If you want to get daily resources, strategies, and learnings on how to build your Web3 business, feel free to connect on Twitter (@JulianIvaldy)
PLAN OF THE ARTICLE :
- LET’S START FROM THE BEGINNING (WEB1, WEB2, WEB3)
- WEB2 VS WEB3, A NEW LOOK AT ENTREPRENEURSHIP
- WEB3 PRODUCT CREATION
- WEB3 MARKETING CREATION
- LEGAL ASPECTS OF A WEB3 COMPANY
- INTRODUCTION TO DEFI, NFT, DAPP, PLAY2EARN, SOCIAL TOKEN, METAVERSE
Let’s start from the beginning
It’s probably most helpful to think about Web3 in the context of previous internet paradigms, Web1 and Web2:
Web1 was the first version of the World Wide Web
Web1 was the first phase of the Internet. In 1990, the Internet was a bunch of connected computers. The web was its first application, created by Tim Berners-Lee. In Web1, everything was static. Users could only search and consume content through web pages. Web1 was designed as a “hyperlinked information system”. A giant library of data collected on a screen from computers all over the network, which users can browse by clicking on linked texts and images.
- Decentralized — Powered by regular computers from regular users
- Open-source — Anyone could build on the web (but not easily)
- Read-only — Publishing content required some technical skills, so most users were readers
Web2 was a step up from the static web pages of Web1
Web2 is the version of the internet most of us know and use today. The internet has become more usable, Web2 is dynamic, and users can now interact with the content published on websites. They can upload videos to YouTube, post photos on Facebook, or comment on other publications.
Three major changes have shaped Web2 as we know it today. The first is the development of mobile (smartphones take us from a few hours a day in front of our desktops to “always-on”). The cloud (instead of buying and maintaining expensive hardware infrastructure, you can now rent it cheaply from vast data centers spread around the world). The social side (you can now create, share and interact in a new way via your online activity).
Web2 is :
- Centralized — Participation in the network is controlled
- Monitored open-source — Users must follow the rules to build on the web
- Read-Write — You can create/interact with the content of websites
Web2 is more and more criticized
When Web2 arrived, the web became accessible and useful to more people, new large markets opened up, and central platforms multiplied. After 10 years, we have seen centralized platforms have a monopoly on others, creating a real imbalance in what customers expect from the web. The big centralized leaders (Google, Apple, Facebook, Amazon, etc.) now control our conversations, searches, content, media, and data.
Your self-expression = their market cap.
What was initially an open forum in Web1 has become a walled garden where each centralized company imposes its rules and controls its users. Today’s Internet is seen by many as an oligarchy.
Internet users are starting to criticize more and more this evolution of the web. They criticize several aspects:
- The attention economy — The attention we give to something has become the native currency of the Internet
- The Internet is owned — Platforms own everything you create online
- De-censorship — Nearly 90% of the web is stored at four hosting providers.
Web3 is the next stage of the Internet, still under construction.
No single definition or strict rules define it, but some values emerge from most Web3 applications. Web3 refers to an Internet made possible by decentralized networks, such as Bitcoin and Ethereum. In Web3, the user can be the user & creator (as in Web2) but also the administrator or at least the actor with a distributed architecture.
The main innovation of these networks is the creation of platforms that no entity controls but everyone can trust. Being associated with a blockchain, each user and operator of these networks must follow the same set of hard-coded rules, called consensus protocols. Another innovation is that these networks allow the transfer of value or money between accounts.
One of the main advantages of Web3 is that it attempts to address the biggest problem that has resulted from Web2: the collection of personal data by private networks, which are then sold to advertisers or potentially even stolen by hackers. The openness of the decentralized web means that no single party can control data or limit access.
We talk a lot about the technological transition, but it’s above all a cultural transition.
Web2 is saturated with offers, do the exercise yourself, look for something on the web. You will find several solutions for most of your requests more or less similar to your search. The consumer now wants more than just a solution to his problem/need. He wants to be a consumer and an actor to benefit in another sense.
Web3 promotes an economy of distribution, transparency in its governance & access/use of data, and security. This vision of the Internet of all seduces the consumers more and more and participates in the development of Web3.
Web3 is still under construction. It’s quite confusing not knowing what will happen or how it will evolve. Many compare it to the arrival of the Internet in the early 2000s. It’s up to us to move forward with the elements we have today, which is the first quality of an entrepreneur. So I hope my thoughts will help you get started in Web3 entrepreneurship.
Web2 vs Web3, a new look at entrepreneurship
By introducing the changes between Web1, Web2 and today Web3, I hope to have clarified the technological transition, especially the cultural and social changes behind it.
When you start a Web3 project, you need to look for economic models of distribution. This can be done through tokenization with distribution based on each person’s contributions, shared governance, and direct profit-sharing…
As a concrete example, we are building NOVA Game, an NFT platform for influencers.
We have three main missions. The first is to convince the biggest influencers to collaborate with us exclusively to create their NFT. The second is to convince designers to create these influencers' NFT — or 3D characters — in large quantities and in a short time. The third is to create a platform used by our customers in which they can buy/sell/get benefits from the different NFTs of each influencer. Of course, we need this platform to be adopted, used, and appreciated.
Our main challenge is to realize these 3 missions without a treasury, being at the stage of launching the project, and not wanting to raise money in Seed unnecessarily.
The solution? We created a DAO (Decentralized Autonomous Organization) where we “sold” our creator economy opportunities vision, our team, and our NOVA Game project. We collected, on the one hand, money from external investors (friends, family, business angels) and the workforce, on the other hand. We managed to incentivize influencers, designers, and developers to work with us based on token remuneration in proportion to their involvement.
As a result, the DAO owns a large portion of NOVA Game’s tokens. Thus, if NOVA Game works, the NOVA Game token will increase, and therefore, the DAO value will increase. Potential employees were easily turned into co-founders through an excellent win-win strategy.
When launching a Web3 business, the key is attracting as many people as possible who can contribute to your project.
The reality is that it’s a bit the same in Web2. Entrepreneurs are not necessarily good at running a company. They are good at motivating and incentivizing co-founders to create a common project. In Web3, it’s the same thing, but instead of incentivizing 2/3/4 co-founders, you incentivize an army of people who will be your investors, employees, and customers…
Beyond the mindset and values to have when starting a web3 project, there are many other differences in Web3 business execution, product creation, marketing, legislation... Let’s look at them together.
Web3 product creation
Creating a Web3 product requires expertise in blockchain in most cases. New positions have appeared and are increasingly in demand (blockchain developer, solidity developer, Web3 developer). Most often, former traditional Web2 developers convert to Web3 because of its opportunities.
There are many platforms to find blockchain developers. There are traditional Web2 platforms like Freelancer or UpWork, but there are also many smaller Web3 sites. I personally use Ethlance, web3 Career, CryptoCurrencyJobs, etc.
If you want to know more about platforms that help you find Web3 talent, I present in this article the 100 tools to create and develop your Web3 startup:
100 tools to create and grow your Web3 startup (NFT, DeFi, DApp, DAO…
I recommend you go through these Web3 platforms to source a developer. The developers are more experienced. You can pay them in crypto or even offer them a collaboration quite easily. Otherwise, the best way to find someone to help you develop your project is to hang out on forums, discord groups, telegram, and chat with people.
The great thing about Web3 products is the commitment to composability. Composability allows anyone in a network to easily build on and around existing products and services to design new use cases. Ethereum’s composability has allowed users a high degree of freedom to be able to assign relatively complex transactions under a single security framework, on a single chain, and with relative ease. Many platforms help you build your Web3 project using other protocols already established, like Moralis.
In Web3, many projects are open source, co-created by the community with a Github (or Radicle, its decentralized version). Each person can put his brick in the project, with a minimal hierarchy/control system, but present to ensure security.
In a Web3 project, you don’t have to follow the same roadmap we learn in business school: Product and Marketing next. You can directly sell a vision to the general public and to your future customers.
Some friends of mine have launched their NFT P2E game.
On their landing page, they announced their road map, based on two public phases. The first phase included the token’s pre-sale & public sale, the product's beta development, and the product launch. It was only in the second phase that they announced focusing on the development of the product with the publication of games, leaderboards, etc.
By putting their landing page online, building their community, and selling their vision & road map, they tokenized their future game (with a token released before the game) and raised +200.000$ from their community to help them realize the game. Thanks to tokenization, you can sell your idea, and your vision, and people will fund you by buying your token before buying your product.
In the beginning, there was a real barrier between the marketing of Web3 projects and the marketing of Web2 projects. This can be explained very simply. For example, traditional advertising methods such as Facebook Ads did not allow the promotion of the vast majority of Web3 projects (Crypto, NFT, Blockchain-powered projects...)
Web3 businesses were therefore promoted in micro-communities, forums, private groups, etc. Affiliate marketing, which still works a lot for this type of project, was the main source that made these projects grow. As Web3 and its applications begin to reach the general public, the marketing strategies used by Web2 companies (ads, collaboration, product placement, specialized advertising) are more often used.
However, there are still differences, especially in the funnels of these marketing strategies (called Loop in Web3). Have you ever seen an ad from an NFT or Crypto project? Didn’t you see anything in common? Crypto or NFT project ads are often redirected to a community (Discord or Telegram). They rarely put their “product” in an ad but highlight their community.
The first brick of a Web3 project is often its community, even before the product is developed. The goal is to turn your customers into ambassadors, working on meritocracy. You will ask them to perform actions, and rewards will be earned.
If you want to know more about marketing strategies to grow your Web3 startup, I made a dedicated video on the subject: Best Web3 Growth Hacking Strategies: From 0 to 1 million users (Crypto, NFT, DeFi, DApp, DAO)
Start by choosing the right channels
Most Web3 projects are on Twitter, Discord, and potentially Telegram. These are the centralized platforms they use to connect to large audiences. There are new Web3 channels like Mirror, but you also need to stay present on the traditional Web2 platforms. Web3 doesn’t mean cutting off from everything.
Create the right loops
Loops are the paths taken by your customers. It’s the equivalent of funnels in Web2. The goal is to choose the right path that your future customer will take. A good CTA from your Twitter can be to join your community on Discord. Behind that, you can set up your discord with an affiliate system to incentive your community members to earn points to participate in your token’s pre-sale. You can ask your community to shill for your project to earn points for being on your white list…
Here are some marketing actions that work in Web3
- Create partnerships — Collaborate with influencers, media, satellite sites, subreddits
- Incentivize your community with a whitelist — Transform your community into marketers by making them carry out marketing actions to have a better chance of getting a place in your presale
- Social proof — Establish partnerships with backers, ventures, auditing companies & KYC agencies
- Shilling —Indirectly promote your project to audiences to build hype for it
For example, with StaySAFU, we went from 5000 unique visitors to 1.260.000 unique visitors per month. How did we do it?
- Development of a free API and establishment of partnerships (with coin listing platforms) to integrate our API tool for free in exchange for backlinks + links to our platform for premium scan
- Multiplication of partnerships with investor communities on Telegram, Twitter, and Subreddits (@CryptoLaunchBsc, @DailyStarsBSC, @Moon_Toons, etc.)
- Organization of AMA (Ask Me Anything), where Sacha and I presented the project to external investors
- Referencing our token on a centralized exchange platform that has 1,000,000 users (CoinTiger)
- Massive shilling by our community
+Some other secret actions 🤫
Legal aspects of a Web3 company
From one lawyer to another, we are told different things. We understood then… There is a big legal vacuum. Concretely, there is no established rule for companies in Web3.
If you want to create a disruptive & ambitious company in Web3, you will never be 100% decentralized. You will need to be in a hybrid configuration with a company registered in your country (or the country of your choice 😉), a professional bank account, and a corporate crypto wallet. Your accounting will be adapted according to transactions from your corporate crypto wallet to your corporate bank account. As more accountants become crypto-friendly, it’s up to you to find the right one for your company.
A small aside on DAOs
Introducing decentralized autonomous organizations (DAOs) in the Web3 economy is a game-changer. Unlike the equity-funded companies of the Web2 era, DAOs are funded by the sale of tokens published at the organization’s inception.
DAO is a completely new phenomenon of starting faceless organizations without leaders. These organizations can work as a corporation and run via rules that are defined on the blockchain. DAOs discourage hierarchical control since each stakeholder has an equal vote via tokens. In addition, they allow more people to invest in startups and share the risk.
A DAO automates value transfers through smart contracts. Human managers are programmed out by code that is democratically agreed on by token holders. Each member owns a fraction of the DAOs assets and can weigh in on decisions proportional to token holdings — as programmed per smart contract.
Integrating economic and social features, the DAO model makes companies more like communities and communities more like companies.
Here are some examples of DAO
- The DAO — The very first DAO was a venture capital fund launched in 2016, aptly named The DAO. DAO tokens, purchasable with ETH, came with the right to vote on where The DAO’s collectivized funds would be invested. Investors were to profit from dividends and rising prices of the DAO token. Unfortunately, the underlying smart contracts had a critical bug that was exploited by hackers. Or maybe not so, unfortunately: hacks expose vulnerabilities we can’t have. Where the DAO Hack initially posed an existential risk to the nascent Ethereum protocol, it ultimately came to strengthen it.
- PleasrDAO is a collective of NFT enthusiasts that pool together resources to get their hands on rare pieces. Notable acquisitions include the Snowden NFT, the original Doge meme image, and an extremely rare Wu-Tang Clan album. Each member owns a part of these NFTs proportional to the number of tokens they hold.
Here is a list of 11 interesting DAOs to discover: 11 Most Interesting DAOs of 2021
Legally compliant DAOs are LLCs, which means they are limited liability companies. Limited liability means that the company is considered its own legal entity, regardless of how it pays taxes… While one person or entity must form the DAO, they do not retain sole control over the DAO.
So what to choose?
Some companies operate only with a crypto-currency wallet — without declaring anything. This is not really legal (I think), but no one can really link the money flowing into the blockchain and the owner behind it (if the person is not DOXXED — if his personal identity is not associated with the project)
Some companies only work with a DAO, meaning the participants’ money remains in the form of tokens, which they are free to exchange or withdraw. States are starting to clarify the issue of taxation on the withdrawal of personal crypto-currencies; they have fixed rates. In France, the rate is 30% on the profit for example.
Other companies operate with a professional bank account, a declared legal structure, and a linked professional crypto wallet. This is the case for most of the large and ambitious Web3 companies. This is essential if you want to be able to value your Web3 company, paid in traditional devices, fundraising, etc.
Curious to understand how to incorporate and manage a DAO? Check out my latest article on the subject: How to create a DAO legally: The different options to launch DAOs without breaking the law
Introduction to DeFi, NFTs, DApp, play2earn, social token, Metaverse
DEFI, THE CRYPTO’S WAY OF WALL STREET
DeFi is an acronym for “decentralized finance.” This means financial services and products operate independently of a central institution such as a bank, lender, or credit card company (thanks to the blockchain). With a DeFi wallet, users of “decentralized finance” can send and receive money, which is then stored on the blockchain and becomes accessible without going through an intermediary. Total value locked in DeFi surges over 1,200% in 2021 to surpass $240 billion.
Here are some types of business models in DeFi that work:
- Token — Launched your own crypto in DeFi
- Media & Community — Sharing DeFi news to an investor community with sponsored content
- Tool — Launch your own SaaS or DApp for DeFi investors, crypto creators, or other market players
- DeFi Investment Funds
NFT, THE DIGITAL PROPERTY
A token is non-fungible when its value is perceived as unique, i.e. when it is not interchangeable with another token. It’s a matter of perception: dollar bills all have unique serial numbers but are considered fungible because the purchasing power of each is the same. It’s a different story if you’re a collector and care about the serial number.
In this sense, NFTs are just tokens with important serial numbers. If you issue 1,000 entry tokens for a giveaway, those tokens are not fungible so a higher number increases the odds of winning. They are fungible if the token number does not matter.
NFTs are on-chain tokens proving ownership of off-chain assets. They are not the assets themselves. Anyone can right-click + save a Cryptopunk.png, but only one wallet can hold their NFT. NFTs are not synonymous with digital artworks or even digital assets. Anything you would like to own can be tokenized to make its ownership verifiable, tamper-proof, programmable, divisible, easy to transfer, and cryptographically secured.
Here are some types of business models in NFT that work:
- Start your own collection of NFTs — Adaptation of physical work or creation of your universe
- Launch NFT Investor Tools — SaaS, DApp, Bots…
- Create a media or a community — Share new NFT projects by accepting sponsored posts
- Create NFT Training — Create training or boot camps to teach people how to create NFTs
We developed NOVA Game with NFTs. NOVA Game is a platform to buy, sell, and exchange NFT influencers. It allows users to take advantage of their knowledge of social networks and their new rising stars by supporting influencers by purchasing their NFT and its benefits.
DAPP, THE ULTIMATE OPEN SOURCE REVOLUTION
The DApp (decentralized application) concept is still in its infancy. Explaining the same thing in a single line is difficult because no specific definition seems to match all the attributes that make an application a DApp.
Five characteristics are found in the majority of DApps:
- The first is the open-source side. This is the first and main attribute of these applications. They make their source code accessible to everyone. Changes essentially have to be decided by all or most users, so it’s transparent that the code is available to everyone for payment.
- The second characteristic is the decentralized nature. As the name suggests, decentralized apps store everything on a decentralized blockchain or any cryptographic technology.
- The third characteristic is their tokenization. They generate DAPP tokens to provide value to their contributing nodes. They also provide access to their application through the possession of their token.
- The 4th characteristic is the incentive. As the application is based on a decentralized blockchain, validator records on the network should be rewarded/incentivized with crypto tokens or any form of digital asset with value.
- The last characteristic is its algorithm. The decentralized application must have a consensus mechanism that presents proof of value in the cryptosystem. Essentially, this adds value to the crypto token and creates a consensus protocol in that users agree to generate valuable crypto tokens.
Finally, DApps work a bit like states. They are democracies with their own money, their own rules, their own people, and their own duty.
Here are some types of business models in DApp that work:
- DApp for DeFi use— Dapps facilitate access to information such as coin listing platforms
- DApp for money management and transfer — Decentralized apps can be used to facilitate the transfer of money around the world.
- DApps for applications in NFTs — Dapps to help NFT investors as platforms that estimate the scarcity of NFTs
PLAY2EARN, WHEN GAMES AND BUSINESS MEET
If you’ve ever hunted Pokémon, collected World Of Warcraft weapons or FIFA player packs, you understand the value of digital assets.
With a blockchain, digital assets become economically scarce. There will only be one Pikachu in crypto-Pokemon. Rare assets are earned, owned, and traded between players in what is a true economy.
To illustrate this, we can talk about Axie Infinity:
It’s a blockchain game in which players raise, fight and trade cute animal creatures called “Axies.” Players earn tokens that they can use to farm Axies (i.e. staking NFT Axies to receive token rewards). By trading Axies and tokens, some players can already make a living from this game.
SOCIAL TOKENS, THE POWER OF COMMUNITIES
In this case, tokens capture the economic value of community membership, subjecting them to the laws of supply and demand. The prices increase as more and more people want to join. In addition to gaining certain rights, tokens can denote ownership, voting, and exclusive access. When the prospect of increasing demand attracts investors, the price soars even higher.
This is as true for ETH holders as it is for any group of people. Through tokenization, brands, artists, creators, and influencers can turn communities into economies.
To illustrate this, we can talk about Socios:
Socios allows sports teams to monetize fan bases with fan tokens. Fans can buy tokens to feel a sense of belonging to the club. They earn a vote proportional to their number of tokens for polls on team decisions, gifts, awards, etc. Lionel Messi reportedly had part of his signing bonus paid in tokens from PSG fans when he signed for PSG in August 2021 — which drove up the price.
METAVERSE, A NEW PLAYGROUND
DeFi, NFT, DApp, play2earn, and social token converge in what is called the Metaverse: a virtual world where people work, play and live together.
The metaverse isn’t new. While Zuckerberg and his all-seeing company considered it the next big thing, the idea has been around for decades. Technically, the first online message boards back in the late eighties and early nineties could be seen as the precursor to today’s metaverse push since it was all about connecting people virtually.
Many people don’t believe in the metaverse, in this vision of completely virtual and digitalized parallel life, but let’s take a look at the history of its last 20 years.
We can see how much our lives have already changed since the arrival of the internet, computers, or even telephones. It’s a new man/machine interface that has arrived and changed how society has evolved (both economically and socially).
We went from working in buildings to working from laptops and phones. From conference rooms to meetings in Slack and Zoom. We care more about our followers than our neighbors. We spend more time socializing on Instagram, Twitter, Discord, and Reddit than in bars. For me, more and more people will gradually lead a hybrid life between real and virtual life. How far and how fast? I don’t know, but it will happen.
Again, the metaverse opens the door to many opportunities. Here are some business models that work today in the metaverse:
- Buy, sell and rent virtual land — Get into real estate in the most popular metaverse like Decentraland or Roblox.
- Creation of worlds, cities, and games in a metaverse — Used creation programs like SandBox Game maker
- Creation of 3D products dedicated to the metaverse — Promoted brands or for your personal collection
- Events in the metaverse — Give visibility to companies in the Metaverse or create your own festival
I hope you enjoyed this article. Remember that you won’t learn Web3 completely from one article. You will learn it by installing Metamask, buying crypto-currencies, transferring some to a ledger, paying fees, creating NFTs, joining discords, asking questions on Twitter, Reddit, etc. However, you already have a good base to build on, so good luck!
Launching or planning to launch your Web3 startup?
Receive the weekly Web3 entrepreneurship newsletter: Inside Web3 💎
If you want to get daily resources, strategies, and learnings on how to build your Web3 business, feel free to connect on Twitter (@JulianIvaldy)
Resources used for the constitution of the article