Calling all web2 disruptors: Are you ready for web3?

An analysis of how web2 consumer apps can enter web3 using Ready’s technical tools and tokenomics.

Recently, I was asked by a savvy blockchain architect how Ready’s web3 gaming platform could be applied to general interest consumer applications on mobile: “Could it be used, for example, to enable all the ‘walk to earn’ type apps?”

It’s an interesting question, and the answer is — “yes.”

There’s a constellation of innovative web2 apps that could naturally benefit by “leveling up” to a distributed web3 experience- for creators and consumers. Let’s explore.

Gaming as a source of innovation

Gaming, since the inception of personal computing, has been on the vanguard of technical innovation. The very first personal computers- now long forgotten- such as Atari, Commodore, and the Apple II- were initially adopted by “hobbyists” and the dominant sector of software sales in those very early days were 8-bit computer games.

This trend has never stopped- take VR- a perennial “waiting for Godot” technology. The main application of this novel tech — where it is most “mature” — is found in the gaming sector. Take “augmented reality.” What was the first implementation at scale that really excited the public? If you thought- “Pokemon Go!” — you’d be right.

A few years ago, I remember taking a quiet walk in New York’s Central Park, and found myself instantly surrounded by about 300 people thundering by, phones in hand, chasing some ephemeral… Pokemon? Like a herd of wildebeest on the savannah, or stampeding buffalo, instantly here and then suddenly gone. Augmented reality at a brief moment of scale — driven by gaming.

In 2022, much of the blockchain ecosystem is persuaded that gameFi presents the most immediate and actionable path to mainstream adoption of web3 technology. Games like Axie Infinity (breed characters) and The Sandbox (think Roblox but web3) attract players looking for a new type of gameplay — one where players, through their actions, are not merely consumers of digital rewards, but ultimately fractional owners in the games. This shift — from “renting” a digital good at the pleasure of the publisher (such as a Fortnite skin) to becoming the “owner” of a digital good, is one of the core innovations that web3 presents- not just in gaming, but in any type of consumer (or enterprise) software product.

While blockchain gaming products remain niche, they provide a rich terrain for basic exploration of how web3 “loops” can operate at scale, and provide value for all participants- the developers, the infrastructure companies- and of course the players.

So back to the question- at the core of many consumer facing apps is a well-documented design science of “gamification.” As the name implies, gamification is another important innovation derived from video games, which found use in non-gaming contexts.

The application of gamification principles in non-gaming products

Gamification can be defined as the rewards and achievements earned through meaningful actions as defined by the app’s creator. While invented in the gaming context, gamification can be applied anywhere, driven by a few universal principles:

  • Reward for mastery: The actions taken by a person reflect genuine skill in the context of the app. For example, on eBay, the seller ranking is essentially a reflection of “seller mastery”, through the equivalent of a leveling system in gaming. In the original version of Waze, the GPS had a playful innovation: driver rankings “driven” by their daily distance traveled on the app.
  • Community formation: In gaming, “leagues” are an example of play forming social bonds. Games with strong league structures enjoy healthy economies, driven by the player retention that comes from playing with friends on teams. It’s a great gamification principle in the context of fitness apps. Take RunKeeper’s “Running Groups”: Runners are encouraged to form a running group, and generate collective statistics on their performance. It turns the solitary experience of running into a communal activity, with a healthy dose of fun competition.
  • Recognition by peers: A core loop in gaming is the reward of recognition. For instance, Call of Duty provides rare “skins” — some of which can only be “unlocked” through a combination of skill and purchase. The skill qualifies the player to have the option to acquire the skin (used in-game as a kind of elite flair), and be recognized by other players for the achievement(s) it denotes. Social platforms thrive on this type of reward loop. Take Reddit’s “Hard Trophies” and “Nearly Impossible Trophies.” Attaining these trophies requires a level of “mastery” in community-based actions that Reddit deems meaningful, which in turn provides satisfaction in the “recognition” those achievements provide, via a badge on the player’s profile.

The shifting economics of gamification in web3 versus web2

Underlying these proven gamification dynamics are a few assumptions- these are at their core “web2 assumptions.”

  • Achievements aren’t synchronized across products — a person’s eBay seller rating has no influence on their Reddit karma.
  • The achievements are not owned by the user- they’re owned by the company issuing them.
  • The user profile earning those achievements is also owned by the company, not the user.

In the context of web3, these assumptions get inverted. The atomic unit of ownership is the person- not the company. The company in this context merely has the “right” — via the person’s permission — to log achievements into that person’s on-chain identity. This has profound product and economic implications:

  • People own their achievements in web3: A person who logs a remarkable amount of miles in Waze, around Los Angeles, for example, is presumably a “serious driver.” Car service centers, garages, and other driver amenities benefit from the ability to attract the business of “serious” drivers through targeted offers and promotions. In the web2 context, Waze retains all the driver’s value. In the web3 context, the driver acquires reputational capital: the building-blocks for establishing a reputation across the web3 space, with expanding opportunities to unlock economic and social benefits as a reputable digital identity takes form.
  • Companies can make more informed business decisions without a middle-man taking the spoils: In the context of web3, personal ownership of data means that companies can more accurately trust that a person being offered an economic benefit is indeed likely to respond. Certainly more so than in the web2 context, where Facebook and Google are the prime beneficiaries of this market need. These “Big Tech” companies acquire all the consumer behavior-based data, and provide smaller businesses with the method to “target” audiences based on various criteria. In the web3 context, the owner of the achievement graph (the person) has disintermediated the middle-man. When you take out a middle-man, prices tend to drop, as the market becomes more efficient. The resulting savings are shared between the company and the person- not Facebook or Google- which, based on their operating revenues (sky high) gives a taste of how much real economic value could redistribute to companies and people in the exchange.

A few caveats- these are the unknowns that must be resolved for this new web3 ownership dynamic to successfully operate:

  • How can people control who sees, and what is seen, in their on-chain reputational graph? There are meaningful privacy questions if everyone can see everything that a person has achieved over time. Take for example an authoritarian regime- they could easily make meaningful deductions by looking at a person’s reputational capital.
  • How can people control who gets to write achievements to their social graph? The flip side of “reading rights” is “writing rights.” Can any entity write anything onto a person’s identity? The blockchain is a public ledger. If an entity wishes to pay the transaction cost of writing an event, what’s to stop them?
  • How can people be stopped from selling their achievements? The easy trading of achievements opens a “farming economy” where reputational capital is tradeable. This undermines the entire premise as it is no longer trustworthy: the new owner of the driving achievement might just be a casual driver, who wants some juicy driver discounts of minimal value to the company taking a risk to provide them (presumably in exchange for acquiring a valuable driver).

The opportunity for web2 disruptors to enter web3

At Ready, we’ve developed a method of generating reputational capital on-chain, as part of our $HALO achievement token (draft whitepaper). At the core, $HALO takes in-game achievements (defined by the game developer) and synchronizes them to the player profile. We can’t presume to have all the answers to the questions above, but can take steps to start answering them, collectively.

In the context of $HALO, a few things are true:

  • Only approved developers can write the player’s profile (the ecosystem controls this permission).
  • Players cannot trade their achievement graph to another player (the smart contract governs the “tradability” of this data).
  • Anyone can read the events affiliated to the player’s identity.
  • The identities are pseudonymous.
  • Over time, the ecosystem has governance rights to decide how data permissions are governed (and players are fractional owners with voting rights in the ecosystem).

It’s easy to see how this web3 inversion of identity ownership- from the company to the person — governed by an ecosystem — opens exciting new doors for consumer-facing apps. As we’ve seen in web2, rules-making when it comes to personal privacy, data access, terms of service occur in completely un-democratic contexts: a board of directors tasked with a mandate to always promote shareholder value at the expense of other considerations. In the context of web3, these critical decisions are distributed over time to a DAO, or Decentralized Autonomous Organization, whose mandate is to ensure the overall health and growth of the ecosystem, through self-governance methods.

Entire categories of personal improvement apps- such as fitness apps- have a natural affinity for these new web3 mechanics. After all, in the blockchain context, the achievements can be seen as “proof of work” by the person (I ran X miles today in RunKeeper).

The question arises for these web2 companies- is there meaningful reward accrued for moving on-chain, knowing that competitors can read, for the first time, their customers’ achievements? Or is the cost too high- a perceived loss of control over their customer data?

The answer to that question, in the near term, may relate to the nature of the web2 service. Is it an “established incumbent” or a “disruptive innovator” looking to leverage new technology as a means to take market share from incumbents?

The question answers itself.

For consumer-facing app makers, looking to innovate in web3, the operations tools that Ready has built to manage and synchronize game data on chain can also support the synchronization of any achievement in the consumer context.

So to all those web2 disruptors out there, we’re ready for you in web3.

Are you ready?

Calling all web2 disruptors: Are you ready for web3? was originally published in DataDrivenInvestor on Medium, where people are continuing the conversation by highlighting and responding to this story.