Tech
The premium for owning Web3 distribution is huge. Here’s why it won’t go to big tech companies
For more than a decade, the blockchain industry has wrestled with a self-determining question: How do we go mainstream? The search for the killer app or company that suddenly moves the masses to crypto infrastructure has proven to be a daunting task. But unlocking product-market fit in this case represents more than a win for the consumer; it will mark a profound shift in how the Internet is structured and governed for our entire lives. So who will be the powerful Web3 distributor, controlling the wallets and app stores of the future?
The prize for owning Web3 distribution is huge but increasingly out of reach FAANG. Despite their vast resources and influence, to date these giants have been most successful in a supporting role, passively assisting the transition to a decentralized future, for example by ensuring convenient access to computing.
Adopting Web3 is a multi-faceted challenge and is not suitable for companies that leverage data and advertising for large profits. The “world’s most innovative companies” are too entrenched in the mire of legacy business models, partners and products, further slowed by culture shock and short-term shareholder orientation.
It is clear that Big Tech is not serious about cryptocurrency. They have never publicly disclosed how their open source initiatives could be redirected to cryptocurrency, nor have they purchased a significant portion of a base layer by acquiring a token, despite the associated governance rights that could come with it to influence the roadmap. One might wonder what we expect from these legacy platform companies that unofficially rule the global web and the true value they provide to users versus themselves.
Despite having ubiquitous distribution and seemingly limitless opportunities to hire emerging blockchain talent, the story has always been that it is not a large enough market opportunity to address today. After liquidating Libra due to a regulatory backlash, Facebook Metaverse unit has a net loss of $40 billion for the last three years and still has no chips on the table in cryptocurrency. Instead of committing to being a distributor to Web3 users, they are trying to innovate the product suite to continue generating more than 95% of revenue through advertising sales, in part due to a widespread belief among regulators that there is no can trust consumers to be responsible for their finances or data.
We are becoming accustomed to having our emails checked to help “fine-tune the AI model,” and most consumers have unconsciously agreed to give up privacy in exchange for modern conveniences. This further strengthens the reach and power of the FAANGs, but it does not bring us any closer to implementing a truly modern technology like blockchain that would materially improve the average person’s life.
We are increasingly ceding our intellectual property and that of our companies to these institutions will become a requirement as the AI arms race strengthens data-centric differentiation. This could be the moment that tips the power structure into full greed mode, breaking it completely.
By design, the next era of the web will not be controlled by a handful of monoliths that refuse to accept a powerful but light role to serve end users without overdoing it. The new internet requires fresh leadership that is willing to chart a very long-term path: a new generation of decentralized projects and startups based on the principles of user control and community governance that will help the industry adapt to the Web3 ethos.
Today’s developers are tireless in their attempts to regain power to challenge the exploitative practices of Web 2.0, operating systems, and app store constraints, so that in 10 years, decentralized organizations become the new, more benevolent ruling class and the FAANGs become service providers.
The existential threat to blockchain is that without a well-organized and strategic global marketing strategy, we will build it and no one will come. However, if we bring in a distribution partner that brings enough scale to make it profitable to build Web3 apps, developers will start testing fun things that could unlock a reward big enough to justify the risks of building for an app store that doesn’t exist yet. Developing a “killer app” matters less than being the distributor that unlocks the opportunity for developers to acquire lots of potential users.
A well-positioned operator is Telegram.
Building a base layer blockchain and associated community is a daunting task, and so far few have been able to tap into real consumer activity outside of cryptocurrencies. Every kingmaker seems to align with a new blockchain: Coinbase created BASE, FTX knighted Solana, Facebook attempted Libra, Amazon dreamed up its own chain for NFTs, and so on. The scalability of the new core levels is impressive, but it won’t be enough to win on technology alone. Deployment and operations are the scalability solution; infrastructure is becoming easier to build and may be trending towards commoditization.
The revolving door will jam when developers start sniffing out low customer acquisition costs and a huge prize in global adoption: the Telegram mini-app opportunity. Telegram mini apps are an open platform for new and emerging brands to distribute crypto-friendly games and apps. The platform supports seamless authorization and cryptocurrency and fiat payments, and allows projects to incubate, fundraise, and commercialize, all within the familiarity of Telegram’s user interface. Today, The Open Network’s (TON) strategic ties with messaging app Telegram combine both the technical capabilities to tackle Web3 and the distribution power of a top 10 mobile application and, most importantly, the credibly neutral geographic launch pad for a consumer-centric approach to Web3. TON already boasts Web3 primitives such as a wallet, an active DeFi ecosystem and tokens with a scalable Web2 user container and 900 million MAUs.
Telegram’s strategic pivot allows its app developers to align their revenue models with the long-term growth of the Web3 ecosystem. By providing critical distribution, a wallet, infrastructure and support services, they can continue to generate substantial revenues while contributing to the larger goal of a decentralized internet. This symbiotic relationship benefits both the TON blockchain and Telegram, creating a more sustainable and inclusive digital economy. Telegram has always been on the fringes of Big Tech, successfully scaling a user-centric messaging app amid stiff competition and following an unorthodox playbook: no ads or hardware moat, just great technology and user experience. Their mission-driven focus is similar to being religious about the user-centric approach for the new Internet, aligning perfectly with the consumer- and developer-driven revolution of Web3.
And while the U.S. is critical to the growth trajectory of most of today’s top 10 apps, for global crypto adoption, perhaps American MAUs are a “nice to have.” Strategically, Telegram’s go-to-market excludes the U.S. but includes the unbanked, which is more than four times the size of the US population. While it would be nice to frame this as a socially conscious decision, and it could be, it also excludes the United States by necessity due to the lack of regulatory clarity and 2020 SEC lawsuit. And the benefit demonstrated outside our borders is enormous: see Wechat’s mini-program economy that has grown to 5 million mini-programs since its launch in 2017, achieving $400 billion in annual transaction volume via apps by 2021.
In response, Telegram has enhanced the intersection between core financial services and the gaming economy. As the first platform to show a glimpse of greatness at the application level, it is finally awakening the Eastern Web3 developer community. Lately, it’s been impossible not to notice the frenzy around Notcoin (35 million users), $TON entering the top 10 of all crypto tokens, and TVL rising to a new all-time high Through STON.fi. And if the super-app use case isn’t entirely compelling, the ability to power it with Web3 will be a challenge for both X and WeChat due to geopolitical pressures and the risk to their legacy businesses. Just this week, X launched a new payments platform which does not accept cryptocurrencies. The company had acquired a broadcast license for crypto payments last yearDespite his personal support for blockchain, Elon Musk’s ambitions and obstacles with X illustrate the complexity and regulatory challenges inherent in adopting decentralized technologies within a centralized platform.
The TON ecosystem is the closest we’ve come to mainstream adoption. If successful, this could lead to larger companies like Telegram helping crypto apps converge with the mass market. If the benefits of blockchain are clear in the user value proposition, no one should have to think about whether a service runs on a blockchain or in the cloud.
As the Web3 revolution unfolds, it is clear that the race for control is not just about technology, but a fundamental reimagining of power, control and trust in the digital age. In the cryptocurrency industry, distribution is a possibility because web3 is fundamentally at odds with the business and ethics of Web 2.0.
Elimination of irrevocable data ownership, loss 30% App Store commissions. and the ability to train AI on your data, emphasizing portable identity and consumer-centric developer goals, and other general side effects of de-platforming, would drive a stake through the heart of Big Tech. It will be fascinating to watch Telegram’s role as a distributor and believer unfold as the rest of Big Tech grapples with questions of mission and purpose and decides whether to join the party in service of the protocols of the future.
Disclosure: CoinFund is an investor in STON.fia DEX on the TON blockchain and holds further exposure across the entire TON ecosystem.
Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.