Blockchain
Everyone has been busy predicting the death of crypto and Web3 lately – and I say fair enough.
But as we all know from history, a burst bubble is not the end of the story. It is often the start of a new one.
The future of the blockchain is one in which the next billion crypto users will not have bitcoin, ether or other fungible tokens. They will use fiat to buy goods and services, and that fiat can be exchanged for tokens somewhere in the back.
Blockchain has already passed through two eras, the Crypto Era and the Web3 Era, and we are on the verge of a third: the Abstraction Era.
Simply put, the blockchain becomes infrastructure. Just as no one is really talking about “the cloud” anymore, we won’t be talking about “the blockchain” anymore either. We don’t need to know if we care which blockchain our purchases are stored on.
In the future, most people who use crypto to buy something may not even know it.
Blockchain, not Bitcoin
When I go to Italy, I don’t start collecting a bunch of euros before I travel. When I get there and sit down in a restaurant, all I care about is eating my pasta and drinking my wine. I pay with a credit card and my dollars are converted to euros. If the back-end technology uses the Solana blockchain to do the conversion and converts my fiat to USDC and then to EUROC, saving the merchant foreign exchange costs, fantastic.
I don’t need to know how the technology works: I still pay in dollars, and the restaurant is still paid in euros. The blockchain technology that enables this seamless transaction does not require my attention.
In this new era, the exciting will not be the currency; it will be the underlying technology: the blockchain itself.
And it’s already happening: on OpenSea you can now buy an NFT with dollars. In fact, that becomes their main call to action.
Starbucks also announced they will begin issuing “stamps” to customers in their Odyssey loyalty program on Polygon, but no one who orders a Pumpkin Spice Latte will ever need MATIC or care.
Reddit’s “Collectable Avatars” (specifically not called NFTs) have been downloaded by 4.3 million people as of September 2022, more than the total number of wallets containing NFTs (2.5 million) prior to September, according to Nansen. These avatars can be purchased with your local fiat currency.
These are all precedents for doing away with all those clunky steps from our current declining Web3 era, so that the end user can make their purchase with a single click, instead of going through the whole complex process themselves.
That’s the age of abstraction in action.
To predict the future
With the mobile evolution, users could only benefit if they had access to a mobile device, a certain level of technical proficiency and a willingness to make behavioral changes. Hardcore cryptos might then say that the crypto movement has so far only progressed at the same point as the original mobile revolution.
The process we go through to use crypto is amazing and a bit ridiculous when you break it down – signing up for an exchange, linking your bank account, buying tokens, installing browser wallets, connecting your wallet. And if you ever need to convert that token into currency, you have to reverse this whole process: send the token back to the exchange, sell it, eat the fees, and then withdraw the money – which can take days (if the exchange allows withdrawals at all!)
This – cumbersome, error-prone process – was this what we all got so excited about?
The cloud revolution, on the other hand, is a natural evolution of technology and the internet: everyone is now in the cloud, often without realizing it. The end user doesn’t know or care how the cloud works, and you don’t need a new device, new technical skills, or new behavior to use the cloud. The cloud just works in the background, streamlining your experience.
Think of it this way: no provider brags to its potential end user about the cloud. The end user does not care where information is stored or what the technological underpinning looks like. They just want a great user interface and the knowledge that their information is stored securely.
We see the same type of evolution with blockchain technology.
In the age of abstraction, we will invest in great companies and technologies – and most of them will be ordinary to happen be built on the blockchain. Many funds used to call themselves “cloud” funds or invest in “mobile,” but not anymore: That distinction would sound ridiculous.
Similarly, in about five years there will be no difference between a fund being a “Web3” fund. Where the technologies or philosophies of cryptocurrency or Web3 make sense, they will simply be used by the best companies, and everyone will benefit.
The future is all about abstraction, and this new era will usher in the next billion users… First billion, since neither our “crypto” era nor our “Web3” era could pull in more than 100 million people.
Nick Ducoff is a partner at G20 Ventures, co-founder of ON_Discourse and a founding member of OurNextDAO, and was previously a 2x founder and securities attorney.