Web3 is a new version of the internet based on blockchain technology. It is being used by companies for various purposes, including improving their understanding of consumer behavior, building their brands, and increasing transparency in their supply chain and production processes. There are three main ways that companies are using Web3 tools: virtual products, hybrid products, and decentralized ownership. Each of these approaches offers potential business value, and companies can experiment with all three to enhance and diversify their digital presence in this new era of the internet.
Following are some of the ways brands can use Web3 to promote their products and services
Virtual products
Some companies use Web3 to create virtual products that can be bought and sold in online marketplaces, such as virtual real estate, virtual clothing, and virtual art. A virtual product is a digital good that exists only in the online world and is not a physical object. Virtual products can take many forms, such as virtual real estate, virtual clothing, virtual art, and more. Companies use Web3 tools to create and sell virtual products in online marketplaces, allowing them to tap into new markets and revenue streams and create new customer engagement and interaction opportunities. Traditional brands are also beginning to experiment with using virtual products to create immersive brand experiences or showcase their products in new ways.
Following are some of the virtual product categories companies are using now:
-
Virtual real estate: Some traditional brands use virtual real estate to create immersive brand experiences or virtual host events. For example, a fashion brand might use virtual real estate to create a virtual fashion show that users in a virtual world can attend. Decentraland is a company that uses blockchain technology to create a virtual real estate in a virtual world. Users can buy and sell virtual land and property and create and share virtual experiences on the platform.
-
Virtual clothing: Traditional brands also use Web3 to create virtual clothing items that avatars can wear in online games or virtual worlds. For example, a sportswear brand might create virtual versions of its physical products that avatars can wear in a virtual fitness game. Cryptovoxels is a company that uses Web3 technology to create virtual clothing and accessories that avatars can buy and wear in its virtual world.
-
Virtual art: Traditional brands also use Web3 to create and sell virtual art, such as digital paintings or sculptures representing the brand or its products. For example, a luxury car brand might create a virtual installation showcasing its latest model. Cryptovoxels and CryptoKitties are both companies using Web3 to create and sell virtual art. Cryptovoxels allows users to create and sell digital paintings, sculptures, and other digital creations. In contrast, CryptoKitties will enable users to buy and sell virtual cats represented by unique digital artworks.
Hybrid products
A hybrid product is a product that combines physical and virtual elements. It is a product created using Web3 technology to bridge the gap between the online and offline worlds. Some brands use Web3 to develop hybrid products that combine physical and virtual elements, such as smart contracts tied to physical goods or virtual experiences connected to physical events.
Following are some of the hybrid product categories companies are using now:
-
Smart contracts tied to physical goods: These digital contracts are stored on the blockchain and linked to physical goods, such as a car or artwork. The contract can contain information about the ownership, provenance, and condition of the physical interest and any other relevant information.
-
Virtual experiences connected to physical events: These are online experiences connected to physical events or locations, such as virtual concerts or virtual museum exhibits. Users can access the virtual experience through their web browser or a mobile app and interact with the content in real time.
-
Physical products connected to digital experiences: Some physical products, such as toys or clothing, can be connected to digital experiences through Web3 technology. For example, a toy might come with a code that unlocks a related digital game or activity, or a piece of clothing might come with a QR code that links to a virtual fashion show.
Decentralized ownership
Decentralized ownership refers to a model of ownership and control where ownership and control of a product or service are distributed among multiple parties rather than being controlled by a single entity. This can be achieved through Web3 technologies, such as blockchain, allowing decentralized networks where ownership and control are distributed among many different parties. This can create new forms of collaboration and co-creation and increase transparency and accountability between brands and creators.
Following are some of the hybrid product categories companies are using now:
-
Decentralized organizations (DO): It is designed to operate in a decentralized manner, with decision-making power distributed among their members. This can be achieved through various means, such as using blockchain technology or other decentralized systems to store and transmit data. The goal of a decentralized organization is to create a more transparent, democratic, and resilient structure for conducting business or achieving a shared goal. Open Source Software (OSS) movement refers to a movement that promotes the use and development of open-source software. In this model, the software is developed collaboratively by a community of volunteers who contribute their time and expertise to the project. Decisions about the project’s direction are often made through consensus-building, with all community members having an equal say. The OSS movement is an example of a decentralized organization because it is decentralized, with no single individual or group having ultimate control over the project’s direction. Instead, power is distributed among the members of the community, who work together to achieve a shared goal.
-
Decentralized finance (Defi): Defi refers to financial products and services that are built on blockchain technology and are decentralized, meaning that a single entity, such as a bank or financial institution, does not control them. Defi includes products such as decentralized exchanges, peer-to-peer lending platforms, and stablecoins. Uniswap is an example of a decentralized exchange because it allows users to buy and sell cryptocurrency directly with each other without the need for a central authority or intermediaries. This means that users have more control over their assets and are not reliant on a central entity to facilitate transactions. Other examples of Defi applications include decentralized lending platforms, which allow users to borrow and lend cryptocurrency in a decentralized manner, and decentralized stablecoins, digital assets pegged to the value of a real-world asset such as the US dollar. Defi can potentially disrupt traditional financial services by offering a more transparent, secure, and efficient alternative to centralized financial systems.
-
Decentralized autonomous organizations (DAOs): DAOs are specific decentralized organizations run entirely by code, with no human intervention required. A DAO is a set of smart contracts deployed on a blockchain, which defines the rules and processes governing the organization. DAOs are designed to be autonomous, meaning they can operate independently of any individual or group. One real-world example of a decentralized autonomous organization is The DAO, a decentralized investment fund created in 2016 on the Ethereum blockchain. The DAO was essentially a set of smart contracts that governed the organization’s operation, including how funds were raised, investment decisions were made, and how profits were distributed.
Building Customer Loyalty
Brands can use DO, Defi, and DAO to build customer loyalty by providing a more transparent, secure, and efficient customer experience. Using a DO, brands can create a customer rewards program: A brand could use a decentralized organization to create a customer rewards program that is more transparent and democratic. For example, the brand could allow customers to earn rewards based on their level of engagement with the brand and will enable them to vote on how those rewards should be used or distributed. This could help to build customer loyalty by giving customers a sense of ownership and control over the rewards program.
Brands could use Defi applications, such as decentralized lending platforms or stablecoins, to offer customers more flexible and convenient financial products. For example, a brand could use a decentralized lending platform to allow customers to borrow funds at more competitive rates or a stablecoin to offer customers a more stable and transparent alternative to traditional cryptocurrencies. This could help to build customer loyalty by providing a more secure and convenient financial experience.
DAOs, on the other hand, could be used by brands to automate specific processes and create a more efficient customer experience. For example, a brand could use a DAO to automate the handling customer complaints or requests, allowing them to be resolved more timely and efficiently. This could help to build customer loyalty by showing that the brand is responsive and committed to meeting the needs of its customers.
Virtual products, hybrid products, and decentralized ownership are all emerging trends driven by adoption of Web3 technologies, such as blockchain and NFTs. These trends create new opportunities for companies to create value and engage with customers in new ways. Virtual products allow companies to develop and sell digital goods that exist only online and can be used to tap into new markets and revenue streams. Hybrid products combine physical and virtual elements, creating new ways for customers to interact with products and brands, and can create new opportunities for customer engagement and loyalty. Decentralized ownership models allow for the distribution of ownership and control among multiple parties, creating new opportunities for collaboration and co-creation and increasing transparency and accountability.
By experimenting with virtual products, hybrid products, and decentralized ownership, brands can use these trends to amplify and diversify their digital footprint and create new opportunities for growth and value creation.