On bridging the web2-web3 gap
Currently, something really strange is happening in consumer crypto. As a collective, we've decided that words like NFT are out and that we should instead refer to them as onchain art.
Then there are the various apps that embrace crypto under the hood, and so there is, for example, Warpcast, which cryptographically signs messages but looks and feels like a Twitter clone otherwise.
Lastly, there is Privy, which makes wallets disappear into the backend of the stack, barely visible to users.
In all of these cases, what is happening is that the traditionally embraced web3 user experience fades or disguises itself as a fake web2 experience. Onchain art just becomes digital art, meaning we don't have to understand the underlying NFT concept; we won't have to explain fungibility anymore either!
With Warpcast, a user now isn't bothered anymore to write down their seed phrase as it is instead stored in their iCloud keychain automatically - a practice not advisable for keys holding funds, yet a neat process for not unnecessarily exposing users to the burdensome task of otherwise having to back them up.
And then with Privy, we've come so far as to not even needing to properly "admit" to users that "hey, this is, by the way, a web3 app." I'm saying it like this here because, really, the first web3 apps were exactly the opposite. They shoved users the Metamask icon in their faces to make everyone understand what was at stake here and that the website would simply not work without having the browser plugin installed.
It seems, however, as if the bull market must have changed something in builders' preference, and my guess would be that it has triggered some kind of collective shame where we simply don't like to expose others to the radioactivity that are web3 user interactions. And so it is now, in the "deepest bear" that we see this curious misalignment from otherwise so streamlined web3 UX emerge. Let me repeat that:
- Warpcast, a web3 Twitter that larps as a web2 Twitter,
- privy, a web3 wallet that larps as a "Login with Google" button and;
- "onchain art," which larps as "digital art."
In fact, I bet even just mentioning the term "web3" at this stage must make some of us feel quite the cringe. Yet, I wrote all of this up because I still think, speaking from my practical experience in having to sell Kiwi News to consumers, I think there is a huge gap between the web2 and web3 user group that I'm not sure can easily be bridged.
While yes, all of the three above-mentioned "web 2.5" projects do nicely remix the best parts of both worlds, I yet have to find a web2 user online who is happy to now be converted into a web3 user. Instead, it is usually at the time of having to mention one of the decentralized product's inherent limitations that makes it clear to the uninitiated that they're currently being converted into this weird world of crypto and its high scam potential.
And then, practically, what this really means is the following: I try to promote my otherwise "useful" website on web2 with the idea of onboarding new users. Yet, web2 users do absolutely not want to engage with web3. And who can blame them? I would feel burned out for having to take the myriad steps to onboard, too! Besides, remember how we "casino on Mars'ed" our asses into the hearts of mercenary internet gamblers? Which actually sane person wants to associate with that?
And going back to onboarding a web2 user, with my own app, Kiwi News, at this stage, there is no way in hell a new user can at any stage onboard freshly from web2 as they first actually have to learn how to bridge funds into Optimism - which is the most advanced consumer concept in crypto at the moment.
To me, as someone who has built on top of web3 for the incredible possibility of tapping into user wallets' funds, it then also comes as a surprise as to why companies like Warpcast and others would embrace a market positioning that is explicitly disrupting the existing wallet infrastructure model, deliberately NOT taping into the existing users funds, and rather betting the house on reinventing the wheel.
Yes, sure, they are hence now in control, and as we've seen with Warpcast, this means that they can make the onboarding experience for normies much better. And if I'm being honest, I can also see how this can be taken a long way and where maybe one-day Warpcast integrates also with a crypto wallet and hence manages to tap into those user funds in a meaningful way.
Yet, it always makes me wonder if the greater-fool-web2 users are really up for being converted covertly into web3 users and if they'll really stay on these "web 2.5" platforms when it is exposed to them that they've crossed the chasm into web3 indeed. I myself, of course, have continued to be loyal to the traditional web3 stack and "Connect Wallet" dialogue, and so you shouldn't expect from me an argument as to why those web 2.5 companies are on the right track.
Still, and as of now, I feel like "showing the system as it is," seems more honest and structurally scalable. That is because these fake-outs of trends happen in the software industry where everyone thinks they're doing actually something valuable, and then they invent vaporware and all the other awful and enshitified software that was rampant after the dotcom crash in the 2000s. "Oh, you want to install ICQ? Please also install this browser plugin bar to Internet Explorer."
In a way, although very different indeed, seeing people shill their latest NFT mints on Warpcast or some bullshit AI-generated motive or seeing the transitory vibe that friend.tech emits, today's post-bull-market web3 isn't much different. It qualitatively also fits a rather pessimistic classification of who's still here. Is it just us who haven't managed to get rich?
In any case, even after writing all of these words to describe the UX gap, I'm wondering where we should go next. Maybe this is my capitulation, as it seems that neither direction is really exciting. Onboarding users exclusively out of web3 clearly won't work because, at least for consumer businesses, it'll be incredibly hard to make the math work for generating sustainable revenue. That is because a consumer social business will have to onboard a lot of paying customers to employ software developers and maintainers. Onboarding users from web2 may not work because web2 is basically a graveyard of "dead players," with a few PMCers left running the show. Reddit is a good example of that. And then, when we want to onboard those web2 users in our neatly disguised apps, won't they expectedly be mad at us for fooling them?
Sure, never try, never know. Yet, in this bear market blues, it makes me wonder if my time wasn't spent better somewhere else.
I feel desperate about the space's future because, on one side, I know that to make a change and onboard potential web2 users, we at Kiwi News would have to make a deliberate effort to web2ifying our app. At the same time, it's pretty obvious to me and Mac that having people "connect their wallets" on Kiwi News, and hence building up the collective spending potential of our users can be a future monetization path. Still, I have lost a lot of my faith in the modern wallet ecosystem and its industry that has made web3 big in the 2020 bull run. I feel loyalty to them because they have become the official membership badge of "this is a web3 website." "Connect Wallet," that means: "Get ready for Ethereum!" Yet, this badge that we show so visibly has become a great burden for us with those who are defecting from it being the successful outliers. Warpcast, Privy, and friend tech.
What gives me some hope is that there are still Zora and Nouns, two organizations that have fully embraced their web3 identity and that have so far not defected on the ecosystem (although you can now create a Zora drop without owning crypto).
A Dan Romero, Mr. Pragmatic Crypto, would read this post, and he would certainly wipe my worries away by saying that we should give consumers what they want. In the early days of Coinbase, users wanted to hold their crypto on the exchange, and Dan proudly says that this is precisely what they started allowing users to do. That is because Dan's philosophy is to let the crypto-purist losers cry on the sidelines once he dominated them in the market. Here's what he wrote in a blog post from January 2020:
I worked at Coinbase from 2014 to early 2019. Over that period, I saw the company grow from a small startup with a few dozen employees and a few hundred thousand customers to a multinational operation with almost one thousand employees and tens of millions of customers worldwide. If there is a defining cultural trait that was responsible for that success it was the company’s pragmatism.
This is not a word typically associated with cryptocurrency. From the perspective of crypto natives, pragmatism means compromise and is in opposition to what crypto stands for: rejecting the centralized fiat status quo completely and replacing it with a superior, transparent, mathematically pure, decentralized system that no one entity controls.
Meanwhile, from the perspective of crypto outsiders (including many people, banks, and governments), anything concerning crypto is scary—no one controls it!—and decidedly not pragmatic.
But it is in this tension where Coinbase’s advantage lies. As a cryptocurrency company, Coinbase is built on and benefits from decentralized systems like Bitcoin. However, its primary business—a cryptocurrency brokerage—requires a strong and on-going relationship with the fiat world, including normal users, traditional financial institutions, and regulators. In order to interface with that system, it is first and foremost necessary to be pragmatic.
So, unpacking Dan's position, it's relatively clear what his suggestion would be in terms of bridging the web2 to web3 gap. Dan suggests serving customers pragmatically by discounting the sacred values of cryptocurrencies to improve convenience. And I think that is a very fair point from Coinbase's perspective, yet there are two concerns I have with it. First is that allowing users to hold funds on exchanges also led to SBF co-mingling billions of dollars. And then secondly, it is unclear if that strategy can now be reapplied to improve the web3 user experience.
Warpcast recently launched "Warps," an internal accounting mechanism that allows users to add signers for third-party applications, a means for Merkle Manufactory to increase the user share of Farcaster's client ecosystem. In pragmatic technical terms, to log into a third-party application with Warpcast, all that is necessary is a low-cost (8 cents) layer two transaction. Yet Warpcast introduces Warps as an internal accounting system, making it "free" for active users to log into third-party apps. The result is that for the dumbest possible user, this is highly convenient and cheap. Be active, and 1 Warp = 1 Login.
But on a technical level, to me, this is also outright stupid. Why go all this way to make "Warps" an internally consistent economic system to power third-party applications when it could be as simple as having people make a single layer 2 transaction for 8 cents? Why gate-keep third-party applications in Warpcast through the concept of Warps? Frankly, it seems to me that the spirit of Dan's pragmatic crypto philosophy here is violated because isn't today's "Just let people do the L2 transactions," the really pragmatic action?
On one side, I have, of course, mentioned that leading consumers to deal with bridging onto layer 2 will lead to incredibly high churn. On the other side, for those already familiar with web3 and readily bridged into layer two, Warps are quite obviously less convenient and an unnecessarily complex abstraction of "just letting people sign their transactions." But it also highlights the essential tension, namely that with the "sophisticated web3 user group" simply not being large or rich enough, a large cohort will have to be served. It explains why Dan is swinging for the fences and has publicly stated that one of Farcaster's goals is to grow to a billion users. With that in mind, the much larger low-IQ mass-consumer cohort is then the group to cater to. It begs, however, the question of what is Warpcast's use in bootstrapping the Farcaster protocol, as this much larger and technically unsophisticated group will obviously not be sold on the sacred cryptographic values of the Ethereum ecosystem.
And I could go on here, as this thing is pretty multi-dimensional - like, what if designing the income streams of your web3 platform will eventually significantly impact your content policy too? But we know Dan, and we also know that he, for example, is happy in his Apple-branded golden cage.
Still, to me, here lies a blatant hypocrisy as "just showing the system as it is," and letting people make their own transactions is, at this stage, obviously the more "pragmatic approach" compared to asking users to pay using Apple Pay or Warps. For the web3-pilled user, Warps are scary because Merkle Manufactory controls them. Apple Pay is scary because Apple controls it and charges a tax. It controls the content. Meanwhile, using layer two is convenient and cheap, a button-click away from feeling in control and power.
This then reminds me of the idea of framing crypto as a luxury financial system and its peripheral applications as "luxury social media." If the web2 users will continue to resist our onboarding, and if that means that we'll have to make the best out of monetizing the existing web3 ecosystem, it will also mean framing, branding, and pricing these systems to those constraints. If web3 social media will ever only grow to, let's say, 10 million elitist tech users, and if Instagram and X will remain as the "bread and butter" sites of the plebes, then a 7 dollar a month subscription won't manage to competitively pay the engineers building the luxury web3 social media sites. Instead, the monthly costs would have to be ramped up proportionally to the smaller networks' sizes. This is the web2 web3 gap and is surely a very popular venture capital bet at the moment. They're betting that they can grow these businesses to the point that they grew Facebook and Instagram, too, and Dan's goal is to onboard a billion, so monetizing that gap is what creates the value.
With all that said, I'm skeptical if this is the place and time for it. Defecting peers always comes at a cost. And betting against an ecosystem is a guarantee of being bitten in the ass later on. I hope that this defection helps the "Connect Wallet" industry to get its shit together and take on the responsibility to improve onboarding.
And to take it to this publication's core idea: How would a severly-capital constraint project like Kiwi News compete with that? Warpcast is a new type of social wallet. It managed to create an amazing user experience because it managed to raise a lot of money, and that enabled it to hire top talent that can build such experiences. Kiwi is none of that, and frankly, I'm not sure if duplicating their effort would make much sense either. But Kiwi is using "financial wallets" in a consumer social use case, which has arguably led to non-sensical user stories. If capital wasn't a constraint, we would long be building our own social wallet. Clearly, as the above argument concluded, Dan and others are spot on in where the value lies. The web2 web3 gap is where the rubber hits the road monetization-wise. But it is also the spot that exposes insane levels of technical complexity necessary to improve user convenience. It certainly makes me believe that our goal must be to grow primarily within web3, at least for those users who want to "write" on our platform. Our bet, in this case, would then be the future user experience improvements of today's wallet ecosystem, which will hopefully enable more consumer-friendly interactions and much less churn.
Still, all of this is an "unresolved crisis" in that I don't understand what is the best path towards a solution for Kiwi. As I have mentioned, I would love to just "bet on the right things here," but clearly the situation's complexity makes me lack conviction on where to go next. Will all web2 users eventually be web3-pilled, and is this a high or low entropy process? What will Lens and Farcaster contribute to that transition? Is Dan a covert crypto maxi? And what actions do I take away for Kiwi News today? Defect? Embrace? Or wait and see?