Creators are Thriving with Web 3.0 Payouts
VYSYN Weekly Release #98: Web 3.0 payouts to creators dwarf those offered by Web 2.0 firms
It is almost impossible to escape the hype surrounding Web 3.0, often described as the next generation of the internet based on blockchain technology. In the media, the term has become a catchall for anything relating to blockchain technology and the digital asset industry. While Web 3.0 is still not adopted on a large scale, Andreessen Horowitz's (a16z) latest report points out various ways it is winning against the present Web 2.0 system.
In the latest edition of the VYSYN Release, we will examine how Web 3.0 is proving more lucrative for creators than Web 2.0. We will also consider some of the flaws and criticisms of the concept, and how it can scale.
Web 3.0’s $174,000 payout per creator dwarfs Web 2.0’s $0.10
Dubbed the State of Crypto, a16z's inaugural crypto research report focused on the world of Web 3.0. The term was coined by Ethereum co-founder and Polkadot creator, Gavin Wood, to describe a blockchain-based decentralized web.
a16z believes that the term covers virtually everything related to the digital asset industry. From NFTs, decentralized autonomous organizations (DAOs), and GameFi to the blockchain networks that power these projects like Ethereum and Solana and their scaling tools. The firm noted that Web 3.0 is a turning point and a natural continuation of the web's evolution as it allows mainstream users to own a piece of the internet.
Despite being a relatively new concept, Web 3.0 is proving better than the current Web 2.0 structure in various aspects. a16z's report highlighted a huge gap in the amount paid to content creators by Web 3.0 and Web 2.0 companies. The report noted that Web 3.0 platforms offer fairer economic terms than the Web 2.0 tech giants. This is not so surprising since Web 3.0 gives users better control over their content and allows them to monetize it in ways that were not possible with Web 2.0.
(Source: a16z State of Crypto)
Take rates, a fee charged by a marketplace on the transaction performed by a third-party seller or service provider, offer a good comparison. Meta currently has nearly 100% take rates across its social media platforms, Facebook and Instagram. In contrast, OpenSea recorded a meager 2.5% take rate. Expressing his dismay at the outrageous take rates of large tech firms, U.S. Congressman Ritchie Torres said in the report, "You know something is profoundly wrong with our economy when Big Tech has a higher take rate than the mafia."
a16z compared Ethereum-based NFT payouts to creators in 2021 with Web 2.0 creators and revealed that primary sales of Ethereum-based NFTs plus royalties paid on OpenSea amounted to a whopping $3.9 billion. This figure is almost four times the $1 billion that Meta has earmarked for creators through 2022. The $1 billion figure is less than 1% of Meta's Revenues. Other Web2 content platforms, such asYouTube and Spotify, paid creators $15 billion and $7 billion respectively.
(Source: a16z State of Crypto)
Payouts per creator offer further insight into how beneficial Web 3.0 can be. To estimate the exact amount paid out to creators, a16z analyzed the number of users these platforms have. Meta's Facebook platform has nearly 3 billion users, YouTube has 37 million channels, Spotify has 11 million artists, and OpenSea has 22,400 creators. Comparing these numbers with the total creator payouts, Meta pays $0.10 per creator, YouTube pays $2.47 per channel, Spotify pays $636 per artist, and OpenSea pays a whopping $174,000 per creator.
Web 3.0 controversies
Despite the hype surrounding Web 3.0, there is no shortage of critics that argue the system is flawed and is a threat to the freedom and openness of the internet. Last year, former Twitter CEO, Jack Dorsey made headlines when he slammed promoters of the Web 3.0 movement and called it a "centralized movement". Tesla boss Elon Musk shared Dorsey's sentiments, stating that he feels it is nothing but a "marketing buzzword."
Another complaint targeted at Web 3.0 platforms is high transaction fees. a16z emphasizes the danger in Ethereum's popularity, calling it a "double-edged sword". Ethereum is notorious for its high gas fees and low scalability, and this has allowed other blockchain networks to swoop in and attract users with better performance and low fees.
Then there is the problem of decentralization. While blockchain networks powering Web 3.0 projects and their DAOs strive to maintain a high level of decentralization, many of them are backed by venture capital firms. The entry of large institutional investors into the space is not all bad, considering the prospect of massive capital inflows. However, with these firms investing large sums in the development of Web3 projects, they are quickly establishing a monopoly within the space. This is the major reason why Dorsey called Web3 "another centralized movement" by VCs and their limited partners.
We are still early in the Web 3.0 journey
In the past few years, we have witnessed an explosion of decentralized and sustainable versions of Web 2.0 platforms and services. While it is notable that some blockchain companies started building Web 3.0 applications five years ago, the space began gaining traction only recently. It is teeming with developers and investors alike, all eager to be a part of the industry's future. An analysis by Electric Capital revealed that 34,000 new developers committed code to Web 3.0 projects in 2021, the highest in Web 3.0’s history.
(Source: Electric Capital)
While there is still a considerable list of concerns and obstacles to overcome, Web 3.0 is in its infancy and developers are working to solve problems. One of the greatest advantages of Web 3.0 is to return ownership of data to mainstream users. However, this is also its biggest challenge.
Since Web 3.0 is built on the ethos of decentralization, users will be 100% responsible for their data and digital assets. They will need to learn how public and private keys work, which cyber security practices are appropriate, and avoid exploitation.
Additionally, most available Web 3.0 applications are too complicated for the average user. To encourage mainstream adoption, they will need to become more user-friendly. Yet, it is important to remember that a mature Web 3.0 space is a long way off and nobody can predict the exact form it will take.
In any case, like the early days of the internet, we are still early in the Web 3.0 revolution. The industry has come a long way since its inception and is clearly transforming the way we think about money and creator compensation. The future is exciting!
About VYSYN Ventures
VYSYN Ventures is a longstanding venture capital company that specializes in funding and supporting disruptive startups in the blockchain and cryptocurrency industry. We have provided early-stage support to several projects that have grown USD market capitalizations of hundreds of millions and even billions. Our incubation program focuses on providing capital allocation, versatile marketing support, and tech assistance.