Web3 is set to change the foundation of the Internet.

Last week, I wrote about how a new social protocol, Farcaster, is changing the relationship between social platforms, users, and data.

Web3 shifts power back to users from platforms. Now, this shift is happening in eCommerce too.

Brands, buckle-up for disruption. There’s plenty of opportunity coming.

Today, we’ll explore:

• The Big Picture: Power to the Users
• eCommerce: Now and Then
• Web3 Meets eCommerce
• Why Now? The Next Supercycle
• What’s Next

Let’s dive in. 🦈

This article is published in collaboration with Boson Protocol.1

The Big Picture – “Power to the users”

In Web3, users own their data and control access to their data regardless of what platform they are on.²

In essence, we’re moving from closed platforms to open protocols.

Farcaster is a social protocol.

But this transformation not only affects social platforms, but all platforms present in today’s Internet. Content protocols (Mirror, Paragraph, etc.), identity protocols, or even commerce protocols.

On the most abstract level, today’s Internet is a collection of platforms hosting siloed information owned by these platforms.

Web3 gives ownership over this information back to users, breaking up the platforms and allowing for an interoperable, composable web and a more efficient value exchange.

• Economists would say we go from a market oligopoly to a free market economy.
• Marketers would say we create new consumer experiences with ownership incentives and co-participation.
• Pragmatists would say we’re giving power back to the person.

A big “protocol” affected by this change is eCommerce.

Similarly to how the Internet democratized access to information, Web3 is now democratizing eCommerce. And we’re at the cusp of potential mass adoption.

Sounds like a book with seven seals?

We’ll break it down.

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eCommerce: Now and Then

The first ever sale to happen online occurred in 1994. It was a CD of Sting’s Ten Summoner’s Tales – and made history and headlines.

It’s pretty incredible to read through New York Times’ coverage on that. People were worried about privacy issues of credit card transactions on the Internet. eCommerce looked like the most alien thing in the world.

And then, the snowball started rolling:

• In 1995, Amazon launched.
• In 1998, PayPal launched as the first eCommerce payment system.
• In 2000, Google launched online advertising (Google Adwords).
• In 2004, Shopify launched. It was the first shopping card software of its kind, enabling millions of retailers to spin up their own ecommerce stores.
• In 2011, WooCommerce started. As a competitor to Shopify, it introduced the first way to launch WordPress eCommerce sites.
• In 2017, Instagram introduced shoppable products.
• In 2021, Covid-19 drove a 77% increase in eCommerce transactions.

And now, we’re on the cusp of the next transformation. And history is repeating itself.

A lack of tools and infrastructure in the 1990s made it awfully difficult for early internet users to spin up ecommerce stores.

So difficult in fact, that solving ecommerce at scale turned into a multi-trillion dollar business (cough Amazon cough).

While Amazon accounted for 39.5% of all US retail ecommerce sales in 2022, even the most basic internet users can open ecommerce stores with tools like WooCommerce, Etsy or Shopify.

Similarly, building a webpage in the 1990s required a team of sophisticated developers. Today, my 80-year-old grandma can create one in minutes with tools like Squarespace or Wix.

What happened?

Standardization, infrastructure and tooling democratized web presence.

Power to the users.

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Web3 meets eCommerce

Web3 is poised to play a significant role in the future of eCommerce and has the potential to revolutionize the way we buy and sell products and services online.

A few months ago, WooCommerce teamed up with Boson Protocol. And that’s a big deal for eCommerce.

Why? WooCommerce is a free, open-source plugin that turns any WordPress website into a powerful online store, powering more than 3.9M stores.³

Let’s unpack this.

This partnership makes it easy for brands and sellers to sell physical goods connected to NFTs (Non-Fungible Tokens).

As soon as a physical good is connected to an NFT, it can be freely traded “on-chain,” i.e. without the need of a centralized platform. This works as long as someone guarantees that the NFT can be redeemed for the physical good at all times.

Boson Protocol does exactly this.

• It allows brands (and literally anyone) to sell physical things as NFTs online, in virtual worlds and on NFT marketplaces.
• Users are guaranteed to either get the product or their money back.

Here’s how it works in detail:

WooCommerce is a popular tool for selling things online. Boson Protocol uses blockchain to handle transactions. Together, they let sellers turn physical items into NFTs easily. This means when you buy something, you could get a digital token that proves it’s real and shows who owns it.

These tokens then become part of the Web3 economy, moving around until someone decides to use them. When they’re ready, they go to the seller’s website, which works with Boson Protocol to switch the NFT for the actual product.

For users, this is great. Their “assets’’ now live online. This means that whatever platform they’re on, they can prove ownership of the physical item, lend against it, or sell it without relying on centralized marketplaces. This is huge.

For brands and sellers, this is great. They now has easy access to a fully decentralized eCommerce system that unlocks:

• Authenticity & traceability: To ensure product traceability and authenticity in the context of the upcoming European Digital Product Passport (DPP).
• Genuine limited editions: Digital twins can transparently limit collections on-chain, removing the need to rely on the brand’s word.
• Post purchase marketing: Owning an NFT and a physical piece connected to it unlocks unique post purchase experiences, and generates a wealth of data through a direct-to-consumer channel for brands.

It’s a new way to market and sell things that wasn’t possible before.

eCommerce essentially becomes much more transparent, trustless, and open – particularly for small businesses. They don’t need to be tech experts or spend a lot of money to start selling products with digital counterparts.

And it gives power back to the users.

History repeating itself? I guess so.

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What’s the scale of this?

• In 2022, global retail eCommerce sales passed $5T for the 1st time and by 2025, total spending is expected to exceed $7T despite slowing growth
• The annual growth rate (CAGR) from 2024 to 2028 is projected to be 9.83%
• There are at least 2.14B consumers shopping online (28% of all ppl globally) and by 2025 projects are that there will be 291M online buyers in the US alone
• WooCommerce is market dominant amongst customizable eCommerce platforms with 39% market share (compared to 15% for Squarespace and 10% for Shopify)

Market share of leading e-commerce software platforms and technologies worldwide as of 2023 (Statista)

Meanwhile, existing eCommerce players such as Visa, Shopify, PayPal or Venmo have started integrating crypto, NFTs and blockchain into their offering.

Now is the time to make it happen.

Web3 Commerce: A Quick Explainer

Why is this uniquely enabled by Boson?

Let’s keep it simple:

Without a blockchain guarantee, an NFT is essentially an IOU – a paper guarantee – from the brand.

Consider two scenarios:

• Primary commerce: Adidas and Bugatti recently collaborated on a limited-edition football shoe, auctioning 99 NFTs that correspond to physical items. Buyers must trust Adidas to deliver the actual shoe, risking receiving an NFT but no physical product.
• Secondary commerce: If you buy a Nike X RTFKT CryptoKick NFT and its physical counterpart on an exchange, there’s no guarantee you’ll get the physical item. You must trust the seller or the exchange to enforce the deal.

That’s a common issue with tokenization of any off-chain asset.

Boson Protocol solves that with an on-chain guarantee that the buyer receives the physical item or a refund, without needing to trust any party. They have worked with brands like Tommy Hilfiger, DRESSX, and many more.

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Why now? A New Super Cycle

What’s happening now? Three trends:

1. Web3 infrastructure is maturing
2. A new demographic of Web3 native consumers is entering the market
3. We’re at the beginning of another Web3 adoption cycle

Let’s unpack each of these.

1. Web3 infrastructure is maturing

We’ve essentially spent the last 14 years since Bitcoin gave birth to “blockchain” building infrastructure. In the last 3 years we saw immense progress:

• Better tooling: Brands have now an immense range of solution providers to choose from covering the whole value chain, ranging from wallet onboarding (Magic, Dynamic, Privy, Tweed, Web3Auth, etc.) to all-in-one user management or ready-made, individual building blocks (e.g. ThirdWeb, Venly, etc.). Boson Protocol now provides the tooling for Web3 commerce. partner of Dematerialzd
• Improved UX: Embedded wallets, MPC (multi-party computation), Account abstraction will simplify wallet UX massively. Learn more here.
• Scalability: The number L2s for Ethereum is going to increase further. Meanwhile, highly-scalable L1 chains such as Solana, Sui, Aptos, or Near will likely emerge as Ethereum alternatives for brands.

Joseph Lubin, Co-Founder of Ethereum and ConsenSys, articulated the progress of Web3 infrastructure in his lighthouse speech at Paris Blockchain Week 2023:

“We are no longer in a period similar to the dot com boom, filled with irrational exuberance for many exciting ideas that did not yet have sufficient enabling infrastructure. We are in a period much like the post-dot-com bust, where economic and geopolitical challenges are extreme and irrational exuberances are unlikely. Yes, there will be more great innovation in our space, but the difference between now and the 12 years leading up to ‘22 is that then we were building enabling infrastructure, and now we have sufficient scalability and constantly improving usability so that real use cases are attractive to many people and businesses. With the recent usage of our tech by so many major brands, we now find ourselves in the era of Web3 commerce.”

Joseph Lubin at Paris Blockchain Week 2023.

Indeed, the similarities to how Internet infrastructure progressed are remarkable. Marc Andreessen, co-founder of a16z, said:

“This is the only time I’ve ever said this [Web3] is like the internet. If you go back through all my historical statements, one could imagine that with my experience I could have said this like 48 times. I’ve never made the comparison before.”

We’re early.

Technology vs crypto market value (Architect Partners)

2. An Emerging Consumer Demographic

The thesis stands that the next cycle will attract a wave of crypto-savvy consumers eager for genuine, innovative Web3 experiences, offering them a full range of uses for their virtual assets without being confined by brands or platforms.

Across the internet, time spent in virtual spaces is on the rise, especially among Gen Z and millennials:

• 45% of Gen Z & A report being online “almost constantly.”
• In the U.S., 38% of Gen Z spend over four hours a day on social media, and even more time consuming content or gaming—more than any other generation.As of February 2022, Roblox had nearly 55 million daily users. Minecraft has about 140 million monthly active users, and Fortnite around 80 million.
• 70% of Fortnite players said they’d bought special outfits and characters – for no in-game benefit other than looking cool.
• In the latest Roblox study, 56% of Gen Z users now say styling their avatar is more important to them than styling themselves in the physical world. 50% are “very” or “extremely likely” to consider a brand in the physical world after wearing or trying a brand’s item virtually. In 2023, total avatar updates grew 38% YoY to 165 billion, and people bought nearly 1.6 billion digital fashion items and accessories, up 15% YoY.
• McKinsey & Company estimates that by 2023, the metaverse could be worth up to $5 trillion, with its e-commerce impact alone ranging from $2 trillion to $2.6 trillion.

Today’s consumers, particularly the younger generation, are always shopping, blending and experiencing multiple channels at once: social media, online platforms, in real life, on phones, laptops, and beyond.

The more time people spend online, the more digital value they create and consume, including virtual products.

Naturally, these consumers are Web3 native:

• We now have 100s of millions of crypto owners worldwide.
• In 2021, 94% of all crypto buyers are millennials and gen z’s under the age of 40.
• 93 million adult Americans own some type of cryptocurrency

And it’s not just about being online, but about new wealth too:

• GenZ has $360B in disposable income, around 25% of them own stocks and 59% believe they could ‘become wealthy’ by investing in crypto
• Millenials and Gen Z make up 60% of the 52+M Americans who own crypto
• There are 88,200 crypto millionaires worldwide

What’s exciting now is that it looks like we’re at the start of a bull run that could be bigger than anything we’ve seen before.

We’ve seen record-breaking asset inflows⁴ thanks to the recently launched Bitcoin ETF, the next Bitcoin halving⁵ is approaching, and investor sentiment is rising.

For brands, this is a huge opportunity to become part of this, stay relevant and meet consumers where they are.

3. The Next Web3 Adoption Cycle for Brands

While the bull market of 2021 into 2022 brought us a bunch of brands capitalizing on the new NFT trend, we’re not seeing much more matured Web3 activations.

In fact, almost 50% of Interbrand’s Top 100 Global Brands have already launched Web3 activations.

We’ve covered a lot with Dematerialzd in our case studies (Starbucks, Nike, Lacoste, Gucci, Fiat).

Essentially, we see six major Web3 use cases for brands:

1. Post-purchase marketing
2. Phygital experience
3. Authenticate & trace products
4. Community & co-creation
5. Monetize IP
6. Loyalty applications

Often, these use-cases are overlapping and can be grouped into 4 distinct categories:

1. Tokenization & Phygitals
2. Loyalty and rewards
3. Community & immersive commerce
4. Data & insights

We’ve covered a lot of this here.

In 2024, brands are a lot smarter and more strategic by finding different ways to embrace web3 beyond just NFTs drops and marketing stunts.

The endgame (at least in the short-term) will be brands that connect all these four categories into single brand activations deeply embedded into their brand ecosystem.

Web3 commerce will play an important role in completing that mix. And could be good for business too:

• 85+% of US merchants view enabling crypto payments as high priority
• Merchants who accept crypto payments saw avg. ROI of 327% and 40% increase in new customers
• Customers using crypto spent about $250 more per transaction

Disclaimer：

1. This article is reprinted from [Dematerialzd], All copyrights belong to the original author [MARC BAUMANN and JACY L. YOUN]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.