"Why Web3 Matters | Future: How to Use Tokenization to Drive Growth and Navigate the Web3 Era"

"Why Web3 Matters | Future: How to Use Tokenization to Drive Growth and Navigate the Web3 Era"

We are now entering the era of web3, a combination of the decentralized, community-governed ethos of web1 and the advanced functionality of web2. Web3 is about ownership and control being decentralized, giving users and builders the ability to own pieces of internet services through tokens. This shift in ownership fixes the core problem of centralized networks, where the value is accumulated by one company, often leading to conflicts with users and partners.

In this article, we will explore how tokenization can be used to drive growth and provide actionable advice for founders and entrepreneurs looking to leverage the power of web3. These insights are drawn from lessons learned by successful companies and projects in the space.

Lesson 1: Get clear on what business you are really in
To effectively utilize tokenization, it is crucial to understand the underlying business process that drives profitability. Take Marriott, for example. While they may appear to be in the hospitality industry, their key process is real estate. Similarly, Costco's key process is inventory management. By identifying the true business model and combining it with tokenization, founders can create innovative solutions while improving their chances of success.

Lesson 2: Use tokenization to solve the cold-start problem
Tokens can act as a "bridge loan" from users to get a project off the ground. However, it is essential to ensure that the project is viable and solves a real user problem, even without the token. Tokenization should enhance the business model, not replace it. Progressive decentralization is key here, as the project should be able to thrive regardless of tokenization.

Lesson 3: Focus token incentives on KPIs that actually matter
Token incentives are a powerful tool, but they must be aligned with key performance indicators (KPIs) that truly impact growth and profitability. For example, app engagement is a critical KPI for many projects. Founders should identify the user actions that drive growth and focus token incentives on those actions, avoiding wasteful allocation of incentives on irrelevant metrics.

Lesson 4: Bring demand from outside the metaverse
Web3 projects that solely operate within the digital sphere often struggle to generate sustainable product demand. To overcome this, founders should explore creative ways to bridge the gap between the real economy and the metaverse. By leveraging connections and partnerships with real-world businesses, projects can tap into existing economic ecosystems to power product demand.

Lesson 5: Token utility is more important than limiting token supply
While limiting token supply may seem like a strategy to increase value, token utility is ultimately more crucial for long-term success. By providing users with meaningful functions and benefits through token usage, projects can create a fundamental incentive for users to continue stacking tokens, even without the immediate opportunity to sell.

Lesson 6: Protect the project from crypto market cycles in the early stage
Token liquidity in the secondary market is valuable, but founders must consider how market volatility may affect their core business. It is essential to assess the potential impact and explore strategies to mitigate risks. Additionally, launching a token on exchanges from day one may not always be the best approach, and founders should carefully evaluate the timing and implications of token tradability.

Lesson 7: Use staking to distribute value-added, not to solve token demand problems
Staking can be a powerful tool to increase user engagement and loyalty. By sharing the benefits of project growth with users, projects can align with the web3 ethos. However, it is crucial to ensure that staking yields come from business profits, rather than token emission. Sustainable staking rewards require a solid foundation of profitability.

In conclusion, the web3 era presents exciting opportunities for businesses and entrepreneurs. By understanding the true nature of their business, leveraging tokenization to solve the cold-start problem, focusing token incentives on relevant KPIs, bridging the gap between the real economy and the metaverse, prioritizing token utility over supply limitations, protecting projects from market cycles, and using staking strategically, founders can drive growth and navigate the web3 landscape successfully. Embracing these insights will enable businesses to thrive in the decentralized, community-driven future of the internet.