How Studying A Web3 Platform’s Business Model Can Help Predict Their Long-Term Success
There’s no denying that the realm of Web3 tech — a future-ready iteration of the World Wide Web — has heralded a new era of decentralized applications, facilitating a host of community-driven ventures that have blockchain at their core. This is best demonstrated by the sector’s continued growth rate of 44.6% over the last few years, with some projections indicating that the Web3 industry will be valued at $116.5 billion by 2033.
That said, understanding a Web3 platform’s business model for investors/users is essential in today’s fast-evolving digital landscape since it can provide significant insights into its long-term viability, sustainability, and overall profitability. Key indicators of a sound business model include a balanced motivation among its community, customers, and partners, as well as aspects like a robust tokenomics framework, active community participation, and a well-thought-out revenue model.
On the other hand, red flags to look out for include an overemphasis on short-term profits, especially at the expense of long-term community engagement. Thus, to ascertain a project’s credibility, it is essential to maintain a perfect dynamic balance of its various key drivers — some of which have been discussed below.
Ensuring engagement the right way!
Continuing on the trajectory of evaluating a Web3 platform’s business model, it’s imperative to delve into the mechanics of its tokenomics, such as gamification elements, staking structure, and reward distribution setup, since these factors can be instrumental in bolstering user engagement and retention.
A well-thought-out tokenomics structure, for example, can serve as the bedrock of any platform, enriching user interactions and making them enjoyable and engaging. For instance, platforms can offer tokens for specific actions, driving participation and fostering loyalty, while game-like experiences can keep users captivated and inclined to contribute more to the ecosystem.
Staking and rewards can also serve as powerful catalysts for enhancing user commitment and interaction with Web3 platforms. By rewarding users for their loyalty and contributions, a sense of ownership and a strong community can be cultivated. For example, projects like Kunji are doing exactly this. It makes use of a strategically designed revenue model that incentivizes optimal performance among asset managers, thereby engendering a win-win scenario for its backers.
To elaborate, the protocol’s approach of allocating 25% of the total user’s profit as revenue and further distributing 80% of this revenue to the Asset Management and Pool Participants demonstrates a judicious balance of motivation and reward. By creating an ecosystem where asset managers are motivated to maximize their performance and where the community is rewarded for its engagement and loyalty, Kunji Finance has put forth an operational model that other Web3 platforms can use to achieve long-term sustainability and success.
Communities and the success of Web3.
The linchpin of Web3’s ethos is decentralization, fostering a paradigm where community engagement isn’t optional but integral to any project’s success. Aspects like active feedback use and technical contributions from backers have become indispensable assets that can drive a project’s adaptability and growth in today’s dynamic digital landscape.
Noteworthy examples like MakerDAO and Aragon have exemplified just this, showing how a vibrant community can significantly influence a decentralized platform’s direction and success. Lastly, developer activity metrics such as library installs, smart contract deployments, etc, also highlight the role of community in a project’s development and innovation.
Why business models matter…
As highlighted earlier, the vitality of a Web3 project’s business model is also important to consider since it can be used to assess its long-term success. Recent data from 2023 substantiates this narrative. For example, community-centric offerings have witnessed an uptick in user retention rates by 37% when employing gamification and incentive schemes as part of their business structures — fostering a more engaged and active user base.
Moreover, platforms that prioritize fair revenue distribution among participants — akin to Kunji’s model of allocating 80% of the revenue to asset management and pool participants — have seen a significant boost in their long-term viability and user loyalty. These quantifiable metrics clearly herald the indispensable role of robust business practices in navigating the complex dynamics of the Web3 domain, ensuring not only the project’s success but also its long-term contribution to the decentralized digital economy.
Therefore, as more and more people continue to gravitate toward using decentralized applications, it will be interesting to see how this space continues to evolve, especially considering how much potential the Web3 industry possesses.