Welcome to the Block & Mortar newsletter! Every week, I bring you the top stories and my analysis on where business meets web3: blockchain, cryptocurrencies, NFTs, and metaverse. Brought to you by Q McCallum.

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#36 - What next?

What next?

It’s said that prediction is a fool’s game. Maybe schadenfreude is why people enjoy those My Predictions For Next Year lists? You read what some pundit put together in late December, and over the next twelve months you have a laugh at everything they got wrong.

I, too, look askance at those lists of predictions. But for a different reason: I find it odd that we release them just once a year.

Me? My thoughts are a steady stream of “What Next?” This question has been the common thread in my career and my interests, from emerging tech to predictive modeling to risk. Those are all fields where you need to continually take stock of what’s happened so you can get an idea of what’s on the horizon. Every news event, every data point is an opportunity to recalibrate your future-vision. It’s how you course-correct to position yourself for a win.

And therein lies the lesson: some of the best predictions are just a slight departure from what’s already happening.

Given that, my “What Next?” for web3 is firmly rooted in what we all saw last year:

More companies will try to implement blockchain projects.

Blockchain spent the year testing out use cases, only some of which took off. Notably, logistics company A.P. Moller - Maersk shut down its big blockchain project and the Australian Stock Exchange pulled the plug before theirs even launched. A group in Kenya successfully ran a pilot program to improve the paper trail around supply chains, but … that broke down on the tail end. (You see, the other side – in the UK – hadn’t modernized their stack. So they couldn’t plug in to that digital ledger goodness.)

Even with these setbacks, I expect that companies will continue to explore use cases for blockchain technology. Is it a drop-in substitute for, say, a relational database? Not by a long shot. But is it useful when you need multiple groups to track and verify activity on a shared, tamper-resistant ledger? Absolutely. It’s possible that someone will really get Some Really Amazing Yet Initially Counterintuitive use case working end-to-end, at which point others will use that as a template.

Cryptocurrency and tokens saw a lot of pain. Maybe they’ll see some gain?

Coin values tanked. There was the Terra/Luna algorithmic stablecoin death spiral, shortly followed by the Celsius and Three Arrows Capital (3AC) meltdown. The FTX saga is heating up. And that’s just what I remember off the top of my head. 2022 was certainly the year of “crypto fall down, go boom.”

My running joke has been, “Well what else is left to go wrong? Pretty soon we’ll run out of problems, right?” But that’s only a half-joke. (And to all of my friends in risk management: yes, asking “what else can go wrong?” is usually the precursor to things going wrong. I know, I know…)

I wonder how much the crashes and crime will drive people to use cases beyond decentralized finance (DeFi). What if there were more token projects for representing fractional ownership of real-world goods and business entities? That sounds a little too much like securitization, though, which would probably catch the attention of regulators.

Fashion and loyalty programs will continue to pave the way.

The fashion industry has thoroughly embraced web3. We saw virtual models, NFTs as event tickets, digital garments, and even pixelated perfumes in 2022 and I don’t see any reason for that to slow down. Similarly, loyalty programs picked up on the idea of an NFT as a special kind of membership card. Starbucks was the big name here, with its Odyssey program. I imagine several companies are keeping a close eye on the coffee chain as they sort out how to work NFTs into their own loyalty programs.

Taking a wider view, this demonstrates that NFTs are more than just overpriced JPEGs. Efforts by Starbucks, Universal Studios, Franklin Templeton and other respected names add legitimacy to the technology by showing how it can serve real business value. That should encourage other companies to find their own use cases for NFTs With Benefits.

We’ll see more metaverse baby steps. Maybe a full jog.

The next couple of years will shift from “this… is what a metaverse is good for?” to “this is what a metaverse is good for.” Major properties have started to carve their niche, attracting corporate and personal uses alike. I’m confident that the big-named spaces like Roblox, The Sandbox, and Horizon will exhibit more growth.

The one maybe in that list is … Otherside. Aside from that big land rush in May, and then some test runs, things have been rather quiet in the Yuga Labs metaverse offering. Will it formally launch in 2023? And if it does, will it live up to the excitement that’s been brewing over the last few months?

Infrastructure providers will power web3 adoption.

It’s one thing to build some public-facing system; quite another to stay one step removed, to develop the infrastructure on which others can build. Think payment rails (so consumers can spend cryptocurrency at retailers), token-gating (to use NFTs as access passes), wallet management services (allowing people to, say, use their plain old credit cards for crypto purchases), and search engines (to find events across the various metaverse properties). These all exist as of 2022 and we’ll see more in 2023 and beyond.

Why is that? Simply put: most businesses want to use The Hot New Tech Thing, not build it from scratch. They will trade money to shorten their time-to-market and offload long-term maintenance hassles. Anyone who provides prebuilt software libraries or a white-labeled service will find eager sales prospects.

But that’s my take …

Check out these lists if you’d like a different view:

The wrap-up

This was an issue of Block & Mortar.

Who’s behind Block & Mortar? I'm Q McCallum. I've spent the past two decades in the emerging-tech space. And I'm very interested in web3 use cases.

Credit where it's due. Big thanks to Shane Glynn for reviewing early drafts. Any mistakes that remain are mine.

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