blockworks.co
Everyone’s been busy predicting the death of crypto and Web3 recently — and to that I say, fair enough.
But as we all know from history, a burst bubble isn’t the end of the story. It’s often the start of a new one.
The future of the blockchain is one in which the next billion crypto users won’t hold bitcoin, ether or any other fungible tokens. They’ll use fiat to purchase goods and services, and that fiat might be exchanged for tokens somewhere on the back end.
Blockchain has already been through two epochs, the Crypto Era and the Web3 Era, and we’re on the cusp of a third: the Abstraction Era.
Put simply, the blockchain is going to become infrastructure. Just as no one really talks about “the cloud” anymore, we won’t talk about “the blockchain” either. We won’t need to know or care which blockchain our purchases are stored on.
Going forward, most people who use crypto to buy something may not even know it.
Blockchain, not Bitcoin
If I’m going to Italy, I don’t start gathering up a bunch of euros ahead of my trip. When I get there and sit down in a restaurant, all I care about is eating my pasta and drinking my wine. I’ll pay with a credit card and my dollars will get converted to euros. If the back-end technology uses the Solana blockchain to do the conversion and it converts my fiat to USDC and then to EUROC, saving the merchant foreign exchange fees, fantastic.
I don’t need to know how the technology works: I’m still paying with dollars, and the restaurant is still getting paid in euros. The blockchain technology that enables this seamless transaction doesn’t need my attention.
In this new epoch, the exciting thing won’t be currency; it will be the underlying technology: The blockchain itself.
And it’s already happening: On OpenSea, you can now buy an NFT with dollars. In fact, that’s becoming their primary call to action.
Starbucks also announced they will begin issuing customers “stamps” in their Odyssey loyalty program on Polygon, yet no one ordering a pumpkin spice latte will ever need MATIC or care.
Reddit’s “Collectible Avatars” (notably not called NFTs) have been downloaded by 4.3 million people since September 2022, more than the entire number of wallets with any NFTs at all (2.5 million) prior to September, according to Nansen. These avatars can be purchased with your local fiat currency.
These are all precedents for how to cut all those clunky steps from our current, declining Web3 era so that the end user can make their purchase with a single click, rather than laboring through the whole complex process themselves.
That’s the abstraction era in action.
Predicting the future
With the mobile evolution, users could only benefit if they had access to a mobile device, some level of technical skill, and a willingness to make behavioral changes. Hardcore crypto types might then say that so far, the crypto movement has only progressed to the same point as the original mobile revolution.
The process we put up with to use crypto is amazing and faintly ridiculous when you break it down — signing up for an exchange, connecting your bank account, buying tokens, installing browser wallets, connecting your wallet. And if you ever need to convert that token into currency, you have to reverse this whole process: sending the token back to the exchange, selling it, eating the fees, and then withdrawing the money — which could take days (if the exchange was allowing withdrawals at all!)
This — unwieldy, error-prone process — this was what we all got so excited about?
The cloud revolution, on the other hand, is a natural evolution of technology and the internet: Everyone’s on the cloud now, often without even realizing it. The end user doesn’t know or care how the cloud works, and you don’t need a new device, new technical skills, or new behavior to use the cloud. The cloud simply operates in the background, streamlining your experience.
Think of it this way: No provider boasts to their prospective end user about the cloud. The end user doesn’t care where information is stored or what the technological underpinning looks like. They just want a great UI and the knowledge that their information is stored securely.
We’re seeing the same type of evolution with blockchain technology.
In the abstraction era, we’ll be investing in great businesses and technologies — and most of those will just happen to be built on the blockchain. Many funds used to call themselves “cloud” funds or invest in “mobile,” but not anymore: Those distinctions would sound ridiculous.
Similarly, in five years or so, there won’t be a distinction that a fund is a “Web3” fund. Where the technologies or philosophies of cryptocurrency or Web3 make sense, they will be simply used by the best businesses, and everyone will benefit.
The future is all about abstraction, and this new era will usher in the next billion users…who will actually be the first billion, seeing as neither our “crypto” era nor our “Web3” era was able to bring in more than 100 million people.