Fintech/Opinion/

What a Web2 fintech founder learned after 3 weeks of Web3 immersion

While there's still a big gap between hype and reality, fintech founders can learn a few tricks from web3.

Anh-Tho Chuong Degroote
Anh-Tho Chuong Degroote

By Anh-Tho Chuong Degroote

Most “Web2” founders are still sceptical of the Web3 hype. But I asked myself seriously: can a fintech founder afford to stay completely away from the “next iteration of the internet”? 

I didn’t know the answer, but I didn’t want to take the risk of being wrong. 

So I took a deep dive into Web3, for three weeks, seven days a week, with the most open mindset possible. Perhaps I’d find a killer differentiator for Lago, which is still 99% Web2. No matter what, at least I’d impress my friends with my crypto knowledge. 

For those of you that aren’t familiar, Web3 usually refers to blockchain-powered technology that prioritises decentralisation, versus Web2 which is more about centralised platforms — your Googles, Microsofts, Facebooks and so on. 

Long story short: my research was nothing short of disappointing. There’s a huge gap between Web3 ideology and the current reality, and for everyone who gets rich on NFTs, there are more who don’t get anything at all. 

That said, I did learn a few things. 

Apart from one exception, there is no market for ‘crypto startups’ yet

Beyond the “getting richer thanks to crypto”, Web3 is full of solutions in search of a problem, especially among startups building for other crypto startups.

But do we really need a CRM (customer relationship management) or a B2B bank for crypto-native companies? How specific are their needs, and how great can a new Web3 product be compared with its Web2 equivalent? Remember that B2B SaaS took a decade to emerge, and prove that SMEs — a massive pre-existing segment — were worth building software for. So it looks early to build exclusively for “crypto SMEs”. 

“Web3 is full of solutions in search of a problem, especially among startups building for other crypto startups”

There might be emerging Web3-related needs such as token-gating access to some resources, or payments, but the best positioned to win are Web2 scaleups. They can spin up specific crypto taskforces to build dedicated feature sets in no time, and so play on both tables. This is what Stripe did: they announced a partnership with Crypto.com and Blockchain.com earlier this year, after quitting the crypto arena in 2018. Stytch, the authentication unicorn, also recently launched Web3 features. 

The only exception might be “pure” crypto infrastructure companies. Not the ones building an equivalent of a well-known productivity SaaS “but for Web3” (i.e. Asana for web3), but the ones building the Amazon Web Services or Microsoft of crypto. Great examples of this are Alchemy and Polygon — respectively valued at $10bn and $13bn. Indeed, there’s just a higher competitive moat and more resilience within the infrastructure space: it will always be needed, whatever the use cases and applications of crypto will be. 

The most promising companies are using crypto behind the scenes

As a fintech founder, the applications of Web3 in the Web2 finance system are what intrigued me the most. While some Web2 fintechs only think of crypto as a “trading feature to add” (something that has been very profitable for Revolut), others leverage Web3 technology to solve Web2 problems. 

The most obvious example might be international transfers and payments, especially from or to underbanked or generally grey-listed regions such as Africa. It can still take up to a week to send money there, with hefty fees attached. 

“The most massive market opportunity might still involve bringing Web3 to the masses, by adapting Web3 to Web2”

This is what Chippercash is solving for: they offer instant payments and transfers to Africa, at a lower rate, using cryptocurrencies and especially stablecoins, cryptocurrencies pegged to another currency or asset like the US dollar or gold. They interestingly barely mention “crypto or “Web3” on the website, and it’s probably part of a strategy to attract a mainstream user persona, not only the crypto enthusiast. Other companies, such as Ejara in Western Africa or Xend.Finance in Eastern Africa, use cryptos to design savings products for this underserved but booming market. 

The most massive market opportunity might still involve bringing Web3 to the masses, by adapting Web3 to Web2, as a first step, in underserved regions, rather than betting on everyone switching to a 100% permissionless model. This may happen, but we’re still very far from it. 

Web2 companies need to steal Web3’s hiring and motivation tricks

Even if the most promising companies might not make it evident to consumers that they’re using a Web3 product, Web3 will still be something that these companies want to communicate to talent. 

While Web2 companies keep competing for talent with never-ending perks and all-time high packages, Web3 organisations attract elite tech talent without even committing to pay them. 

I’ve seen top executives spend their early mornings, late nights or weekends participating in DAOs (decentralised autonomous organisations) or building protocols. 

What motivates them? This upbeat energy of building the future. The best way to describe it is to visualise Web3 as a whole new planet or continent: for builders, this means you can reinvent everything, every concept and shape it as you like. In most cases, they are given the possibility to co-own part of the DAO, through ownership tokens, earned based on their contribution. 

This has big implications for Web2 founders. Don’t let some people with “digital monkey photos” make you feel bad about being Web2. That’s okay. But you’ll need to work hard to give talent the same kind of excitement — and potential upside — in order to compete.

Anh-Tho Chuong Degroote is CEO of Lago

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Alessio
Alessio

Most definitely Web3 is there for us to make it working and solve tangible and centralised problems. As always the reality is that this can help us moving forward but we have to make sure is being use in the right way to avoid destroy what we have built so far. New technology are created because of needs and needs are created because of lack of time spent research the downfalls of what we do. Considering the life goes fast we have to find solutions together.

Paul
Paul

Please check what the Cardano ecosystem is going in Africa. They are solving real problems ( world mobile, identify management, P2P lending protocol, etc. Realfi is beyond DEFI and creates real opportunities for real people who needs. I believe you should attend a Cardano submit to better understand what are the real problems that Cardano ecosystem is trying to solve.

Anh-Tho Chuong Degroote
Anh-Tho Chuong Degroote

Will do, thanks Paul!

T C
T C

I thought its fair assessment of the state of affairs. No one can predict the future. It is also true we have more solutions looking for problem to solve in this tech driven world.

Brian
Brian

“but the ones building the Amazon Web Services or Microsoft of crypto.”. This is what draws me to FLUX.

Louis
Louis

I just wanted to say that every technology has an entrance, and you just have to find that diamond in the ruff, as in any new model. I have found that in this company that have been building the last 4 yrs. Email if you want to visit

Jack
Jack

Disruption doesn’t come with a manual.

A D
A D

Spend another 10 weeks so that you understand that even your negative assessment is just way to happy. You have no idea what you are saying. You make a great point that there is no need for all this Web3 crap, yet you say that the infrastructure should be useful. What?

Taylor Matthews
Taylor Matthews

infra services for web3 startups provide tangible value in the form of paying customers. Makes sense to me