Top 5 Mistakes Traditional Business Make When Entering Web3
At Faiā, my meta-community agency, we’ve had countless prospects or clients hear about overnight millionaires in crypto, Web3 or NFT, then try to enter thinking it's going to be a breeze. Nothing could be further from the truth.
As a result, I've compiled a guide of the top 5 mistakes traditional businesses make when trying to enter this emerging space.
Here’s what I'll cover:
Planning an ICO
Making an NFT collection for quick money
Wasting money on traditional marketing or advertising
Trusting agencies who don’t warn about legal ramifications
Thinking short-term based on attention-grabbing headlines
Let’s dive in.
1 — Planning an ICO
If you’re not in the year 2017 or 2018, ICOs are yesterday’s craze. They were hot for a minute, but the market has long since moved on from that mode of fundraising.
ICOs stand for “Initial Coin Offering” and was the crypto version of an IPO (or Initial Public Offering). During that period, ICOs saw many overnight millionaires enter the scene out of sheer luck or timing. Every man and his dog was creating their own crypto-currency because there was very little oversight in the form of rules or regulations.
Unfortunately, as regulators learned more about the technology, many creators (both complicit and unsuspecting) ended up in jail due to breaking securities law. Mostly in countries with strong rule of law. Those trying to avoid accountability have since fled to foreign tax havens with less “restrictive” jurisdictions.
2 — Making an NFT collection for quick money
This is no surprise. Wherever there are stories of overnight successes, there will be a flurry of copy-cats looking to replicate the same, even if dubiously.
NFTs (or “Non-Fungible Tokens”) are the latest form of fundraising. Like the original ICO craze, NFTs are seeing the same sort of frauds, scams, and money-laundering that plagued many ICO projects.
Before NFTs burst onto the scene, we saw an evolution and scramble from ICO > IEO (Initial Exchange Offering) > IDO (Initial DEX Offering) > STO (Security Token Offering). As you can see, people were trying to get away from the tarnished ICO “brand”, and skirt regulation to still do the same thing without running into legal problems: raise money through crypto.
NFTs became the ecosystem’s saving grace because it actually offered something in return for people’s money: “unique digital assets”. Unlike ICOs and its derivatives, which offered nothing but a speculative token, NFTs at least provided digital (art) collectibles from well-known or rising artists.
There was also a significant culture shift — brought out by a now-liquid generation used to digital assets in video games — that saw the socially accepted concept of ownership move from physical to digital.
The initial success stories, including the likes of Beeple, Bored Ape Yacht Club, and CryptoPunks, saw droves of copy-cats enter the scene yet again. By seeing the meteoric gains from their digital artworks, others entered the scene in hopes of “making it rich” too.
Some succeeded, but a large majority did not — just like any other industry.
As a result, the NFT ecosystem has already become mired in copy-cats, “rug-pulls”, and increasingly sophisticated scams. Those who made money were those who were already perfecting their craft — NFTs were simply a new channel to sell their works. Timing was everything here.
3 — Wasting money on traditional marketing or advertising
String is not wrong. Traditional marketing (e.g. ads, billboards) doesn’t work in the NFT space.
Because it’s a whole new generation of buyers who value different things are found in non-traditional places (e.g. Twitter, Discord, etc.).
4 — Trusting agencies who don’t warn about legal ramifications
It always surprises us when we hear prospects say that they’ve never been informed about the legal ramifications of taking certain actions in this space. This is usually because most marketing agencies will do what you ask, without understanding the intricacies of the technology or its legal implications.
The blockchain and crypto spaces are unique in the sense that they deal with money itself. “Crypto” has enabled the masses to essentially print their own currencies with little recourse (although this is changing).
A massive cultural shift is taking place, and these emerging technologies are questioning the very roots of our beliefs. This comes at a time when governments and financial institutions globally are over-extended due to irresponsible, yet predictable, debt-financing.
As Ray Dalio explains in his book Principles for Dealing with the Changing World Order, most of the mightiest empires have declined after around 50–250 years.
This means the crypto space is a part of that transition between world orders, and the rules of the game will be restructured accordingly.
Who we trust, and how, is what’s at stake. So choose wisely.
5 — Thinking short-term based on attention-grabbing headlines
It’s easy to get swept up in the headlines of people making millions (or billions) in this space. But just like other industries, a small percentage of success stories are over-magnified in the media, giving people an unrealistic expectation about what’s involved in “succeeding” in the space. Luck or right timing is not easily replicable.
Community is the name of the game in Web3. The reason for this is because the next generation is highly aware of scams, bots, and fake news. Previous generations would often get away with things because of the lack of information available. But with social media, everything (for better or worse) is easily searchable online. This next gen knows not to trust everything read online, without verifying. This is why you’ll often hear the “don’t trust, verify” ethos in crypto communities (even though we prefer Ronald Regan’s original “trust, but verify” quote more).
Because “community” is a hot topic, it’s often mistaken for mere audience-building. Nothing could be further from the truth. Genuine communities not only show up to support at the beginning, but stick around for the long-run. Building this requires consistent effort over long periods of time. It also requires conscious culture-building.
As a result, when entering Web3, be sure to bring a pragmatic attitude towards it. Bring any experience you have with traditional businesses, but think about Web3 as a new growth or revenue channel.
It may help improve your processes, speed up automations, or even revolutionize the way you work.
Either way, don’t get caught up in the headlines you read about. It’s better to think of it as hard, and be pleasantly surprised, than think of it as easy, but be utterly disappointed.
And there you have it! Hopefully these 5 tips will help you enter the Web3 space with greater awareness. If you’re interested in speaking with us, feel free to book a time here.