In the ever-evolving realm of Web3, aggregation is taking on a whole new meaning. Web3 aggregators are a different beast, and understanding how they fit into this landscape is crucial for investors and enthusiasts.
The dynamics that once ruled Web2 aggregators products like Uber, Netflix, Amazon, and Google (Search Engine) don’t necessarily apply here.
THE OPEN DATA AND OPEN CODE PARADOX
Open Data
One of the first distinctions between Web2 and Web3 is the way data flows.
In the old Web2 model, users pushed their data into centralized platforms. Like registering your Facebook account, platforms like Facebook guarded this data jealously.
In web2, the number of users and amount of data you could abstract from users was what made Platforms more profitable, and the barrier for entry for new products was difficult.
This data hoarding was often a competitive advantage.
But in Web3, things work differently. The data and content flow in from open networks.
Mark’s early statement about user sign-up on Facebook
Imagine it like this:
In Web2, users upload their data to platforms, and they have to go there to interact with it, thereby even submitting more data (human behavior and interaction).
It became easy for such platforms to personalize Ads for their users, leading to more conversion and revenue.
In Web3, you could be on various platforms, and they can all access and interact with your data stored on the public blockchain.
Web3 platforms Like Lens protocol and CyberConnect are social media networks that allow developers to create applications focused on content, friendship, and digital identity.
Lens social graphs have led to platforms like Hey, Orb, and Riff, while cyber connect profile identity is cross-chain enabled.
This opens up possibilities, but it also levels the playing field for other products to break into the market.
Web3 aggregator Vs Web2 aggregator. Source Massari
Open Code
In Web2, closed-source code was seen as a competitive edge. It allowed companies to keep their proprietary technology under wraps, giving them a distinct advantage.
In Web3, the paradigm is open source.
The very nature of blockchain technology promotes transparency and collaboration. This, in turn, diminishes the competitive edge that closed code once offered.
Defi protocols like Sushi swap V1 and pancake swap V1 were a fork of Uniswap V1, and this has generally helped to hasten up development in the web3 space, the idea of if it worked on Ethereum chain it will work on any other EVM chain.
MARGINAL USER BENEFITS: WEB2 VS. WEB3
In the transition from Web2 to Web3, one major difference is the change in user experience, and the benefits users derive.
In Web2, users saw a considerable leap in value, going from generic, often passive content delivery to more customized, continuous content experiences. The improvement was significant.
The same went for advertisers and long-tail creators, who found better tools for reaching and engaging their audiences.
Now, as we venture into Web3, the user migration doesn’t offer such a stark jump in value. Users in Web3 already have a wealth of content and services at their disposal. This means that user adoption will likely be slower and less sticky.
Web3 platforms face the challenge of offering something more enticing than what’s already available.
There are always many alternatives with slight differences within a short period.
For instance, the creation of a social platform, Friend.tech became the most exciting thing in the web3 space during its beta testing, and in a matter of weeks, the web3 space saw another alternative like Stars Arena, Fan.tech.
Collapsing Moats: Open Data and Open Code Aggregators
Moats that protected Web2 aggregators are no longer as effective in the Web3 world. Closed-source, closed-data moats that kept competitors at bay in the Web2 realm don’t have the same power here.
With open data and code, competitors find it easier to enter the scene and challenge the established aggregators.
WEB3 AGGREGATORS: A NEW BREED
Blockchains will enable an entirely new category of markets. However, let’s look at some examples of Web3 aggregation in action.
Web3 Identity and on-chain reputation
In the world of decentralized networks and anonymity, the shift in Web3 is such that the costs of building a competing aggregator are relatively low.
In Web2, platforms had to invest heavily in user and supplier acquisition. But in Web3, a new platform can simply capitalize on wallet naming services such as Ethereum naming services or Lens.
Thereby, users will not need to create new accounts when signing up on wallets like Coinbase wallet and Coin98, or DApps like Aave, or browsers like Brave, but users can use their old identity to interact on the platform.
The user data is pulled from the blockchain, making user migration easy and thereby leveling the barrier of entry for new platforms to grow.
Data accessibility
The cost of verification and authentication is relatively cheap in web3 when compared with web2, where genuineness is highly dependent on one’s morals of giving out accurate data.
Platforms like Dune Analytics, Defillama, and Arkham aggregate on-chain data and permit any user to query, explore, and gain crypto data insight.
This has helped the web3 community make informed decisions when it comes to investing.
Data infrastructure and integrations
Setting up the infrastructure for running a traditional data venture, the cost of running infrastructure eats into the firm’s profitability.
Companies like Google and Amazon have very large data centers and would have to avoid downtime by all means possible.
Still, In the case of Blockchain and protocols, the perceived “value” of the network increases with each new node that hosts data on these networks as the possibility of the entire data network going down diminishes.
Platforms like Covalent and Chainlink have built data infrastructure for the entire blockchain. Dapp builders can simply use the infrastructure to make Blockchain API calls.
Asset Management Aggregators
Users can deploy capital into pools and have their funds managed for them by Yarn Finance, Convex, and Beefy.
These are yield management platforms that could help users earn maximum rewards. Zapper, Instadapp alchemy dapp are like the app store of web3.
They are aggregators for everything web3. Helping users web3 enthusiasts discover more legitimate Dapps.
With aggregators like this, the user journey becomes enjoyable, safer, and more accessible.
COMPETING WITH MOATS: TOKEN LOYALTY AND RECOMMENDATIONS
Web3 aggregators in the social realm must find new ways to build user retention moats.
While token models and loyalty programs can boost user adoption and retention, scale-driven moats are traditionally more successful.
Front-ends that can scale to offer customized data collection, indexing, and recommendation features will likely be more sustainable in the Web3 era.
The world of NFT marketplaces in Web3 presents us with another breed of aggregators.
NFT marketplace Blur indexes NFT listings across various base marketplaces, creating a single interface for trading across platforms.
Blur seized a large chunk of NFT trading volume from Open Sea through its aggregator and airdrop strategy. Open data properties diminish the profit potential and barriers to entry compared to their Web2 counterparts.
Blur Vs Opensea Vs Opensea pro. Source @d_jungle on Dune
A CHANGING COMPETITIVE LANDSCAPE
OpenSea bought Gem, currently rebranded as Opea Sea Pro, to serve and compete in the NFT aggregator space; the landscape is shaped by open data, pulling on-chain data.
It’s not about being a gatekeeper but about providing users with the broadest selection of NFT listings. This open model curtails the profit potential, as aggregators cannot be as selective in serving users.
CONCLUSION: THE WEB3 AGGREGATOR CHALLENGE
Web3 is bringing forth a new era of aggregation, and it’s clear that the old moats don’t apply in the same way.
The open nature of data and code, along with the changed user benefits, is shaping a competitive landscape where traditional aggregator advantages are less pronounced.
To succeed in this environment, Web3 aggregators must adopt innovative approaches and adapt to the unique dynamics of this new era.
As the Web3 journey continues, these aggregators will play a pivotal role in shaping how users interact with blockchain technology and decentralized applications.
Adaptability, innovation, and the ability to provide users with tailored, value-added experiences will be key in establishing and maintaining a position in this rapidly evolving landscape.