Tech
The Prize for Owning Web3 Distribution Is Huge. Here’s Why It Won’t Go to Big Tech
For more than a decade, the blockchain industry has wrestled with a self-determined question: How can we go mainstream? Searching for the killer app or company that suddenly moves the masses towards crypto infrastructure has proven to be a daunting task. But unlocking product-market fit here represents more than a win for the consumer: It will signal a profound shift in how the Internet is structured and governed throughout our lifetimes. So who will be Web3’s power distributor, controlling wallets and the app store of the future?
The reward for owning Web3 distribution is huge but increasingly out of reach for the FAANG. Despite their vast resources and influence, these giants have so far been most successful in a supporting role, passively assisting the transition to a decentralized future, for example by ensuring convenient access to computing.
Moving to Web3 is a multifaceted challenge, not suited to companies that exploit data and advertising to generate big profits. The “world’s most innovative companies” are too entrenched in the muck of legacy business models, partners, and products, further slowed down by their own culture shock and short-termism of shareholders.
It’s clear that Big Tech doesn’t take cryptocurrencies seriously. They have never made public how their open source initiatives might be redirected to cryptocurrencies, nor have they purchased a significant portion of a base layer by acquiring a token, despite the associated governance rights that might come with it to influence the roadmap . You may be wondering what we expect from these legacy platform companies that unofficially rule the global web and the true value they provide to users versus themselves.
Despite ubiquitous distribution and seemingly limitless opportunity to hire emerging talent in blockchain, the story has always been that it is not a big enough addressable market opportunity today. After phasing out Libra due to regulatory backlash, Facebook the Metaverse unit has a net loss of $40 billion over the past three years and still has no chips on the table in the cryptocurrency space. Instead of becoming a distributor for Web3 users, they are trying to innovate their product suite to continue generating more than 95% of their revenue through ad sales, in part because of the widespread belief among regulators that consumers cannot be trusted with their own finances or data.
We are getting used to having our email filtered to help “tune the AI model,” and subconsciously, most consumers have agreed to give up privacy in exchange for modern conveniences. This further strengthens the reach and power of the FAANGs, but brings us no closer to implementing a truly modern technology like blockchain, which would materially improve the average person’s life.
We are increasingly ceding our intellectual property and that of our companies to these institutions will become a requirement as the AI arms race reinforces data-centric differentiation. This could be the moment that pushes the power structure into a mode of total greed, breaking it completely.
By design, the next era of the web will not be controlled by a handful of monoliths that refuse to accept a light-touch but powerful role in serving end users without overdoing it. The new internet requires fresh leadership that is willing to chart a very long-term path: a new generation of decentralized projects and startups based on the principles of user control and community governance that will help the industry adapt to the Web3 ethos.
Today’s developers are tireless in their attempts to regain power to challenge the exploitative practices of Web 2.0, operating systems, and app store constraints, so that in 10 years, decentralized organizations become the new, more benevolent ruling class and the FAANGs become service providers.
The existential threat to blockchain is that without a well-organized and strategic global marketing strategy, we will build it and no one will come. However, if we enlist a distribution partner that brings enough scale to make it profitable to build Web3 apps, developers will start testing fun things that could unlock a big enough prize to justify the risks of building for an app store that doesn’t yet exist. Developing a “killer app” matters less than being the distributor that unlocks the opportunity for developers to acquire many potential users.
A well-balanced incumbent is Telegram.
Building a base blockchain and associated community is a daunting task, and so far very few have managed to tap into a real consumer activity outside of cryptocurrencies. Every kingmaker seems to be aligning themselves with a new blockchain: Coinbase created BASE, FTX knighted Solana, Facebook attempted Libra, Amazon imagined its own chain for NFTs, and so on. The scalability of new-age base layers is impressive, but it won’t be enough to win on technology alone. Distribution and activity are the scaling solution; infrastructure is becoming easier to build and may be moving toward commoditization.
The revolving door will jam when developers start to smell low customer acquisition costs and a huge premium in global adoption: the Telegram mini-app opportunity. Telegram mini-apps are an open platform for new and emerging brands to distribute crypto-friendly games and apps. The platform supports seamless permissioning and crypto and fiat payments and allows projects to incubate, raise funds and market, all within the familiarity of the Telegram user interface. Today, The Open Network’s (TON) strategic ties with the Telegram messaging app combine both the technical capabilities to tackle Web3, the distribution power of a top 10 mobile application and, most importantly, the credibly neutral geographic launch pad for a consumer-centric approach to Web3. TON already boasts Web3 primitives like a wallet, an active DeFi ecosystem and tokens with a scalable Web2 user container and 900 million MAUs.
Telegram’s strategic pivot allows its app developers to align their revenue models with the long-term growth of the Web3 ecosystem. By providing critical distribution, a wallet, infrastructure, and supporting services, they can continue to generate substantial revenue while contributing to the broader goal of a decentralized internet. This symbiotic relationship benefits both the TON blockchain and Telegram, creating a more sustainable and inclusive digital economy. Telegram has always been on the fringes of Big Tech, successfully scaling a user-centric messaging app amidst fierce competition and following an unorthodox playbook: no ads or hardware moat, just great technology and user experience. Their mission-driven focus is akin to being religious about the user-centric approach to the new internet, aligning perfectly with the consumer and developer-driven revolution of Web3.
And while the U.S. is critical to the growth trajectory of most of today’s top 10 apps, for global crypto adoption, perhaps American MAUs are a “nice to have.” Strategically, Telegram’s go-to-market excludes the U.S. but includes the unbanked, which is more than four times the size of the United States population. While it would be great to frame this as a socially conscious decision and it could be, it also excludes the US by necessity due to the lack of regulatory clarity and SEC Case 2020. And the advantage demonstrated outside our borders is enormous: see the mini-program economy of Wechat which has grown to 5 million mini-programs since launch in 2017, reaching $400 billion in annual transaction volume via apps by 2021.
In response, Telegram has been boosting the intersection of basic financial services and the gaming economy. As the first platform to show a glimmer of greatness at the application level, it is finally awakening the Eastern Web3 developer community. Lately, it has been impossible not to notice the frenzy around Notcoin (35 million users), $TON entering the top 10 of all crypto tokens, and TVL rising to a new all times at the highest level Through STON.fi. And if the super-app use case isn’t entirely compelling, the ability to augment it with Web3 will be a challenge for both X and WeChat due to geopolitical pressures and the risk to their legacy businesses. Most recently this week, X launched a new payments platform which does not accept cryptocurrencies. The company had acquired a broadcast license for crypto payments last year. Despite his personal advocacy for blockchain, Elon Musk’s ambitions and obstacles with X illustrate the complexity and regulatory challenges inherent in adopting decentralized technologies within a centralized platform.
The TON ecosystem is the closest we have come to mainstream adoption. If successful, this could lead to larger companies like Telegram helping crypto apps converge with the mass market. If the benefits of blockchain are clear in the value proposition for the user, no one should think about whether a service runs on a blockchain or in the cloud.
As the Web3 revolution unfolds, it is clear that the race for control is not just about technology, but a fundamental reimagining of power, control, and trust in the digital age. Distribution is up for grabs in cryptography because Web3 is fundamentally at odds with the business and ethics of Web 2.0.
Remove irrevocable ownership of data, lose 30% App Store commissions. and the ability to train AI on your data, emphasizing portable identity and consumer-centric developer goals, and other general side effects of de-platforming, would drive a stake through the heart of Big Tech. It will be fascinating to watch Telegram’s role as a distributor and believer unfold as the rest of Big Tech grapples with questions of mission and purpose and decides whether to join the party in service of the protocols of the future.
Disclosure: CoinFund is an investor in STON.fia DEX on the TON blockchain and holds further exposure across the entire TON ecosystem.
Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.