When it comes to the emergence of Web3, it can be hard to hear through all the noise. The idea of Web3 – a future version of the internet based on blockchain technology – is…
When it comes to the emergence of Web3, it can be hard to hear through all the noise. The idea of Web3 – a future version of the internet based on blockchain technology – is something many in business have likely only heard about as outlandish stories gain traction on social media. Tales of massive overnight profits and soaring valuations have quickly given way to reports of fraud and scams and falling prices.
But it’s the idea behind how blockchain technology works that has people seeing a world of possibilities. A blockchain is a database that stores information as a digital ledger, which is then distributed across a network of linked computers. Because information stored on a blockchain is maintained across the entire network of computer systems on the blockchain, it is incredibly difficult to change or alter.
Experts in a variety of industries see more uses for blockchain technology than peddling “Bored Ape” NFTs or non-fungible tokens, a type of digital certificate saying you own the rights to a specific product, whether that product be music, art or some other physical good. In the case of Bored Apes, the products are illustrations of apes that sell for hundreds of thousands of dollars.
Several southeastern Wisconsin companies – from real estate firms to breweries to the Milwaukee Bucks – are already experimenting with Web3 technologies and trying to find the best way to build their business with the help of blockchain.
Volatility in value, security concerns
Like any new and emerging technology, the blockchain and Web3 have their flaws. The Federal Trade Commission reported this month that although cryptocurrency has yet to become a mainstream payment method, “it’s an alarmingly common method for scammers to get peoples’ money.”
More than 46,000 people have reported losing over $1 billion in crypto to scams since the start of 2021, according to the FTC. One factor that contributes to this issue is the fact that the blockchain is decentralized – there is no authority such as a bank to flag suspicious transactions or stop fraud. A lack of education on cryptocurrency and reputable companies also comes into play. The FTC report shows that nearly half of people who reported losing crypto to a scam since 2020 said they clicked on a related advertisement or social media post. With big names like Lebron James and Tom Brady hopping on the crypto bandwagon, more and more average people are wandering into the world of Web3.
While it’s great that celebrities are talking about cryptocurrency, national advertisements lack information on where the average person can educate themselves, said Christopher Perceptions, founder of PerceptForm Inc., whose mission is to educate and provide cryptocurrency financial services to minority populations.
Incubated in Perceptions’ hometown Milwaukee and now headquartered in Raleigh, North Carolina, the startup is working on several education initiatives, including bringing a two-week smart contract coding camp to Milwaukee that will allow people from all backgrounds to learn about blockchain technology.
“This is a very important piece as it relates to talent,” Perceptions said. “If Milwaukee can turn out Web3 talent, they’re going to be filling a huge gap as it relates to the industry. There are so many people crying out for tech talent, but all of the tech talent is either under contract or already swamped.”
While some people may have only heard of blockchain technology through the recent NFT artwork craze – one NFT by the Wisconsin artist Beeple sold for $69 million – artistic outputs are not the only use for it. Perceptions has seen organizations experimenting with using NFTs as a visitor’s badge, a way to prove residency, and to store supply chain information.
As for Bitcoin’s plunge in value – each coin was worth more than $60,000 in November and the price had now fallen below $23,000 at press time – Perceptions said such volatility is common, particularly when it comes to a new asset class. He believes as more people start using cryptocurrencies, regulation occurs and development continues, this pattern will become less frequent.
“Most people are probably going to fall privy to what Twitter or the news is saying,” Perceptions said. “Zooming out, if we were to look at Bitcoin from a one-year horizon, it looks like it’s down 37%. If we were to zoom out even further, as most investors generally do, Bitcoin is up 27,000%. There are peaks and valleys – it’s common.”
One might think market volatility and security concerns would hold back interest in blockchain technology. Gordon Nameni, partner and managing director at August Brown, a technology-focused management consulting and advisory firm based in Wauwatosa, said he’s actually seen the opposite effect take place. Banks, in particular, are interested in cryptocurrency because of the ways it can improve data security overall when used appropriately.
“Because of issues related to data security, more people are starting to realize the way to go is blockchain,” Nameni said. “When you encrypt something on the blockchain, it makes it more secure. The proletariat may not understand the value of the blockchain, but more and more businesses are starting to realize that it’s related to greater security.”
Source of initial interest
For Mike Doney, venturing into blockchain technology was spurred by the COVID-19 pandemic causing a downturn in the market. As the market began to recover, different industries were not bouncing back at the same rate.
“Wall Street was appreciating in value, more specifically the equities’ values were skyrocketing, but businesses on Main Street like your local coffee shop were struggling and were closed. The stories were not coinciding with each other,” said Doney, vice president of marketing at Milwaukee-based investment company F Street Group.
The differing recoveries led him to begin researching Bitcoin and a way to conserve value that was exempt from inflationary pressures caused by government actions.
F Street Group initially purchased Bitcoin, and other coins like Ether and Cardano to research the cryptocurrencies’ viability. The company also holds several non-fungible tokens linked to land plot purchases. F Street Group’s land plots give the company rights to allocated space within the Metaverse.
“We’re still kind of looking at this (blockchain technology) from a viewpoint of if most startup companies fail, what will emerge and has that already been decided or is the technology in such a nascent stage that we haven’t seen what the predominant use case for blockchain will be?” Doney said.
F Street Group is also launching its own digitized token, dubbed High Life, through a partnership with San Francisco-based Securitize, a blockchain-based trading platform. A total of 10,000 High Life tokens will become available to investors on the Algorand blockchain within the next few weeks.
“That token will represent the ability of investors to be a part of our core tenants of business, without directly investing in one particular component of that business,” Doney said.
Token holders will generate a yield payment for each F Street Group token they purchase. The value of each token is $1,000, and that value will remain constant. Each investor must purchase at least five tokens to take part in the offering. The money raised from the token sales will go into F Street Group’s real estate development projects and high-interest yield loans to real estate developers. For every day an investor holds a token within their digital wallet, they generate 7% annualized yield back on their investment. That works out to $70 annually.
“You’re holding the value on the money you invested, so rather than seeking that $1,000 potentially go lower, you maintain your pegged value and you’re just essentially generating interest on your investment,” Doney said.
The last cryptos standing
Joseph Wall, associate professor of accounting at Marquette University, said people often conflate the term blockchain technology with cryptocurrencies since crypto is what made blockchain technology so well-known. He sees the value of cryptocurrency not within the tokens or coins themselves, but in the underlying technologies they use and whether those technologies have intellectual property value.
“People see all these cryptocurrencies and probably 90% of them may not have disruptive potential,” Wall said. “Still, just like the dot-coms were back in that era, there are some that are really innovative and trying to change the world, and those are the ones that are ultimately, to me, going to survive in some form.”
Wall believes cryptocurrencies created to make processes go faster or to speed up the processing of financial transactions are more likely to succeed because the actual technologies those cryptocurrencies use have value. People and companies looking to invest in cryptocurrency should investigate which platforms are actually looking to solve a problem, potentially leaving a couple hundred cryptocurrencies standing – out of more than 10,000 in existence as of early June, according to CoinMarketCap.
“If you would have started off with the premise of only investing in the dot-coms that had storefronts … and had ‘X’ amount of revenues, you would have also gotten yourself down to a couple hundred companies,” said Wall. “Now, many of those would have failed, but you would have eventually owned some of the biggest companies in the world, and I think we’re in that same space.”
Another consideration for those interested in the crypto space is the effort to overhaul current regulations. Since all the departments of the U.S. government have been tasked with coming up with crypto policies within the next few months, Wall expects the Securities and Exchange Commission and the Department of Treasury to soon roll out rigorous standards meant to protect investors.
Digging deeper into the feasibility of blockchain technology
Local interest in blockchain technology spreads far beyond the world of real estate. August Brown received so much interest in blockchain technology from banking clients that the company launched a cryptocurrency feasibility analysis. The analysis specifically examines the viability of the back-end technology vital to cryptocurrencies and possible risks to businesses and their clients.
“In our space, we ultimately saw that there was a gap. … We kept on hearing about crypto, crypto, crypto, and banking clients were asking questions related to its application and how to mitigate risk with companies that may be participating in that Web3 space,” Nameni said.
When it comes to the average business owner, Nameni believes the best use case for blockchain technology is found in supply chains. Businesses that move to a blockchain-based supply chain model could increase their efficiency and throughputs. Crypto-based payment mechanisms also have lower transaction fees than traditional credit cards.
“Blockchain ensures a transparent supply chain,” Nameni said. “It enables smart contracts that are able to automatically execute when certain parts of the supply chain are completed. It also allows smoothed out payments with quicker settlements, and it’s easier to audit.”
The team at August Brown believes that in 10 to 15 years, all parts of the supply chain will be housed within the blockchain.
Expanding the fan experience
Blockchain technology can also be used as an avenue for customer engagement. Two major Wisconsin companies have experimented with using NFTs as a marketing and branding technique and as an additional layer to the fan experience.
At the start of the year, Sprecher Brewing Co. announced it would launch its own series of NFTs. Tim Cigelske, director of communications for Sprecher, said the venture marks the intersection of the brewery’s history with what the brand hopes to be known for in the future. The goal is to eventually tie the purchase of a Sprecher NFT to a physical good or experience.
The Milwaukee Bucks have also launched a series of NFT artwork, celebrating the team’s two NBA championship titles. Housed within the blockchain network Sweet – created specifically for the buying and selling of NFTS – the Bucks’ “Fear The Deer” NFTs allow fans an opportunity to collect, own and trade various digital assets, including digital collectible posters, an NFT ring that comes with a physical championship ring resembling the one given out to the Bucks team last year, and a digital replica of a 1971 NBA Finals ticket.
“Bucks fans are next-level when it comes to their team, and they’re going to love the opportunity to create their own digital shrine to the team,” said Dustin Godsey, chief marketing officer for the Bucks. “Fear the Deer NFTs is something that will grow over time, and we’re excited for fans to be able to expand their love for the Bucks from the home court to the digital realm.”
NFTs are becoming increasingly popular in the sports world, with the NBA launching its Top Shot digital collectible platform. NBA Top Shot, stored within the Flow blockchain, allows fans around the globe to purchase packs consisting of digital tokens that commemorate specific NBA moments – almost like virtual trading cards. The MLB has done something similar with its “Candy” marketplace, as has the NFL with its “NFL All Day” platform.
Staying ahead of the curve
In May, Milwaukee Mayor Cavalier Johnson was among a group of co-sponsors who voiced support of a resolution recognizing the potential of blockchain technology to create unique opportunities for communities across America to grow their economies and create jobs.
Introduced by the U.S. Conference of Mayors – the largest national organization representing mayors of America’s largest cities – the resolution notes that blockchain has the potential to “provide tools for cities to innovate, to streamline operations, functions, and to better deliver public services and increased access to opportunity for businesses and families.”
However, it also notes that it is “increasingly clear that there needs to be direct and coherent guidelines for the testing, adoption, and use of technologies built on blockchains in a safe, transparent manner that protects consumers and businesses.”
Milwaukee and the region have notoriously fallen behind the coasts when it comes to implementing new and emerging technologies. Since a computer with internet access is all that’s needed to use blockchain technology, the commitment to explore and adopt Web3 technologies is dependent on a willingness to try.
“I don’t think that we’re falling behind,” Nameni said. “I think that there’s been a substantial amount of (Web3) activity. Our challenge really is ensuring that there are opportunities for the smaller companies to get networked and interact with the larger companies. The coasts sort of have that built in networking infrastructure. … We’re getting better. It’s not like we’ve arrived, but we’re certainly getting better.”
Marko Knezic, founder of Milwaukee crypto consulting firm Cream City Crypto and copywriter for San Francisco-based Unstoppable Domains, believes blockchain technology will continue to gain traction and momentum at an exponential rate until it’s everywhere. He said Web3 technologies are shaping up to be the biggest universal advancement in tech since the advent of the internet, but adoption at that scale takes time.
“The benefits are different for everyone. And they’re undeniable,” Knezic said. “I don’t believe that adopting blockchain technology is a matter of infrastructure so much as it is a matter of willingness to deploy new technology.”
He believes the region has a unique opportunity to be a leader in implementing Web3 technology. Even though southeastern Wisconsin has a strong manufacturing heritage, Knezic echoed Nameni’s sentiments that blockchain technology has several uses for improving the supply chain, which could be a common use, even for the region. However, it’s the core of how blockchain technology works and its decentralized form that Knezic believes makes blockchain an invaluable fixture.
“Decentralization is all about creating a more equitable world built on a free and open internet,” Knezic said. “This may sound a bit… grandiose, but having total ownership and control over our money, data, content and freedom to do everything else we do online without permission from a centralized authority is the root of blockchain, crypto and other derivative technology.”