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The Final Boss for web3?

Why Apple's power and position is pivotal for the future of the internet.

Web3 is the new hotness. It’s also the promise and potential to add a new layer to the internet. The missing layer. A native layer of ownership, value, and transactions. We didn't have this layer 20 years back. That's why we invented ads-driven business models. With the hoarding of user data that followed. Now, we’re onto something better.

For this next layer of the internet to grow, it needs more products and users. In fact, the next billion users.

Most "web3-people" agree that a key ingredient for mainstream adoption is better user experiences (UX). Most things are a little clunky in web3 now. Onboarding requires effort. For any consumer-facing product, a great user experience is everything. And for most, that means crafting great mobile experiences. Smartphones have become our main computing devices. Apps have become our primary windows to the internet.

For web3 to cross the chasm into mainstream adoption, it must face off with the king of the apps. The final boss. The Apple.

How does Apple plus web3 adoption fit together? Via the apps. It's all about the apps. Apple is the most powerful gatekeeper of app distribution. Succeeding with mobile apps today means building for iOS and distributing your app through the AppStore. Apple only allows that when you play by their rules and guidelines.

The iPhone market share is ≈50% in the US and 15% globally. You can't not build for iOS if you want to create a breakout app success.

The Not-so-good Alternative to Apps

Some developers (including the current batch of web3 products) build in-browser experiences to circumvent the AppStore and its rules. Users use Safari on their iPhones to access the product. The user experience of these browser-based apps is kinda clunky. There's friction. You can make work "okay," but it'll still suck a little.

That's by design. Apple wants it to suck. Just enough so that developers opt for native apps instead.

Before we get into any bashing of monopolistic tendencies, let's dole out some credit where credit is due:

Apple's AppStore ecosystem deserves a fair share of recognition. It's helped propel us to the current state of smartphones. Through Apple, apps became our primary interfaces to use the internet on the go. They employ quality control to ensure apps work as intended and are safe.

Apple saw the layer of the internet that was missing. Then single-handedly built that inside their own walled garden. Frictionless payments and interoperable identity are core barriers removed in the process. The user experience is pretty neat. You store your payment card with Apple, and they enable frictionless payments across all the apps.

Playing inside Apple's garden isn't free. As a developer, you have to obey the rules of the AppStore. The core rule is that most transactions with and in apps must use the payment rails of Apple.

This is the golden rule (or maybe the "diamond rule"?). In any case, it's a valuable rule. In fact, it's the kind that generates $70 billion of gross revenue per year. (Insert mind-blown emoji). Apple takes home a net of 15-30% of that through their fees.

I can think of 70 billion reasons for Apple to prevent web3 from happening.

Let's sum it up thus far:

To increase the adoption of web3 products, we need great mobile experiences distributed through the AppStore. Apple decides who gets that distribution – and who doesn't.

What Does Apple Think About web3?

So far, the "Apple web3 strategy" seems to repeat the "Apple web2 strategy":

Enforce the strict rules of the AppStore and force all transactions through their own payment rails to collect Apple tax.

An October 24, 2022 update to the AppStore guidelines states:

  • Revised 3.1.1: "Apps may not use their own mechanisms to unlock content or functionality, such as license keys, augmented reality markers, QR codes, cryptocurrencies and cryptocurrency wallets, etc."

  • Added to 3.1.1: "Apps may use in-app purchase to sell and sell services related to non-fungible tokens (NFTs), such as minting, listing, and transferring. Apps may allow users to view their own NFTs, provided that NFT ownership does not unlock features or functionality within the app. Apps may allow users to browse NFT collections owned by others, provided that the apps may not include buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase."

With this update, Apple is doing a few things:

  • Acknowledge NFTs as a "thing" (good)

  • Allow minting, buying, and selling NFTs (good)

  • But only if the above transactions use Apple's payment rails (bad)

  • Disallow token-gating inside apps (bad)

This ruling effectively stops most web3 projects dead in their tracks. The whole point of web3 is choice, open and accessible products with internet-native transactions through the blockchain. Apple is saying "no" to pretty much all of that.

And so, we find ourselves at an impasse: Web3 needs the app distribution network of Apple. Apple doesn't want (nor need?) the open ecosystem promise of web3.

Where Do We Go From Here?

Here are a few reflections and alternate paths forward:

  • Free to mint. Every NFT use case isn't hampered by this. There is a lot of potential in deploying free NFTs as connective tissue between a product/brand and its users. That's still possible.

  • Alternate devices. Developers can build and distribute Android apps, but the reach an Android alone isn't big enough.

  • Web3-native devices. Solana is releasing a feature phone and a complete mobile development kit. EthOS is an "Ethereum native" mobile operating system. Both projects are promising – but they're niche. Most people aren't going to side-load EthOS on their phones. They're caught in the web of iCloud and frictionless mobile computing. They need that blue iMessage bubble, you know.

  • Apple ships its own wallet. Apple could enable a very seamless wallet experience for users. But wouldn't that be them extending their walled garden into a pseudo-web3 territory? Doesn't feel like immense progress.

  • Open the gates! Let web3 apps into the AppStore, with their own payment rails. Third-party wallets are built with tight, OS-level integrations. This is the best scenario but also the least likely. Unless it's forced by:

  • Regulatory action. This is far from my expertise, so I dare not venture too deep into regulation. But, in my opinion, this might be the most feasible way to open up web3 adoption through mobile. We could get to a place (or maybe we're there already) where Apple's consumer-friendly walled garden becomes so powerful that it turns consumer-hostile. By way of limiting options for users.

All-in-all, the ecosystem that Apple's built over the years is really powerful. People like the blue iMessage bubbles. Share photos through iCloud. They keep their data in sync across phones, tablets, and watches.

As much as I'd want to see it happen, it's hard to picture the momentum of web3 building to the point where people leave all of that behind.

I'm still wrestling with the question of how Apple's power plays into how the web3 space evolves. It's a question that I'll continue to wrestle with it. It's sad if the future of web3 depends on Apple and/or regulators. Both actors represent the kind of concentrated power structures that web3 can break up and redistribute more fairly in its fullest form. It feels like a "letting the fox mind the henhouse" situation.

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