In simple English, this is about the structural hurdles potentially keeping web3 from growing at a much faster pace.

More importantly, these could be why web3 and crypto applications along with an open financial system may never be adopted.

If you are a degen, at this point you might be like:

Let me explain.

Cart before the horse simply means doing some process in reverse order. Specifically in reverse order of how it is supposed to happen or get done.

I believe we have 2 reasons why web3 growth is driven in reverse order. Particularly when compared to how the same scale and growth to 3 billion gamers and 4 billion social media users happened in web2:

In web2, most of the digital adoption happened through the iPhone moment. Putting smartphones out there and making them affordable with minimal adoption friction gave consumers a new world with a very user friendly easy to use experience.

Today, we spend most (53% on average) of our digital time on mobile rather than any other device. Mind you people have to spend half of their awake time on desktop because they are working (obviously this is not the case)

That is why making a website mobile compatible or making a mobile application and publishing them on app stores are so critical. Uber would not be a business, let alone a small company, today if it was not a mobile application.

A lot of mobile app publishers, particularly game publishers, have perfected the art of user acquisition over the years and built billion dollar businesses on top of it. A regular publisher might spend more than $100MM a year on user acquisition and not only recoup the amount but make 4-500 MM in revenue.

The user acquisition journey can be mapped out as below

In web2, marketing teams are able to track this whole funnel and optimize through experiments or A/B testing.

In web3, we have public and open access to everyone’s conversion data. What transaction happened on what product at what time of the day and where (which chain)?

This is powerful as this is the most important step in the whole acquisition funnel.

The problem is that we lack most of the other steps that come before conversion. As the blockchain is decoupled from web2 tech we are using, we are not able to see which Instagram account has which wallet or where this guy has seen an impression about the product. Where does he live? What does he do? What is his age? These are still questions waiting to be answered.

Hence the term, cart before the horse. We are starting with the most meaningful KPI but we are losing out on all the rest. As we are not able to measure the ones that lead to conversion, we are not able to scientifically optimize on user acquisition.

There is a reason why crypto is very popular in certain countries like Philippines, Turkey, Nigeria…

The populations have 1 or several of the below characteristics:

Normally payments systems in a financial system of a country requires an infrastructure to be set up, settlement systems and communication systems between regulatory, payment and banking entities.

With crypto payments, there is nothing to set up. Literally zero. If you can download a mobile application for a crypto wallet, you are set to transact, pay and receive. Domestic or international, no difference in experience and no difference in cost of transacting.

Obviously still full of innovation with all the fintech going on. Even more promising with regulatory support coming from open banking initiatives. However, if we were to look at the countries where a good financial system infrastructure and end user experience is fully functional, we can generally talk about Europe, USA, Japan and China. Very different than what we see below, isn’t it?

Now recall fintech since 2005. How did it come to be with Revolut and Stripe? They started out to solve problems apparent in USA startups or companies or European customers and users. However even back in 2005, USA and Europe had still better financial systems and applications compared to the likes Nigeria, Turkey or Philippines. Yet, fintech companies still set out to make things better and solve problems for these 1st world populations.

Then came open banking to 1st world.

And only after that (maybe even recently) is the open banking coming to the rest of the world.

Now look at crypto. 3rd world countries have a much more higher adoption rate relative to their 1st world counterparties:

So with fintech, the innovation was led top down, first happening in the 1st world and then spilling out to the rest of the world.

With crypto, we see the reverse order. First happening with 3rd world and we do not know if it will climb its way up to the 1st world.

Hence: cart before the horse.