welcome to web2.5

Executive Summary

What is web2.5?

The everyday retail adoption of blockchain and cryptocurrency has skyrocketed since early 2021, due in particular to the popularity of NFTs. Large traditional brands — all of which are rooted in “web2” models of growth, retention, and engagement — have spent the past year experimenting with how to adopt web3 technology. Their goal has been to facilitate direct audience engagement, foster community growth, incentivize participation through ownership, and monetize valuable brand IP.

The reality of legal ambiguity, user experience, and true decentralization, however, hinders complete web3 activation by large companies. Still, a number of brands have proven remarkably flexible and earnest in their pursuit of web3, navigating the many challenges while finding ways to adopt decentralized technology within tried-and-true web2 parameters. They have combined the best of web3 (novel technologies, digital IP, composability, and strong communities), with the proven web2 models of development, growth, and promotion.

This midway point is what we call web2.5. This is a set of solutions that allows users to navigate web2 infrastructure using their web3 assets. Centralized exchanges, front-end NFT marketplaces, and custodial wallets all provide clear structural examples of this midway point. When done well, web2.5 has proven powerful at allowing companies to enhance their brand, enter new markets, engage their community, explore new innovations, and reach the next generation of users. 

Web2.5: Looking Back

Since early 2021, a few defining features of web2.5 have emerged from brands:

• Bridging the Physical and Digital. Brands have a keen eye on how to use NFTs to allow customers to redeem physical goods and collectibles.
• Blue-chip PFPs. The leading NFT projects can be categorized as “profile pictures” (pfps). Traditional brands have been eager to partner with these grassroots projects to maximize community participation.‍
• Rights & Licensing. Crypto-native NFT projects have upended what the “best” rights and licensing is for brands.

Web2.5: Looking Forward

With over a year of web2.5 behind us, we can anticipate some of the trends to define the next wave of brand adoption:

• Stronger Web2.5 Solutions. Web2.5 isn’t a blip on the radar, it is a set of solutions that will grow stronger, more identifiable, and more profitable as brands continue to enter the space.
• Beyond PFPs. To stay ahead of the curve, NFT activations will need to offer users more than art and ownership. Nuanced utility will be key.
• “X-to-Earn.” Brands need to offer many ways to join NFT communities. Play-to-Earn, Attend-to-Earn, and Listen-to-Earn are just a few examples of engagement models that will be built out in the near term.