Dialogue with Mysten Labs CEO: How to Build Web3 Products That Consumers Want?

Original Title: Build Beyond: The Secret to Great Web3 Products

Author: Sui Foundation

Compiled by: Lu Tian, CoinTime

Recently, we had the privilege of sitting down with Evan Cheng, co-founder and CEO of Mysten Labs, to discuss the value of Web3 technology for consumers, how to better interpret this technology, and its impact on product development.

Q: You mentioned that Web3 is a revolution of ownership. How will this new technology change consumer behavior? Can you elaborate on this point?

A: This question ultimately revolves around who controls the assets we create. In fact, every action we take on the internet generates something of value. Looking back at what we call the Web2 era, many platforms developed based on distributing consumer content, whether that content was consciously created or unconsciously generated.

Take Twitter as an example. A tweet itself is content, and interpersonal relationships can actually be leveraged as an asset. Therefore, I believe most consumers are not even aware that they possess valuable assets, which have essentially been monetized.

These platforms are essentially a two-sided market, right? They act as intermediaries between consumers and content creators. There’s nothing wrong with that; we do need a platform or market. In fact, the internet should help achieve this, allowing everyone to effectively create a market. This means a fair competitive environment where you don’t have to be a big player to have a stage.

But the reality is that centralization and the associated network effects give these platforms immense control and influence. They have become the distributors of content, reaping substantial profits from this interaction. This is unfair. It is no longer a collaborative win-win between creators, consumers, platforms, or sellers. Instead, the sellers control everything. We see this repeatedly across various types of businesses. Intermediaries always hold the power, and they are the biggest beneficiaries. You cannot change this unless people realize this phenomenon exists. Even with awareness, you will face a tough struggle. We see this issue with Ticketmaster, and we see similar problems in the NFT market because they believe paying royalties is not in their interest.

Returning to your question, if I own and can control my assets, decide how they are used, who can use them, and how I can transfer or share ownership, then I can reduce my reliance on intermediaries and platforms. This will fundamentally change the status quo and shift power. Thus, in Web3, everything revolves around assets, ownership, and the distribution of ownership, because you want to transfer the operations of your assets and ownership to a piece of code, like a smart contract.

Smart contracts are neutral; they have no emotions. They can be designed for profit, but once designed to be transparent and immutable, you don’t have to worry about them becoming malicious actors.

Q: Can you share some examples of malicious actors and how Web3 can improve this situation?

A: You can find actors abusing their intermediary positions in various fields. Think of platforms like Instagram and YouTube; while they operate well globally, similar issues exist in other areas, such as supply chains, secure assets, and even real estate. Rent-seeking behavior has always been present, with intermediaries always trying to extract value from transactions.

Take home buying as an example. You might feel confused by the numerous documents you sign and wonder, "Why do I have to pay fees to the title company or other entities?" Consider structured financing or various supply chains, from growing coffee beans to finally making coffee—how many intermediaries are extracting value along the way? This is clearly unreasonable.

Therefore, it makes sense for product builders and creators to focus on content and goods. They not only want to reduce intermediaries in transfers and transactions but also want to build direct relationships with users. However, current profits are concentrated at the top of the supply chain. Today, Apple essentially taxes all actions on the internet because they take a 30% cut from apps and restrict what they can do. In turn, these apps ultimately pass this tax onto others.

The only way to break this cycle is to control the assets themselves and establish a relationship between producers and consumers that does not rely on intermediaries and is unaffected by policy changes. This is the value of Web3.

When I realized that information arbitrage occupies a large part of the banking industry, I recognized that the transparency of smart contracts is an advantage. This way, the space for intermediaries or centralized participants will be greatly reduced.

Trust arbitrage is another good example. People trust a platform, which may be based on its brand, policies, regulations, or compliance. As an intermediary, you provide trust and take a cut. However, if you transfer that trust to software managed by multiple parties, trust will be decentralized, fundamentally changing this dynamic.

Proponents of Web3 often mention the vision of attracting "the next billion users." The media is also eagerly anticipating Web3 products that truly achieve mass adoption. So, what should we do to achieve this goal?

Looking back over the past decade, many have made money by packaging technologies that do not actually solve problems. Therefore, to attract everyday users, the key is to provide a better new product experience that allows them to truly understand the advantages of decentralization and better control their assets, all presented in a way they can easily grasp.

Discussing decentralization may be difficult for the average person to understand, but we can talk about the advantage of no longer needing to trust centralized entities. We can discuss trusting a piece of code controlled by many entities rather than a single entity. Education is certainly important, but product experience is even more critical. Because without truly experiencing the benefits, our arguments are meaningless.

99% of people don’t even know the internet is centralized, nor do they understand what that means for them. Therefore, we must truly change the status quo. Many people focus on UI and UX, and it is indeed necessary to consider reducing friction points. However, what is more critical is to show consumers the actual benefits. This aligns with the point I mentioned earlier. If we can show consumers the real benefits of not being taxed by intermediaries, their behavior will change. Consumers will actively seek such product experiences. This is the way to spark development momentum because, conceptually, this is indeed a stark contrast for most people.

Q: Besides removing intermediaries and giving users more access and control over their data and assets, do you think there are other values that ordinary consumers are not aware of?

A: Aside from removing intermediaries and having more access and control over data and assets, ordinary consumers may not yet realize another value of decentralized technology: trust. Nowadays, people are generally skeptical about developments in media, technology, social media, and even government trust is declining. I see this as a huge opportunity. Because when software is written in a transparent and reliable way, people can trust the code. If this is achieved, it will fundamentally change the game. When you trust the software you interact with, behavior patterns will change, leading to more convenience.

Currently, you have to trust global companies like Google, Apple, and Facebook to log into various services. However, these companies can be hacked and face various issues. In contrast, if you can use a piece of code as a gateway to access services that require authentication, and that code is not hackable and does not store or transmit your sensitive information, things will undergo a tremendous transformation.

Q: Decentralized technology offers what people want; they just don’t realize they can have it. How do you think the industry needs to communicate this value?

A: Well, my answer might be controversial. I think many industries don’t understand it. People understand it, but they can’t express it well.

In communicating the value of decentralized technology, the industry needs to adopt a clearer strategy. While decentralized technology can meet people’s needs, many have not yet realized that they can achieve these needs through this technology.

In fact, many people within the industry know very little about this. Although some may have an intuition about it, they find it difficult to convey this value to the masses. The industry has not done a good job of explaining the value of Web3. Typically, people only talk about the concept of "read, write, own," but few can clearly explain the true meaning of "owning."

Ordinary people may wonder, "Why should I own these things? I’m happy to give my photos to Instagram, my videos to YouTube, and my efforts in games to the game companies." They need to realize the value of ownership.

Moreover, there are many bad actors in the field, including scammers and those trying to get rich quickly. The number of these people seems to far exceed that of truly excellent practitioners. This has led to a chaotic and concerning environment.

Indeed, most people have not been educated enough to distinguish between trusting the black-box code of large tech companies like Google and the code of smart contracts in decentralized technology. However, the design of decentralized technology makes the code transparent, and for the value of smart contracts, personal information is often less important than the value to centralized tech companies.

Yes, this is important. These codes are transparent, not only trustworthy but also typically do not retain users' assets. Decentralized technology aims to provide convenience, rather than requiring users to provide information, data, photos, videos, etc., and promising not to abuse it. While most companies do not abuse this data, they do extract value from it.

When these companies profit from user data, they retain that data because it may have high value.

People may not realize that the side effects of this situation are worse. When these companies have vast amounts of data, they may use that data for anti-competitive behavior, pushing out competitors. This way, their network effects become stronger, ensuring that competitors cannot pose a threat to them. As a result, consumers may have to pay higher fees or receive less in return from these platforms. Apple is employing this strategy.

Q: Recently, I watched your talk for the Digital Building Lab. You emphasized in your talk that when designing L1, the first focus should be on the needs of developers, the problems they want to solve, and the consumer experiences they want to create, before starting development. How can this philosophy be applied to how application developers approach their products when they start using Web3?

A: In the Web3 space, many people view complexity as a solution, focusing only on solving a single problem. For example, much of the content provided by aggregators, L2s, and classifications is addressing technical issues. This is actually the wrong direction.

When I mention developers, I refer to those building products and services for consumers and businesses. They want to abstract complexity and turn their product or service ideas into runnable code. Therefore, it is not appropriate to sell them on this complexity.

Product developers should not make the same mistake when targeting consumers by pushing complexity onto them. Currently, many Web3 products simply add complexity that consumers should not have to deal with. Consumers have to consider paying gas fees, wallet experiences, and how to extract value from assets. These issues should not exist. Many Web3 products currently focus only on how to profit from the system.

For me, developers must focus on behavior change. What do they want to achieve? Many developers have already keenly realized the problems they want to solve. They care about "how to acquire customers? How to interact with customers?" Now, they have a platform to build direct relationships with potential users. Therefore, they need to figure out "how to use this platform? How to attract users? How to get their attention first? Do they need to give up something to spark their interest? Should they sell products to them and promise future returns? Once they have their attention, how to convert them into users?" These questions are important aspects that developers need to focus on regarding their relationship with consumers when building products.

Q: Many people talk about the user experience (UX) issues in Web3. Do you agree with this statement?

A: I don’t fully agree. Poor user experience does exist, such as token management, login, or wallet issues, but these are just surface-level problems. Solving these issues does not fundamentally address the problems of Web3; at best, it can only make Web3 products comparable to Web2 products.

Take Celsius and other lending applications as an example; they address user experience issues by reverting to centralization. Users put funds into the application, and then the application deploys those funds into yield farming activities. After that, they operate like lending companies in the centralized world. This is not the right way to solve the problem. You are not actually building a differentiated product or solving the centralization issue. This will lead back to the same fundamental problems.

Most people do not have a sufficient understanding of the real needs of consumers and developers. The economic losses caused by changes in product policies are underestimated in their impact on developers and consumers. Therefore, people believe that poor user experience is a barrier to adoption. However, even if your application has a perfect user experience, it may still fail to solve actual problems for consumers.

Q: Do you have any thoughts on advice for building great products in Web3?

A: I think developers need to communicate with consumers and understand their pain points. This does require a change in mindset. They need to think about how to transform those centralized, controllable, trust-providing, and activity-promoting elements into a process that emphasizes coordination. Ultimately, this is the most challenging part and the part that has yet to be validated and realized.