🎯 Week 8 - Web 3 basics for Product Managers
Quote
Everything will be tokenized and connected by a blockchain one day. – Fred Ehrsam
💯 Framework // Concept // Mental Model
A comprehensive guide to understanding crypto and blockchain for product managers
The third generation of the internet, or Web 3, is being built on a new set of technologies that have the potential to change the way we use the internet. With Web 3, we will have a more secure, private, and decentralized internet that gives us more control over our data.
There are many different aspects to Web 3, but some of the most important include:
Decentralized applications (Dapps): These are apps that are built on a decentralized network, meaning they are not controlled by any single entity.
Blockchain: This is a distributed database that allows for secure, transparent, and tamper-proof transactions.
Cryptocurrencies: These are digital assets that use cryptography to secure transactions and to control the creation of new units.
Unless you’ve been living under a rock for the past few years, chances are you’ve heard of Bitcoin, Ethereum, and other cryptocurrencies. With the prices of Bitcoin and Ethereum reaching all-time highs in late 2017, it’s no surprise that crypto and blockchain have become hot topics in the product management world.
But what exactly are crypto and blockchain, and what do they mean for product managers? In this article, I will provide a comprehensive guide to understanding crypto and blockchain for product managers. We’ll cover everything from the basics of each technology to its potential applications in the product management world.
Introduction: What is cryptocurrency?
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
The essential pieces of “cryptocurrencies” are blockchain technologies, which ensure the integrity and reliability of these assets: crypto transactions need to be recorded and verified on a decentralized ledger maintained by someone else besides the original parties to the transaction. Furthermore, cryptocurrencies often rely on encryption technologies to protect these transactions.
How Blockchain Technology is Used in Cryptocurrencies
Blockchain technology is the backbone of cryptocurrencies. A blockchain is a digital ledger of all cryptocurrency transactions. It is constantly growing as "completed" blocks are added to it with a new set of recordings. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. Bitcoin nodes use the blockchain to differentiate legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.
Bitcoin: The first and most famous cryptocurrency
Bitcoin was the first cryptocurrency, and it remains the most famous and widely used today. Bitcoin is decentralized, meaning it is not subject to government or financial institution control. Transactions are recorded on a distributed public ledger called a blockchain. Bitcoin is pseudonymous, meaning that transactions are not linked to real-world identities.
Ethereum: Cryptocurrency with a twist
Ethereum is like Bitcoin in that it is a decentralized cryptocurrency, but it has a twist. While Bitcoin is mainly used as a currency, Ethereum is used as a platform for running smart contracts. This means that Ethereum has a lot more potential uses than Bitcoin. For example, Ethereum can be used to create decentralized applications, create smart contracts, and more.
Layers 0, 1 and 2
In the world of cryptocurrency, there are three main types of protocol: layer 1, layer 2, and layer 0. Each layer has its purpose and function, and all three are necessary for the ecosystem to work properly.
Layer 1 protocols are the foundation of the system and are responsible for the security and integrity of the network. Bitcoin, Ethereum, and Litecoin are all examples of layer 1 protocols.
Layer 2 protocols are built on top of layer 1 and are responsible for scaling and enabling new features and functionality. polygon and Plasma are examples of layer 2 protocols.
Layer 0 protocols are the application layer and are where users interact with the system. Polkadot and wallets are examples of layer 0 protocols.
What Product Managers Need to Know about Crypto
The Art of Web3 Product Management
Web3 product management may not look different on the surface, but it still has its quirks that affect the product management function. PMs are expected to work cross-functionally, improve products to meet user needs, and drive business outcomes; however, Web3 has its own unique aspects. Product management plays a reduced role in the early stages and Most crypto projects can do without a PM in the early phase.
At present, the main priorities are designing crypto-economic incentives, fostering online communities, and developing core project infrastructure—roles in which (PMs) do not play a significant part. The requirement for a PM only arises when the project has attained a sizable user base and wants to consolidate its market position. This is when factors such as a product roadmap become crucial. The startup may also want to launch additional projects, which would be challenging for developers to coordinate. A PM could be brought in at this stage to provide the required coordination for a project and ensure that objectives are met.
Execution over Mission and Vision
PMs at Web2 companies are used to focusing on long-term strategy and vision for products. While taking the long view is great, Web3 demands focusing on rapid execution ahead of planning and strategizing. In other words, “speed of iteration beats the quality of iteration.”
In a traditional company, you might be asked to develop a product vision statement. The chances that you’ll do the same in Web3, especially if working with a crypto startup, are low.
In a Web3 context, a product vision is mostly contained in the project’s white paper, usually written by developers with technical knowledge of the protocol—not a product manager.
As a Web3 PM, you’ll likely need to prioritize building and marketing products and adapting to ever-changing market conditions. The Web3 industry is too competitive (for reasons explained later) for PMs to spend time on extensive research, planning, or brainstorming product strategies.
Web3 PMs are more generalists
Big Tech corporations often subdivide the product management position into smaller categories to promote productivity. Therefore, daily responsibilities such as user research, UI/UX design, QA testing, and product marketing are generally carried out by separate individuals.
Web3 startups are frequently composed of small teams, so product managers may have to fulfill several roles. The average Web3 PM may, on a good day:
Analyze user sentiment by scanning crypto communities on Discord, Reddit, and Twitter.
Coordinate smart contract audits.
Conduct product/industry research with Defi Pulse, Dune, Nansen, and other on-chain analytics tools.
Work with engineers to create effective crypto-economic incentives.
In a typical corporate organization, these roles would be divided. For example, smart contract audits could come under the QA Manager’s responsibilities, while analyzing user sentiment could be assigned to the User Researcher.
Competitive advantage is low
In the past, Big Tech companies conquered various markets by hoarding customer data, hoarding intellectual property (IP), vendor lock-in, and high switching costs. That’s why a few mega companies now effectively control large swathes of the market.
Web3 is a different story—there are few, if any, competitive advantages for companies. This is due to several reasons:
Data aggregation: Companies like Facebook and Google built monopolies by storing and monetizing user data. Product managers also rely on user data to make decisions and inform product development strategies.
In Web3, corporate control of user data is much harder to achieve. Blockchain technology focuses on decentralization and user anonymity. This means data-tracking methods like cookies or Google Analytics are no longer options.
Public analytics: Although user data is, for the most part, unavailable, it is possible to get performance data for almost any project. If competitors need to track your Web3 company’s progress, they can simply check publicly available metrics, such as:
Token price patterns
Total Locked Value (TVL)
Transaction volume
Token holders
Without any data moats, building an edge is harder. Of course, the upside is that you can have user data from other projects or an entire industry at your fingertips.
Low IP protection
Web3 was built on open-source ideals and prizes the idea of “technology as a public good.” As a result, software for Web3 is in the public domain, where it can be freely used, duplicated, or even modified.
The implication is that building a better product is hardly enough to guarantee success. Anyone can simply fork your project and compete from a product standpoint from day one.
For example, one of the most-used Defi protocols today, SushiSwap, started life as a Uniswap copycat. Not only did SushiSwap’s creators rely heavily on Uniswap’s software, but they also (openly) lured users away from Uniswap. If that sounds crazy, then you’re just starting to understand what Web3 is like.
Understanding the Risks and Opportunities of Crypto for Product Managers
Cryptocurrency and blockchain technology are often lauded for their potential to revolutionize the way we interact with the digital world. For product managers, it is important to understand both the risks and opportunities associated with these technologies.
On the one hand, crypto and blockchain have the potential to make many existing products and services obsolete. On the other hand, they also present a unique opportunity to create entirely new product categories and business models.
As a product manager, it is important to stay up to date on the latest developments in crypto and blockchain. By doing so, you will be better equipped to make informed decisions about whether and how to incorporate these technologies into the products you work on.
Summary: What should product managers know about cryptocurrency?
As we have seen, the key to staying ahead of the curve in a rapidly changing industry is to always be learning. Of course, not every trend will be relevant to your business, but it's important to be aware of what's out there so you can make informed decisions about which technologies to adopt and how to best use them.
By staying ahead of the curve, you'll be able to keep your business ahead of the competition and position yourself for continued success in the years to come.
Source
https://www.departmentofproduct.com/blog/web3-for-product-managers-a-guide-for-the-crypto-curious/
📚 Book
Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World
🎧 Podcast
😎 Meme
I spend a lot of time researching on topics to give you the best content, If you like my work please like and share it with others. If you have any feedback for me or want me to write on other topics please leave a comment below. Thanks for your continued support.