I am more optimistic about the future of web3 commerce. Last year I wrote an article “Challenges and The Future of Web3 Commerce”, where I grumpily outlined the current issues of web3 commerce at the time: unimportant fees, bad ux, bad taste, bad etiquette. Feel free to read it here. 

Nearly 8 months later (and with the Coinbase x Shopify integration) I’m here to provide more thoughts on the matter, as someone who has benefited from building a native web3 consumer packaged goods brand, Humankind Candles. Before becoming a candlemaking wizard, I was doing ops at YC and SV-Angel backed startups. 

I also noticed that there was a lack of information around commerce and web3, as I started to get a few new paragraph subscribers, despite not being an active writer. So I felt it was important for me to share my thoughts, if people had organically searched and liked my writing. 

I’m going to go over all my previous assertions about challenges and tell you why I was right, or wrong. 

Fees Don’t Matter to Merchants 

Payment structure I believe is about to fully mature. People no longer think about gas fees, and now even startups comp gas fees for their customers. The pitch of “lower fees” still has not been proven to attract merchants, because that would require their customers to pay in crypto. With the new Coinbase card, and also Xeno, (apparently) tap to pay is right around the corner.

I was wrong about people not caring about lower fees. Although it’s true that most merchants have already calculated their margins with the Visa/Mastercard 2.5%, merchants are struggling for cash, considering the recent tariffs. Although my end stage product - candles - has not changed, and neither my customers nor I pay duties on them, my raw materials have been impacted by the tariffs. I’ve had to change raw materials suppliers and slightly raise my prices, which is inconvenient and takes up my time.  I have a few friends in similar positions with 7fig or 8fig CPG brands, and they’ve been squeezed by tariffs, so the margin would probably matter to them more right now. During my 1 on 1 conversations, especially with larger brands, a common thread is finding the best CPG-startup-bank with the lowest fx fees. 

I distinguished the differences between fees in web2 vs. web3 fees, with the assertion that the fee was visible on the merchant side and invisible to the customer. Now, because gas fees are so low, they’ve become almost negligible to both parties. I’m sure that larger companies are comping maybe tens of thousands dollars in gas fees, but the comparison can be made to paying for AWS credits or any other software subscription a successful startup may need. 

Bad UX

Thank god! It has gotten a lot better. And unfortunately, many of the startups remixing payments for merchants have died. Last year I had maybe spoken to 6-7 startups all trying to build some version of Shopify for crypto, Stripe for crypto etc, etc. I don’t think those startups died because Shopify or Stripe came out with their product. They died because merchants did not have the urgency to challenge the status quo, or seek extra cash laying around in reducing their fees. But now the time has come for that, but they have already gone. I think some of them would’ve survived if they had just used the Shopify API to their advantage. And, we are so close to reaching web2 payments parity with Apple Pay. What I thought would take years has only taken a few months. I’m glad the big players see what I have been seeing. Everything has gotten better and I am much happier. 

Here is the list of ideas that I think have died and why they’ve died:

• Creating a whole different website/re-listing merchants products. Merchants don’t have time to manage or update two stores regularly. Again, stressing the lack of Shopify API usage in my original article. 

• Creating a checkout button which can be hard coded into the Shopify website. Breaks the terms of service as checkout hijacking. 

• Using multiple addresses as a way to split revenue amongst owners. Businesses typically only have one or two bank accounts.. I felt like this solution came from the DAO era and have slowly begun to die out. 

• NFTs associated with physical products. I tried this early on at Humankind but no one really cared about the art because it’s impossible to tie speculation to the NFT and the physical product, so it makes the NFT worthless. The inverse is true, take the Christmas time Pudgy Penguins air drop, where people bought a ton of those plushies just for the token, and then donated the rest. There can only be one value proposition, you speculate on the token/NFT or the value is in the product. 

This, compiled with what seemed like a market downturn over the past few months, and the lack of merchant growth in the crypto space, led to these startups dying. There are a few more complicated ones I’ve been pitched that I no longer remember. 

Coinbase x Shopify

Now, the default option is to use the Coinbase x Shopify integration. Although it’s not available worldwide yet, or even in every state (it is available in most states by the way), it’s a great step forward. Merchants at this point do not have to “pick” a web3 processor, the groundwork for accepting web3 payments already exists. 

At the time of starting this article, Base Pay had not come out yet. Since I took a break from writing this, and came back, Base Pay has now been connected to the Shopify API, so essentially, addresses are relatively attached to onchain identity now. Again, not in all states or countries. 

Anonymity and Security

About anonymity: after getting more orders from more anonymous people, they are diligent to send their packages to a PO box/offices with their corporation attached, and potentially initials. I’m curious to see how much anonymity will play into this. I’m relieved that no one invented ZK proofs for shipping companies, because my friends always used to joke about this. Now I've come across a few products like Payy who can apparently transfer or obscure transactions through their credit card. They recently subtweeted Base Pay, saying that merchants would knock out their kneecaps for a $5 transaction, and many folks underneath agreed with the founder. 

As a merchant, but also someone in crypto, it would not take a transaction to figure out how much money you have. People have their ENS’ out in public, there are tools like Zapper.xyz and Interface that can connect multiple wallets to see peoples’ total net worth and transactions. Even the scummiest web2 black hat merchants care more about scamming people at scale (doing transactions) and just not sending the product. Why kill someone for $100,000 when you can scam 20,0000 airdrop farmers for $5 or whatever. There’s also my ICP, which is typically middle-upper class folk, who can afford a $100 candle. The people that spend at a merchant are typically all financially in line with what the merchant is offering. All that to say, most merchants don’t care about how much you have in your bank account, or crypto wallet. They probably already have an idea based on their product they're selling. Yes there’s edge cases and yes I’ll probably be proven wrong with some new novel elaborate scam but if these crypto payment products are for the merchant masses, the majority of merchants are honest people trying to make a living. Customers who are super cagey about their money rich or not always have separate bank accounts/wallets, so I do feel this is a dead argument. 

Bad Etiquette and Bad Taste

I was just grumpy that day and felt like complaining about poor work etiquette and bad taste. I regret writing that because it didn’t add any value to the article.

Looking Beyond

Now, I want to chat again about Greg Isenberg’s points in his newsletter, the one I referenced in my earlier article.

1. “Human support is the new luxury. Getting to talk to a real person will feel like walking into a store and them handing you a perrier. Brands will use human customer service as a flex.” What I did not expect is for AI to be so good at customer service. But I still think there’s a lot of value in human service, even if it’s as good. In the majority of cases the AI works fine, but of course there’s CX edge cases in every business. My values around Humankind have also solidified this year, because I believe I can win just through great customer service. I was reading the book “Unreasonable Hospitality”, by Will Guidara, and ultimately people just want to feel cared for when they buy stuff.

2. “Community will trump discounts.. Belonging matters more than saving a few bucks”. Recently a new app web3 TYB has come out, and I like the point system, but I find the brands a little too corporate in the sense that I don’t think they’re actually listening to customers. Of course the people who have joined are super fans, so maybe they’ll take anything the brand gives them. I just sense there’s a missing part to the community and I wonder what it is. I look forward to seeing more from them. 

3. “Customers will become co-creators”. Maybe this is the part where I’m missing from the TYB app.. I don’t sense that customers are co-creators yet. 

4. “Customers will be the new product curators”. Yes, and no. After making candles for an entire trip around the sun, customers are very good at suggesting what they are familiar with, but not quite good at predicting what they’ll like. I as a founder have to guess, based on manufacturing trends, scent trends, and then throw in my own little spin of what would delight my customers. Again, Pistachio Cream and Japanese Milk Bread is my hit product, and I don’t think any customer or AI could’ve come up with that combo. 

5. “Buy with friends’ will explode”. Haven’t seen a product solely focused on this value proposition yet but it’ll come. 

My end point is the same as it was last year: Web3 commerce products need to focus on how to make customer relationships and feedback loops better for merchants. Then they need to focus on helping merchants (who already have existing good taste products), retain customers.