Web3's decentralized nature has fostered composable, open architectures and protocols, spurring innovation but also creating the following challenges for projects seeking a sustainable competitive advantage:

šŸš§ Barriers to Entry: Composability and open protocols ease market entry, leading to a saturated competitive landscape and making differentiation a daunting task.

šŸ” Technology Replication: Most Web3 technology components are like lego bricks, readily available for any project to build & serve specific use-cases. This enables easy feature replication, causing service commoditisation and forcing competition on pricing (wherever applicable) or user experience.

šŸ„… Weakened Network Effects: Composability allows seamless integration between projects, undermining network effects and making user retention more difficult.

āž° Value Capture Dilemma: Open architectures hinder value capture, impeding projects' ability to generate sustainable profits and invest in growth.

A few ways Web3 projects could navigate these challenges would be through:

1ļøāƒ£ Cultivating strong developer ecosystems
2ļøāƒ£ Prioritizing user experience
3ļøāƒ£ Forming strategic partnerships, and
4ļøāƒ£ Focussing on community involvement and governance through aligning actions with long term incentives