The Promise of Web3
Tomorrow's web will be one in which the users are the owners
Welcome back, friends! Today I'd like to discuss the 3 different phases of the web and the features of web3 (or crypto) that make it so exciting. This week's article was inspired by a question from a friend who wanted to learn more about web3.
I'll start with a brief history of web1 and web2 and then get into where we are today, the transition to web3.
Web1 was the first version of our Internet. It's known as a read-only era of the Internet because you mostly used it to read data that others had posted!
Websites in the web1 era were basically static sites filled mostly with text. There wasn't much you could do on these sites other than browse and read them! Everything was pretty much a mess; there were no standards in place for templating or accessibility.
An example of a web1 website would be CNN way back in 2001. It looked something like this: https://web.archive.org/web/20000815052826/http://www.cnn.com/
The next iteration of the Internet came with web2, known as the read-write era of the Internet. In web2, the Internet became interactive at scale. Users could read posts and leave comments, create blogs, and use social media networks like Myspace and Facebook. In fact, users today create most of the content on the Internet. Thanks to the iPhone, web2 also saw the rise of the mobile internet.
With web2 we saw the rise of the tech giants. Companies like Google and Facebook sprung up to provide valuable digital services for people and businesses.
Many times, these companies operated off of ad-based models where sites were free for users while the company made its money by selling ads targeting its users.
These giants generated (and continue to generate) enormous profits. As their marginal cost to produce was next to nothing, most incremental revenues flowed straight through to their profits. (It costs almost nothing for Google to display another ad to a user). Though these platforms needed eyeballs to make their websites valuable (see how much more valuable Google is than Yahoo!?), companies didn't give much of this economic value back to their users. Instead, profit-maximization and value-extraction was the name of the game. As we'll see in web3, profit-maximization and value-extraction are bugs of web2 and will have a limited lifespan.
Web3 (and crypto)
A lot of people use web3 as a term that's synonymous with crypto. I tend to think that web3 is a better term for a few reasons. First, it helps people shed the idea that crypto is all about finding the next "currency." Instead, it's really about building the next world-changing applications using programmable money (like Ethereum). Second, it comes without all the baggage of the word crypto. Most people are highly suspicious the second you say the word crypto, and to be honest I don't always blame them. There are a lot of scammers in crypto; new technology usually attracts schemers and fraudsters. But web3 also implies that we're entering a new phase of the Internet, which is something that everyone has used and trusts, at least to a degree.
So what is web3?
If web1 was about reading and web2 was about reading and writing, web3 is about reading, writing, and owning. The biggest change from today's Internet to the Internet of the future is that tomorrow's web will be one in which the users are the owners. We're already seeing this play out, with ownership being given to users through governance tokens.
Another way to think about this shift is by looking at who captures the value created by the web. In web2, an enormous slice of the value created is captured by our tech giants: Apple, Amazon, Facebook, Google, and others. These companies create platforms, attract users, and then sell those users' data in order to turn a profit. That's not to say I think these companies are unilaterally evil or bad for the world; they've created an enormous amount of value for society and should be rewarded for it. But that also doesn't mean that there's not a better way of doing things.
In web3, a much smaller slice of the pie will go to big tech companies or protocols. Instead, more of the pie will go to users of decentralized applications (either in the form of ownership, lower fees, or more privacy).
How is this possible? There's a unique feature of web3 that enables this dynamic. All the code is open-source.
Unlike Google or Apple's code, code for decentralized applications is published straight to the blockchain and is freely accessible by all. This means that if you're treating your users poorly or extracting too much value, your code will be taken and relaunched by a new company or DAO that's more user- or developer-friendly.
Apple's 30% commissions on its App Store simply wouldn't work in web3; someone would take the code and re-launch the store with a lower commission (as they should!).
Rather than product and code being a moat, like it is in web2, community is the primary moat in web3. Having a strong and vibrant community of users is the best moat that one can build in web3, since the underlying code of the product is more easily accessible. This is not to say that product isn't important; product is very important, it's just that it's not the primary moat that people will use to defend their protocol.
One of the best examples of this new dynamic in web3 took place with the launch of Sushiswap. A team of anonymous users at Sushiswap forked the code of the most popular decentralized exchange, Uniswap, and used it to launch their own exchange. In response to Sushiswap's fork, Uniswap gave governance tokens to anyone who had used its platform in the past (in order to keep the user base it had built). The users of the protocol became its owners.
What does Web3 Uniquely Enable?
Because we're in such early days for web3, we haven't really explored all of its possibilities. I love this analogy from Chris Dixon:
Let me unpack that a little bit. When the iPhone was first launched, we didn't really know what digital-first apps looked like. Instead, we tried to port our existing world onto our phones. Notebook apps looked like physical notebooks, stopwatch apps looked like physical stopwatches, and so on (this is called skeuomorphic design).
Slowly, as Chris points out, we started to create digitally native apps (and designs). We start out by thinking that a notebook app should look like a notebook. Over time, we realize that it’s actually better to embrace the unique features of the technology rather than cling onto past designs.
The same trend will happen in web3. Today, most applications are simply web2 apps ported onto the blockchain. They're very cool but most aren't the most exciting apps that will be built on-chain. Over time, we're going to build apps that are web3-native, just like we built apps that were web2-native.
It's important to think about the applications that web3 (and technological advances more broadly) uniquely enables. When Jeff Bezos started Amazon, he saw that the Internet uniquely enabled him to offer customers the biggest library of books on the planet.
At some level, we can't even imagine new innovations that web3 will bring. No one imagined the applications that we'd be able to create with web2, nor could they fathom how far-reaching their impacts would be.
Just like web2 saw the shift from desktop to mobile, I think that web3 could see the shift from mobile to AR/VR. This is part of what's known as the metaverse thesis (in short, that an increasing proportion of our lives will be spent online, possibly in the form of VR). Web3 is well suited for the metaverse. As we spend more and more time online, we need to be sure that our surroundings are accurate. We don't want a single entity like Facebook or Google to control our surroundings! Instead, we want to have full ownership over the metaverse so that we can prevent companies from having too much power over our lives.
Great article on the promise of Web3! It's exciting to see how this technology is poised to transform the way we interact with the internet, allowing for greater decentralization, transparency, and control over our digital lives. The potential for Web3 to enable new forms of social and economic organization, as well as drive innovation in areas like gaming, art, and finance, is truly remarkable. I can't wait to see what the future holds for Web3 and how it will shape the digital landscape for years to come.
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