Web3 Views – 1
There is a diversity of opinions on Web3. Here are a few:
First, let’s look at the problems with centralized platforms.
Centralized platforms follow a predictable life cycle. At first, they do everything they can to recruit users and third-party complements like creators, developers, and businesses.
They do this to strengthen their network effect. As platforms move up the adoption S-curve, their power over users and third parties steadily grows.
When they hit the top of the S-curve, their relationships with network participants change from positive-sum to zero-sum. To continue growing requires extracting data from users and competing with (former) partners.
Famous examples of this are Microsoft vs. Netscape, Google vs. Yelp, Facebook vs. Zynga, Twitter vs. its third-party clients, and Epic vs. Apple.
For third parties, the transition from cooperation to competition feels like a bait-and-switch. Over time, the best entrepreneurs, developers, and investors have learned to not build on top of centralized platforms. This has stifled innovation.
Now let’s talk about web3. In web3, ownership and control is decentralized. Users and builders can own pieces of internet services by owning tokens, both non-fungible (NFTs) and fungible.
Tokens give users property rights: the ability to own a piece of the internet.
…Tokens align network participants to work together toward a common goal — the growth of the network and the appreciation of the token.
This fixes the core problem of centralized networks, where the value is accumulated by one company, and the company ends up fighting its own users and partners.
Before web3, users and builders had to choose between the limited functionality of web1 or the corporate, centralized model of web2.
Web3 offers a new way that combines the best aspects of the previous eras. It’s very early in this movement and a great time to get involved.
I love the idealism of the Web3 vision, but we’ve been there before. During my career, we have gone through several cycles of decentralization and recentralization. The personal computer decentralized computing by providing a commodity PC architecture that anyone could build and that no one controlled. But Microsoft figured out how to recentralize the industry around a proprietary operating system. Open source software, the internet, and the World Wide Web broke the stranglehold of proprietary software with free software and open protocols, but within a few decades, Google, Amazon, and others had built huge new monopolies founded on big data.
Clayton Christensen generalized this pattern as the law of conservation of attractive profits: “When attractive profits disappear at one stage in the value chain because a product becomes modular and commoditized, the opportunity to earn attractive profits with proprietary products will usually emerge at an adjacent stage.”
Blockchain developers believe that this time they’ve found a structural answer to recentralization, but I tend to doubt it. An interesting question to ask is what the next locus for centralization and control might be. The rapid consolidation of bitcoin mining into a small number of hands by way of lower energy costs for computation indicates one kind of recentralization. There will be others.