The Business Model of the Web
The saying goes “if you’re not paying for the service, you’re the product.” That idea has come into harsh focus in the past couple of years as it’s come to light how our data is bought, sold and weaponized against us from services like Facebook.
The current model, in reductive terms, is to grow your database of active users, extract as much data as you can from them, and sell that data in the form of advertising, or something much more nefarious.
Through our desire to connect with friends, find new affinity groups and answer math questions wrong on LinkedIn, we have helped a handful of companies to grow to the size of small countries, seemingly impervious to the law.
Much of the ethos of web3 is about taking that power away from one central figure, and distributing it among the users of the platform. Web3 comes with ownership, which comes with the right to governance and decision-making. In short, if decentralized Twitter wants an edit button, all they have to do is vote on it.
Would a decentralized Facebook be perfect? Almost certainly not, but the point is that how it operated would be decided by the users, and not by one person wielding a trillion-dollar weapon of propaganda.
The Core Values of the Open Web
The values of the web3 movement are far more important than the technology behind it. Here are a few that I’ll try to break down into a few paragraphs:
To enter into an agreement, even with a standard contract, requires trust. Trust that the other party will fulfill its obligations; trust that payment will be made on time; trust that you won’t have to go to court.
By contrast, smart contracts are programs that make agreements transparent and self-executing, meaning that once a condition is met, the next condition can happen automatically. For instance, a vote reaching a 51% majority within a specified timeframe can trigger an action that was voted for without the need for human interaction.
Smart contracts don’t eliminate the need for trust, but they do mitigate it enough that it is possible to collaborate with large groups.
Spotify is the perfect illustration of where centralized power fails. Artists create 100% of the value of Spotify, but receive a comically small amount of the capital it creates.
A decentralized Spotify would give ownership of the platform to musicians and developers based on how much value they brought to the platform. How much they were paid per stream would be transparent and voted on by the collective, and Spotify’s current $46B market cap would be owned and shared by the artists and the team that builds it.
To me, this is where the philosophy of web3 gets interesting. In a world where almost every interaction with the economy requires someone’s permission - opening a bank account, making an investment, applying for a job - the open web proposes a different way.
The blockchain is open to anyone. Anyone can join a DAO and participate in the work. Anyone can start a project and issue a token that will rise or fall in value, and share that token with everyone else involved. Anyone can take part in building, without the approval of a central authority, much to the chagrin of central authorities.
This is also where the most friction and uncertainty lies in web3, as they still need to operate in a world in which laws are entirely based on who has permission to do what. I’ve spoken to a few lawyers in this space, and while there are some best practices, what official government policies will look like is still anyone’s guess.