a16z partner Chris Dixon: Why is Web3 so important?
Now is the early stage of this movement, and it is a good time to get involved.Author: Chris Dixon, Partner at a16z
Compiled by: Linqi, Chain Catcher
Web1 (approximately 1990-2005) was about decentralized and community-managed open protocols. Most of the value accrued to the edge players of the network—users and builders.
Web2 (approximately 2005-2020) was about isolated, centralized services run by companies. Most of the value was contributed by a handful of companies like Google, Apple, Amazon, and Facebook.
We are now at the beginning of the web3 era, which combines the spirit of decentralization and community management from Web1 with the advanced, modern functionalities of Web2.
Web3 is coordinated through tokens, an internet owned by builders and users.
The Importance of Web3
First, let’s look at the problems with centralized platforms. (I wrote more about this issue in 2018).
Centralized platforms follow a predictable lifecycle. Initially, they do everything possible to recruit users and third-party contributors, such as creators, developers, and businesses.
They do this to strengthen their network effects. As the platform moves along the S-curve of adoption, their control over users and third parties steadily increases.
When they reach the top of the S-curve, their relationship with network participants shifts from a positive-sum relationship to a zero-sum relationship. To continue growing, they must extract data from users and compete with (former) partners.
Notable examples of this include Microsoft against Netscape, Google against Yelp, Facebook against Zynga, Twitter against its third-party clients, and Epic against Apple.
For third parties, the transition from collaboration to competition feels like a bait-and-switch. Over time, empowered entrepreneurs, developers, and investors have learned that they cannot build and grow on centralized platforms. This has stifled the power of innovation.
Now let’s talk about web3. In web3, ownership and control are decentralized. Users and builders can own parts of the internet through non-fungible tokens (NFTs) and fungible tokens.
Tokens give users property rights: the ability to own a part of the internet.
NFTs empower users to own objects that can be art, photos, code, music, text, game items, credentials, governance rights, access passes, and anything else people create next.
NFTs exist on blockchains like Ethereum. Ethereum is a decentralized global computer owned and operated by its users.
A blockchain is a special computer that anyone can access but no one owns.
Ethereum is powered by a fungible token, ETH, which is used to incentivize the physical computers that support the system. ETH is also the native currency for transactions within the system, such as purchasing NFTs.
Users can acquire fungible and non-fungible tokens in various ways. You can buy them, but there are also ways to earn them for free.
Uniswap is known for retroactively airdropping 15% of its governance tokens to early users of the protocol. Community grants like this have become commonplace in Web3 as a way to build goodwill and incentivize adoption.
You can also earn tokens through creative and entrepreneurial activities. For example, people earn approximately $100 million worth of ETH daily by selling NFTs.
Tokens unite network participants to work towards the development of the network and the appreciation of tokens.
This addresses the core issue of centralized networks, where value is accumulated by a single company that ultimately competes against its own users and partners.
Before Web3, users and builders had to choose between the limited functionalities of Web1 or the corporatized, centralized model of Web2.
Web3 offers a new way that combines the best of previous eras. It is early in this movement, and now is a great time to get involved.
