USV Partners: The Necessity of Web3 from the Perspective of Internet History

Original Title: "Web3 / Crypto: Why Bother?"
Author: Albert Wenger, Partner at USV
Translated by: gm, Rhythm BlockBeats

One thing that continues to surprise me is that a considerable number of people believe that Web3 or crypto has absolutely no merits. Perhaps this is their genuine belief, or maybe it is an extreme reaction to those Web3 supporters who argue that Web3 brings true liberalism. From the beginning, I have tried to provide a more comprehensive perspective, pointing out both the potential benefits and drawbacks of Web3, much like my talk at the Blockstack Summit.

However, today I want to attempt to provide a compelling explanation of why it makes sense to pay attention to Web3, and this requires telling some stories and understanding the nature of Web3's disruptive innovation.

The late Clayton Magleby Christensen described this type of innovation as "disruptive innovation": it offers new functionalities and effective solutions to the market, but conversely, it can also disrupt the connections with existing markets.

Thus, in the early stages, the innovation may have good utility in one dimension, but in other aspects, it could lead to worse situations. However, that dimension will eventually become increasingly important, and as the innovation is widely adopted, other aspects will gradually begin to improve.

Moreover, an example of "disruptive innovation" is the personal computer (PC). When the first PC was produced, it was worse than any computer we have today; it had very little memory, limited storage, slow CPUs, minimal software, and could not multitask. However, it had one advantage: it was cheap. And this was significant for those who did not have a computer at all.

But it was precisely this strange combination that led existing computer manufacturers (who were shrinking mainframes into microcomputers) to overlook the PC. They focused only on all the negative aspects and ignored the positive factors, or within their understanding, they tried to compete by making their products cheaper. But aside from IBM, these computer manufacturers never embraced the PC until they went bankrupt or were acquired by other companies.

Currently, blockchain is still a poor database. It is slow, requires more storage and computation, and has little customer support. But at the same time, it has a completely different dimension: no entity or organization can control it, as people try to express this dimension by calling it "decentralized," although the effect is still lacking.

So, how is this different from a cheaper PC? Because it matters to some people. Why? Because most of the power held by large companies and governments comes from the databases they operate and control.

For example, Facebook can decide who can read from and write to their database, as well as who can see which parts of it, and they can change this database unilaterally. It turns out that this is also the source of Facebook's power worldwide. Currently, many people rightly see this power as a problem, but they have yet to recognize how the structure of the original internet technology directly contributes to this extreme centralization.

It would be useful to look back at the early days of the internet to see how we arrived at this situation today. When Tim Berners-Lee invented HTTP (Hypertext Transfer Protocol), he unleashed what we now consider permissionless publishing, allowing anyone to create a webpage while anyone with a browser could access it.

This was a remarkable breakthrough at the time, as almost all publishing prior to this required a publisher to decide what should be published. While some people complained that this would lead to losses, I believe it was an opportunity for many creators and learners who had previously been marginalized or completely shut out to gain knowledge.

Additionally, HTTP is a stateless protocol, meaning there is no directly built-in memory in the protocol, and thus no concept of a database. Therefore, if users wanted to build something like a shopping cart that could hold multiple items, they needed to implement data storage somewhere outside of HTTP itself.

Marc Andreessen and his team at Netscape invented "cookies" to help solve this problem, but unfortunately, this mechanism is far less elegant than the REST (Representational State Transfer) proposed years later by computer scientist Roy Fielding in his paper.

At the same time, cookies are files sent with HTTP requests that can be read and written by web servers. In the early days, people would write the items in their shopping cart directly into cookie files.

However, because these files reside locally on the client computer, it meant that people could not start shopping on their desktop computers at work and then finish shopping after returning home. Thus, today cookies often only contain user IDs, while all other database functionalities are stored on the server.

As a result, all powerful internet companies are essentially database providers. Facebook is a database of people's profiles, friend lists, and status updates; PayPal is a database of people's account balances; Amazon is a database containing SKUs, payment receipts, and purchase histories; Google is a database of web pages and query histories.

Of course, over time, many competitors to these large companies have emerged, but operating databases has remained their powerful core, and only they can decide who has the right to read and write to these databases and which parts they can access.

In other words: It turns out that mere permissionless publishing is not enough; we also need permissionless data. Why do we need this? Because we need to avoid having just a few large companies controlling most of what happens on the internet, which would lead to regulatory distortions when correcting power imbalances; we need to consolidate power imbalances.

And we need to understand the consequences of not doing so. Comparatively, this is also why almost everyone hates the cable and utility companies that control their (partial) data.

It is worth noting that before the publication of the Bitcoin paper, we also did not know how to achieve permissionless systems. At that time, we had distributed databases and federated databases, but all of these were still managed by a small number of entities, such as almost all financial networks, ACH, or VISA.

We did not have a protocol to maintain consensus, which made it difficult to agree on the contents of the database and to decide who could join or leave the protocol.

And Web3 is an innovation that brings about change, which cannot be overstated. At the same time, let me clarify again that I am not saying it will solve all problems; it certainly will not, and it may even create new problems.

Nevertheless, permissionless data remains a key missing part of the internet, and its absence has led to significant power concentration. Therefore, if developed properly and with the right regulations, Web3 can provide meaningful power shifts for individuals and communities.

If widely adopted, Web3/crypto technologies will also begin to improve in other aspects. They will become faster, more efficient, easier to use, and more secure. Just as the PC was an innovative platform that never emerged from mainframes or microcomputers, Web3 will also become an innovative platform that will never come from Facebook, Amazon, Google, and the like.