What does web3 actually change?

The web3 ecosystem is full of keywords like crypto, blockchain, token, NFTs with a lot of things which a common user may not really care about like decentralisation, privacy, ownership etc.

This leads me to 2 questions. First, at a very fundamental level what changes with web3 and second, how does that affect how we interact with the internet. Here’s my attempt at answering those questions for myself in an oversimplified, opinionated world view.

The original p2p internet was essentially a way for information to be exchanged across two computers. It was governed by transfer protocols (http, ftp etc.), and still is. But over the years what information was exchanged, how it moved from point A to point B, what it was used for, and who brokered that exchange of information between 2 parties changed. This brings us to the internet of today.

One of the biggest keyword and the founding philosophy of web3 and blockchain is “decentralisation”. The idea being that in today’s world, every transaction between two or more parties is brokered by a centralised agency. The attempt to remove that centralised agency and enabling peer to peer transactions is what decentralisation fundamentally is. In the world of finance, when you replace banks & governments then it leads to cryptocurrencies and blockchains and when you do that with internet then you end up with web3.

It is not that these centralised agencies, the brokers per say, don’t add any value to a transaction and can simply be removed. Banks provide the trust between two parties which is necessary for a transaction. Similarly one of the basic value addition by internet companies is solving the discovery of two parties. When we talk about decentralisation, then we are not removing these centralised agencies but replacing them with communities and hence the p2p trust & infra of blockchains.

So, to answer the first question, web3 essentially replaces centralised agencies (think internet companies) with communities.

Now, whenever I have to imagine a particular entity/product in a web3 context I try to identify the value addition done by the underlying company and replacing it with communities. Some examples would be authorisation & authentication, discovery, moderation, computing infra, technology, value added services etc. Alternatively, I try to see the company as a broker between various players in the ecosystem namely users, employees, service providers, partners, integrations, infra providers etc. In a decentralised ecosystem, the transactions are directly brokered between various entities by pre-defined rules set by the underlying communities (DAOs).

But how does change the internet for us? Does it become free again? Do the obnoxious ads (Youtube, all social media) go away? Do the subscription fees (Netflix, Medium) and service charges (Uber, Swiggy) go away? Do I get a better control of who sees what I post and what I see on the internet? Do I get better payouts (Youtube, Uber, Swiggy)? Does it become less addictive? Will the censorship be gone? Will it become better at showing me what I need?

One of the things that ails internet companies is their underlying business models. Most of them were built on the foundations of growing rapidly, becoming monopolies and then raking in the profits by controlling margins. Hence a need to control everything, creating walled gardens, selling addiction and spending obnoxious amount of money on growth.

Another important aspect is cost of doing business & failure of getting paid. Getting paid on internet was tough and as the complexity of internet products increased so did the cost of managing those products. So business models like Ads evolved, later on leading to subscriptions. Commissions & service charge were easier where digital transactions were involved by default.

The first problem is a problem of greed which in theory can easily be solved by replacing companies by communities. A good alternative of which can still be seen in form of open-source products & non-profit organisations like Wikipedia & Internet Archive.

The second problem is more complex and doesn’t necessary get solved by default when we move from companies to communities. Though enabling direct transactions between various entities can create opportunities for better business models.

So, will web3 make internet better? will it change anything?

From my opinion, it depends majorly on what kind of business models we develop. How we distribute responsibilities, costs & earnings among the resultant communities.