Web 2.5 ?
Web 2.5 ?
One emergent trend you should focus on amidst all the hype
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Web2 vs web3 is a futile debate. Ultimately products & businesses that deliver value to customers will prevail.
The operating model for the commercial internet has been platform ownership of all data. No doubt this has created immense value for customers. But it has its limitations, and these have pushed people to look for alternatives.
A nascent but promising solution is using performant public blockchains like Solana or Polygon as distributed stores of information and logic. The last two years have seen a web3 hype cycle and both of these ecosystems have seen growth in projects, developers, customers, and investments. But projects have also garnered criticism for being overly financialized, not having real use cases, having sub-par UX, etc.
It is easy to get lost in the noise of scams, token prices, celebrity endorsements and mentally switch off to everything in the space. If you’re someone who works in technology and has been observing web3 with curious skepticism, this essay is for you. In the first section, we’ll talk about why the trend of open & consumer-owned data is powerful and likely to play out. And in the latter half, we’ll share ideas for experiments you can run to add value to your customers and business today.
Expand your time horizon.
Technology trends typically have a few key driving forces that determine the speed and extent of their spread. For e.g. the internet made it cheaper and faster to exchange information globally. But, as shown in the graph below, it took several decades to reach critical adoption (e.g. a billion users) because a lot of hard problems needed to be solved to build the infrastructure to distribute high-speed, low-cost internet at scale.
At the time it was not at all obvious the impact that the internet would have. Here’s a rather famous clip of Bill Gates from the Lettermen show. But, it was the power of the idea & its potential that inspired people to persist toward a solution. And sure enough, anyone who ignored the internet (or new technologies more broadly) did so at their own peril.
History repeats itself. Unless you believe that the internet & mobile phones are the last major technological breakthrough you have to ask the question - what’s the next one that will inspire a generation to persist for decades? We think that trend will be the shift of data ownership from single corporations to more open networks.
The power of consumer ownership of data.
Before we address why consumer ownership of data is important, let’s understand it better. Instead of data being technically and legally boxed within a single corporation, it is stored on a public blockchain (like Solana or Polygon). It is owned by each consumer who accesses it through their cryptographic keys (more practically through wallets like Phantom, Coinbase Wallet, or Metamask).
Any application can request users when it wants to access or update this information (not the other way round like it is today). And users can either accept or reject this request. This means no single application can prevent another app from accessing data once a user has provided permission. And the underlying blockchains themselves should be decentralized and not subject to the whims of one application or entity.
It is hard to imagine or argue for the benefits of data ownership because platforms that own data monopolies have winner-take-all dynamics. The reason why the largest platforms like Instagram, Whatsapp, Twitter, Zomato, Airbnb, etc don’t have much meaningful competition is their network of customers & suppliers. We don’t feel the pain of having our social graph locked into Instagram because there doesn’t seem to be any other app we could take it to anyway. This is a self-fulfilling prophecy.
There are three key reasons why this will change.
Richer experiences for consumers are possible with open data. Data is the most valuable asset of today’s consumer technology companies. They have commodity and easy-to-copy user interfaces and most machine learning algorithms are open-source.
Today, platforms restrict access to their customer’s data. This restricts both, the kind of people who can build on it and the kind of experiences being built. You either need to be an employee or an approved partner with these companies.
A paradigm where each customer controls their own data is superior for two reasons. Firstly, there will be a global bazaar of developers and applications building on top of it. Secondly, the type of applications is limited only by human creativity and not by artificial constraints.
This post on data composability outlines the idea really well.
If Medium were built on open data, Substack wouldn't have to build an editor, interface, and CMS from scratch. They'd build a subscription module that operates on top of the Medium editor and content. You could continue writing in Medium (or elsewhere) and publishing there while using Substack's subscription feature to build an audience and deliver directly to them. (This is what we’re beginning to see with Mirror’s ecosystem with apps for curation, discovery and more.)
A level playing field for founders. There have been many examples of businesses that were built on closed platforms and then got wiped out when the terms of engagement changed. Chris Dixon talks about this in his essay on Why Decentralisation matters - he argues that platforms inevitably move from friendly to adversarial relationships with their partners because of their inherent financial structures.
In their web3 thesis, Kyle Samani of Multicoin Capital talks about why founders will always pick a more open and predictable ecosystem over an opaque and closed one.
Privacy & the intolerant minority. It is true that not everyone will care about data privacy or sovereignty. Many of us will be happy & relieved trusting a reasonably accountable central entity with our information. However, there will likely be a small but sufficiently vocal group that cares about it. Initially, there could be niche products that serve them. As these products get better, two things will happen - they will start attracting a larger set of customers & mainstream platforms will need to respond to preserve their business.
Using the framework NNT provided in his essay linked earlier, a person who cares about privacy will not use a closed-system product but someone who doesn’t care as much about privacy will be okay using one that provides it.
This could lead us to systems that are sufficiently decentralized so as to appease this minority but performant enough to serve the majority.
But, how did we end up here?
A fair question to ask at this point is, if data ownership is so great why don’t we already have it? Why did the products we use today choose to build closed platforms?
I don’t know but here’s my best guess - we had neither the technology nor the infrastructure for it. These platforms were launched in the early 2000s when less than 10% of the world had access to the internet. Open source equivalents for these platforms existed but they weren’t consumer grade.
The founder of Signal, Moxie wrote an essay titled my first impressions of web3. In it, he outlined two key challenges that led to the rise of today’s platforms over yesterday’s open source systems - convenience (owning your data requires people to set up their own servers ) & speed of execution (distributed decision-making has been too slow).
Are these constraints insurmountable? Highly performant public blockchains enable distributed global shared state. Crypto tokens have the potential to share value with contributors. This creates an incentive for teams to be competitive. This is the first time that open source contributors can be paid commensurate to the impact their products have (this is different from grants). Hardware required to power this infra continues to get cheaper & easier to use.
Another point to think about is that literacy about technology is increasing faster than ever. Sal Khan had said if you asked someone 400 years ago - what % of the world is capable of writing? The literate elite would have said 15-20%. We know today that this is wildly inaccurate.
With the right incentives & infrastructure, it is hard to predict what people will be capable of (including one day running their own server :) ). But it is safe to say that the possibilities of consumer-owned data are compelling & serious effort is being made to get us there.
If you’re with us so far & you want to be more than just a passive observer of this trend, this next section is for you.
Dipping your toes.
NFTs are easily the most popular web3 application of the last year. But most people think of them as useless & expensive monkey pictures. Instead, think about NFTs as secure and portable metadata. You can use them to represent something truly unique about your customer & hand it over to them to carry around the internet.
Here’s a use case enabled by NFTs that can benefit your customers and business today.
Expression. A key human need is to express ourselves to others. And platforms like Twitter & Instagram are integrating NFTs to allow their users to express themselves better. This is a great opportunity for you to enable customers to export parts of their identity that are uniquely formed within your product but have wider appeal.
The exact implementation will obviously depend on your specific business. Here are some examples:
Zerodha can award an NFT to traders who win their 60-day challenge,
Health & fitness apps like Cult.fit and Headspace can issue NFTs to users who complete workout and meditation streaks.
Learning apps like Duo Lingo, and Unacademy can issue NFTs to customers who complete learning streaks.
OTT platforms like Netflix, Prime, Disney+Hotstar, etc. can issue super fan NFTs computed by viewing behavior of certain actors, film franchises etc.
Task and information marketplaces like Urban Clap, Stackoverflow, Quora, and Reddit can issue NFTs representing user ratings & contributions.
In most of the examples listed above, you will observe that these products already have the underlying metadata as part of a core product loop. All they would need to do is package it well & enable customers to export it on-chain.
There are infinite threads of our identity formed across different silos of the internet. Simply allowing your customers to express some of these attributes is incredibly powerful. Firstly because these social media platforms provide an immediate use case of displaying them as profile pictures.
But also, these customers become brand ambassadors for you in both existing & new virtual worlds. And to your surprise, you may see these NFTs become primitives that other developers use to build experiences for your consumers.
This may sound scary because it feels like opening up the gates to allowing your competition access to your consumers. This isn’t the case. You can aggregate the information well to hide the raw data, run tests at smaller scales, and be selective about what types of information you include in the NFTs.
Finally, if it makes sense for your product - allow your customers to import parts of their identity that are important to them (i.e. bring in NFTs they may have acquired elsewhere, into your product). In a world of open, customer-owned data it will critical for your application to expect customer state to be modified externally and be able to read relevant updates to it.
Web3 UX today is still working its way towards mass consumer adoption. However, the idea of open-consumer-owned data is compelling to both consumers and builders. Starting early to explore how this is compatible with your products/services will create an invaluable edge as the market evolves in this direction.
If you’re building such experiments we’d love to work with you, reach out via DMs on Twitter, or Linkedin.
Thanks to Yash for designing the cover image.
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