There's only one convincing reason why web3 will go mainstream
'Read, write, own' is too narrow. 'Internet of value' is too vague. The correct way to understand blockchain is by seeing it as the world's computer.
I started writing this post inspired by Kevin Kelly’s essay arguing that there are only two types of problems with new tech products.
1. This product doesn’t work because of X problem. These are Class 1 problems.
2. This works perfectly, and that causes X problem. These are Class 2 problems.
Class 1 problems come when the product doesn't work properly. Class 2 problems come when it does.
These problems are highly relevant in the context of web3 (which is a word I’m using as shorthand for blockchains like Ethereum1). But they are only relevant if you believe that one day, web3 will work perfectly and become mainstream.
This essay is an argument for why that day will come.
In particular, I want to argue that web3 will become mainstream because it resembles a ‘world computer’. A virtual computer that everyone can use and share.
Elsewhere, people have argued that web3 will become mainstream because it enables an ‘internet of value’, or because it enables true ownership online. On their own, I don’t think these narratives are useful or convincing. Instead, we need to consider web3 as a world computer to understand why it will go mainstream, and to understand what the Class 2 problems will look like in the future.
Let’s start by exploring what these other narratives are, and why they’re incomplete.
The first idea is that blockchain enables an ‘internet of value’. The internet we all know today is an ‘internet of information’, where anyone can publish anything, like sending an email, and you can transfer money, but only through companies, not directly via the internet. This means that sending money is limited to what their tech supports and where they operate.
Blockchain fixes that because it works almost like a big database, documenting what everyone owns, from cash to art to property deeds. To prove what we own online, we usually rely on middlemen, who extract benefits from us to prove it and also limit what we could own. Lots of exciting things are meant to spawn from bypassing those middlemen, like NFTs for art, like DAOs for community funds, or like the reward points on Starbucks’ new loyalty programme.
Why this is useful makes sense to me. How we send money now works pretty well within countries, but sending cash abroad requires you to jump through hoops, and it’s much harder to transfer anything else. But it’s not obvious to me why this will make web3 mainstream. Being able to send assets digitally does not feel like a big enough ‘pull factor’ on its own. It makes existing activities easier but feels too intangible to illustrate the new things it makes possible.
The second idea is that blockchain enables true ownership online. This is where the ‘web3’ moniker comes from. Web1 let people read things online, but it was technically hard for most people to create their own content. Web2 fixed that, by letting people write. With platforms like Myspace, Facebook, and YouTube, people could publish their own content on the internet. The problem was that to circumvent the technological difficulties of doing this, internet users had to hand over their content to those platforms, which took large portions of the advertising revenue, sometimes all of it.
In turn, web3 fixes that by letting people own their content. By storing content on the blockchain, instead of in a centralised server, web3 turns YouTube into one platform amongst many. It’s like if you could carry your videos and subscribers across YouTube, Vimeo, and everywhere else. Now platforms have to compete to attract creators, meaning creators are going to get a much better deal when it comes to ad revenue.
That ‘read, write, own’ evolution is simple enough to understand. The problem is that it only explains one small part of web3: the creator economy. In reality, there is much more going on.
Internet of value and digital ownership matter, but we need to take a step back to understand how it all ties together.
In reality, it’s all about data.
Blockchain gives data on the internet three properties that it did not have before: ownership, programmability, and trust.
IT’S ALL ABOUT DATA
Ownership. People can make and own assets without relying on a middleman.
This extends the read, write, own thesis. Ownership is certainly a big part of web3, but this is not just for the sake of ownership for the reasons illustrated above, it is also for the sake of visibility. Ownership and visibility are two sides of the same coin here. If you own something, but nobody else can see that you own it, or you cannot prove to anyone that you own it, then the relevance of your ownership is limited.
Letting people prove they own something online is a major innovation. And it extends well beyond the creator economy. The impact of blockchain is that all the assets and data you put on the blockchain, and who owns them, can be seen by everyone, and unlike in web2, there are no structural obstacles to that.2
Before we move on, it’s important to stress that whoever creates the data can easily choose to do so anonymously. Blockchain gives people the option to prove that they are the creator, which allows for more privacy, not less, because you share only what you want and when you want.
Programmability. Assets can be exchanged and automated.
Being able to own digital assets is meaningless if you cannot do anything with them. This is the usability layer for web3. It enables exchange. It is the ability to programme assets on the blockchain that lets you transfer a video, receive a recommendation from someone, or be acknowledged for engaging with a platform.
Or to automatically set the conditions for when an exchange occurs. When digital ownership happens on the blockchain, instead of on an organisation’s computer that most people cannot access, it becomes far easier for assets to be exchanged and automated:
Real estate is a $200 trillion sector, and it’ll become much quicker when property deeds are transferred on the blockchain rather than on paper.
A blockchain prototype made by the UK Government suggests that the time required to do this will fall from months to minutes.
UEFA put their tickets on the blockchain for the Euro 2020 football tournament, meaning they would only activate when users were near the stadium, preventing scammers from faking tickets.
Trust. Everyone can see and trust the relations between those assets.
Assets can be owned and exchanged, but equally critical for understanding the full scope of a blockchain is the idea that everyone else can verify what is owned and exchanged.
A big aspect of this comes from the fact that data on the blockchain is relational. It relates multiple parties. Leo sold a video to a collector. Leo received a recommendation from his colleague. Leo bought a ticket from UEFA. These events represent the exchange of assets, but without blockchain, they could only occur via a middleman to facilitate the exchange, who kept the knowledge to themselves. In web3, those relationships can form directly.
In web1 there were users, but only in web2 could they reach out to each other.
But in web2, we still needed middlemen to connect us. We couldn’t do this on our own.
That changes in web3, where connections can be made directly. There are still middlemen, but users are not reliant on them. YouTube becomes in competition with other middlemen.
The fact that these data relationships are direct is important. Directness allows it to be visible to everyone. When you sign up for the Starbucks loyalty programme, only you and Starbucks know this for sure. When you join Starbucks’ blockchain loyalty programme, everyone can see your progress without relying on someone to verify it.
INTER-OPERABILITY
Blockchain creates a network where anyone can directly create and exchange assets, and where everyone can see what is happening.
Last week I interviewed Justin Waldron, one of the co-founders of Zynga, the social gaming company that was bought for $13 billion during the 2022 stock downturn. He’s also the co-founder of PlayCo, a Sequoia-backed gaming unicorn (they raised a $100m Series A), and it’s with PlayCo that he is building in web3. When I asked him why, he summed it up in one word:
“Interoperability.”
Interoperability refers to the ability for anyone to see what people are doing on, for example, the Starbucks loyalty programme, and use that data in their own application. All those exchanges and relationships, across the entire network, can be tied together:
Reddit, the internet forum website with half a billion monthly users, integrated the points that users award each other on some forums with the Ethereum blockchain, meaning those points could be sold or traded, whilst anyone can build apps that, eg, ‘only users with a certain amount of Reddit points can access’.
There are 14 different services involved in making a financial security (according to PwC); the $14 trillion industry would work a lot more smoothly if everyone was working on one interoperable network, rather than different Excel spreadsheets.
Justin is building a product called Storyverse that makes it easy for (web3) IP owners to license their IP to animated comic book writers.
A WORLD COMPUTER
Alone, ‘internet of value’ and ‘read, write, own’ fail to fully comprehend why the future of the internet lies on the blockchain. At best, they are two of three pieces in the puzzle. Owning assets online matters, but being able to programme these assets to facilitate exchange and make them useful is equally critical. Meanwhile, letting users trust those exchange relationships allows further relationships to be built on top of them. These three features combine to underpin a network that lets users create and exchange assets and build up a web of those relationships. In other words, blockchain underpins the foundations for a complete digital economy.
The best way to understand the blockchain itself is to think of it like a world computer that anyone can use.
Fundamentally, a computer consists of memory, processing, and communication. Data is stored on the hard drive and in other places like RAM. It is processed for different applications by different processing units, and the motherboard lets all these units talk to each other and makes the computer work.
Ownership is our memory, and everyone can add assets to it.
Programmability is our processing, facilitating asset exchange.
Trust is our motherboard, which lets these exchanges build on each other.
This is not dissimilar to how a blockchain actually works. Indeed, Vitalik Buterin, co-founder of Ethereum, has oriented that blockchain around the ‘world computer’ idea for many years. It overlaps very closely:
Consensus, to agree on what data is stored on the blockchain (like memory)
Application, where applications occur (like processing)
Networking, which handles communication (like the motherboard)
This lines up really nicely, and reflects the importance of each part of the blockchain by tying it to a critical reason for why the future will be built on blockchain.
Understanding blockchains as world computers that underpin digital economies is the best way to understand why it is the future of the internet.
Blockchains represent a virtual computer that anyone can verifiably store and exchange assets. These ownership, programmable, and trusting features create strong network effects. When one asset or piece of data is stored usefully on the blockchain, it becomes more appealing for the next piece to be stored there, because you could form a relationship or exchange with it.
And because everyone can see and trust that relationship, it becomes even more valuable for more data to join it, because you can programme more relationships on top of those existing relationships, creating an ever-increasing web of interactions that makes the network ever more useful and ever more valuable. Much like how an economy works.
There is a cold start problem for a network like this, but that cold start is already overcome. Already, billions of dollars worth of activity happens on blockchains, and more established organisations, from Reddit to Ubisoft to Nike, are already here. They’re closely followed by the likes of Starbucks and Disney. It is only heading in one direction.
And so we are now in a position to understand why the future of the internet lies onchain. The future of the internet will be built on the blockchain because it underpins a world computer that anyone can add to and interact with, building on top of the billions of dollars worth of value that already exists there. The future of the internet lies onchain because it is where the digital economy is already being built.
Next:
We’ve explained why web3 will go mainstream. Next we’ll try to categorise the Class 2 problems that might come from that.
Then I promise to take a break from web3 for a bit.
Naval’s interview with Vitalik Buterin is a good read or listen.
I’m talking about Turing-complete blockchains here, if you want to be specific.
The obstacles are those Class 1 problems, like UX, cost, and understandability, but these are not structural problems.