Harry Alford
Web 1.0 was the static web, and Web 2.0 is the social web, but Web 3.0 will be the decentralized web. It will move us from a world in which communities contribute but don’t own or profit, to one where they can through collaboration.
By breaking away from traditional business models centered around benefiting large corporations, Web3 brings the possibility of community-centered economies of scale. This collaborative spirit and its associated incentive mechanisms are attracting some of the most talented and ambitious developers today, unlocking projects that were previously not possible.
Web3, as Ki Chong Tran once said, is “The next major iteration of the internet, which promises to wrest control from the centralized corporations that today dominate the web.” Web3-enabled collaboration is made possible by decentralized networks that no single entity controls.
In closed-source business models, users trust a business to manage funds and execute services. With open source projects, users trust the technology to perform these tasks. In Web2, the bigger network wins. In Web3, whoever builds the biggest network together wins.
web2: we work in a zero-sum environment where everything is a competition (who can build the biggest network)
web3: we work in a positive-sum environment where collaboration wins (how can we build the biggest network together)
— Jesse Pollak (jesse.xyz) 🛡️ (@jessepollak) August 17, 2021
In a decentralized world, not only is participation open to all, the incentive structure is designed so that the greater the number of participants, the more everybody succeeds.
Learning from Linux
Linux, which is behind a majority of Web2’s websites, changed the paradigm for how the internet was developed and provides a clear example of how collaborative processes can drive the future of technology. Linux wasn’t developed by an incumbent tech giant, but by a group of volunteer programmers who used networked collaboration, which is when people freely share information without central control.
In “The Cathedral & The Bazaar,” author Eric S. Raymond shares his observations of the Linux kernel development process and his experiences managing open source projects. Raymond depicts a time when the popular mindset was to develop complex operating systems carefully coordinated by a small, exclusionary group of people — “cathedrals,” which are corporations and financial institutions.
Linux evolved in a completely different way. Raymond explains, “Quality was maintained not by rigid standards or autocracy, but by the naively simple strategy of releasing every week and getting feedback from hundreds of users within days, creating a sort of Darwinian selection on the mutations introduced by developers. To the amazement of almost everyone, this worked quite well.” This Linux development model, or “bazaar” model as Raymond puts it, assumes that “bugs are generally shallow phenomena” when exposed to an army of hackers without significant coordination.
The open development policy of Linus Torvalds, who conceived the Linux kernel, was far from cathedral-building. Linus’ users were his co-developers. Cultivating a community while leveraging collaboration scales innovation to a degree of intensity matching the users’ complexity. Linus did a lot of things right, like releasing early and often, growing a beta list of users, sending announcements encouraging participation, and he listened to (and gave credit to) beta testers.
Just as Linux represents software built by networked participants rather than a single cathedral, Web3 represents an internet run by vast swathes of networked participants instead of Web2’s version, which is dominated by a few corporations.
Web3 allows for network mining – incentivizing the users of a system who are contributing to the network effects of that system, to earn from their contribution. This collective alignment of incentives is incredibly powerful and just beginning.
— Alex Bane (@Alex1Bane) August 12, 2021
Proof of stake: The collaborative testing ground of Web3
Crypto is a technology model for building projects where the user is the focus. One area where every user maintains some level of participation is on proof-of-stake protocols. With proof of stake, there are levels of participation that prevent the “cathedral” from happening. Even though there’s a team behind every chain, ultimately, the design of a decentralized network means that they will not have absolute control. At different levels of participation, multiple groups of users play critical roles in harmony with key features like governance and scalability.
As developers transition away from proof of work for greater power efficiency and scalability, more protocols will implement a version of proof of stake, in which users stake tokens (cryptocurrency) to run validators for a particular network. Users of all types are incentivized to secure the network by locking up tokens and are rewarded in the form of the network’s native tokens.
Validators can be slashed for misbehavior like double signing blocks or downtime, and penalties can include loss of existing funds or future rewards. Staking is your voice, and good behavior is encouraged to increase the number of participating users so the network can flourish without the need for centralized control.
Since proof-of-stake protocols are in relatively early-stage development, upgrades are frequent right now, with network updates and proposals driven by operators and co-developers. For instance, Polkadot, a Web3 platform, is a sharded protocol that enables blockchain networks to operate together seamlessly. It uses user-driven governance to upgrade the network, and the loose coordination is “on-chain and enacted autonomously, ensuring that Polkadot’s development reflects the values of the community and avoids stagnation.” When the network sees limitations of current staking parameters, they impose restrictions to ensure the stability of the network. The community changes the terms of service, not the company.
Rewards are the incentive for people who run nodes, but not every chain draws users whose primary purpose is making a financial return. There needs to be memetics, culture, socialization and purpose for people to use the network.
Blockchains will continue to be abstracted away in Web3. The millions of people buying NFTs from OpenSea, the first NFT marketplace to pass $1 billion in monthly trading volume, probably don’t care that it supports Polygon, “a popular Layer 2 Ethereum blockchain that boasts a more energy-efficient structure that will allow OpenSea to entirely eliminate gas fees for creators, buyers and sellers on that blockchain,” according to TechCrunch.
Nor do they ultimately care that Degenerate Ape Academy is built on Solana, a proof-of-stake blockchain. The collectors only care about adding rare pictures of cartoon apes to their portfolios. Unbeknownst to most crypto gamers and art collectors, the more usage there is, the stronger the network becomes.
10/ To some people, NFTs seem frivolous and toy-like. But NFTs are important because they offer radically better economics to creators and developers versus existing Web 2 platforms. https://t.co/ToIK4MeIz9
— cdixon.eth (@cdixon) August 17, 2021
While abstraction might temporarily bring new users into the space, institutional users want to be reassured for the long term by solid technology, which means, in some cases, the blockchain supports cathedrals. Provenance is a proof-of-stake blockchain network developed by Figure, a home equity line of credit originator, to provide a ledger, registry and exchange across multiple financial assets and markets. The chain is run and operated by large financial institutions like Franklin Templeton and Caliber Home Loans.
Financial institutions are incentivized to run nodes because they receive transaction fees. They’re also incentivized to participate, because certain aspects of their business are cheaper using Web3 and blockchain technology compared to Web2 processes.
As decentralized teams play smaller roles in managing protocols, individual participants can manage the protocol with little organization. However, participants will still need to be incentivized to secure, use and build on the protocol. All of these examples amplify what makes Web3’s networked collaboration so successful — an alliance of autonomous users receiving constant stimulation while working toward a common goal.
Linux was a catalyst for the creative thinking that’s manifesting in Web3. Cathedrals, however, still exist and it’s unclear if Web2 will fully transition to Web3. How can technology truly belong to the people and Web3 be wholly driven by networked collaboration? It’s a leap of faith. Cathedrals that enable rent-seeking behavior will need to continue to embrace the bazaar, bending toward how these communities work from the bottom up, not top down.
Web3 might not be the final answer, but it’s the current iteration, and innovation isn’t always obvious in the beginning. As long as talented builders are incentivized to collaborate, Web3 can open up a whole new world we never dreamed possible.
The bazaar model partially remade the commercial software world in its image, and crypto’s networked collaboration will inevitably do the same to traditional business models. Centralized organizations will not win without embracing decentralization to some degree, and those that do will be decades ahead of their competition.
Networked collaboration harnesses the brainpower of communities and has promise. We’ve seen an explosion of interest in crypto that continues to parallel, if not follow, the principles laid out by Torvalds. The future of the internet will belong to “people who leave behind the cathedral and embrace the bazaar.”
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