This article will give Web3 product designers an understanding of where the internet came from, and how it is still evolving. Many think of the internet as a static technology, but we are on the cusp of massive disruption with the rollout of Web3, and Web3 tokens. Stay tuned for future Web3 Design Courses where we deep-dive into products in the Web3 ecosystem.
This is a good point to talk about the evolution of the internet. We can break the internet’s development into three phases: Web1, Web2, and Web3.
Web1 is characterized as “read-only” because only a few entities published content for consumption by many. The internet was thought of at this time as a digital encyclopedia. Users accessed static web pages containing text, images, and hyperlinks; however, there was little interactivity for end-users other than consumption.
This brings us to Web2, which is also referred to as the “social web”. Online communities and identities began to emerge at this time. Web2 is especially characterized by social media platforms, and the idea of user-generated content. Now everyone had the ability to create content, build a social network, and react to the posts of others (e.g. like and share buttons). The web went from a few content creators to billions. If Web1 is considered “read-only” then Web2 can be considered “read-write” for the average user. Centralized web platforms attracted users with large networks and simple user experiences.
This has ended in a winner-take-all dynamic. There are several monopoly-like companies, such as Google, Amazon, Apple, and Facebook, that largely control how the internet is experienced by end-users. For example, users must agree to the terms and conditions of these centralized companies if they want to participate in the dominant social network. Also, Web2 companies have the rights to all the user data generated on these platforms, which they mine and sell to advertisers. Roughly 98% of Facebook’s revenue is generated in this way. It’s a strange idea that we’ve become accustomed to – that users who join a network, and increase the value of that network with their presence and activity, capture little, if any, of the value they create.
Additionally, large user bases act as an economic moat that protect Web2 companies from competition, making these platforms cautious of third-party development, and product integrations. This incentivizes Web2 companies to close-off their ecosystems, which stifles innovation. For example, Apple is able to reject applications from launching on its app store for any number of reasons, one of which being competitive risk. And, even when it accepts applications, Apple takes a hefty 30% cut from the application’s revenues. Of course, third-party developers are paying for the privilege to launch on a platform with a reach of over 1 billion iOS users. Still, one wishes for something better than a system that extracts value from its end-users, and regards third-party development coolly, if not with open-hostility.
To recap, going from Web1 to Web2, we went from open-source internet protocols, intended to decentralize information sharing, to monopoly-like, centralized social networks that limit end-user choice, and third-party integrations. Web3 can remedy the current issues with Web2. Web3 users can literally self-custody their data, identity, and other digital assets with cryptographic wallets. And, developers can now choose to build applications on neutral, open-source Web3 platforms (i.e. blockchains). Web3 removes rent-seeking middlemen and connects users directly to the applications they want to use. If things change, they can pick up, and move to another ecosystem that better suits their needs, without the loss of data or other digital assets.
One of the major innovation’s of Web3, and something important to wrap your head around as a Web3 product designer, is that Web3 aligns incentives better than the current system. Developers, end-users, and cryptonetwork service providers (i.e. nodes) are all incentivized to work towards the same goal – the growth of the cryptonetwork. This is all made possible by Web3 tokens.
If you enjoy videos over reading when it comes to online learning then checkout the course on YouTube. This is part 2 of 7 in the Crypto Design Trends 2022 series. Also, make sure to stay tuned for future Web3 Design Courses where we will get into more interesting topics about emerging dApps.