To date there have been three iterations of the digital world. We are currently in the early years of Web3 and it is so different than what has come before it, that it becomes a very real strategic advantage to understand it. I’m a historical learner which means that I interpret the present and the future through the lens of what has come before. Some may say that this isn’t a helpful way to think about cutting edge technology but they can get their own newsletter and pipe down. This is how I work, and I’ve been working hard to get a framework of understanding for what is coming.
And that’s an important starting point. This is what IS coming, not what MIGHT come. Hell, in most ways, it’s here already. If someone so far entrenched in the mainstream as I am can take notice, it might be new to me, but it isn’t new to the world. That’s an important thing to grasp. This is the future, not the future.
So thinking historically about the internet age, we can say that Web 1.0 (~1990-2005, also called “the Information Economy”) is commonly dated to when the Netscape browser became publicly available and the experience on the web went from text-based to visual navigation. Some people won’t remember or believe that the internet used to be a system of text-based commands. You’d literally browse information databases by typing out queries. My first “browser” was called PINE and you could browse hundreds of thousands of text-based (no graphics) documents, and participate in USENET groups where people just had textual conversations and sometimes uploaded huge picture files over really bad connections.
When Netscape introduced a graphical browser, though, the world changed and you could visually browse a document, look at a picture, play a game. Websites became a thing and companies paid lots of money to have hard-coded HTML sites that were basically hyperlinked magazines. Fortunes were made by people who could code and make it look nice. Some websites incorporated this visual view of things to categorize and present information to a suddenly data-hungry population. Yahoo! was the winner of Web 1.0 until Google (with CIA backing, look it up) presented a new and better way of displaying search results. Monetization in Web 1.0 consisted of convincing advertisers that you had a lot of people (“eyeballs”) spending time on your site and seeing their banner ads (“impressions”). My first real job was at Web 1.0 startup, WebMD, where I worked on content and corporate development deals.
Networks are made of nodes. The more nodes you have, the more valuable the network. In fact, a network’s value is computed as a square of its nodes. So when Yahoo! was the only game in town, you absolutely had to be on Yahoo, it was a make or break thing for your company’s website. Google disrupted that a bit by making you earn your spot based on the quality of your network and its inbound interaction with your site. This feature … the construction of a platform based on interaction with a central core of content … is Web 2.0.
Web 2.0 (~2005-2020ish) is how you think of the internet today. You go to certain sites to entertain certain experiences. You check up to see who your cousin brought home from college for Thanksgiving dinner on Facebook, maybe. You look at your roommate’s Spring Break hotel on Instagram. You don’t give out your number to cute guys at the bar, you pass them your Snap. You crack wise about people who don’t take vaccines on Twitter. You catch a ride from a stranger with Uber, or get your groceries delivered on Instacart. You book a weekend in a beachfront condo you could never afford on Airbnb. Every task you have has a neat tidy box, called an app. It’s an “Easy Button” to accomplish extraordinarily complex and previously cost-prohibitive tasks.
Because all of those tasks are discreet, definable and valuable, they can be monetized individually or as a subscription. Subscriptions are preferable because you want people paying for things they don’t use all the time and the burden of processing micro transactions is still perceived to be high. Trillions of dollars have been transacted on Web 2.0. In fact, the last 10 years of commerce have eclipsed the value of goods and services transacted by humans since the idea first came around for the first Home Sapiens.
Web 2.0 gave birth to the creator economy. Individuals could produce content, share it with a global audience and take a small sliver of its associated commerce for themselves. Think TikTok and OnlyFans, although there are hundreds of other options. The problem … and this becomes very important … is that the thing that makes Web 2.0 so good for users is that its free to us, pays content creators a bit, but benefits the platform itself to the detriment of the end users in ways that can be really hard to see.
Platforms owns individual user data, can use algorithms to influence behavior and thinking patterns, can monetize on all of this with no disclosure requirements to users, or having to ask for meaningful permissions. The cards are stacked deep against the individuals who are told “My house, my rules. If you don’t like it, you can’t participate.” This has given rise to something very different in the course of how Americans like to think of the world … and that has given rise to the discontent necessary to go to Web3.
While they seem like buzzwords, Artificial Intelligence and Blockchain are technologies fundamentally remaking the digital world and how we live in it. Those in the know, know. Did you notice that Facebook just renamed itself Meta? It was derided as a PR ploy, but augurs something very different is coming. The Web 2.0 companies understand that the curtain has closed on those iterations of themselves and they must prepare for what is coming.
What is coming is an internet owned by users and creators without the need for platform middlemen. It will be powered by tokens, called cryptocurrencies, that will allow you to act, transact, interact, and react in a different way than ever before. Tokens are property rights. Read that again. Tokens are property rights.
Now users can compensate content creators directly and forever when content is accessed by those willing to pay for it. Imagine writing the most popular twitter post in history and never seeing a dime from it, while Twitter earns money from those seeking to read it, and often uses that money to restrict your rights to that post. That’s a very Web 2.0 thing to have happen.
In Web3, though, that same post could be tokenized and anyone interacting with it, and thus increasing its value, can share that value with the original creator. In Web 2.0, users ARE the product. In Web 3, users have a say … a literal controlling vote, on how their information, content, online behaviors and preferences, are experienced and encountered by others.
And there are great things coming. AI engines are already writing legal contracts equal to those drafted by the highest paid attorneys in the world. When you tokenize those contracts and make them “smart,” you eliminate the hassle of collecting and disputing whether goods and services were delivered correctly and on time. Cryptocurrencies are tied to the contractual terms and released when those terms are satisfied.
The blockchain will fundamentally remake the real estate market. Questions about who has the proper title to a piece of property will be a thing of the past as an instant blockchain lookup will reveal the entire chain of title in seconds. Transfers of title and associated purchase prices will happen on the backs of specialized tokens created to best fit the flows and needs of commercial parties. They will happen instantly and cost a fraction of a percentage of what is being charged now.
Actually, it’s already happening. There are millions of people (no exaggeration) who are figuring out how to exist in a Web3 environment already. Girls on OnlyFans are showing off their bikinis (or lack thereof) for bitcoin, not dollars. Bank of America is moving billions to and from accounts every day using XRP, not wire trasnfers through manual clearinghouses. One of our portfolio companies is using AI and quantum computational math to make general aviation plans run on electricity and not fossil fuel.
If you are still one of those naysayers … who brag about your lack of participation in contemporary life (“I never saw a single episode of Game of Thrones,” or “I don’t even have a Facebook account”) or whatever nonsensical excuse you give for letting this present life pass you by, enjoy the end of an era. There’s no going back from here.