Web3/Crypto: Why Bother?

One thing that keeps surprising me is how quite a few people see absolutely nothing redeeming in web3 (née crypto). Maybe this is their genuine belief. Maybe it is a reaction to the extreme boosterism of some proponents who present web3 as bringing about a libertarian nirvana. From early on I have tried to provide a more rounded perspective, pointing to both the good and the bad that can come from it as in my talks at the Blockstack Summits.

Today, however, I want to attempt to provide a cogent explanation for why bothering about web3 makes sense. This requires telling a bit of a story and also understanding the nature of disruptive innovation. The late Clayton Christensen characterized this type of innovation as being worse at everything except for one dimension, but where that dimension really winds up mattering a lot (and then over time everything else gets better also as the innovation is widely adopted).

The canonical example here is the personal computer (PC). The first PCs were worse computers than every existing machine. They had less memory, less storage, slower CPUs, less software, couldn’t multitask, etc. But they were better at one dimension: they were cheap. And for those people who didn’t have a computer at all that mattered a great deal. It is exactly this odd combination that made existing computer manufacturers (making mainframes down to mini computers) ignore the PC. They only focused on all the bad parts and ignored the one positive dimension or to the extent that they understood it they tried to compete by making their own product cheaper. Other than IBM, they never embraced the PC and went out of business or were absorbed by other companies.

A blockchain is a worse database. It is slower, requires way more storage and compute, doesn’t have customer support, etc. And yet it has one dimension along which it is radically different. No single entity or small group of entities controls it – something people try to convey, albeit poorly, by saying it is “decentralized.”

Ok, so how is this remotely the same as PCs being cheaper? Well because to some people this matters a great deal. Why? Because much of the power held by large companies (and by governments) comes from the fact that they operate and control databases. Facebook alone gets to decide who can read and write from their database and what parts of it anyone can see. They alone can make changes to this database. This turns out to be the source of Facebook’s power in the world. Many people rightly see this power as a problem, but fail to see how the structure of the original web technology directly contributed to this extreme centralization.

It is useful to go back to the beginning of the web to see how we got here. When (now Sir) Tim Berners-Lee invented the HyperText Transfer Protocol (HTTP) he unleashed what we now think of as permissionless publishing. Anyone can put up a web page and anyone with a browser can access it. This was an amazing breakthrough, as pretty much all publishing previously had required going through a publisher of some kind, who decided what should and should not be published. And while some people bemoan this as a loss, I consider it a gain in access to knowledge for many creators and learners who previously were kept at the margins or shut out entirely.

HTTP though is a so-called stateless protocol. That means there is no memory built directly into the protocol. It doesn’t have a notion of a database. So for example if you want to build something as simple as a shopping cart that can hold multiple items, you need to implement the data storage somewhere that’s not part of HTTP itself. Marc Andreessen and his team at Netscape invented cookies to help solve this problem (sadly a far less elegant mechanism than what Roy Fielding proposed in his dissertation on REST years later).

Cookies are files that get sent along with HTTP requests and can be read by and then written to by the web server. In the early days people would literally write the items in a shopping cart directly into cookie files. But because these files sit locally on a client computer, it meant that someone couldn’t start shopping on their desktop computer at work and then finish shopping once they got home. So instead these days cookies tend to just contain user IDs and all the other database functions reside on the servers.

As a first approximation all the big powerful internet companies are really database providers. Facebook is a database of people’s profiles, their friend graphs and their status updates. Paypal is a database of people’s account balances. Amazon is a database of SKUs, payment credentials and purchase histories. Google is a database of web pages and query histories. Of course all of these companies have built a great deal more over time, but operating a database has stayed at the core of why they are powerful. Only they get to decide who has permission to read and write to this database and which parts of it they get access to.

Put differently: it turned out that permissionless publishing alone was insufficient. We also need permissionless data. Why do we need this? Because otherwise we are left with a few large corporations controlling much of what happens on the internet, which then leads us to all sort of regulatory contortions aimed at rectifying the power imbalance but in practice mostly cementing it. We of course know where this winds up and that’s why pretty much everyone hates their cable company and their electric utility.

Now the important part to keep in mind here is that prior to the Bitcoin Paper we literally didn’t know how to have permissionless. Yes, we had distributed databases. And yes, we had federated databases. But all of those still had a small group of entities in charge (cf pretty much every financial network such as ACH or VISA). We didn’t have a protocol for maintaining consensus – meaning agreeing on what’s in the database – that would allow anyone to join the protocol (as well as anyone to leave).

It is difficult to overstate how big an innovation this is. We went from not being able to do something at all to having a first working version. Again to be clear, I am not saying this will solve all problems. Of course it won’t. And it will even create new problems of its own. Still, permissionless data was a crucial missing piece – its absence resulted in a vast power concentration. As such Web3 can, if properly developed and with the right kind of regulation, provide a meaningful shift in power back to individuals and communities.

And if widely adopted Web3/crypto technology will also start to improve along other dimensions. It will become faster and more efficient. It will become easier and safer to use. And much like the PC was a platform for innovation that never happened on mainframes or mini computers, Web3 will be a platform for innovation that would never come from Facebook, Amazon, Google, etc.