Welcome to Web 3
How we got here, and why we're just getting started.
Innovation is cyclical.
In 1942, the economist Joseph Schumpeter first proposed the concept of innovation cycles, where economies progress and grow through cyclical and accelerating bursts of innovation, adoption, and gradual replacement of key technologies.
But where are we today within the context of these innovation cycles? As someone passionate about helping build the future, this is something I’ve been asking myself for a while now, but only over the past year has the answer become increasingly clear.
We are currently approaching the end of our most recent innovation cycle, Web 2, dominated by apps, smartphones, and the big Tech behemoths like Google, and just now beginning to enter a new cycle, aptly named Web 3, defined by blockchain, decentralization, and the increasing importance of digital technologies in our everyday lives.
But to understand the unique moment in history that we’re living in, we have to first understand where we came from and how we got here. So let’s dig in!
To predict the future, look to the past.
Web 1 - A messy beginning
Quick reminder: from the ‘90s until even the early 2000s, people still viewed the internet much in the same way that many view crypto today - as a ‘passing fad.’
Even as internet adoption skyrocketed to 125M users by 2000, in the US alone, for most people, the internet was still a novelty.
And you can even see that newness come through in the language of the time. From “surfing the internet,” “exploring the world wide web,” and “writing electronic mail,” we were still using analog metaphors to explain how the digital world worked. This was what today we can refer to as Web 1, the first iteration of the Internet.
Here’s a great quote from Chris Dixon, a GP at the VC firm Andreessen Horowitz and Web 3 evangelist1:
The internet of the 90s and most of the 2000s was very different from today. For most people back then the internet meant a desktop computer…to check email or stock prices or research a vacation…Friends ran from 1994-2004 and it’s full of obsolete devices like payphones and answering machines…There’s a revisionist history that the internet followed a mostly smooth adoption curve…adoption was much bumpier and episodic.
For many people, the internet was still too new to really understand its potential to reshape every aspect of our everyday lives.
And of course, the Dot-Com Crash of the ‘90s didn’t help, when excessive stock market speculation and inflated expectations in internet companies eventually popped a massively overhyped bubble. After hitting an all time high in 2000, the dot-com heavy NASDAQ declined 75% by 2002, taking down some of the largest internet companies of the time and completely resetting the competitive landscape2.
We had crashed from a peak of inflated expectations, and hit rock bottom, at the trough of disillusionment3.
Yet through it all, the builders continued building, and internet adoption continued to increase.
Web 1 was a beautiful introduction for how the internet could improve our lives, but the technology simply wasn’t there yet for mass adoption. Our computers were too slow and bulky, our internet connections too slow, and our ecosystems too immature.
But as we came to see in the following years, mass adoption of new innovations simply takes a magical combination of time, technological advancements, and cultural catalysts.
Web 2 - Apps, Recessions, and Platforms
If Web 1 was a rehearsal, Web 2 was the main act for the internet.
By 2008, 25% of the world’s population was online, and it was fairly clear the internet was here to stay.
We hadn’t quite hit mass adoption yet, but things were about to change.
2007 to 2008 saw the introduction of key technological and cultural catalysts that created the modern Web 2 economy that we live in today, where digital technologies have fundamentally disrupted every aspect of our analog lives.
And it’s all thanks to two key events: the introduction of the iPhone, and the Financial Crisis of ‘08.
There’s an app for that
In 2007, Steve Jobs walked onto a stage and changed the future of the internet by introducing the world to the iPhone. While not the first smartphone, the iPhone was revolutionary because it made the internet so sexy, simple, and accessible that anyone could suddenly use it.
Suddenly we had jumped from a world of cramped physical keyboards, to a world of touchscreens with simple and clean app-driven interfaces. In the coming years, we began to enter a new world: one where there was an app for everything, accessible at the press of a button.
We started with slow 3G wireless connections and simple gaming apps like Doodle Jump, but over the following decade, mass rollouts of 4G LTE networks across the US and the world, along with the introduction of open source Android OS phones, enabled entire countries to adopt smartphones and leapfrog the desktop → laptop → smartphone progression that the US and other developed countries had followed.
In the years since, internet adoption has only continued to skyrocket globally, hand in hand with the growth of the global smartphone market.
A shifting of the narrative
And smartphones and the rise of the App Economy were only one half of the story!
Technology is nothing without the Culture that utilizes and shapes it, and in 2008, just as we saw smartphones introduced to the masses, we also witnessed the global economy crash thanks to the Financial Crisis of ‘08, caused by an unfettered real estate bubble and overwhelming greed from the financial markets.
The fallout was swift and severe, crippling the American and global economy, but perhaps more importantly, forcing an entire generation of Millennials, the oldest of whom were just beginning to enter the workforce, to figure out how to make a living in a world where many of the traditional office jobs of generations past were gone forever.
But where there are lemons, one can make lemonade. And for innovation to take please, one needs a set of actors to turn ideas into action.
The Financial Crisis forced Millennials to become those actors, who in the prime of their young adulthoods, found themselves in an upended and chaotic world, hungry for the opportunity to make something of themselves.
But in the chaos, there is also opportunity - and in the years following the Financial Crisis, we saw the narrative quickly shift.
Wall Street was suddenly out, and now Tech was in.
America has always loved the scrappy underdog, and Goldman Sachs and the Big Banks were the villains who bankrupted the world, and Tech was an optimistic opportunity to build a better and brighter future for all, complete with ping pong tables and cold brew on tap.
The stage was set for Web 2 to fulfill the future that Web 1 promised but couldn’t deliver. What happened next was the creation of the internet as we know it today.
Digital disruption, everywhere
At the beginning, opportunity was everywhere to introduce digital tech to different industries and verticals.
And while we saw many different startups rise to prominence, the ones who scaled the largest, generated the highest returns, and had the most consequential effects on their customers and society at large were platforms, the main characters of Web 2.
In simplest terms, platforms are centralized internet middle men that serve as a base upon which other apps, products, and services can be built.
Pretty much any major tech company you can think of today is a platform. The largest six make up 25%+ of the S&P 500 market capitalization: Facebook (now Meta), Amazon, Apple, Google, Microsoft, and recently, Tesla. And the list goes on: from Airbnb to Uber, Shopify, Booking.com, Robinhood, and more.
In aggregate, many of these companies have helped create our modern digital economy.
At their best, platforms offer a centralized, trusted, and standardized way to empower and connect all relevant parties to most efficiently buy, sell, exchange, and interact with virtually anyone or anything.
And unlike in the early days of Web 1, where most users were passive participants and consumers of information, Web 2 unlocked more of the internets potential, allowing anyone to easily become an active creator and participant in our global digital economy.
But as the largest platforms have grown to unprecedented global scale, we’ve seen that the very centralized nature of platforms that brought them so much success, can be a threat to the stability of the world at large.
From disruptors to incumbents
You’ve probably heard it before, so I’ll keep it simple.
Web 2 platforms have too much power.
Facebook is the most obvious example. As of Oct ‘21, they have 2.9B daily active users, which is 37% of the Earth’s entire population, and larger than the populations of China and India combined4.
To date, Facebook and its other businesses (Instagram, Whatsapp) have become so embedded in our day-to-day lives that we’ve seen its power to sway elections5, incite political revolutions6, and cripple entire economies when not functioning properly7.
And while nothing is black and white in terms of the positive vs negative impacts that the rise of platforms like Facebook have brought forth, it is immensely concerning that Facebook is ultimately ruled with an iron first by one man - Mark Zuckerberg.8
In any other era, a man who has access to and influence over 37% of the Earth’s population would be considered an emperor.
But in our strange modern world, where our politicians are too old to even understand how Facebook makes money9, and tech has the ability to scale at unprecedented rates, there seems to be little that anyone can do to check the absolute power that platforms like Facebook and others (ex. Amazon & Google) hold over virtually every aspect of our modern lives.
No one man should have all that power!
- Kanye West
However, the critical issue with our existing Web 2 world is not that platforms or Tech in general are inherently bad innovations.
Progress requires iterations, and for all the challenges and issues that have come with the rise of Web 2, the technological advances we’ve seen have also engendered a more interconnected world, unlocking opportunity for billions of people to communicate better, learn faster, build better, and elevate their own positions in life.
Rather, the core issue with Web 2 is that platforms are inherently extractive and centralized, resulting in a power imbalance that benefits the platform and its owners far more than the users themselves.
Platforms are most valuable at scale, which means acquiring as many users as possible with minimal cost, which almost always means free to use. But nothing is truly free in life — users may get to use a platform and enjoy its services, but the benefits almost always end there.
At scale, platforms and their owners come out the far bigger winners, as they can monetize and profit their large database users in a plethora of ways, from advertising to data mining, subscriptions and more. The more users they have, the more valuable the platform. The upside is virtually unlimited.
But at the same time, users almost never own their own data, and perhaps most importantly, don’t share in any of the financial upside as a platform grows.
On top of all this, users are also exposed to arbitrary platform changes, censorship, security vulnerabilities, and lack of interoperability between platforms. The list goes on.
Until recently, we didn’t really have the tools to tackle the underlying inequalities that exist within the Web 2 internet. But in the past year or so, we have seen a Cambrian explosion10 of activity, built on top of blockchain technology, that is starting to crystallize and herald a new way for how the Internet can be run, if we work hard enough: Web 3.
Welcome to Web 3
So what exactly is Web 3?
Web 3 is both the natural next evolution of the internet, as well as a return to the original founding vision of what the internet should be: a decentralized and open World Wide Web that is owned, built, and operated by its users.
In retrospect, it’s easy to now see that Web 2, with all its flaws for relying on centralized platforms, was perhaps a critical and necessary stepping stone to helping onboard much of the world into the digital age.
And in recent years we’ve seen the world evolve in such a way that we can finally begin to see the early beginnings of Web 3, thanks to COVID-19 and the recent maturation of blockchain technologies.
Almost two years ago, the entire world was suddenly forced to adopt digital technologies to live, work, and operate on a daily basis.
From remote work becoming the new normal, to the explosive growth of digital metaverses like Roblox & Fortnite, rapid adoption of contactless payments and mobile-first banking/trading, and much much more, COVID-19 has already drastically accelerated digital adoption across effectively every aspect of our daily lives.
And in the midst of all this, we’ve also seen blockchain technology, born of the Financial Crisis of ‘08, mature and finally start on the path to mainstream adoption.
It may have started with Bitcoin, originally conceived as an incorruptible digital currency for the modern era, but in the 13 years since Bitcoin’s introduction, we’ve seen blockchain tech evolve to bring us Ethereum and smart contracts, which in turn brought us ERC-20 tokens, Nonfungible Tokens (NFTs), Decentralized Finance (DeFi), Decentralized Autonomous Organizations (DAOs), and so much more.
If you don’t know what any of those terms mean, you will soon.
Because these technologies are the building blocks for a Web3 future. A future where NFTs create verifiable digital property and ownership, DAOs decentralize labor and businesses, and DeFi allows anyone to become a bank and exchange value at anytime, anywhere across the world.
The writing is on the wall, which is why we’re seeing all the big tech companies move as quickly as they can towards Web 3. From Facebook going all in with Meta, to Square becoming Block to focus on Bitcoin, Twitter and Reddit integrating NFTs, and Apple preparing to launch their AR glasses to enter the Metaverse, the momentum is clear and unstoppable.
Currently, crypto and Web 3 adoption is outpacing internet adoption, but it’s still very early. 2022 is the new 1996, where we’re still experimenting, building, and figuring out what works and what doesn’t.
It’s a verifiable Wild West out there today, filled with chaos, uncertainty, but more than anything, opportunity to build a better world.
And that’s why I’m diving headfirst into the Web 3 world, joining myosin.xyz, a growth marketing DAO, as Head of Product and Community. I’m headed to the frontier, and I’d love for you to join me as I explore the great unknown that is Web 3.
From DAOs to NFTs, DeFi, Metaverse, and more, I’ll be reporting back on my learnings and insights along the way. Because if we all help each other navigate through this new Internet, we can all make it, together.
If that sounds fun to you, feel free to subscribe below, share with someone you think would be interested, and/or follow me on Twitter at @blakeminhokim.
See you on the frontier!
Blake Minho Kim