What does a “decentralized web” mean anyway?

I have been hearing for a while comments such as “web 3.0 is going to be a decentralized web”, and I must admit to not paying a lot of attention. After all, the web is already “decentralized”, right? People host web sites all around the world! Recently I have been digging a bit deeper, to turn buzzwords into real concepts I can put a finger on. So, here is my personal (current) take on web 3.0.

It’s all about Cryptocurrencies, right?

Well, maybe. A lot of people talk about web 3.0 from a cryptocurrency / blockchain / distributed ledger / non-fungible token perspective. You can put me in the skeptic camp at the moment. These technologies may be a good solution for some problems, but I am always wary of anyone who starts talking about technology before real life problems.

Personally I think the vision of “web 3.0” is more of a cultural change, where crypto might be a useful technology to support that move, but I don’t think it is mandatory. 

A Future Commerce article recently reminded me of “The Pygmalion Effect”. Basically talk about something enough and it may become real because everyone is talking about it. They expect it. When people talk a lot about a technology, some investors put money into it, then they want to see returns, so *something* happens regardless of whether it is good or bad. I worry about crypto technologies falling into this camp. 

Facebook’s rename to “Meta” for the metaverse is another example of The Pygmalion Effect. There will be a metaverse because Meta said there will be and is throwing money at it. VCs are investing just in case. I think it’s going to happen. What it will be exactly, I am not sure. But I am pretty confident there will be a metaverse! Heck, they already made a movie on it! (Ready Player One.) So people can already grasp what it might be like. We will just have to wait and see how many people want to put in VR headsets for extended periods. (I am more bullish on AR over VR myself.) Apple’s entrance into the market seems to be getting closer, with much sleeker devices than the norm today. Apple has successfully matured multiple areas before (mobile phones being the most obvious example), and I expect will do it to the AR/VR world as well.

But back to crypto. There is a problem that these technologies are being considered for solving. You can use a blockchain ledger to prove a transaction occurred to other people (“I paid for this”), without a third party. For example, your favorite music band puts on sale a T-shirt. You buy it, and it also gives you rights to a digital version of that shirt. Now all the games you play where that T-shirt is available can check and say “yes, you have paid for that shirt, here it is!” So even though you are on different gaming platforms, you can use your digital T-shirt across them all.

Does this require a blockchain? No. You could use a digital signature instead for example, or have public services with APIs to check ownership. With a blockchain, proof of ownership does not reside with a single 3rd party – it is encoded in a public ledger which is distributed and replicated across lots of computers. This saves money right? No need for a 3rd party who will want a cut of the transaction! This is where reports of the amount of CPU consumed by blockchains comes in (e.g., “Bitcoin Uses More Electricity Than Many Countries”). Does that sound like a “good” solution for proving ownership? (As I said, I lean towards the skeptics camp as to whether its the best ultimate solution.)

And there is another question. Will different competing game platforms agree on a shared digital ownership platform? Or will they demand you purchase digital assets again on their own platform? There is a commercial business side that will be interesting to see how it evolves. Microsoft’s purchase of gaming companies may mean that they don’t care about purchases from other games. Buy from Microsoft and stick to games they own!

So what is web 1.0 / 2.0 / 3.0 about then?

So what then is web 3.0, when compared to web 1.0 and 2.0 (as part of “the world according to me!”).

Web 1.0: This is the world of static web sites where publishers create content that others consume. It is also often referred to as “the read-only web”. Publishers often made money advertising things they sell, or showing ads for what other people sell.

Web 2.0: This is the world where the web becomes interactive. Readers can contribute content. Likes, comments, social media, reviews, and so on. It is often referred to as the “read-write web”. Creators on platforms can often get a share of the revenue the platform makes.

Web 3.0: The world is decentralized. The goal is no longer to make all information available to everyone. Instead, it is a story where there are more smaller focused communities. Membership matters. This is more of the world of Discord servers. Creators are still present on bigger platforms, but there is a separate “community” space accessible by their closest supporters. Not all of their content is public. They also start adding direct revenue streams from their community rather than relying on a share of revenue the platform earns.

Remember that web 1.0 did not go away with the advent of web 2.0. Similarly web 3.0 is not a replacement of web 2.0 practices. It is a new way of looking at what a significantly large portion of people are doing, and so is worth a label.

So why is this change happening? One reason relates to the rise and evolution of content creators. They started on platforms, but as creators turn into serious businesses, risks start floating to the top.

The risks of platforms

One risk of relying on a platform for your traffic (and hence income) is platforms change their algorithms. Algorithm changes are not (necessarily!) malicious. Positive reasons for changes include:

  • To give users a better experience
  • To prevent unfair exploitation due to loopholes

Any change can however result in some existing sites getting less traffic (for good and bad reasons) while others get more traffic. So even though the overall traffic level may stay the same (or increase), some people are likely to be worse off after a change. Obviously those negatively impacted will not be happy.

The risk is if individuals are relying on a platform for a significant amount of revenue, algorithm changes can have a major impact on their bottom line, and its completely out of their control. There are many surveys showing that this is a significant source of stress for many content creators. At any time their hard work could disappear, and it’s (somewhat) unpredictable.

This has led to interest in revenue streams that are not tied to a platform that they do not control. They are still present on platforms, but other revenue models are becoming increasingly common.

Profitability of platforms and communities

Different platforms have different models of monetization. It is not my intent to go into specific offerings and their relative profitability, but understanding the variations can be interesting. Revenue streams for a content creator include:

  • Advertising revenue (a share of platform’s profit from ads)
  • Affiliate revenue (being rewarded for referring a traffic to another site)
  • Creator funds (a pool of money shared by platforms with creators, according to some rules)
  • Sponsorships (getting paid by sponsors who support you out of good will)
  • Merchandising (show your loyalty by buying my T-shirt and mug)
  • VIP access to restricted content (“behind the scenes passes”)
  • Training courses (“I will share my expert knowledge for a fee”)
  • One-on-one consulting (“you will get my exclusive time, at a price”)
  • Tipping and Subscriptions (“if you enjoy my content, please support me financially”)
  • Digital asset ownership (buy rights of ownership of a digital asset)

More tools and services are appearing to support these different forms of revenue sharing, with more support for direct money transfers from the viewer to the creator. Patreon, Stripe, and many more are building increasingly solid offerings to support a wider range of models.

One of the famous papers in this area is “1000 True Fans” by Kevin Kelly [2008]. He puts forward the model that if you want to earn a living from your creative content, you don’t need to gain millions of followers. Rather, focus on building a core base of 1,000 true fans that will buy everything you create. If you have such a base you will naturally have a larger base that will pay for some of your content, and an even larger base that will follow and talk about you even though they will not pay anything. Focusing on a core of 1,000 is a much more manageable proposition.

Audience vs Community

The 1000 True Fans paper brings us to the difference between building an audience and building a community. Many of the big platforms today are oriented around audiences where lots of people can consume your content. Yes, your audience can leave likes and comments, but the platform owns the audience, not you. You can share a message with your audience members, but the platform frequently does not reveal audience contact details of followers. If you move to another platform, the audience does not automatically come with you.

Platforms such as Discord are different in that they encourage more engagement in a smaller community. Yes, creators still publish content, but in the private space there are more discussions between community members. The space is only open to members, creating a feeling of exclusivity. Presented content (like screen shares and Clubhouse-style audio meetings) may not be recorded, meaning you have to be present or else you miss out.

The result of communities is smaller groups of people that are more dedicated and passionate about areas of interest. The community has its own space (on Discord/Slack, a dedicated website, or similar). There is a greater feeling of separation between spaces, compared to social platforms where content from many creators is more mixed together.

Creators benefit as they have more ownership over their communities. They bear more responsibility to bring in traffic, but the goals are more modest. The goal is not to achieve millions of viewers, but rather hundreds to thousands of members..

So are the current platforms going to go away?

Like all changes, market dynamics will change as the more communities grow. The old models will not completely disappear, but traffic levels will change and how people use platforms will change. For example, creators may post content on multiple social platforms, not for revenue on the platform, but as lead generation for their own communities.

Another consideration is the open web is not growing, and has not for many years now. With all the growth in technology, why not? I think there is a lot more content available – it’s just not public on the web. A lot of content has been created on social platforms, and some want people to stay on their platforms, not browse around the open web. For web 3.0, I think a decision for people creating content is who they want to share it with. It is no longer a model of “share as much as I can, as often I can, to earn a percentage of what the platform will give me” (on the open web or in a “closed” social platform). I think the new world is one requiring more thoughtful consideration of what to share where, including how to monetize it (if revenue is a goal).

Is web 3.0 a good thing?

One debate is whether the more commercial footing of web 3.0 is a good thing or not. Isn’t this against the idea of an open web? 

In my opinion: maybe. 

The reality is that the open web is only as successful as it is today because it has provided financial worth. I am not saying all content on the web is there for financial reasons, but a lot of it is. Businesses share information to reduce support costs, increase customer loyalty, promote new products, and so on. If there was no money to be made on the open web, it would not be as big as it is today. And as soon as you think people creating good, entertaining content should receive financial support (in return for their time spent), then they slip into being “businesses” too.

So I don’t think everything about the web should have a financial reason for existing, but I do think it is reasonable that people creating valuable content are able to earn money for providing services or entertainment to others.

Wrapping Up

I shared my personal take on web 3.0. There is no exact definition.

Blockchains and crypto-technologies may be a part of that vision, but I don’t think it’s obligatory for web 3.0 to exist. You don’t have to have a distributed block chain ledger for small tips, or to prove you own something.

When is web 3.0 coming? I look at my kids. They don’t ever watch normal TV. They watch YouTube videos on content regarding their current favorite games. They hang out with friends on Discord servers. They spend more money inside games buying things than physical goods. I don’t think web 3.0 is “coming soon”. I think it is here now and has been for some time. It is more getting a label, and increasing in significance in respons to demand.

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