a16z Founder: How Can Cryptocurrencies Upgrade Web2 Networks into Web3 Economies?
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a16z Founder: How Can Cryptocurrencies Upgrade Web2 Networks into Web3 Economies?
The internet began with great promise, but over the past decade it has been overtaken by a few massive, tacky theme parks. We can build great cities to replace them, with thriving economies.
Navigating Web3 tides with focused insightsBy Chris Dixon, co-founder of a16z
Translated by TechFlow
Over the past 20 years, we've built networks on the internet. Social media platforms like Instagram, Twitter, YouTube, and Discord are all networks—divided into billions of small networks composed of fans, friends, subscribers, supporters, and more.
These platforms have given many people audiences they previously lacked. However, due to a fundamental misalignment between the networks and the companies that own them, we’re seeing increasing tension around the rules and economics governing these networks.
For example, social media companies that control large networks frequently kill promising third-party developers, suppress cross-network interoperability, charge excessive fees, and adopt intrusive advertising models—not necessarily out of malice, but because it's the logical outcome of their business model. If you don't do these things, your competitors will, and you'll be driven out of business.
I’ve written extensively about this issue before. We’re now entering a new era of the internet—Web3—where we have the opportunity to upgrade these networks into economies, building systems where the incentives of network owners, participants, and third-party developers are fully aligned.
An economy refers to a network with freely flowing cryptographic assets—from any node to any other node—coordinated by decentralized participants rather than a centralized network owner.
Why cryptocurrency?
In theory, you could have a digital economy without cryptocurrency. But crypto ensures true ownership of goods (NFTs) and currency (tokens), reduces switching costs, and prevents networks from reverting to Web2 tactics like deprecating APIs or increasing take rates.
When Web2 networks engage in commerce, they face very limited ceilings, with centrally dictated prices, products, and buyer-seller relationships. Because users are locked in, Web2 extractiveness is extremely high.
A true digital economy is like a real-world marketplace. Anyone can create new goods and services and freely transact with anyone else. People can fully express their creativity and enjoy the economic rewards of what they produce.
What might a new economy built atop existing networks look like?
We can glimpse the future by observing emerging NFT communities. For instance, the CryptoPunks economy flows across Discord, Twitter, Telegram, OpenSea, Larva Labs, and beyond. They are cultural artifacts whose value comes from shared myths, memes, stories, and experiences within their surrounding communities.
Now apply this to the real world—say, a band that has spent years building a fanbase but today earns only fractions of a cent from streaming services. Using tokens and NFTs, the band can upgrade its network into an economy.
Goods flowing through the band’s economy might include social tokens, digital art, collectibles, tickets, in-game items, exclusive experiences, or anything else creators and technologists dream up (we're still early—many great ideas remain undiscovered).
The band earns revenue from primary sales and resales, may hold a significant portion of fungible tokens, and shares incentives with the community to grow the economy as large as possible. If you have a good idea, you’re welcome to contribute or build on top. Systems and services become like Lego blocks, accelerating progress for everyone. Like something another economy is doing? Don’t compete—collaborate.
Economies that grow organically from the bottom up eventually resemble cities, while those centrally controlled and owned by a company end up looking like theme parks. No single company can match the creativity of a thriving ecosystem.
The internet began full of promise, but over the past decade has been dominated by a few massive, soulless theme parks. We can build great cities to replace them—cities with vibrant economies. We have the tools, and the seeds have already been planted.
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