Why Web3’s Shared Data Across Applications Doesn’t Matter
The ability for applications to read and write their data to the blockchain will be inconsequential
When you ask people what Web3’s biggest value props are, a common answer is sharing interoperable data across applications. Here’s what a typical explanation looks like:
Chris claims that shared data like “usernames, social graphs and posts” are an important reason why Web3 apps will differentiate from and outcompete Web2 apps.
At a high level, this sounds appealing. Shared data is an awesome resource. It’s like how in Web2, anyone can tap into the data of Wikipedia articles or Hacker News posts by importing from their APIs and data dumps, but extended to all the data inside every app on Web3.
Challenge for readers
Please stop reading for a second and ask yourself: How do you analyze this kind of abstract claim? What’s the approach for unpacking it?
Most people don’t have the mental toolkit to process this claim. They’ll live out their whole lives not realizing what they’re supposed to do in order to productively analyze and discuss these kinds of claims.
So consider using this as an interesting mental exercise. Take some time to ponder how you would go about analyzing the claim that web3 adds value by letting you share data across applications.
Scroll down for the answer.
The answer is that we need to use this one weird trick: SPECIFICITY.
We need to unpack the abstract high-level claim with a specific example or two. Things tend to look very different when you look at them lower-level like “Which specific app might want to share which data exactly?”, rather than focusing entirely on abstractions like “Does shared data represent a social and technological advance?”
Example 1: Podcasts
The podcast ecosystem is an example of shared open data. To publish a podcast, you need to publish an XML feed on the web. Different podcast players like Apple Podcasts, Overcast, and Spotify are all reading from the same set of published podcast XML feeds on the open web.
The problem is that participation in this ecosystem is voluntary. For instance, nothing is preventing Spotify from having exclusive podcasts that aren’t published to the open web. That’s what they’ve famously done with the Joe Rogan Podcast, and it may be a highly successful strategy for them. As of 2021, Spotify has become the most popular podcast app, so its strategy appears to be working well.
Would it have made the situation any different if Joe Rogan’s podcast had been published to the blockchain, rather than being published to a web2 server? No. Spotify would still have offered him $100M to take his podcast feed off the blockchain and let them monetize it with ads.
Example 2: Twitter
Imagine if Twitter’s CEO, Parag, was super idealistic and wanted to port Twitter to Web3 to maximize value for users; shareholders be damned.
In our hypothetical example scenario, Parag leads Twitter to take the following steps:
- Publish all user profiles to the blockchain
- Publish the follower graph to the blockchain
- Publish the entire tweet database to the blockchain
- Publish a version of the Twitter source code that anyone can run on the blockchain
Since we’re assuming that Parag is voluntarily leading Twitter to embrace this open Web3 data-sharing, we’re sidestepping the question of how a new Web3 social network could compete with Twitter’s established closed-data network-effect moat. We’ll be analyzing Web3’s value prop under these ideal conditions. This is easy mode for Web3.
In this idealized scenario, the first thing that would presumably happen is that President Trump would fork Twitter and unban himself, and then millions of people who want to follow Trump would use Trump’s fork. At this point, both OG Twitter and Trump Twitter would be fully interoperable. It’s just that people on the OG Twitter fork wouldn’t see Trump’s tweets, same as if they’d personally blocked Trump.
So far, this situation is equivalent to what would have happened if, rather than banning Trump, Twitter had instead auto-blocked Trump on every user’s behalf, but was allowing users to manually unblock him. Back on Jan 6, 2021, many people would have argued that auto-blocking Trump was preferable to banning Trump, and their opinions would have been ignored by Parag. But now those people are empowered to decide for themselves whether or not they want to block Trump. Pretty cool.
What happens next?
A new startup, Chirper, raises $500M by promising to build the most popular Twitter client.
Chirper is a closed Web2 product. It vacuums up all tweets in realtime from Twitter’s blockchain, but doesn’t share its own chirps on the blockchain.
At this point, most Twitter users say “screw these Chirper guys, ngmi, I’m supporting Twitter and the Web3 community”.
What does Chirper do next?
Chirper pays Kim Kardashian West, who has 70M Twitter followers, $25M/yr to move exclusively to Chirper. If you’re using Twitter, you see the first half of Kim’s chirps, followed by “…see the rest of this chirp on Chirper” and a link.
A thousand other prominent Twitter accounts get lucrative contracts to switch to Chirper. Now everyone’s Twitter timeline is full of half-tweets linking to Chirper.
At this point, which Twitter client does everyone want to use: Twitter or Chirper?
That’s it. Checkmate. Web2 Chirper becomes more popular than Web3 Twitter.
But won’t there also be 10 other Web2 companies competing with Chirper? Sure, there will be, and none of them will care about open data on the blockchain.
This is already the state of social network startups today. Data interoperability is already totally possible in Web2, like with podcast XML feeds. Nothing will change once blockchain gets more mature at supporting data interoperability.
My conclusion from these two examples is that while open data is an appealing abstraction, the ability to publish open data will be inconsequential, because a world where all services publish all their data is an unstable equilibrium regardless of its data-layer technology.
Spotify can take podcast-listener market share without sharing its data. Chirper can take Twitter-user market share without sharing its data.
In any lucrative space (podcasting, microblogging, etc), companies with a closed-data model can outcompete open-data alternatives for market share, and make large profits doing so.
If you liked this post, I’ve written more skeptical Web3 takes here:
- Chris Dixon’s Crypto Claims Are Logically Flimsy
- Naval Ravikant and Chris Dixon Didn’t Explain Any Web3 Use Cases
I also write a blog called Bloated MVP.