Understanding the Incentives for Web3

Why Sangeet Paul Choudary is working with Boson Protocol

Boson Protocol

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BosonProtocol

8 min readOct 22, 2021

Sangeet Paul Choudary talks about why he got into platforms, why he is taking his work in a new direction, and finally why Boson is a good home for that exploration.

I first got into understanding platforms more than a decade ago, before people saw them as an economic phenomenon. As a business scholar and entrepreneur, I’m fascinated about how systems work at an elevated level. What is fundamentally changing? And how do those changes translate into experiences that we see in the world around us? Some people like to solve very specific, tactical, concrete issues. I’m fascinated by understanding and explaining things from first principles, using the rules of physics and economics, rather than jumping to conclusions from the evidence that we see with our eyes, which are really an outcome of those rules.

Back then, I wanted to explain why business models were changing because of digital technologies. Plenty of authors were framing this question in their own way. The shift from offline to online. Non-intelligent to intelligent systems. Web1 to Web2. But nobody was really articulating the fundamental shift in business models. That’s what got me hooked.

My work during the first half of the 2010s looked at the move from pipelines to platforms, which I write about in my best-selling books — Platform Revolution and Platform Scale — as well as my top-ranked HBR and Wired articles. I’ll admit that I initially drank some of the Kool Aid about how Facebook, Airbnb and others were making the world a better place.

Rise and fall of Web2 platforms

By the second half of the decade, the direction of my work had changed. I started to pick away at the seams of platforms, exploring whether the platform economy had grown too big. Were platforms actually beneficial for their users? Or were they, in fact, extrapolating their power and in need of regulation?

Issues around antitrust are well known today, but it wasn’t so long ago that platforms such as Uber and Deliveroo were held up as disrupters of outdated markets. So, it was absorbing to take a contrarian approach, as I worked with the International Labor Organization and the World Intellectual Property Organization, and subsequently addressed the Danish Parliament on these issues, which eventually provided governments with a new lens for seeing the user-platform relationship.

I’m sometimes asked whether I feel disappointed or let down by platforms for failing to create a fairer ecosystem, where wealth is shared more equally. By watching the evolution of platforms take place, at scale, I was able to develop additional lenses of policy, fairness, and societal value.

This journey led me to Boson Protocol. Their founder Justin Banon had been inspired by my work on platforms, and used it to build out his previous company. When he called me in March this year, I wasn’t entirely sure whether this was a fit, but I soon realised we were a perfect match. My reasons boil down to two clear insights, which I believe are critical for understanding what platforms mean for the Web3 world.

1. The platforms of the future will not be merely demand aggregators

Facebook, Google, Amazon and others aggregate demand at scale, whether as a social network, search engine or eCommerce site. They organise and control the entire ecosystem, running both the marketplace and the rules of participation.

When they grew to prominence, these Web2 platforms were hailed as the great unbundlers of vertical corporations. Amazon, for example, was going to liberate the sellers who were confined by the rigid supply chain demands of Walmart and similar large retailers. Sellers were drawn in by the promise of an open marketplace, and the potential to reach a far wider, global audience. Of course, many of these businesses have prospered as a result.

Yet, the promise of openness remains empty. We never reached the Promised Land. By aggregating demand into a controlled space, Amazon can extract value rather than distribute it fairly. It can centralize and exploit data. Commoditization is another problem, as sellers must fight tooth and nail to become the default seller on Amazon’s Buy Box, or risk losing the market. Amazon unbundled the fixed structures of retail corporations, but then bundled them back up by regulating access to the consumer. Sellers are captive once more.

Boson Protocol aims to decouple the control point, separating the marketplace from the rules of participation, and so create a new network on which world commerce can run. To unbundle the unbundlers. No regulated access to the consumer. No price matching algorithm that forces the seller to match and sell in a certain way. No Buy Box. Instead, there is a competitive market all the way down, where sellers have more choice in terms of who they want to sell their wares through. One protocol to unite many different marketplaces and agents — and may the best win on merit alone.

I like that Boson has a clear vision of becoming the protocol upon which future commerce takes place. The big challenge for any new technology or business model is to get the early adopters on board, then spill over into a more mainstream audience. Finally, you need to solve all the corner cases that need to be solved. I think Boson has the right team of people to bring this roadmap to reality. In fact, they are already heading fast in the right direction.

2. Decentralised technologies will incentivize distributed wealth creation

The second insight is that Web3’s decentralized technology will essentially create the mechanisms that enable incentives for fairness and distributed wealth creation. We’re not there yet. Too often, Web3 folk see the technology as the solution. As soon as we free up data and give back freedom of choice, then the masses will pour over, right? Web3 will sweep Web2 aside! Not so fast. Between technology and solution, there is something called incentives. How do you leverage decentralized technologies to set up the right incentives for distributed wealth creation?

Part of the answer is minimal extraction at the protocol layer. Instead of a 30% cut, the smart contracts require just a minimal cut, and cycle money back into the ecosystem. A solution for this does not exist yet.**

What I like about Boson is that they are pragmatic on the possibilities of decentralized commerce. They are trying to solve both a structural problem and a practical consumer use case. That’s rare.

Boson wants to solve the problem of creating trust for transactions in a decentralized world, in the context of commerce. By solving these real problems, I see an opportunity to apply a lot of my new principles and see them work and deliver results in a very quick feedback loop.

Web2 bad, Web3 good?

This pragmatism is also important for avoiding the mindset of “Web2 bad, Web3 good”. When you start taking positions, then you don’t see the full picture. Let’s be honest. Web3 won’t solve all the problems. Web2 got plenty of things right. In my conversations with Boson, we talk a lot about how Web3 can fix the failings of Web2. But we also discuss how to execute the wins of Web2 within the current limitations of Web3.

Consumer data harvesting is a simple example. Web2 dropped the ball, leading to accusations of surveillance capitalism and privacy issues. They extracted data beyond what was needed to provide users with their service. In fact, it is often argued that exploitation of personal data is fundamental to Web2 business models.

But not all data extraction is wrong. There’s a lot of value to both the seller and buyer from analytics and market intelligence, and some data will need to be collected for transactions to take place. The benefit of Web3 is that you can have data privacy while avoiding massive data harvest with extractionary goals. Zero-knowledge and other privacy-protecting technologies can be used to protect personal data from users.

So, you have to incentivise data contribution rather than extraction. You can end up with a “best of both worlds outcome” — something that delivers the value of Web2 within the framework of Web3. That’s the kind of conundrum I enjoy most.

Optimism for the future of Web3

I increasingly believe that what we are creating with Web3, either in its current or evolved state, will provide a lot of the infrastructure and systems that future companies and business models are built on. Before the pandemic, I might have given a different answer, but the maturity of technology has changed so much over the last year alone.

The rapid improvement in technology and widening of the user base is one reason to get excited about Web3. What are the other seismic shifts that could accelerate change and help craft a world where Web3 is the natural next step? The rise of the metaverse is one of those events. There is a whole generation that is growing up indoors who want to spend their life somewhere uplifting outside the real world.

We’re also seeing a big shift in financial infrastructure in general. I’m not saying we’re at a point where DeFi is going to replace our financial systems. But all of our existing financial systems are giving a long, hard look at how to overhaul infrastructure that was created in the 1970s. And by infrastructure, I don’t just mean technology, I mean business models as well.

No better time to be alive

If you are motivated by understanding how business systems work — the laws of physics and economics — then there’s never been a better time to be alive. Thirty years ago, value creation models were largely static. Ten years ago, they were accelerating rapidly, but nothing compared to now. And it’s only going to escalate further.

We are in an era where understanding how things work — how new technologies fundamentally change the systems around us and how to make good predictions based on those interpretations — is an incredibly important field of work that impacts the lives of millions worldwide. That’s what excites me.

If we can discover the incentives that will drive wealth creation with Web3 and show the difference between real value and speculation, then Web3 platforms will become the natural successor to Web2’s aggregators of demand. That’s what attracts me to Boson.

Watch this space. A more equitable and fair alternative will always prevail. It’s written in the rules of nature.

** Boson Protocol will launch on Mainnet in November 2021.

About the author

Sangeet Paul Choudary is a business scholar, entrepreneur, author, and advisor to Boson Protocol. He is best known for his work on platform economics and network effects. He is the co-author of the book Platform Revolution: How Networked Markets Are Transforming the Economy and How to Make Them Work for You.

About Boson

At Boson Protocol, we are creating a decentralized commerce ecosystem that everyone can use and anyone can trust.

Boson Protocol is a decentralized infrastructure for enabling autonomous commercial exchanges of anyThing, specifically off-chain items. Boson is a peer-to-peer system which replicates the benefits of a market intermediary, without the disbenefits of centralized systems.