DO WE LIVE IN WEB 2.5? AND WHAT DOES IT MEAN?

Our world is gradually moving from Web 2.0 — the era of digital platforms. However, blockchain — the disruptive technology of the Web3 era — is a digital platform itself (yes, we’ll prove it below). Where are we now? Right now, we are in a transformational state — at the crossroads of the two digital eras — Web 2.0 and Web3.

Source: Designed by D&A Partners ©

In previous articles, we discussed that digital platforms had become the disruptive business model in the Web 2.0 world. Today, they are the base of the world’s most high-cost companies.

“The most valuable companies in the world and the first trillion-dollar businesses are built on digital platforms that bring together two or more market actors and grow through network effects”. — Michael A. Cusumano, Distinguished Professor of Management at MIT Sloan School, Head of MIT Sloan Management Review

In a nutshell, platforms can be characterized by the following features:

• they are intermediaries that connect the demand and the supply in one or many markets;
• they let buyers and sellers use their infrastructure to exchange values (e.g. product, money, content, etc.);
• being intermediaries, they receive a percentage of each transaction (like AirBnb), monetize information about their users (Facebook), etc.;
• platforms exist online.

WEB3 MOTTO: LET’S GET RID OF INTERMEDIARIES

In a world where all market power belongs to intermediaries (aka digital platforms), a technology emerges that aims to get rid of intermediaries. It is blockchain.

“Whereas most technologies tend to automate workers on the periphery doing menial tasks, blockchains automate away the center. Instead of putting the taxi driver out of a job, blockchain puts Uber out of a job and lets the taxi drivers work with the customer directly”. — Vitalik Buterin, the creator of the Ethereum cryptocurrency

So, what are the key features of blockchain?

• This technology connects the demand and the supply. These are precisely the same characteristics as digital platforms. However, the demand side in blockchain is those who want to verify their transaction using distributed ledger technology. The supply side is validators who validate the transaction.
• Values are exchanged on blockchain: the demand side receives the verification services, and the supply side gets the reward. Again, this feature matches the main feature of digital platforms, which provide their infrastructure for value exchange.
• The system exists online, as digital platforms do.

Thus, we see that blockchain is a digital platform itself! However, a digital platform is not an intermediary. It sounds revolutionary, but it is true: undermining markets based on digital platforms, blockchain is a digital platform itself.

Like any other platform, blockchain’s success depends on its ability to attract users on both the supply side and the demand side at the same time.

But here comes the question: how does this technology, which encourages us to eliminate intermediaries, transform markets?

And does it?

THE IDEA OF WEB3 PLATFORMS

The key idea of Web3 platforms is the following:

1. They are based on blockchain.

2. They are fully decentralized.

3. They don’t centrally store or commercially exploit user data.

Sounds like a dream, doesn’t it?

WEB3 PLATFORMS: WHAT THIS DREAM LOOKS LIKE IN REAL LIFE

Here are some examples of fully decentralized platforms that meet the high ideals of the Web3 era:

1. BeeToken (a decentralized short-term rental platform).

2. SnagRide (a decentralized taxi ordering platform).

3. Aworker (a decentralized job search and recruitment platform).

WEB3: WHY IS THE MARKET NOT CHANGING UNDER THE INFLUENCE OF NEW TECHNOLOGY?

As we see, even though the world needs Web3 solutions, blockchain platforms are still inferior in popularity to “classic” digital platforms.

BeeToken, SnagRide, and Aworker, as we mentioned before, can hardly be considered full-fledged competitors to Airbnb, Uber, and Head Hunter.

The unpopularity of decentralized platforms today is users’ habits: despite all the complaints about the market behaviour of Web 2.0 digital platforms, users think of them as a guarantee.

The functionality of digital platforms (ratings, verification of real estate photos, etc.) allows users not to question the trust of their counterparties found on the platform as they trust the platform itself.

So, what can blockchain offer?

Blockchain offers a fundamentally different mechanism: there is no need to trust anyone (neither the counterparty nor the intermediary). It’s the technology that makes the transaction transparent and secure.

At D&A Partners, we are convinced that the development of the meta-universe will inevitably lead to fully decentralized digital platforms. Their key differences with the platforms of the Web 2.0 generation can be classified as follows:

Source: Designed by D&A Partners © The table was prepared using the McKinsey & Company report “ Value creation in the metaverse” and Onyx by J.P. Morgan report “Opportunities in the metaverse”.

WHERE ARE WE NOW?

We are somewhere between Web 2.0 and Web 3.0.

A transitional form of digital platforms is those that operate using blockchain technology but retain the presence of an intermediary between the supply and demand side.

An example of this generation of platforms is OpenSea. Often, OpenSea is considered to be the new generation of decentralized blockchain platforms:

“OpenSea is a decentralized non-fungible token (NFT) marketplace for buying, selling, and trading NFTs”. — Moralis Academy

This is not true! In fact, the OpenSea digital platform is centralized almost as much as Amazon. For example, as an intermediary, OpenSea charges for each transaction and moderates content (it can block a user, delete an NFT, add a collection to front page favourites, etc.).

Nevertheless, most NFT marketplaces show the initial signs of a Web3 generation platform:

1. The product that is being traded on the platform, the NFT, exists in blockchain.
2. Marketplaces don’t usually create entry barriers for either sellers or buyers. Any user can post a token and offer it for sale as an NFT. Anyone with a crypto wallet can purchase an NFT.
3. Payment on these platforms is done using cryptocurrencies.

It looks like we are living in a world of Web 2.5 now, and you can already “sense” better technology. However, it will take time for each of us to experience its benefits and accept the new reality fully.

How long do you think it will take humanity to trust technology, not platforms, and step into Web3?

Catherine Smirnova

This article was written by Catherine Smirnova of Digital & Analogue Partners. Visit dna.partners to learn more about our team and the services.

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