Social media’s next big threat: The rise of web3 and decentralized platforms

In a sharing economy where ownership is held by a few at the top, web3 has the potential to flip this model on its head.

tl;dr
1️⃣ Platforms are built on public networks 🚗
2️⃣ We are guests on these platforms 🏚️
3️⃣ We don’t own our own data 📡
4️⃣ Ownership & property rights are key 🔑
5️⃣ Property rights enable innovation 📈
6️⃣ A token encapsulates ownership 🎁
7️⃣ Tokenization is inevitable ⚡️
8️⃣ Markets are good for society 🤝
9️⃣ We are still early ⏰

Let’s start with an analogy of the current web2 model: Roads

No single person owns the roads. Roads are a public asset with network effects. If you were an entrepreneur, would you start a new business on a busy road or a farm road?

The answer is obvious. More traffic means more people.

People build/invest on top of public assets because of this expected traffic. The internet was built in a similar way with a common set of rules that helps devices connected to the internet communicate with each other. It’s called TCP/IP.

Now let’s take it a step further…

No one builds a long-term business on top of Facebook or TikTok. Why? Because somewhere down the road a CEO might decide to change the terms of service. These private companies have no incentive to give up ownership of the network. It’s this ownership of our data that they survive on.

I’m not saying people haven’t built businesses on Facebook because they have. But none of these are “long-term” scalable businesses that have lasting power over a decade.

Large social media platforms such as Facebook, Instagram, and Twitter generate revenue through advertising. The platforms use algorithms to target the ads to users who are most likely to be interested in them, based on data such as users’ demographics, interests, and browsing history.

We are just guests on these platforms. We don’t own our own data.

The rise of web3…

Web3, aka “the decentralized web”, refers to the use of blockchain technology to enable decentralized and distributed systems on the internet.

One way in which web3 could disrupt the revenue model of social media platforms is by enabling users to own and control their own data, rather than having it controlled by a centralized entity such as a social media platform.

In a web3 model, users could sell access to their data directly to advertisers, rather than having a social media platform act as a middleman. This could give users more control over how their data is used and allow them a path to monetize their data in a more direct way. It also has the potential to create a direct relationship between brands and their consumers.

There literally would be no middleman.

This opt-in model gives control back into the hands of the content creators that made these platforms the dominant forces of the internet of web2.

If we could move our data from private databases owned by these massive platforms to a marketplace, this could have a major disruptive impact on the hegemony of these giant social platforms.

Ownership is the key.

Air-BnB and many other new platforms wouldn’t be possible without ownership.

• Ownership / property rights enable entrepreneurship.
• Innovation clusters around property rights.
• Our data is our property.

This property could be bought and sold like anything else as long as we have a simple mechanism to do so.

Enter, the non-fungible token.

“A token is a simple software that encapsulates ownership.” — @punk6529

• Fungible = common, interchangeable e.g. 1 dollar bill
• Non-fungible = unique, one of a kind e.g. house, car, art, etc.

What if you planned a ski vacation with your family and months prior purchased a ski pass to your favorite resort for the weekend. But a couple days before you had a change of plans. What if those ski passes were NFT’s? The NFT represents your ownership certificate for two adult day passes.

You could post those NFT’s for sale on a data marketplace and accept bids. If it was a desirable weekend, you might even make money on the deal.

In the future, everything will be tokenized; experiences, memberships to fraternities and clubs, hotel reservations, etc. Imagine a future where people could accept bids on their data!

If you believe that markets are a net positive for society, then you believe in web3.

Web3 has the potential for more transparent and fair monetization of user data through tokenized ownership rights to that data.

Not so fast…

Web3 technology is still in the early stages of development, and it is difficult to predict exactly how it will impact the revenue model of social media platforms. However, it has the potential to significantly disrupt the current model and change the way that these platforms generate revenue in the future.

We have no idea how this will impact regulatory changes. The current political climate seems reluctant to embrace this new technology for obvious reasons. But the seeds of a major disruption are clear. It has already started.

Amazon recently announced their “Amazon Shopper Panel” where you can get $2/month for your data and $10/month for sharing receipts for non-Amazon purchases.

The writing is on the wall.