The New Frontier Is Web3
Chris Dixon and Naval Ravikant On The Wonders Of Web3 · 5 min read
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This post is a summary of a very popular episode of the Tim Ferris Podcast from October 20211. The guests are Chris Dixon and Naval Ravikant, two of Web3's most articulate evangelists.
Chris is a general partner at the VC firm, a16z, with a focus on Web3. Naval is the co-founder of AngelList, and has invested in more than 100 companies, including Twitter, Uber, Postmates.
This episode is often cited as a great entry point to Web3. However, I find the 2 hour 31 minute runtime quite a deterrent for newcomers. For the summary, I have structured the episode in to 3 distinct parts — Web3, NFTs and everything else. This post covers part 1 — "The Wonders Of Web3".
I personally believe Chris Dixon's “5 Mental Models For Web3” remains the best introduction to the ecosystem, which is why its Super Simple summary #1. Do check it out in case you haven’t yet. It isn’t a prerequisite to this post but repetitive information from it is minimized here.
As always, plenty of the summary is plagiarized and paraphrased. Even quotes. Some lines are lifted directly from the transcript. The summary mixes Chris and Naval’s thoughts indiscriminately, unless specifically mentioned.
All credit goes to Tim Ferriss, and his guests Chris and Naval for putting this content out for free. Links to source content and more information about the guests can be found at the end.
Read Time: 5 minutes (per part)
Time Saved: 2 Hours 17 Minutes
Prerequisites: Tokens (Need a refresher? Start with the basics here)
Companion Piece: Why Web3 Is A Gamechanger
The New Frontier is Web3
Index
The Wonders of Web3
Web3 Is The New Wild West
Why We Need Web3
The Secret Sauce: Tokens
Why Web3 Wins
Composability
Why Web3 Will Play Out Differently From Web2
It’s Still Early: Skeumorphic vs Native Use Cases
The Wonders Of Web3
Web3 Is The Current Wild West
What the smartest people do on the weekend is what everyone else will do during the week in 10 years 2
Its not a coincidence that this keeps happening. Silicon valley was born out of garages.
Once a company gets big, it is managed by business people, who have to create financial returns on a 1 to 3 year horizon. Engineers and hobbyists meanwhile try to invent interesting new things unconstrained by near-term financial goals.
Today, Web3 is the least regulated, the most decentralized, the most permissionless landscape. It is the frontier.
It has 24x7x365 global markets that are self-funding. Engineers and builders from all around the world, including those employed by Web2 giants, are setting sail towards it.
Partly because they can make crazy money if it works out. But much of the appeal is also that it is open source, has open platforms, portable data, user privacy, user control, and community-owned networks.
Why We Need Web3
The internet is the most important invention of the century. We’re talking about how money and power are going to flow on the internet.
No one controlled Web1, which means when Larry and Sergey were building a search engine, they knew they could own and control it forever.
During the Web2 era, there were now two competing models for building networks — 1. independently, using open protocols or 2. within closed networks with centralized ownership.
The closed ways won.
This was at least partly because of ease of use. Setting up your own domain was still very technical. On the other hand, creating Facebook or Twitter profiles took three clicks plus your friends were already there. Mobile phones accelerated this.
And so we ended up with 5 — 6 companies that kind of control the internet.
With Web3, you can now build sustainable networks using open protocols. Instead of just corporations capturing value, the users and builders of the network can do so, using tokens.
The Web3 Secret Sauce: Tokens
Web3 is an internet owned by users and builders, orchestrated with tokens
Tokens enable a new kind of philosophy where both value and control accrue to the users of the network i.e. the token holders. Not to a company. There might not even be a company, in the same way that there is no Bitcoin company.
Chris: This is how I believe the most important internet products will be created in the future.
Why Tokens Matter
Naval: Digital private keys enable digital private property.
Through tokens, we finally have private property on the internet and we don’t need middlemen like lawyers or movie studios or music labels or even governments to determine who owns what.
We can each own a piece of the internet3
Why Web3 Wins
Because people get excited when they actually get to participate
Not only in the value creation but also in control and governance of the system
Because tokens are self-marketing. Incentives are aligned
When somebody owns something and has skin in the game, they want to evangelize it
For instance, there is no marketing team for Bitcoin. Yet, its user base and network has grown exponentially
Because of composability. Let’s examine this in detail
Composability — Digital Legos
Composability is to software what compound interest is to finance
Web3 is composable. Tokens are composable.
Composability is the secret sauce of the secret sauce.
Composability means projects can build on top of each other like LEGO blocks without needing to communicate with each other or seek permission.
This is why the Web3 revolution is so supercharged. Code, data and applications on Web3 work like LEGOs, such that your pieces could connect to all the other LEGO pieces of the kids down the block.
The codebase is open source. You don’t have to rely on the very limited APIs that Facebook or Twitter might choose to expose. And then take away later on as they’ve infamously done.
On top of that you can actually own the little piece of every platform that you contribute to and this is absolutely a revolution.
Another superpower is that in open source, you only solve each problem once. If somebody has already built a good version of how to solve a certain problem, you just reuse or tweak that.
So it’s actually better than LEGOS. Its digital LEGOs — where one can just copy someone else LEGO project instantaneously and then build on top of it.
Chris: I think one thing people who aren’t in the tech business may underestimate is how dominant open source software is. Open source software went from a curiosity in the ’90s to now 99 percent of the code in the world.
How did open source win? It’s composability.
Why Web3 Will Play Out Differently From Web2
A handful of companies “won” Web1. Microsoft, Netscape, Yahoo and Google could be on that list. The winners list for Web2 would probably include Apple, Facebook, Google again.
Is Web3 also going to be eventually controlled by big companies? No.
This is because -
Web3 has both open data and private data
Contributors can own the platform
Web2 incumbents can’t compete
Open Data Is A New Paradigm
We are too used to thinking of an app being a computer program run by a third-party. They control the code, they own the platform and they own the data.
The beauty of Web3 is, for the first time, all the data is actually open. The data is living in the blockchain or in distributed systems, and yet it is secured. It’s actually secured far better than corporations because it is secured by our own private key. It won't be leaked in the the next big company hack.
Each of us has a safety deposit box now in the cloud that we can give selective access to.
User Owned Networks
We have all come to accept that in Web2, the network owner gets most of the economic benefits and creators get scraps. Sometimes the scraps are not even monetary, just hearts and retweets.
In Web3, contributors own the platform instead of corporations. For instance, who owns bitcoin? No one but bitcoin holders.
Web2 Incumbents Are At A Disadvantage
Can Web2 winners dominate Web3? No.
Naval points to Gall's Law, a rule of thumb for systems design, which says that —
All complex systems that work, evolved from simpler systems that worked. 4
Said differently, if you want to build a complex system that works well, build a simpler system first, and then improve it over time. Don’t design a complex system from scratch. Or patch an existing complex system in to another one.
Web2 companies are the former - an existing complex system. New Web3 innovations are the latter - a simple system that has been slowly evolving for a decade.
The tokens themselves are the primitive, and people are going to recombine, and assemble, and recompose these primitives to create incredibly complex systems.
On the other hand, trying to jam tokens in to an complex system like existing social networks and games not built for them, is like trying to design a new complex system from the top-down. It will fail.
It’s Still Early
Skeumorphism
Skeumorphism was a term popularized by Steve Jobs. Apple's digital interfaces were skeumorphic i.e. they mimicked their real life counterparts for familiarity. For instance, the notepad app looked like a physical notepad, the calculator app looked just like a table calculator.
This is skeumorphism. And it signifies a transitory period. Early films looked like plays. And then over time film developed its own grammar, like establishing shots and montages. This also happens with new technology.
We are still in the skeumorphic era of Web3.
Native Web3 Use Cases Are Coming
The opposite of skeumorphic is native.
So while Web1 was skeumorphic, resembling digital magazines, Web2 advanced to native web applications, like social networks.
Native projects tend to be the only ones we will care about eventually. They are still rare in Web3.
One example could be Loot5. A "game" by the creator of Vine, Don Hoffman. He actually just created 8000 cards in simple text that have a randomized inventory list for a fantasy game. And each card is an NFT.
Thanks to composability, it has inspired this whole community of people to build things that use these NFTs. Creative people are treating these NFTs like a 52-card deck and developing games and experiences around them as a community.
That’s just a very profound new way to think about building a game. And that’s just an early experiment.
Naval: I thought we were going to replace Uber, and Facebook, and Twitter with Web3-enabled primitives. Now I think we’re just going to create brand new things that we can’t yet even predict or identify.
We’re going to end up shifting our attention to those things. So Twitter and Facebook will still be fine, will continue to exist. Just the way people still use Microsoft Office, even though the internet dominates our attention. The value is created in the cool, in the native cutting-edge stuff.
Thanks for reading. Don’t forget to subscribe and also check out the Appendix below, which includes sources and readings + my two cents on the topic.
Part 2 - Coming Soon
Let’s keep up the journey down the Web 3.0 rabbit hole.
Also, in case you missed it, read about Bitcoin from the perspective of its most high profile early evangelists - the Winklevoss twins. Through the summary of their interview with global macro investor, Raoul Paul.
DAOS - Decentralized Autonomous Organizations, are changing how humans work together. Learn more here.
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Appendix
My 2 Cents
//I have nothing to add. Stay tuned for part 2 on NFTs!
Source
I am grateful to The Tim Ferriss Show for publishing this episode. Interviewer - Tim Ferriss, entrepreneur, investor, author, podcaster Guests - 1. Chris Dixon, General Partner at a16z 2. Naval Ravikant, co-founder and Chairman of Angelist
Additional Sources and Readings
Blog by Chris Dixon - Why Web3 Matters Blog by Chris Dixon - What The Smartest People Do On The Weekends.... Twitter Thread by Chris Dixon on NFTS and Owning The Internet -
Twitter Thread by Dickie Bush picking quotes from this episode -
Scraps
Coming Soon
Footnotes
Link to episode. See Source above for additional information
See Chris Dixon’s blog post on this - What the smartest people do on the weekend is what everyone else will do during the week in ten years
See Additional Sources And Readings above for a thread by Chris Dixon on this