This is the third article in a series of six articles that outline why developers should build their applications on the Internet Computer. The first article, which briefly explains what the Internet Computer is, can be found here.
Web3
In the early days of the Internet, web content was static. At some point in the early 2000s, the Internet shifted: webpages moved away from static content to dynamic platforms that allowed people to interact with each other. This shift from static webpages to dynamic platforms is commonly thought of as moving from “Web1” to “Web2.”
The shift involved more than just moving from static to dynamic websites. During Web1, builders relied on open protocols that were decentralized and community-governed. But Web2 changed that. The platforms that dominate Web2 are completely controlled by a handful of monopolistic mega-corporations—namely Amazon, Google, and Facebook. Those corporations treat the platforms they own as toll roads, and try to extract value from their users at every turn. Moreover, their executives have sole discretion of how the platforms—many of which have become engrained in the fabric of society—are governed.
Today, there is a technological movement that seeks to wrest control of the Internet from those mega-corporations. The grand vision behind that movement (commonly referred to as Web3) is that the major platforms that shape our lives should be governed by a diverse group of stakeholders and run autonomously on a decentralized network. The crux of this vision is that those who use a platform should have some say in how the platform is governed.
Blockchain is a Building Block for Web3.
General-purpose blockchains offer developers a set of tools they can use to decentralize how their platforms are governed. Specifically, blockchain technology enables developers to create something called a decentralized autonomous organization (DAO), which is a piece of code that is controlled by a group of stakeholders. Blockchain technology also enables developers to create digital assets (commonly known as “tokens”) that can represent virtually anything—including the right to participate in the governance of a DAO.
Web3 developers often try to build decentralized platforms using blockchains like Ethereum or Solana. But the severe limitations of those blockchains typically render decentralization illusory. Both Ethereum and Solana have extremely limited compute capacity, which functionally limits the kind of logic that those blockchains can be used for to basic financial logic. Moreover, their design makes it prohibitively expensive to store data on either blockchain.
Because of those limitations, developers who “build on” Ethereum or Solana use the blockchain for only a portion of their platform and typically rely on centralized servers (often Amazon Web Services) for everything else. That isn’t necessarily a problem for storage-light platforms that use only basic financial logic, because Ethereum and Solana are capable of hosting everything other than the front-end of those platforms. But it becomes a problem when platforms require any complex logic or data storage: whoever controls the servers that the platform uses controls the platform, regardless of whether it has a DAO.
The Internet Computer Uniquely Enables Web3.
The Internet Computer takes the core concept underlying Ethereum and expands on it so that the blockchain can do more than just basic financial logic. DFINITY (the research organization behind the Internet Computer) built the Internet Computer Protocol from scratch, leveraging novel cryptography. This new design, along with stringent node requirements, enables developers to build every single aspect of their platform on the blockchain, without sacrificing much performance or cost.
Because platforms can be built entirely on the Internet Computer, it is now possible—for the first time ever—to build truly decentralized platforms. Indeed, if a developer builds a platform on the Internet Computer, she can decentralize the platform by ceding complete control of it to a DAO comprising a diverse group of stakeholders.
DFINITY is currently developing a turn-key solution that will make it extremely easy for developers to decentralize their platforms. Under DFINITY’s solution, once a developer cedes control of their platform to a DAO, the only way to change any aspect of the platform will be through the DAO’s governance mechanism. DAOs will be governed democratically: they cannot take any action without first having a vote.
To participate in a DAO’s governance, an individual must stake (i.e., lock up) the DAO’s governance token. The number of votes an individual is entitled to cast will depend on the amount of tokens they have staked and the duration they have staked them. As a reward for actively participating in governance, the DAO will automatically create new governance tokens and distribute them to people who vote.
One issue with true decentralization is that few have the technical chops to understand each and every proposed change to the platform’s code. And even those who do understand often don’t have the time to focus on each proposed change. To avoid overburdening token holders, there will be a feature that allows them to “follow” others and copy their votes on any subset of proposals. Thus, a token holder might choose to follow the developer who created the platform on all proposed changes to the platform’s design, but not on changes to the platform’s rules.
Web3 Benefits Builders.
Web3 is more than just an ethos: it provides concrete benefits to developers who build new platforms. Bootstrapping a new platform is extremely difficult. At their core, platforms are networks that connect people for some specific purpose. Because a network derives its value from how many unique users it has, a platform with few users is of little value.
Today, developers of new platforms have to spend significant amounts of capital on sales and marketing efforts to persuade users to join their platform before it provides value. Even then, sales and marketing alone might not be enough. Tokens enable developers to provide a financial incentive for the first users to join a new platform. By rewarding early users to make up for the lack of utility provided by a new platform, tokenization uniquely enables developers to bootstrap network effects.
In addition, early users become ardent supporters of a platform if they have a stake in its success. Token holders have a strong incentive to persuade others to follow their lead and join a new platform because they personally benefit from the platform’s growth. Thus, not only can tokens incentivize people to join a new platform, but they also encourage users to market the platform at no additional cost to the developer.
Disclosure: The author of this article owns ICP, which is the native token for the Internet Computer.