How web3 data portability reduces the power of centralized services

March 19th, 2022

How web3 data portability reduces the power of centralized services 🧵

For people new to web3, one thing that can be confusing is looking at user profiles on services like OpenSea. For example, here is my OpenSea profile

My OpenSea profile
My OpenSea profile

If you are used to web2, you might think OpenSea holds the data and NFTs displayed on my profile page.

In fact, the data and NFTs are held by me, and OpenSea is just providing a view into that data.

You can easily confirm this by going to other services and viewing my profile.

Rainbow -

Showtime -

More technical people can view the data directly on the Ethereum blockchain.

In these examples, you'll see mostly art and game objects (and my .eth name), but down the road NFTs will hold robust data sets including full social graphs

Why is data portability important?

It means that users can easily switch services if those services start charging too much, inserting ads and algorithmic feeds, throttling their traffic, or mistreating them in other ways.

This is similar to how web1 worked. For example, I host at a web hosting provider. If the host starts misbehaving, I can easily move my data to another host and switch my DNS records so points there.

And I can make this switch without losing the audience I’ve built up over time via inbound links, SEO, email subscribers, and so on.

Compare this to web2. Many people spend years building an audience on web2 services, but if those services decide to reduce your organic reach or otherwise misbehave it's basically impossible to switch.

web3 works like web1 did. There will be centralized services built in web3 — and many will be quite useful — but their economic power and overall control will be limited by the lower switching costs due to data portability.

This is why web3 take rates are dramatically lower than web2 take rates. OpenSea, for example, charges 2.5% on transactions.

Compare this to web2 take rates. FB, Twitter, & Instagram take 100% of revenue. YouTube takes 45% of revenue. Apple and Google app stores take 30%.

The lower take rates will make web3 services especially appealing to creators who are unable to build sustainable businesses on web2 platforms.

web2's take rate is web3's opportunity

Corollary to this:

wrong question: are there centralized services involved?

right question: are there centralized services *with high switching costs* involved?


Originally published on January 8, 2022

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