Discover more from Startup Riders

Surfing startup waves. Made in Spain.

Over 6,000 subscribers

🌊 Web3

6 powerful ways to understand web3, great board members, and 11 deals worth >€200M

Ivan Landabaso

Jun 17, 2022

Hello! I’m Ivan Landabaso, partner at JME.vc. Join thousands of entrepreneurs surfing startup trends. Easily digestible, twice per month. From Spain to the 🌍.

Summary

Gm startup riders! This week’s good stuff for your startup brain includes:

🕸️ Web3 Analogies: 6 powerful ways to understand web3.
🍬 Startup Candy: great board members.
💵 Deals & Jobs: 11 startup deals in Spain (>€200M).

Investments in crypto-assets are not regulated. They may not be appropriate for retail investors and the full amount invested may be lost.

🕸️ Powerful Web3 Analogies

Now that the markets look like they are cooling off a bit (and remember nobody knows anything about timing the market) - its probably a great time to study and think about Web3 much more clearly.

😟 Problem

Understanding “Web3” is hard for most people - because “experts” often write to sound smart, peddle their own agenda and/or without thinking about most people.

🤩 Solution

Let’s simplify basic “web3” ideas by turning them into extremely simple analogies.

P.s. - for you crypto diehards out there, please don’t bite my head off, I’m just trying to onboard boomers / geriatric millennials.

🕸️ Web3 Analogies

1. 🧱 Blockchain = A Computer In the Sky

Analogy: A blockchain is a computer in the Sky — Tim Roughgarden

Think of a blockchain as a programmable computer that “lives in the sky”. Anyone can use it, but nobody fully owns it. Think about it as a public good.

This special computer in the sky is supported by thousands of physical nodes cooperating through a consensus protocol (rules to make sure nobody is cheating).

What’s so cool about it? Despite seemingly having no single owner, this special computer enables a new form of ownership for its users. Let’s say you are a user of such special computer, you will really own the digital data that lives in such computer.

The computer will enforce your property rights - which is amazing, and revolutionary.

One last important thing about blockchains - they invert the relationship between software and hardware. As opposed to “traditional” computers - when it comes to blockchains, it is the software that governs the hardware, not humans - which opens up a new design space for innovation to flourish.

A few additional simple analogies to help you think about this when you hear a bunch of buzzwords that are hard to make sense of:

Layer 1 Blockchains: there are many different computers in the sky you can interact with - think about them as Cities of the next internet. Example: Ethereum could be New York (lots of finance businesses, fancy, expensive, congested). Solana could be Los Angeles (lots of art, big, cheaper, but less decentralized than NYC)
Layer 2s & Rollups: Skyscraper technology in these cities of the next internet that help run traffic smoothly to avoid congestion - solving scalability.
Interoperability Networks: the highways that connect these different cities or computers in the sky (i.e. Cosmos, Polkadot)
Smart contacts: A programmable robot lawyer living inside Microsoft Excel, that helps you verify and trigger different types of actions.
Non-Fungible Tokens: a powerful way to connect culture to the internet.
Metaverse - Most people confuse a “metaverse” with a digital environment. It’s not - it refers to a moment in time, where people spend more time online than in the physical world.

2. 🌐 Internet Evolution = 📖 Read, ✍️ Write, 💵 Own

Popularised by Chris Dixon @a16z - this is a simple way to think about the evolution of the internet, and how it went through its different fases. It is helpful to study its history.

📖 Web1 | 1990-2005

Analogy: Wikipedia. Think about web1 as a collection of encyclopedia pages, all connected through “hyperlinks” (connective tissue).

Its main characteristics:

Static: Mostly a collection of static pages, which means they just revealed some stuff when you clicked on them.
Read-only: It felt like a digital encyclopedia because you could only really just read it - you couldn’t interact with posts, login or get analytics.
Users = consumers - you went there to consume content, that’s it.

An important thing here - in Web1, our encyclopedia - there were no economic incentives built-in - what Andreessen calls “the original sin”. Meaning, the first version of the internet was actively protected by the US government to avoid using it for commercial purposes.

So, just remember - your web1 digital encyclopedia couldn’t make you or others money (in theory).

✍️ Web2 | 05-Now

Analogy: A Wikipedia you can read, write and interact with - but on which you do not own any of your data, nor do you get rewarded for contributing in.

Web2 is sort of like web1 + the ability to write on that encyclopedia. The writing part is awesome as it opens up many features and use cases for our digital encyclopedia.

Some great stuff:

Personalized: You can login to it, and it’ll remember you!
Interactive: You can interact with your favorite chapters, leaving likes, bookmarks, comments…
Self-improving: The encyclopedia will know about you and remember what you’ve been up to, and show you better and better information (sometimes) as it learns about your interests
Analytics: You can now track how many hours, interactions, and other engagement variables

Some problems:

Closed Apps: applications are closed, private and generally opaque.
Not your data: each app is closed - and you do not own anything on them.
Advertising: the default business model for this apps is advertising.
Subject to data breaches: because these are walled-gardens, they can and are breached many times over. No system is ever completely secure.
Subject to surveillance and censorship: since you don’t own your data.

There’s lots of other stuff you can do in Web2, and the big players (FAANG) that emerged throughout this era certainly took advantage of this paradigm shift to build better products, stronger businesses and more (sure we can spend hours debating here on these points, but not today).

🤝 Web3 | 2020+

Analogy: A wikipedia you can write and interact with, that you have the option to contribute to, own and get paid for.

What is Web3.0? Features, Design, Skills, NFTs - Data Analytics — Source

Web3 is a cultural movement - enabled by blockchain (remember the computer in the sky?) - that solves some of the fundamental problems with web2 listed above, namely:

Money becomes a native feature of the new internet: economic incentives are baked-into the architecture of Web3. It resolves Web1/2’s original sin. It opens up a new decision-making vector for builders and participants - participating in the economics of a given application (making money).
Decentralized applications open up new use-cases, and attempt to solve surveillance and censorships issues.
Users regain (more?) control over their digital identities and data.

Much like Web1 and Web2 - we are seeing lots of attempts at replicating what worked in the real world, or in previous platforms, and replicating these in Web3. However, much like in Web2, the big disruptors will likely be nothing like we’ve seen before.

Think about the big winners in Web2, the biggest disruptors like Facebook or Uber were non-skewmorphic - aka not something we had seen before, as opposed to all the attempts at replicating real-world use-cases (i.e. digital newspaper).

For that reason - it is likely extremely hard to predict with any level of accuracy what all this creative and engineering effort will blossom into, but something powerful has the potential to come out of it.

Web3 likely won’t be a sudden dramatic change - more like a collection of ideas slowly but surely occupying digital mindshare.

Perhaps we are going into a world where people will organize around smaller, tighter communities - leveraging blockchain technology. As Zuck said in 2020:

"For the next decade, some of the most important social infrastructure will help us reconstruct all kinds of smaller communities to give us that sense of intimacy again. This is one of the areas of innovation I'm most excited about. Our digital social environments will feel very different over the next 5+ years, re-emphasizing private interactions and helping us build the smaller communities we all need in our lives."

You may or may not buy into the idea of a “web3” (for better or for worse). Either way, its important to study it and to keep an open 🧠, to potentially avoid this type of thing:

Personally, I tend to think the cultural movement behind “Web3” - when removing all the excess hype - has a lot of potential to help unlock tons of human creativity.

3. Internet ≠ The Web

The web is a movement that actually makes the internet into a platform - on top of which we can build real applications.
—Chris Dixon

When and How the French Revolution Ended — Source

Here’s another simple and powerful way to think about Web3 - make the distinction between Internet and the Web.

Web1 & Web2:

Internet: the underlying infrastructure powered by protocols i.e. IP, TCP, HTTP…
The Web: the cultural movement that turns the internet into a platform, where people started to build real applications, powered by i.e. JS, HTML, CSS…

Web3:

Blockchain: the underlying technological backbone, the computer in the sky.
Web 3 = The cultural movement that turns blockchain into a platform, were new applications are starting to emerge.

4. Killer Apps & Accelerators

Thinking about killers apps and accelerators also makes Web1 Vs Web3 clearer:

Web1:

Killer App = Email
Accelerator = Moore’s Law

Web3:

Killer App = Bitcoin - a peer-to-peer decentralized payments network.
Accelerator = Open source + composability (lego bricks).

5. Infrastructure Vs Apps Cycles:

Another good framework to think about what Web3 is and where we could be is the infra vs apps cycle. They say history doesn’t repeat itself, but it does rhyme - and we can see very similar market dynamics at play in Web1-Web3:

The evolution of utility on Ethereum | Messari — Source

6. Feedback Loops

Considering these infra vs app cycles + market fluctuations, it is pretty hard to take a birds-eye perspective to understand what the maturity of this so called Web3 is.

Likely, we’re still very early, with early signs of potentially positive feedback loops: