Cudos Web3

When the revelations of former Facebook product manager Frances Haugen became an international story in October 2021, the outrage over specific details was tempered by a kind of fatalism. After all, didn’t we all know this already? Yes, there was something compelling about seeing Facebook’s internal research detailing the mental health impact of Instagram on teens or their failings in policing political misinformation on the platform. But at the same time, it was hard to feel surprised, much less the appropriate level of anger. It had long become an accepted fact that Facebook, like the other dominant platforms of the Web2 era, did not have its users’ best interests at heart.

Of course, this fact is made more troubling – and more dangerous – by the sheer number of users these platforms can boast. A company that puts profits ahead of the safety and wellbeing of its users is always a cause for concern. But when, as in Facebook’s case, that company can boast almost 3 billion monthly active users – more than half of the total number of internet users in the world as of 2021 – the problem’s scope becomes unprecedented.

It’s no longer a question of the harm suffered by individuals – as significant and troubling as this is. Facebook’s willingness to prioritise profits above protecting users threatens to have far-reaching social ramifications. When former Facebook VP Chamath Palihapitiya claimed in 2017 that Facebook was “ripping apart the social fabric of how society works” he sounded alarmist. Now major online news outlets can call Facebook a “doomsday machine” and draw only exhausted nods of assent.

In this context, we can understand the growing calls for a paradigm shift in how the web operates. The burgeoning discourse around Web3 – understood in broad terms as a decentralised, open, and permissionless future for the web built on blockchain technology – represents a desire to escape from this increasingly dystopian reality.

However compelling this vision may be, undoing two decades of corporate dominance won’t be achieved overnight – and indeed, we cannot take for granted that it will be achieved at all. Despite the somewhat triumphalist tone of Web3 proponents such as Chris Dixon, who has declared that “we are now at the beginning of the web3 era” and proposed 2020 as the end date for Web2, there remain far more questions than answers around what Web3 will actually look like and how it will be built.

Getting into the finer details of how Web3 might work is essential, lest we find ourselves repeating the same mistakes of the Web2 era. But what were those mistakes, exactly? That is, how did Web2 become the highly centralised data-extraction machine we’re struggling to escape in the first place? The answer to this question, at least in part, requires us to look more closely at the role of platforms.

Web2 and the rise of platform capitalism

In his book Platform Capitalism, the academic Nick Srnicek defines a platform as “digital infrastructures that enable two or more groups to interact”. Google and Facebook, for example, connect users with each other and with businesses and advertisers; Amazon connects customers with sellers and, through its AWS operations, provides businesses with their own platform-building tools.

Platforms are, according to Srnicek, the defining feature of the Web2 era and give it its underlying economic model. Most importantly, the dominance of platforms explains the highly centralised nature of Web2 and the many troubling consequences that have resulted from this.

To understand this relationship between platforms and centralisation in Web2, we need to consider two key features of platforms, at least as they currently exist:

  • Network effects are key to success. A platform requires a significant quantity of users to make its offer of connection worthwhile. And the more users, the stronger its value proposition. A social network that none of your friends uses is largely worthless, while a social network that all of your friends use is virtually impossible to resist.

  • Data is an essential source of value. As intermediaries, platforms have access to enormous quantities of data on how users interact – what people search for and share, what captures their attention, what they seek out and what they avoid. Leveraging this data is fundamental to giving a platform a competitive advantage. Data underpins a platform’s ability to attract users and achieve network effects by personalising its services, as well as providing a vital revenue source through the selling of targeted advertisements.

These basic characteristics of platforms lead to several highly significant consequences. Firstly, platforms tend to prioritise increasing the number of active users above all else. This means, for instance, offering everyday users free access to the platform – an up-front or per-use fee would massively impede the establishment of network effects. Secondly, and by extension, platforms tend to be anticompetitive and monopolistic in their business practices. A 2020 report by US lawmakers described Facebook, Amazon, Apple, and Google as “the kinds of monopolies we last saw in the era of oil barons and railroad tycoons.”

The result? Platforms tend toward centralisation, aiming to monopolise a particular form of interaction on the web and, from this position, extend their dominance to new areas. Facebook, for instance, has moved from social media to instant messaging and virtual reality. Google has stretched its control areas from search to email, streaming video, and others. Amazon is the leading online retailer and cloud computing provider striving to corner the emerging smart home market. In each case, platforms seek to capitalise on their existing user base – and the enormous quantities of data they can extract from these users – to corner new and emerging forms of online interaction.

What lessons does this offer for Web3? It might be tempting to say that, in order to achieve its goal of returning to the decentralised origins of the web, Web3 needs to steer clear of platforms. And indeed, some influential arguments have been made that Web3 should focus on protocols and not platforms. Nevertheless, this may be wishful thinking. Platforms, after all, emerged for a reason – they offered users something that simply was not available in the read-only world of Web1. What is needed is a clearer understanding of the benefits platforms offer and how Web3 can preserve these benefits without resorting to the same logic of centralisation.

The benefits and dangers of platforms in Web3

While it’s important to understand how the relationship between network effects and data extraction push platforms toward centralisation, there’s a crucial piece of the puzzle missing: platforms are also easy to use. And while this may seem to go without saying in 2022, in the early 2000s the web was a very different place. Many of the activities we now rely on platforms to facilitate – instant messaging, sharing audio and video, etc. – were previously slow, cumbersome operations requiring some degree of persistence and technical know-how.

Google, Amazon, and Facebook offered users primarily a massive simplification of online life. Finding information, shopping, or keeping up with your friends became far easier and more intuitive processes, helping to accelerate mainstream adoption and support the transfer of ever-greater parts of our lives onto the web. In less than a decade, social media went from the frivolous pastime of digital natives to an essential social function, and this shift is impossible to imagine without Facebook’s app shielding users from all the complex infrastructure operating underneath the surface.

And it is this fact that should make the proponents of Web3 pause. Because the reality is that, at present, the fundamental building blocks of Web3 are extremely complex and difficult to understand for the average web user. While the NFT boom of 2021 led to endless primers, explainers, and summaries on blockchains, tokens, minting, and mining, this will hardly suffice to make the crypto space accessible for a mainstream audience. At a practical level, interacting with blockchain tech requires, for the moment, relatively high levels of technical competence.

To achieve some of the same functions that a single Web2 platform allows, in the existing crypto space users must navigate a range of different applications and interfaces, most of which do not have the uninformed user in mind. Further, not only is the Web3 space currently fragmented across many competing blockchains, each with a diverse range of apps built on them, but interoperability is also often lacking between these chains – or is only achievable through interacting with yet another application.

The result is that, even if the average web user does find themselves reading up on blockchains and the benefits of Web3, their ability to transfer their online life to blockchain-based DApps will likely be limited. And this leads to a core problem – we find ourselves recapturing the benefits of Web1 only at the cost of reintroducing many of the drawbacks, too.

This is the crux of Moxie Marlinspike’s recent, trenchant critique of the existing Web3 space. He notes that the shift from Web1 to Web2 was effectively conditioned by the fact that, as he puts it, “people don’t want to run their own servers.” While he means this literally, he also has a more general point in mind: the majority of web users don’t want to interact with or understand the technical infrastructure that enables their activities. They certainly don’t want to have to manage or maintain this infrastructure themselves. And while some may bemoan this fact, it’s hard to imagine it changing.

Platforms, of course, solved this problem spectacularly well. They enabled the web to become an intimate part of everyday life for billions of people by ensuring the everyday user would not have to run their own server, or have anything other than a basic functional understanding of how to access and utilise certain apps.

As Marlinspike notes, the same dynamic is already beginning to unfold in the Web3 space. OpenSea, for example, has established itself as the de facto NFT platform. By drawing together the largest number of buyers and sellers and streamlining the transaction process effectively – including offering simple ways for neophytes to mint tokens – they have been steadily pushing toward precisely the same network effects that enabled Facebook to take over online social interaction and Google to dominate search traffic. In doing so, OpenSea has begun to subtly undermine some of the fundamental principles of Web3 – for instance, by reserving the right to remove NFTs from the marketplace (and from a user’s MetaMask wallet) for often nebulous “terms of service” violations.

The core issue that Marlinspike’s critique raises is that, far from combining the benefits of Web1 and Web2, the rapid emergence of centralised platforms in the Web3 space could actually be the worst of both worlds. These platforms would be centralised enough to raise all the same privacy and ownership concerns of Web2, but decentralised enough to prevent quick iteration and development. For similar reasons, others have argued that the current blockchain ecosystem is not Web3 at all, but something more like Web2.5 – “businesses that are crypto-native but not fully decentralised in operation.” And with Web2 giants such as the newly rebranded Meta looking to swoop in, there is ample reason for pessimism.

Decentralised platforms and the way forward for Web3

Responses to this emerging impasse in the Web3 transition have been diverse. For some, it’s not really something to be concerned about.Sarah Tavel of Benchmark – the venture capital firm that recently invested in NFT-based fantasy football game Sorare – argues the concept of decentralisation itself is simply not fundamental to Web3. She believes that “decentralised infrastructure is now a means to the end” of building “new consumer experiences”, and “that doesn’t mean you want to go as decentralised as possible to do that.”

For Gavin Wood, co-founder of Ethereum and the first to use the term Web3 back in 2014, the fact that users in the Web3 space could participate directly as “co-provider” for the apps and services they use is enough. As he puts it, “there’s a big difference between having a right or a freedom that you could execute if you had bothered educating yourself well enough, and the inability at a very basic and fundamental level of doing something because you lack the inclusion in an exclusive group.” His response to Marlinspike is, in effect, that it’s important for people to be able to run their own servers, even if most don’t want to.

Both these responses are, in their own way, unsatisfactory. They both lead to a reality that falls far short of the vision of Web3 as a truly decentralised and open alternative to the dominant Web2 paradigm. However, they also suffer from the same flaw – they are extrapolating from the imperfections of the present rather than looking at the significant advances being worked on in the crypto space to address precisely these imperfections.

Ethereum co-founder Vitalik Buterin responded to Marlinspike’s post on Reddit with a lengthy comment noting that, while Marlinspike’s critiques were in many ways valid, they are “missing where the blockchain ecosystem is going”. Similarly, the pseudonymous crypto futurist suzuha posted a lengthy piece commending Marlinspike’s insight into the current issues in the crypto space, while outlining some of the ongoing research and developments within the space that are specifically intended to tackle his critiques.

But as important as these technical developments are, there are broader trends within the crypto space that give reasons for optimism – not least because they show that platforms do not automatically entail centralisation. That is, if Web2 platforms became monopolies, it wasn’t just because of network effects alone. But, as we saw above, it was also because of the specific economic structure of platform capitalism. In this structure, owning data was fundamental. This not only encouraged Web2 platforms to seek as much user data as possible aggressively but also to shield the operations of their platforms from other businesses – as well as, of course, users themselves. Most fundamentally, it meant that platforms reliant on user-generated content to function were eager to radically limit users’ control over this content.

What if, instead of platforms based around centralised ownership of data, we were able to build platforms in which each user retained control over everything they shared? What if, instead of locking users into opaque systems that are obscure by design and unilaterally controlled by the platform’s owner, users were able to see their inner workings and have a voice in how they developed? In such cases, neither network effects nor user-friendliness would necessarily entail centralisation in the full sense of the term. Blockchain-based platforms could combine open-source code and tokenisation of data to ensure that users not only have a clear understanding of how a platform operates but also be fairly compensated for any data they’re required to hand over.

As blockchain infrastructure continues to develop, so too do the possibilities for developing platforms that offer the benefits of Web2 without demanding users cede control in exchange. However, the scalability problems of blockchains such as Ethereum are beginning to be solved with Layer-2 solutions, while increased interoperability between chains thanks to projects such as Cosmos gives DApp developers more options for combining the benefits of different chains and avoiding the problem of siloing.

And this is precisely what the Cudos network is offering. We recently discussed the major steps Cudos is taking toward supporting interoperability to support the emergence of truly decentralised blockchain infrastructure. But Cudos is also contributing another fundamental service that will be essential to building decentralised platforms for the Web3 era: decentralised cloud computing.

With Cudo Compute, the fact that people “don’t want to run their own servers” won’t necessarily result in centralised web infrastructure. Instead, DApp developers at all scales will be able to draw on distributed cloud resources through an open, peer-to-peer network. This will mean that centralised isn’t reintroduced beneath the surface of an ostensibly decentralised platform ecosystem – as well as avoiding the kinds of large-scale outages that plague centralised cloud providers.

How can you help Cudos build the Web3 ecosystem?

As we approach the launch of the Cudos mainnet, we need the support of developers and testers to help ensure it is robust and reliable. Join our Discord server and get in touch if you’d like to contribute to the final phase of our testnet. 

If you’d like to contribute your computing power to the incentivised pilot phase of Cudo Compute, register your interest today

Ultimately, building a truly decentralised future for the web requires collaboration and collective effort. If you’d like to help support our project, you can buy CUDOS tokens or become part of the Cudos Telegram community.

About Cudos

Cudos is powering the metaverse bringing together DeFi, NFTs, and gaming experiences to realise the vision of a decentralised Web3, enabling all users to benefit from the growth of the network. We’re an interoperable, open platform launchpad that will provide the infrastructure required to meet the 1000x higher computing needs for the creation of fully immersive, gamified digital realities. Cudos is a Layer 1 blockchain and Layer 2 community-governed compute network, designed to ensure decentralised, permissionless access to high-performance computing at scale. Our native utility token CUDOS is the lifeblood of our network and offers an attractive annual yield and liquidity for stakers and holders.

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