Table of contents

https://www.dynamic.xyz/blog/web3-the-shared-rails-for-everything

Web3 - the shared rails for everything

Web3 - the shared rails for everything

For years, I kept brainstorming ways to build a startup to disrupt email. One of the most frequently used tools globally, it was weird to me that it was resistant to new approaches. It felt like there were opportunities to improve the UX, async interactions, spam handling, and much more. I of course wasn’t alone - products from Slack to Google Wave to Hipchat tried, and yet email remains, growing stronger still.

So one wonders - why is email so powerful? Why can’t a single company build a tool that “beats” email, and why do businesses default back to email for cross-company communication? There are many reasons, but a key one is the fact that email is built on shared rails. That is, no one entity owns email. Many popular companies leverage email as a protocol, from Gmail and Outlook to startups such as Front, but email on its own is a decentralized, distributed protocol*, making it powerful, and almost indestructible.

Yet besides email, not many protocols exist on the web today that are as distributed, and as robust. Twitter sits on top of a centralized Twitter protocol, payment products such as Venmo are managed by a centralized PayPal-controlled ledger, identity is mostly owned by Apple, Facebook, and Google via Sign in with Apple/Facebook/Google, and data is siloed within specific sites.

This centralized approach has created some great consumer products - Twitter is a tool I use daily, Venmo makes it easy for me to transfer payments to friends, and I have a love/hate relationship with Gmail. But it has also stifled innovation. Imagine the value of 10 companies competing for ownership of the Twitter UI on top of a decentralized Twitter protocol. Each can decide on the right interaction for it, develop independent filtering protocols according to its desired type of discord, and contribute to a protocol that benefits everyone else. How many more successful companies could be built on top of a decentralized Venmo payment protocol, or a decentralized Slack protocol?

Web3 enables us for the first time to move towards the email model for everything else - decentralized rails in the center, and at times centralized players on top, on which innovation can be built, improved on, and expanded.

Individuals outside the crypto space talk about crypto prices, fluctuation, and uncertainty. For me, the excitement about web3 comes back to its unique ability to construct protocols around money, identity, social information, and other sources that are currently centralized, accelerating innovation across “locked” spaces, and essentially creating email-like protocols for everything else.

“The Beeper’s Gonna Be Making A Comeback. Technology’s Cyclical”

Dennis, 30 Rock

The almost singularity of email as a successful decentralized protocol isn’t coincidental. It is nearly impossible to coordinate the adoption of protocols across companies, countries, and systems. It breaks multiple game theory assumptions of optimization, and has many more things going against it than for it.

There is a further argument that the topics mentioned above - social, identity, and money have been solved and so a goal to create shared rails around them is moot. Twitter works, LinkedIn works, and Venmo works. That is true to an extent. Venmo works for US consumers because it ties US-required compliance to its protocol. Twitter works, but is tied into a daily policing of which information should be shown on its platform. LinkedIn works, but its efficiency for all its consumers is debatable. As these rails become large enough, it’s nearly impossible for a single company to handle all use cases and edge cases, meaning innovation slows to the speed of the company’s productivity, rather than that of the market.

To some extent then, technology really is cyclical - these problems have indeed been solved, but solving them again using decentralized platforms will enable new companies, innovations, and experimentation that is currently locked (before you shake your head with disagreement, I will humbly remind you of IRC and the number of times its functionality has been re-built and rebranded by different companies).

“Science Is Whatever We Want It To Be”

Dr. Spaceman, 30 Rock

We established that protocols that aren’t owned by a single company can be beneficial. They are also almost impossible to create. In other words, they have a cold start problem. 

So what makes crypto/web3 special in this regard? Why hasn’t this been done almost anywhere else outside email? And why would web3 be able to create these protocols and compete against tech giants who control the current underlying layers of payment, social, and identity? The answer is actually pretty straightforward. It comes down to incentives and network effects.

Crypto, for the first time, enables tying data protocols with money protocols, creating incentives for cross-company adoption of an underlying decentralized system. These incentives are extremely powerful, breaking a Game-Of-Thrones-sized “cold start” Wall (I hope the pun isn’t lost here). They have their critics, and might mask challenges that are critical to solve, but are effective nonetheless.

These incentives also lead to massive network effects. As more systems are built on top of protocols, these protocols become more valuable, drawing more developers to build on top of them still. A successful payment system on top of Solana, for instance, creates an incentive for more builders on top of Solana, not less. The value of the protocol compounds as more developers leverage it.

Shared rails enable geographically-focused UIs with relevant context that can be developed on top of a decentralized Twitter protocol. A Venmo competitor can arise in Europe, using Venmo rails, with tools to ensure European-related compliance, and a second one can rise still focusing on optimizing cross-border payments using Venmo rails. In short, web3 is uniquely positioned to create and accelerate the adoption of decentralized protocols.

“60 percent of the time, it works every time”

Brian Fantana, Anchorman

As I wrote this last section of the post, I was debating two quotes, the one above, and the title of the Seth Macfarlane movie - A Million Ways to Die in the West. I chose the former, mostly because Anchorman is one of the greatest movies of all time (yes, you heard me, don’t @ me), but the latter reference might be even more relevant here. 

The reality is that when new protocols emerge, most die. That isn’t an indication of the flaws of protocols in general, but rather a natural course of exploration of a new frontier, albeit one less deadly than the old west. Many new protocols are attempted, and most don’t work. That is doubly true in web3. 

There will be multiple efforts to create a decentralized social layer. Today alone, protocols such as DeSo, Farcaster, Lens, CyberConnect, and others compete to try to jump-start an ecosystem. There are similar attempts in the world of payments. SolPay on Solana and Lightning on Bitcoin are trying to increase throughput and reduce the costs of a payment systems that rely on shared rails. In parallel, there are multiple attempts at decentralizing identity - ENS, Unstoppable Domains, Handshake, Bonfida, and others who compete for your identity handle, while companies such as Ceramic, Spruce, Protocol Labs, and others work to offer decentralized storage options.

Of the above, or perhaps out of a group not in the above, new protocols will indeed emerge and solidify themselves as the defacto rails in their respective fields. The ability to combine these protocols with financial incentives will finally create a solution to a protocol cold start problem and accelerate growth in a shorter-than-expected amount of time. It might not be long before we have shared rails far beyond those of email, and that, in my opinion, is the real revolution of crypto.

------

* Email has recently come under criticism as a protocol given the power of large providers to de-facto block small ones using spam filters and other methods. One example mentions this, with a counter follow up here. The point of this article stands, and is reflected in the counter - there is optionality, and choice for those that want it, because anyone can fundamentally develop a solution on top of the open protocol.

https://www.dynamic.xyz/blog/web3-the-shared-rails-for-everything
Itai Turbahn

Itai is the co-founder and CEO of Dynamic.xyz. Before Dynamic, Itai spent 7 years in product management leadership positions, and was previously a consultant at the Boston Consulting Group. Itai holds an MBA from Harvard Business School and B.Sc degrees in EECS and Economics from MIT.

Related articles

Sign up to our closed beta

(It's easier than minting an NFT during a gas war)

Join our closed beta