Author: Alana Levin, Variant Fund Investment Partner; Translation: Golden Finance xiaozou
Lately, I’ve noticed two trends that seem to be accelerating on the Internet:
Existing applications are becoming increasingly siloed and self-contained.
New startups are working to make the Internet more open and interoperable.
I would summarize the relationship between these two trends as follows: established companies are trying to consolidate and strengthen their profit margins and moats, while new startups see these profit margins as opportunities.
The core premise of a more interoperable internet is that one app should be able to read the data of another app’s users. Think about this: SeatGeek prioritizing you for season tickets based on your past betting history on DraftKings; Resy recommending restaurants based on the type of food you recently ordered on Amazon Fresh; Fila offering unique discount codes to people who watched Emma Navarro’s stunning U.S. Open and are interested in buying gear from sponsors.
I'm noticing two types of startups chasing this interoperable internet opportunity.
The first approach fits the status quo of the internet today because it accepts the fact that the vast majority of existing user data is stored in closed applications, using a technology called web proofs, which are cryptographically signed data from a web server proving that a user took a certain action online. Web proofs allow users to choose how their data is used. In the examples mentioned above, users can choose to prove to SeatGeak that they are active DraftKings users; consumers can choose to give Resy access to the details of their recent Amazon Fresh order, but they don’t have to do so.
The second category attempts to rebuild the core categories of Internet applications using persistent, mandatory open source data. A key difference from the first category is that no one controls the data - so instead of third-party developers asking users to prove that they have performed a certain action (i.e., requiring users to provide web proofs), developers can verify user actions themselves. Farcaster is one of the main companies in this field. It is an emerging social network that stores everything from users' social graphs, posts, likes, etc. in a set of distributed hubs. It has become a thriving developer center, and we are starting to see its network attract some cool applications.
I’m interested in both approaches. Given that embedded crypto wallets will gain more and more adoption, we can start to imagine how new economic flows will emerge.
On the former: We could see micro-economies and emerging information markets riding this powerful wave of access. One challenge with users selling their data so far is that individual pieces of data aren’t actually worth much. Micropayments could be a way for consumers to start monetizing their data. But the opposite could also happen. I can imagine a world where consumers are willing to pay for priority access to certain features (e.g., priority ticketing), and that exclusive access is granted through web proofs.
Regarding the latter: advertising underpins a large portion of the economic flow on the internet today. What if the market became more efficient by better matching consumers with the products they want and ensuring that advertiser dollars actually translate into consumer dollars? I wrote this in a previous article:
Companies can send coupons directly to the wallets of target customers (since every account is associated with a wallet).
Coupons may be issued based on a post by the consumer (or a post that the consumer follows) that mentions a similar product.
Businesses can operate with confidence that data will always remain open source and accessible (i.e., no worries about APIs being deprecated or priced out), allowing them to invest in improving the effectiveness of their distribution channels.
The budget will only be spent when the consumer makes a purchase (i.e. the coupon is used).
Open source data graphs are central to achieving this vision.
Overall, both approaches seem promising, and both are moving toward a similar end-game: a more interoperable Internet. Taking radically different approaches to how data is accessed, what types of data are available, and whether to meet users where they are or take them into the future seems like a good thing that can’t be hurt in any way. The more Internet experiments, the better!
