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This post first appeared in Alana's newsletter.
Recently I’ve noticed two trends on the internet seem to be accelerating:
Incumbent applications are becoming more siloed and self-contained.
New startups are trying to make the internet more open and interoperable.
I’d summarize the tension as: incumbents are trying to strengthen their margins and moats, while new startups see that margin as opportunity.
The core premise of a more interoperable internet is that one application should be able to read a user’s data from another application. Think: SeatGeek giving you priority bidding for season tickets based on your DraftKings betting history, Resy recommending restaurants based on the type of food in your most recent Amazon Fresh order, or Fila giving unique discount codes to folks who watched Emma Navarro’s awesome US Open run and consequently became interested in purchasing gear from the sponsor.
I’ve seen two categories of startups going after this interoperable internet opportunity.
The first approach meets the internet where it is today, in that it embraces the fact that the vast majority of existing user data lives in closed applications. Its foundation is a technology called web proofs: cryptographically signed data from a web server that proves a user had taken a certain action online. Web proofs allow users to choose how their data is leveraged. Putting this in context of the examples mentioned earlier, a user could choose to prove to SeatGeak that they are active DraftKings users. Consumers could choose to let Resy access details about their most recent Amazon Fresh orders, but they don’t have to. (Check out this piece if you’re interested in learning more about the legal considerations).
The second approach is an attempt to rebuild core categories of internet applications with persistently and enforceably open data. A core distinction from the first approach is that no one has control over the data – so instead of a third party developer needing to ask users to verify that they’ve taken a certain action (i.e. in the form of a user providing a web proof), developers can simply verify the action themselves. Farcaster is one of the main companies building in this space. It’s a new social network, where everything from user social graphs, to posts, to likes are stored in a distributed set of hubs. It’s become a flourishing developer hub and we’re starting to see some cool applications leverage its network.
I’m excited about both approaches. And when considered in tandem with growing adoption of embedded crypto wallets, we can start to envision how new economic flows might emerge.
On the former: we could see microeconomies and new information marketplaces emerge on the back of this enriched access. To date, one of the challenges with the notion of users selling their data is each piece of data isn’t actually worth that much. Micropayments might be one way that consumers can start to monetize their data. But the reverse might happen, too. I could envision a world in which consumers are willing to pay for priority access to certain features (e.g. better slots in ticketing queues), and that the process for granting that exclusive access involves a web proof.
On the latter: advertisements underpin a significant amount of economic flows on the internet today. What if that market could be made more efficient, by better matching consumers with products they want, and ensuring dollars spent by advertisers actually convert into dollars spent by consumers? I wrote this in an earlier reflection on the state of crypto:
A company could send coupons directly into their target customers’ wallets (because every account has an associated wallet).
The coupons might be based on some mention of a similar product in a post the consumer created, or a post that the user liked.
The business can operate with the confidence that data will remain open and accessible forever (i.e. no concern about APIs being shut off or prices being jacked up), which allows it to then invest in refining the effectiveness of this distribution channel.
The budget is only spent if the consumer converts to a sale (i.e. the coupon is used).
Open data graphs are a core step toward this vision.
On the whole, both seem like very promising approaches toward a similar end vision: a more interoperable internet. That they take very different approaches to how the data is accessed, what data is available, and whether to meet users where they’re at or pull them into the future seems like a net good thing. The more experimentation on the internet, the better.
If you’re a developer reading this and interested in learning more, some good resources I’ve seen for the web proofs approach are on a company called Pluto’s website. For the latter, download Farcaster and start building cool stuff today.
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