Who will own the internet?
Who will own the internet? The question is up for grabs according venture capitalist and author Chris Dixon in his new book Read Write Own, Building the Next Era of the Internet. The future internet could be an open-air bazaar where people skip through various apps taking their followers with them, where no one worries about being censored or being demonetized for upsetting corporate overlords, and where everyone who brings value is rewarded accordingly.
That’s not the internet today. Who owns the internet today is simple. According to Dixon, the top 1 percent of social networks account for 95 percent of the social web traffic and 86 percent of social mobile app use. The top 1 percent of search engines account for 97 percent of search traffic, and the top 1 percent of e-commerce sites account for 57 percent of e-commerce traffic. The top five biggest tech companies gain massive market cap and leave alternatives in the dust.
Thus, the internet is intermediated by five companies. In some circles this is fine, don’t like the stranglehold Google, Meta, et al have on the internet? Don’t like that you’re at the whim of specious and ever-changing terms of service? That’s just the market at work. You can always build an alternative yourself. That’s fine in theory, but network effects and sunk costs mean switching from tech behemoths is impractical at best and impossible at worst.
Corporate Networks Own the Internet Today
According to Dixon, the oligarchy isn’t actually part of the internet, certainly not as it was originally designed as an “information superhighway” exists adjacent to the stack the internet was built upon. “Corporate services like Facebook and Twitter operate networks that interoperate with the web, using components like HTTP, but they are not part of the web in any meaningful sense. They do not adhere to the web’s entrenched customs and norms. Indeed, they break the web’s many technical, economic, and cultural tenants—like openness, permissionless innovation, and democratic governance.”
This set up has deleterious effects for everyone except the corporations themselves and their shareholders. The companies cheat the internet of its original innovation, energy, and promise by making it permissioned. In business, writes Dixon, “permission becomes a pretense for tyranny.”
Examples of corporate tyranny aren’t hard to find.
Corporate networks rob the people who make them valuable; the ones who create and consume platform content by keeping all the money in “take rates” which hover around 1% except for YouTube which is an outlier at around 45%. “Publishing” has been democratized, but with strict controls about who can publish. If you happen to be controversial or start moving the needle in a direction the oligarchs don’t like you’re deplatformed. Or your story is banned if it’s about a presidential candidate’s son that may hurt the oligarchs’ preferred candidate.
We All May Own the Internet Soon
But a new era may already be here. Crypto or “blockchain networks” as Dixon refers to them can change the current power structure by making internet a bottom-up bazaar—an open-air market where creators and private enterprises sell their wares on top of a “public” infrastructure, open source and permissionless. This design structure costs money, hobbyists can tinker but building out and maintaining the infrastructure costs real money. That’s where tokens come in. As more people use a blockchain network the tokens that are inherently part of its design become valuable creating the right incentive for people to dedicate themselves to using, creating, and maintaining its functioning and security.
As Dixon writes,
Tokens have all the earmarks of a disruptive technology. They are multiplayer, like websites and posts, the disruptive computing primitives or earlier internet eras. They become more useful as more people use them—a classic network effect that primes them to be must more than mere playthings. The blockchains that underpin them are also improving at a rapid rate, driving by platform app feedback loops that generate compound growth.
The bonus of this system is everyone becomes owners, creating a virtuous cycle. As tokens gain value, everyone—coders, content creators, validators, and users—have an incentive to maintain and grow the network. Moreover, everyone is paid fairly for their contributions, and if they’re not, switching costs approach zero. Open source means a new “fork” is always available. Code ensures stability which invites ever more investment and innovation. Major changes require votes not the whims of CEOs or “Trust and Safey Councils.” Code limits human meddling. DeFi applications, for example, kept running smoothly amid the tumult caused by Sam Bankman-Fried, Do Kwon, and others unjustly associated with crypto because their frauds involved tokens.
Dixon Swings and Misses on Proof-of-Stake
But Dixon doesn’t get everything right. An obvious supporter of the Ethereum blockchain, he brushes off concerns about its vulnerability to centralization and political capture. Ethereum switched from the energy intensive but decentralized Proof-of-Work to the less secure Proof-of-Stake as its consensus mechanism in 2022.
Others, no less knowledgeable, have real concerns about the long-term viability of Proof-of-Stake. Brian Brooks, former acting Comptroller of the Currency, describes Proof-of-Stake as an “electronic means of traditional corporate governance – the shareholders with the most shares can control the system and could in theory act contrary to the interests of other users who have smaller token holdings.”
Nic Carter, nobody’s crypto fool, describes Proof-of-Stake this way:
[A] cornerstone of the anti-Bitcoin energy argument [is] the notion that you can have something for nothing with Proof of Stake. No energy consumption, yet still a functioning decentralized consensus. . . . [T]his is fantastical. ‘Proof of Stake’ is just a fancy phrase meaning “those who have the most wealth wield political control.” That sounds a lot like our current system, which Bitcoin is specifically designed to solve. Bitcoin explicitly rejects politics, and doesn’t grant any special privileges based on coins held.
Perhaps Dixon may prove correct and new-Ethereum will prove as secure as its “classic” predecessor. But Ethereum made the switch over specious energy concerns that have plagued the West. We are not running out of energy and wouldn’t even approach it for centuries. Further Bitcoin’s energy use is miniscule and potentially quite valuable for human flourishing.
Overall, however, Dixon has written an interesting valuable book for how the internet may change in the coming decade. If he’s right, it will be a massive improvement from the current iteration and may spur ways of communicating and creating not yet imagined.
By Jossey PLLC
