Read Write Own: Building the Next Era of the Internet by Chris Dixon
Date read: 5/12/24. Recommendation: 9/10.
Regardless of your views on web3, blockchain, and crypto, this is worth reading. Dixon discusses how the internet evolved, the pitfalls of big tech, and the three types of networks—protocol networks, corporate networks, and blockchains. As he explains, just as internet startups undercut the high prices of traditional businesses, blockchain networks expose the soft underbelly of corporate networks: high take rates. While the future won’t unfold exactly as he details, the book is a useful exercise in challenging ourselves to consider if there’s a better way. One where builders and creators reap more of the rewards from our work and our content, rather than being exploited by large technology companies. Remember, “If it’s free, then you’re the product.”
Check out my notes below or Amazon for details and reviews.
My Notes:
Networks are the killer app of the internet:
Web, email, social apps, payment apps, marketplaces are all networks.
Pitfalls of Big Tech:
How big tech architects networks: “To restrict and constrain startups, impose high rents on creators, and disenfranchise users. The negative effects of these design choices are threefold: (1) they stifle innovation; (2) they tax creativity; (3) they concentrate power and money in the hands of a few.” Chris Dixon
Facebook and Twitter cut off third-party companies that were building apps on their platforms in the early 2010s. No new startup activity takes place on top of social networks and no new startups have survived because the biggest platforms are anticompetitive.
Anticompetitive: “Amazon learns which products in its marketplaces are top sellers and then undercuts their makers with its own cheap basic versions…It would be as if Target controlled not just its store shelves but also the roads that all stores build on.” Chris Dixon
“If it’s free, then you’re the product.”
Network design:
Network design = the way nodes connect, interact, and form an overarching structure.
“Network design determines outcomes.” Chris Dixon
Three types of networks:
Protocol networks: open systems controlled by communities of software developers and other network stakeholders (email, web). Money and power flow to network edges, incentivizing systems to grow around them.
Corporate networks: owned and controlled by companies, instead of communities (Facebook, Uber, Venmo, etc). Similar to walled gardens that are controlled by a single groundskeeper or a cathedral. Money and power flow to the network center (companies who own the networks) and away from users and developers at network edges.
Blockchains: Software that governs a network of hardware devices and establishes inviolable rules, solving for problems where all power and money naturally flow to the middle (as with corporate networks), and better align incentives. Similar to a bazaar, rather than a cathedral or walled garden. “They can connect people in social networks while empowering users over corporate interests. They can underpin marketplaces and payment networks that facilitate commerce, but with persistently lower take rates. They can enable new forms of monetizable media, interoperable and immersive digital worlds, and artificial intelligence products that compensate—rather than cannibalize—creators.” Chris Dixon
“Asking ‘What problems do blockchains solve?’ Is like asking ‘What problems does steel solve over, say, wood?’ You can make a building our railway out of either. But steel gave us taller buildings, stronger railways, and more ambitious public works at the outset of the Industrial Revolution. With blockchains we can create networks that are fairer, more durable, and more resilient than the networks of today.” Chris Dixon
“Networks built on blockchains can combine the best features of prior networks, benefiting builders, creators, and consumers and ushering in a third era of the internet.” Chris Dixon
Blockchains:
“Whereas most technologies tend to automate workers on the periphery doing menial tasks, blockchains automate away the center. Instead of putting the taxi driver out of a job, blockchain puts Uber out of a job and lets the taxi drivers work with the customer directly.” Vitalik Buterin
“Blockchains are a software abstraction that overlay on top of physical devices. They’re state machines. Just as the meaning of “computers” once shifted from people to machines, so too has the term since encompassed not just hardware but software as well.” Chris Dixon
“Blockchains are by design resilient to manipulation. They are built on top of a network of physical computers that anyone can join, but that is extremely difficult for any one entity to control. These physical computers maintain the state of the virtual computer and control its transitions to new states. In Bitcoin these physical computers are called miners, but the more common term today is ‘validators’ since what they’re really doing is validating state transitions.” Chris Dixon
“Blockchains are useful for enabling coordination among people who don’t have preexisting relationships. They are most useful when they are not just multiplayer but massively multiplayer—in broad use across the internet.” Chris Dixon
Encourage bottom-up, emergent economies: “Token rewards are like land grants, incentives given to contributors for various activities. Tokens confer ownership, enshrining property rights. Take rates are like city taxes, fees the network charges for access and transactions. DAOs are like city governments, responsible for overseeing the development of infrastructure, resolving disputes, and allocating resources to maximize the network’s value.” Chris Dixon
“Blockchains provide a sensible organizational structure for networks. Tokens are the natural asset class.” Chris Dixon
Tokens:
“The read era of the internet was defined by the website which encapsulated information. The read-write era was defined by the post, which encapsulated publishing, making it easy for anyone, not just web developers to reach broad audiences. The internet’s latest phase—read-write-own era—is defined by a new simplifying concept: tokens, which encapsulate ownership.” Chris Dixon
“Blockchains represent a radical departure from the status quo. Through tokens, they flip the script on digital ownership—making users, rather than internet services, owners.” Chris Dixon
“In the physical world, people would be upset if they had to start over whenever they visited a new place. We take for granted that we have a persistent identity and can take objects from place to place. The concept of ownership is so deeply embedded in our lives that it’s difficult to imagine how the world would look if that were taken away. Imagine if the clothes you bought could be worn only in the venue you bought them in. What if you couldn’t resell or reinvest in your house or car? Or what if you had to change your name wherever you went? That is the digital world of corporate networks.” Chris Dixon
“The digital world would be a better place if ownership were as widespread there as it is in the physical world.” Chris Dixon
“Tokens have all earmarks of a disruptive technology. They are multiplayer, like websites and posts, the disruptive computing primitives of earlier internet eras. They become more useful as more people use them—a classic network effect that primes them to be much more than mere playthings. The blockchains that underpin them are also improving at a rapid rate, driven by platform-app feedback loops that generate compound growth. Tokens are programmable, so developers can extend and adapt them for myriad applications, such as social networks, financial systems, media properties, and virtual economies. They are also composable meaning people can reuse and recombine them in different contexts, amplifying their power.” Chris Dixon
Rewarding users for constructive contributions to the network: “Blockchain networks use token incentives to motivate developers.” Chris Dixon
“Tokens provide a new way to skip advertising and acquire customers through peer-to-peer evangelism. Tokens empower individuals to become stakeholders in networks, not just participants.” Chris Dixon
Authentic communities are the best way to go viral: “Bitcoin and Ethereal don’t have companies behind them, let alone marketing budgets, and yet tens of millions of people own their tokens.” Chris Dixon
“Blockchain networks bake community ownership into their core design.” Chris Dixon
Disruptive technologies:
“When disruptive technologies debut, they’re often dismissed as toys because they undershoot user needs.” Chris Dixon
This is the reason Western Union passed on acquiring the phone ; they couldn’t understand how rapidly it would improve and how it would serve its primary customers, businesses, and railroads. And the same thing happened with Dell and Microsoft with smartphones.
Disruptive technologies are also misaligned with incumbent business models. No startup is going to beat Apple at making or selling better phones. “A more interesting startup idea would be something that makes phones less valuable. This is something Apple is far less likely to pursue.” Chris Dixon
Rise of corporate networks:
Early-mid 2000s everyone was building toward an open web with Web 2.0. Communicating through open APIs to improve the internet experience for users. Then the iPhone debuted, smartphones exploded, and power became concentrated with a select few. By 2013 Americans spent as much of their time on their phones looking at Facebook, as the entire rest of the web. Corporate networks shifted from “attract to extract” model, sacrificing interoperability and open ecosystems. It’s a natural progression, companies generally always do whatever it takes to maximize profits. Otherwise, they die.
Composability:
A property of software that allows smaller pieces to be assembled into larger compositions. “The power of composability is that once a piece of software is written, it never needs to be written again.” Chris Dixon
Composability hasn’t reached its full potential because the rules are constantly changing in corporate networks and developers need financial resources to host and run the software. Blockchain networks provide strong commitments that their prices and access rules won’t change. And the network itself covers its own costs by distributing token rewards to its validators.
“Blockchain networks turn ‘Don’t be evil’ into ‘Can’t be evil.’ Their architecture provides strong guarantees that their data and code will forever remain open and remixable.” Chris Dixon
Take rates:
“Just as internet startups undercut the high prices of traditional businesses, blockchain networks expose the soft underbelly of corporate networks: high take rates.” Chris Dixon
Facebook, Instagram, TikTok, and Twitter share almost nothing with network participants, extracting about 99 percent of their networks’ primary revenue source, advertising. Great for their profit margins, but terrible for creators who provide content without reciprocation.
“Early network participants create significant value for corporate networks, yet they rarely receive fair compensation for their efforts.” Chris Dixon
Popular blockchain networks (Ethereum, Uniswap, OpenSea) have very low take rates (0.06%-2.5%), allowing money to pass directly to network participants (users, developers, creators).
“Thick networks claim more profits for the center of the network and create thin complementary layers, with lower profits, for creators and software developers. Thin networks do the opposite, generating less profit for the network core and more profit for complements.” Chris Dixon
“Roads should perform basic functions, but you don’t need them to be hotbeds of innovation…On the other hand, you do want lots of creative entrepreneurs building around the roads: creating new shops and restaurants, constructing new buildings, expanding neighborhoods, and so forth. Roads should be thin, and their surrounding should be thick. Social networks should be thin utilities, like roads. They need to support basic features and be reliable, performant, and interoperable. That’s about it. The rest of the features can be built around the network.” Chris Dixon
“The web developed as a thin network—and look at the results. The network itself is a simple protocol (HTTP), and all the innovation happens on top, at the level of websites.” Chris Dixon
“The broader societal goal should be to build new tech stacks where users, creators, and entrepreneurs are not squeezed but rewarded.” Chris Dixon
Counter arguments:
“A reasonable skeptic might doubt the viability of a specific network or whether the world needs blockchain networks at all. Maybe the internet has enough networks. Maybe corporate networks are sufficient and will keep winning, either because users are too locked in already or because they’ll always outcompete blockchains in areas like user experience.” Chris Dixon
Future:
“In 2007, the big question for mobile was, what kinds of mobile apps would matter? Today the big question for blockchains is, what kinds of blockchain networks will matter? Blockchain infrastructure only recently matured enough to support internet-scale applications. The industry is likely now nearing the end of its incubation phase and entering its growth phase. It is a good time to be asking what a killer blockchain network might look like.” Chris Dixon
“For the internet to be an accelerator of deep creativity, it needs a better economic engine. Creating new jobs isn’t just nice; it’s necessary. As new technologies like AI automate work, social networks can be a counterweight that provides people with fulfilling career opportunities.” Chris Dixon
