a16z partner: How does Web3 design incentive mechanisms?

Original Author: Chris Dixon, a16z

Compiled by: 0xCC, Block Rhythm

This article was published on social media by a16z partner Chris Dixon, titled "The Web3 Playbook: Interoperability as a Growth Mechanism." The author explains how Web2 has become increasingly closed through network effects, and how Web3 ensures its interoperability through incentive mechanisms. Rhythm has compiled his views.

When people transition from Web2 to Web3, one thing that can be confusing is that the "laws of physics" in Web3 may be very different from those in Web2. The motivation for applications to be interoperable is a great example.

In Web2, applications have complete control over user data, so each application can unilaterally decide whether to interoperate with other applications.

According to Metcalfe's Law, when two networks compete, the motivation of smaller networks is to seek interoperability, while the motivation of larger networks is to avoid it. Therefore, larger Web2 networks almost always decide against interoperability, and since they have complete control over all user data, it is easy for them to do so.

After operating under this logic for many years, we have ultimately arrived at today's internet, where almost no applications or networks can interoperate (except for the web pages and emails inherited from Web1).

For network participants, this has led to a poor outcome: a worse user experience and being locked into applications. Developers and creators find it difficult to cold start and scale their audiences, and they also risk being locked in.

Now let's look at the incentives for interoperability in Web3. In Web3, data is owned by the users themselves, so applications cannot prevent them from transferring their data from one application to another. Similarly, according to Metcalfe's Law, while larger networks have the motivation to prevent interoperability, they cannot do so in Web3.

This is where it gets interesting. Smaller networks not only have the motivation for interoperability but also make interoperability a core growth mechanism.

For example, if you are a startup team for a Web3 game and greatly admire the fanbase built by larger Web3 games, an effective way to attract their community is to allow their tokens—both fungible tokens and non-fungible tokens (NFTs)—to enter your network.

There is no reason to require a token to function the same way in a newly established game as it does in an older game, nor is there any reason to require NFTs to have the same uses, appearances, or functions.

The key is that by giving value to users' data and assets, you create an incentive for users to join and expand the network. Additionally, by deciding which networks to interoperate with first, you can help guide the type of community you are developing.

This example illustrates a very good property of Web3: the incentives of networks/applications align perfectly with the incentives of network participants (users, developers, creators, etc.).

Web3 does not hope that application/network designers will do the right thing ("do no evil"), but instead creates new systems where the rules are enforced by code ("do no evil"). The incentive mechanisms of networks and networks align the interests of network participants.