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Brian Armstrong, CEO of Coinbase, approves of Chris Dixon Exploration of transition from Web 2 to Web 3.
Chris Dixon: Going from Web 2 to Web 3 – “Your take rate is my opportunity.”
Jeff Bezos famously said, “Your margin is my opportunity,” referring to how Amazon took market share by lowering prices and eating into competitor margins. What Amazon did in commerce is what the internet did more generally. Lowering costs and redistributing value back to users has been the internet’s core economic dynamic since the 90s.
Craigslist did this with classifieds, Google and Facebook did this with media, TripAdvisor and Airbnb did this with travel, and so on. Today this trend continues as Web 3 startups begin to eat into the margins of Web 2 incumbents. The higher the take rate, the more vulnerable the incumbent.
The video games industry does about $120B/year in sales, a significant portion of which is virtual goods. Most video games have 100% take rates. However, web 3 (aka crypto) games reduce the take rate dramatically. For example, Axie Infinity has generated over $1B in gross sales in the past year, most of which has gone back to users.
Some people pay to get ahead in most video games, and others work to get ahead. The difference in Web 3 is that the economy is a peer to peer: players fund other players, not just the game developers.
Today there are over 8 million musicians on streaming services, yet less than 15,000 musicians (less than 0.2%) make more than $50K/year. That’s because streaming services and music labels keep the vast majority of the revenue.
With NFTs, musicians keep over 90% of sales. By cutting out layers of intermediaries, musicians can credibly support themselves with just a thousand true fans. Social media platforms like Twitter, Instagram, and TikTok have take rates of 100% — they don’t share any revenue at all with creators! That’s been great for them but bad for users.
In contrast, Web 3 social platforms like Rally, Mirror, and BitClout have effective take rates well below 10%. Most of the value is sent back to users and creators. Web 2 platforms depend entirely on creators for content yet give only scraps back. This is not sustainable. Web 2’s take rate is Web 3’s opportunity.
The community was like: Web3 allows for network mining – incentivizing the users of a system who contribute to that system’s network effects to earn from their contribution. This collective alignment of incentives is incredibly powerful and just beginning.
