Can WEB3 Bring Back Competition to Digital Platforms?

Like the early Internet, blockchain and Web3 applications promise a new wave of decentralization and competition – yet at the same time, it is unclear which of the dynamics that drove concentration in online platforms and services will remain in force under the Web3 paradigm. In this piece, we highlight three fundamental costs that Web3 technology can potentially reduce: the cost
of verification, the cost of interoperability and portability, and the cost of composability. We then explore how reducing these costs may influence the design of digital ecosystems, as well as the resulting market structure and competition.

By Christian Catalini & Scott Duke Kominers^[1]

The Internet played a major role in decentralizing access to information and services, bringing competition and innovation back to many concentrated industries. At the same time, because of network effects and economies of scale, verticals such as communications, retail, media, and music have seen the emergence of Internet players with substantial market power. Like the early Internet, blockchain and Web3 applications promise a new wave of decentralization and competition – yet at the same time, it is unclear which of the dynamics that drove online concentration in the first place will remain in force under the Web3 paradigm.

In this article, we highlight three fundamental costs that Web3 technology can potentially reduce: the cost of verification, the cost of interoperability and