November 13th, 2021

What is web2.5 and why does it matter?

To understand web2.5, we should start by briefly outlining web3 and web2.

Web3 values openness, transparency, composability, and participation. The platforms are owned and governed by the users, not by any one individual or corporation. Crypto is the enabler of this new form of ownership and governance.

Web2 is the older version of the internet. Access is open but ownership is closed. Think: social networks and platforms that aggregate content. That content is user-generated but corporation-owned. Value accrues to the aggregators, not the creators.

Jarrod Dicker, of TCG Crypto, describes this dynamic well:

So what is web2.5?

Web2.5 is a middle ground - web2 companies embracing web3. It’s almost easier to define them by what they’re not rather than what they are: they’re not crypto natives and they’re not built on decentralized platforms.

Examples include Twitter enabling Bitcoin payments, Gucci selling NFTs in Fortnite, and Facebook becoming Meta.

These are companies in transition. They tend to be focused on updating old infrastructure instead of redesigning how we travel. It’s the difference between trying to update our railroads to high-speed rails vs. building a system of hyperloops for streamlined travel. One is built on existing infrastructure; the other redesigns the entire system.

Chris Dixon has an article on how there are generally two phases of innovation: the skeuomorphic era and the native era. “In the skeuomorphic era, design thinking is largely adapted from older domains.”

We start by taking what we know, like sending mail, and build it on the new infrastructure (email). Once we’ve nearly exhausted those possibilities, only then do new, native business models start to emerge.

Web2.5 is almost indefinitely stuck in a skeuomorphic era (adapting designs from web3), largely because web2 will never be crypto native. It will take what we know from web3 and try to apply it to web2. That indefinite transition is what I call web2.5.

And it’s not always easy to make that transition. Last week, the CEO of Discord dropped hints that they were testing MetaMask integration. A couple of days later, he walked back those hints, in large part due to backlash from the existing web2 users.

In some ways, it’s tempting to say web2 and web2.5 are not going to make it, and that web3 will completely disrupt the way we engage with the world. As our lives become increasingly digital, digital currency and digital identities make sense. Web3’s openness, transparency, and composability have strong compounding effects.

But web2 companies have entrenched network effects. Facebook has nearly 3 billion monthly active users; DeFi has around 5 million, or 600x less.

Many cite that as the case for exponential growth in web3 (and I agree). But it’s also a risk - as web2 becomes web2.5, they have the potential to control the narrative. When I ask my friends what they associate with the metaverse, they say Facebook’s VR tech, not ethereum.

So, again, why does this matter?

Web2.5 will help make crypto mainstream. But it likely won’t be the crypto we call web3. Elements of web2.5 may be similar to web3, but the narrative will differ. And a different narrative means different values and different goals. Web3 is built on openness & transparency. Web2 is closed off & centralized. Web2.5 will be a hybrid, and which elements make it into the hybrid are what really matter.

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