Web 3 is a Network of Formats and Formats will Build the World

Web 3 is a Network of Formats and Formats will Build the World

Last week I wrote about NBA Top Shot and a format replacement cycle occurring between traditional cardboard cards and digital ones. While oversimplified and not the entire story, people are in essence taking their collection and "burning" it to the blockchain. It has sparked a new gold rush in people minting new art and embedding them in NFT's as artists, art collectors, and anyone interested in art seek to mint and/or own the digital Mona Lisas, etc.

I think format is incredibly important to understand during this shift as it has become more nebulous over time throughout the web. I also think we are caught up in Web 1 notions of what "format" means as things get digital, and focusing on the technical term of the word - hence the whole "jpg on the blockchain" analogy when referring to them in some skeptical manner - because it literally means everything.

It's best to revisit each new iteration of the web and see how format manifested and changed.

Web 1 - Files as Formats

Web 1 was all about a network of websites and pages that were published on a particular file format. Early on there were Provider formats like AOL and Prodigy which were closed platforms that would resemble something like Snapchat and/or other "apps" today. They were bundled with access to internet and many people liked them because it was good info, but mostly because of the chat. Eventually as browsers got better and the world embraced more open formats.

Most people don't remember, but there was a time when many websites weren't just published in HTML. In fact there are probably people nowadays who don't even think about it. It just works. Initially it was common to click on links based on the file format the data was shared in. There were HTML links, but also .txt, .jpeg, .midi, .rar pages behind each click. Today many of these files still live out there but it's very rare to click on one without trying. There was also a brief period when Flash pages were a format you would consider building on (along with subsequent Adobe formats like Flex). HTML thankfully won out as the standard format by which to deliver a "page" or to embed into a hyperlink. While it feels like a given today, there were a few years of debate, thought most smart people knew that Adobe would lose that battle.

On top of that you had lots of competition amongst file formats for images, audio files, videos, compression etc. There were some winners amongst certain verticals (.mp3 ended up becoming a standard for quite some time) but even today we use .jpg's and .png's somewhat interchangeably.

Format replacement cycles that started to take off in Web 1 were bringing print publications online and some media online - most notably through Napster and torrents. It was very open, free, and relatively unmonetized. Nobody really cared about making a dollar on digital formats until the end when Napster started to really scare people.

Web 2 - Platforms and Venues as Formats

Web 2 was characterized by a lot of things, but mostly all about connections between people. It was ushered in with Youtube/Myspace/Blogging/Twitter and accelerated with Facebook and then mobile. Even Gig and the early Creator economy platforms we are seeing  today are about connecting a person to a person. Need a friend? There's your friend. Need a ride? here's a car. Looking to learn how to paint? Here's an artist.

In Web 2, file formats from Web 1 didn't go away but they all kind of disappeared. They were subverted. We had new formats, which were platforms and venues. The formats became the places where our connections were made, and our discussions were held. In Web 2, Youtube is a format for video. Facebook and Twitter are formats for communications and publishing. Spotify is a format for music and radio. Netflix is a format for television. Uber is a format for transportation. Airbnb is a format for travel. Apple is a format for telephone. Amazon is a format for shopping.

The replacement cycles of Web 2 were weirder - as it was famously quoted as software eating the world. I think it's actually helpful to visualize it in its most literal sense in relating to Web 3. Our TV didn't go away but everything about it became a computer and software ate the cable box, the local news, the video stores, and DVD stores in your town. Amazon ate main street. Our portable music didn't go away but software ate Sam Goody, the local radio station, etc. Our friendships didn't go away, but software ate the playground, the telephone, and other ways to communicate with our friends.

Many of these replacement cycles - like in Web 1 added new value (and problems). It wasn't that hanging out with people just went away and completely online, it enabled new types of interactions between wider groups of people. New definitions of what "friend" meant that still haven't really been hashed out aside from "internet friends". Television replacement cycles have hurt some aspects of local news but ushered in a golden era of really good artful television. I won't go into media and fake news because, well I think you get it.

In every case, the new digital formats were more dynamic. They enabled types of value transfers, interactions, and exchanges that the analog format just didn't offer. The companies that owned those formats have become very, very, very valuable.

Two formats that did have Web 1 style debates about are interesting and keys to Web 3 - ad formats and RSS.  It's not that Ads weren't around in Web 1, they were just less important. In Web 2 you started to see venues and platforms pop up where people connected. Ads needed a format. Web 1 properties became terrible formats for ads, as they didn't have enough data and they weren't venues so they couldn't create more custom formats. Ads became native to Web 2 formats, which had lots of personal interaction and data, therefore were able to support Ad business. Web 2 in many ways didn't just eat the world, it ate away at Web 1.

RSS is the most interesting one as it's a template to format in Web 3. At the beginning of Web 2, there was a huge debate over RSS. It was ushering in a golden age in blogging, and making it easy to find cool stuff to read. The problem started happening when Ads came in and needed a format. RSS didnt' end up proving itself to be a good enough format for ads to live in fast enough for Web 2 formats to eat ads and RSS. RSS or something like it could have done this but, like Flash before it, it just couldn't compete. Currently we are witnessing a renaissance for the RSS format with podcasting. Podcasting runs off of RSS and it works because the ad can be embedded in the media file itself. This has sparked an entire subindustry around podcasting and creators of audio content and produced new stars and new niche radio but in a very Web 1 (or is it Web 3) way. While the Spotify format tries to replace it, it could actually end up replacing them.

Web 3 - Formats as Open Platforms and Venues

The importance of RSS/podcasting to understanding Web 3 is that it Web 3 subverts the old format again. Just like with file formats in Web 2 which are still "there" but nobody really cares. In Web 3, the platforms and venues that connected us can still exist, but nobody will care. The format embedded in the format is what enabled an entire open platform and ecosystem to emerge. You had different podcast apps, tools for creators, creators themselves, etc. Nobody makes money off of the format really, but tons of money is made around the podcast format, by that format being open and standard. The format itself isn't really anything and could be replaced by a better RSS and a better audio file and something even better for the creators. Thats the point. The point is that it's easy to create better formats to expand with the needs of the ecosystem in this new virtual space.

Web 3 is all about connections between formats. The best way of thinking about it is if you took the world before web 1 and digitized all of it. A digital "CD" or digital "Vinyl" mean much less because it's just a video game image in your head, but it could mean everything if the artists want to publish to it and it plays in another digital format of "CD Player" that people use and the artist also likes the digital format of "Concert Hall" that people also use. There will be many formats for different types of things but the best formats will be interoperable up and down the value chain for the creators that publish to them.

This should seem obvious, but it's not going to be for lots of people. Real world licensors and middlemen will want to insert themselves around these formats or even own them. This will not create a good format for many. Even NBA Top Shot is a bad format because it's NBA Top Shot. Top Shot is a better format. Moment is perhaps the best format because nobody truly owns a moment. In a world where "moment" is a format, then you have an economy of artists capturing that moment and potentially players who were captured in it. I think the idea of the league and even Top Shot the brand become less important but still have a place there if they embrace the fact that they don't own the moment or that the moment itself has the business logic of a set of creators and collectors that make it a format that plays nice with other formats such as "game" or "Sportscenter" and "Television".  The best formats may not be so granular but they could in infinite space.  Flow is the bottom of the stack format for NBA Top Shot, and itself must compete with Formats such as Ethereum (ETH2) and other blockchains. NBA Top Shot will be as valuable as Flow takes it. If it doesn't interop with other chains, aka if people don't build around that format, then NBA Top Shot is not a good format.

Web 3 replacement cycles will take analog world value and "record" it onto new digital formats that serve as analogs. It can also export them out back to the real world as well. They will also take Web 2 platforms and suck out all the value prop they get paid for. The concept of an exchange or marketplace can live with the format. Matching can be an entire slew of applications around a finite shared inventory of "things". Even real world platforms and venues like Uber are not great formats for web 3. A car sitting in finite analog space but represented and discovered in digital space can be represented by an NFT. That car and driver is now incentivized to find lots of places that help people find him. The concept of Uber, and even Uber the company can exist, but the creator is now the driver, both literally and figuratively. When everything is sitting out on the blockchain "matching" is still an important problem, but you don't have exclusivity on the inventory of rides. That changes the entire value chain. Think of a world with many Expedias who will extract value by serving the rider with the best ones. But also in the world are potentially services that help drivers analyze their routes, publish to different applications, maximize their prices, and communicate with their customers to drive longer term relationship.

Even a lot of the stuff being minted today is extracting way too high of a royalty fee for this new web. It may be collectibles that end up in some digital museum but if it can't do anything and transfer value without being able to pay someone to help facilitate that along the way in an emergent, open fashion then you just minted on vinyl when mp3 might come out tomorrow. The best businesses on web 3 will be those that understand the value of format and the value of not owning it but contributing to the development of it and they themselves have artist/creator like economics as the ecosystem grows.