Web3 Series - Unlocking Web3: How Crypto Wallets and Network Effects Will Drive the Next Wave of Disruption and Empower Users
- Alvin Lourdes
- Sep 14, 2024
- 5 min read
September 14 2024
In Web2, platforms like Facebook and Google operate with centralized control, where user data is stored and monetized by the platforms themselves. This model aligns with the Five Forces framework, where platforms have significant bargaining power over users and act as gatekeepers, controlling access to data, privacy, and value. Users are essentially locked in by the high switching costs imposed by these platforms, as they dominate the ecosystem with network effects that favor incumbents.
Web3 disrupts this dynamic by shifting control back to the users.
In Web3, you hold the keys to your data through your crypto wallet, which securely stores your digital identity, assets, and reputation. This fundamentally weakens the platforms’ bargaining power and reduces barriers to entry for new players, as users can easily move between platforms without losing their data. Privacy becomes a core part of the system, integrated directly into decentralized networks, where users can control how and where their data is used. This new wave of competition opens up opportunities for user-centric platforms, driven by shared ownership and transparency.
Let’s explore how Web3 empowers users, who controls the data, and how privacy is protected.
How Web3 Gives You Control Over Your Data
In Web3, the control over your data resides with you, the user, rather than with the platforms. This is possible because of crypto wallets, which store all your essential digital information, including:
Digital Assets: Cryptocurrencies, NFTs (art, collectibles, virtual goods).
Identity: Your profile, credentials, avatar, and any digital affiliations.
Reputation: Scores or records of your behavior within different Web3 communities or DAOs (Decentralized Autonomous Organizations).
Community Memberships: Your participation in specific Web3 platforms or decentralized communities.
Unlike Web2, where data is locked inside a platform, Web3 allows you to bring all of this data with you when you move between platforms. Your crypto wallet acts as your digital passport, and when you join a new platform, you simply connect your wallet, and all your data follows. This means you can easily switch platforms without losing anything, as the control remains with you, not the platform.
For example, if you were using a Web3 social media platform and decided to move to another one, you wouldn’t lose your followers, NFTs, or reputation. Instead, these would stay with you in your crypto wallet, ready to be reconnected to any new platform you choose.
How Privacy Is Built into Web3 Systems
Web3 offers more than just portability; it also allows you to control what information you share. Just because your data is stored in a crypto wallet doesn’t mean it’s visible to everyone. Web3 gives you the ability to decide what data to share and when.
Here’s how privacy is integrated into the system:
Selective Sharing: When joining a new platform, you can choose which pieces of your data to share. If you don’t want to share your reputation or some part of your identity, you can withhold that information. This ensures that you only reveal what is necessary while keeping other details private.
Encryption: Certain parts of your data, such as personal identity details or sensitive assets, can be encrypted, meaning that even though the data exists on the blockchain, it is only accessible to those you allow.
Anonymity: Many Web3 platforms allow you to engage anonymously, using your crypto wallet as a pseudonym. This means you can participate in platforms without revealing your real identity, protecting your privacy while still allowing you to interact and contribute.
For example, if you join a decentralized finance (DeFi) platform, you may choose to reveal only your wallet address and transaction history but keep your personal identity hidden. On a decentralized social media platform, you might share your profile and reputation but hide your affiliations with other DAOs.
Who Controls the Data in Web3?
In Web3, you are in control of your data. The platform doesn’t own or manage your data—you do. Your crypto wallet is where all your data is stored, and only you can access it. Even though data is stored on a public blockchain, your wallet gives you complete control over which data to expose and to whom.
You control your digital assets, identity, and reputation.
You decide how much or how little to share when joining new platforms.
You have the ability to move your data freely between platforms without losing anything.
What Happens to Your Data When You Leave a Web3 Platform?
In Web2, leaving a platform often means losing your data. But in Web3, your data is never tied to a single platform. Instead, it’s stored in your crypto wallet. When you leave a Web3 platform:
Your data stays with you: All your assets, identity, and community memberships remain safely in your wallet.
Nothing is locked in: You don’t lose any of your digital possessions or connections. You can take them to the next platform you join, instantly reconnecting everything by simply linking your wallet.
This mobility and user freedom are major advantages of Web3. Platforms no longer control your experience—you do.
The Role of Community Cohesion in Web3
In Web2, communities are tightly bound to platforms. If you leave a platform, you lose access to those communities. In Web3, your community memberships are stored in your wallet. When you join a new platform, you bring those affiliations with you, keeping your communities intact.
Community Cohesion: Whether it’s a DAO, NFT-based group, or any decentralized platform, your participation and memberships are tied to your wallet. This means that switching platforms doesn’t cut off your community ties.
For instance, if you are part of a gaming DAO and move to a new Web3 gaming platform, your role and participation in that community stay with you. The new platform can recognize your membership as soon as you connect your wallet.
Control, Privacy, and Freedom in Web3
Web3 represents a massive shift from the centralized control of Web2. In Web3, you own your data through a crypto wallet, allowing you to carry your digital assets, reputation, and community memberships with you wherever you go. Importantly, you have complete control over privacy, choosing what to reveal or keep hidden when joining new platforms.
When you leave a Web3 platform, you don’t lose anything. Everything stays with you, thanks to the decentralized nature of Web3. This gives users unprecedented control and mobility, making Web3 a more user-centric, private, and flexible way of interacting online.
Future Orientation
Web3 has the potential to revolutionize the world by decentralizing control and giving individuals ownership over their data, assets, and digital identities. Unlike traditional industries, where power is concentrated in the hands of a few corporations, Web3 empowers users to participate directly in the value creation process, fostering transparency, privacy, and fairness.
By removing intermediaries and enabling peer-to-peer interactions, Web3 could disrupt industries like finance, healthcare, and entertainment, creating more equitable access to resources and opportunities. This shift would benefit society by promoting inclusivity, reducing monopolistic control, and encouraging innovation driven by community collaboration rather than corporate interests.
I will explore Web3 in detail this week. Discuss how this technology can help solve the worlds most pressing issues.