Unbundling the unbundlers - The end of winner-takes-all

For instance, a Web2 marketplace provides a central search interface and a central reputation system. In a Web3 d-commerce ecosystem, the best search interface and the best reputation system gain market adoption, not just the one sponsored and enforced by the central market maker.

In the Web2 world, market infrastructure and market governance were bundled by platforms. Amazon, Ebay, Upwork, Uber, and other such marketplaces bundle both market infrastructure (in the case of Amazon, even physical infrastructure through FBA and Amazon Logistics) and market governance.

Web2 platforms encourage open market competition in production by reducing search costs for consumers, commoditizing distribution for producers and encouraging price transparency. This leads to open market competition among producers to a marketplace and the best producers bubble to the top of search results, and benefit from market exposure.

Web3 extends this open market competition from producers to the creators of market infrastructure.

While platforms and marketplaces vertically unbundled production from distribution and encouraged distributed and decentralised production, the ability to horizontally bundle market infrastructure and governance enabled them to centralize governance and rewards.

For instance, a marketplace like Ebay bundles seller onboarding, seller analytics, buyer onboarding, buyer decision support, search functionalities, and exchange infrastructure. All these components will be unbundled in a Web3 world.

As the ecosystem builds market infrastructure components in a decentralised manner, value accrues at the protocol layer (growing token value) which provides reliability of governance across all market infrastructure components. Conversely, as the token value increases, more market participants come on board to create new forms or market infrastruct... See more

In the Web3 world, market infrastructure gets unbundled from market governance. While the core components of market governance are encoded into the protocol layer, components of market infrastructure may be built by the ecosystem around the protocol.

While Web2 benefits from network effects in production, Web3 benefits from a mutually reinforcing cycle where greater adoption of the protocol for governance drives greater creation of marketplace infrastructure, which in turn reinforces the adoption of protocol. Once such a loop is set in motion, Web2 companies building market infrastructure withi... See more

The protocol layer still provides reliability of market governance, without requiring a central intermediary or arbiter. However, market infrastructure components are decentralized and may be owned across various players in the ecosystem. This decentralisation allows a greater degree of customisation in market infrastructure while also allowing sha... See more