Web3 had better not be Transaction Cost Hell

Currently, the web is monetized mostly by either ads or subscriptions (or by companies offering you free stuff and then selling your data). Over the years, there have been various attempts to switch to a system of micropayments. But despite a few limited successes (e.g. buying one song from a music service), these attempts have generally failed. An... See more

the main attraction of web3 might not be decentralization, but rather what economists call excludability — it will be stuff people pay for, rather than free stuff.

Lots of transaction costs aren’t paid in dollars — they’re paid in seconds of effort, in the mental cost of attention-switching, and in the hassle and stress of keeping things in mind. Web3 should focus on stuff that allows people to pay fewer of those costs, rather than stuff that forces them to pay more.

In the end, most of these users would likely migrate back to either free ad-supported services or to subscription services that only make you think about payments once in a while.

[J]ust imagine taking [privatization] to its absurd extreme. Imagine if we could privatize city streets and create ownership rights for the air. Every time you walked out your door, you would have to pay some fraction of a cent for the privilege. Every time you took a breath, you would pay a far tinier fraction for the chemical changes caused by yo... See more

We can do a similar reductio ad absurdum for a micropayments-based web. Imagine if everything you do online required you to decide whether to make a tiny payment. Send an email? Pay a few cents. Read one more paragraph of an article? Pay a few cents. And so on. It would be an utter nightmare.

One of the first popular posts I wrote on my old blog was called “Do property rights increase freedom? (Japan edition)”. In it, I challenged the notion that assigning property rights to everything is consistent with human liberty, and cited some examples of how Japan made people pay for a lot of stuff that was free in America.