Network Effects, Moats, & the Business of web3

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Jun 23, 2023

Scott Duke Kominers, a renowned A16z crypto research partner and Harvard professor, dives into the evolving landscape of Web3. He discusses how network effects drive user engagement and reshape competition, highlighting the transition from traditional platforms to decentralized environments. The conversation also delves into composability as a catalyst for innovation, emphasizing community dynamics and governance in open-source frameworks. With insights on token incentives and the need for new business strategies, Scott provides valuable guidance for builders in this transformative digital age.

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INSIGHT

Web3 Businesses as Platforms

Almost every Web3 business is a platform enabling user interaction, characterized by network effects.
More users increase interaction quality, but Web3's openness makes dominance harder.

INSIGHT

Porter's Five Forces in Web3

Porter's Five Forces model analyzes competitive advantage by examining rivalry, new entrants, substitutes, supplier power, and customer power.
Web3 intensifies these forces due to open data, forking, and user control, making competition fiercer.

INSIGHT

Community Cohesion

Web3 platforms can cultivate community cohesion by granting users digital ownership and governance.
Engaged users become invested in the platform's success, potentially exceeding classical platform value creation.

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with @skominers @smc90

In this deep dive and tour through key business concepts, from theory to practice, we cover the topics of strategy, competitive advantage, network effects, moats, and more -- covering both both basic foundations, as well as the tricky nuances in a new world of open source, including web3. In the first half of this discussion, we cover foundational business concepts and questions -- such as the nature of competition, and how it *really* changes in web3; as well as how network effects really work -- and then, in the second half (in case you want to skip ahead), we cover mindsets and general guidance for builders…

Our expert guest -- in conversation with editor in chief and host Sonal Chokshi -- is a16z crypto research partner Scott Duke Kominers, who is also a professor at Harvard Business School; a faculty affiliate in Harvard’s Department of Economics; and advises several companies on marketplace development, incentive design, and more; as well as advises, and is directly involved, in several NFT communities.

Scott also teaches on these topics -- both at Harvard and also recently at our Crypto Startup School -- so be sure to subscribe to our playlist for those talks on the a16z crypto YouTube channel to get the latest updates as we release more videos from the 2023 cohort.

Listen to web3 with a16z: https://web3-with-a16z.simplecast.com/