The development of the internet can be divided into several important stages: from early information transmission networks to the platform economy of the Web2.0 era, and now to the protocol economy of the Web3 era. Each transformation is accompanied by fundamental restructuring of power structures, value distribution, and business models. Web3, through blockchain technology, smart contracts, and decentralized governance, is redefining the value creation and distribution mechanisms of the internet, transitioning from the traditional "platform is king" to a new paradigm of "protocol is king." This transformation not only changes technical architecture but also profoundly affects economic, social, and political operations.

Limitations of the Platform Economy

Traditional internet's Web2.0 era was built on the platform economy, with a few tech giants at its core, forming a highly centralized power structure. While this model brought efficiency improvements and better user experiences, it also exposed deep structural issues.

Power Concentration and Monopoly

In the platform economy, a few large tech companies control user data, content distribution, advertising revenue, and ecosystem rules. These platforms form "winner-takes-all" situations through network effects and data advantages, making it difficult for new entrants to compete. Users and creators contribute value but are in weak positions in value distribution, with most profits going to platform operators.

Lack of Data Sovereignty

In the platform economy, user data is controlled and used by platforms, with users lacking control over their own data. Platforms can monetize user data commercially, while users often receive no corresponding benefits. This inequality in data sovereignty leads to privacy breaches and algorithmic manipulation.

Innovation Suppression

The centralized nature of the platform economy suppresses innovation. Small developers and entrepreneurs depend on large platform rules and APIs, easily affected by platform policy changes. When platforms adjust strategies or raise barriers, entire ecosystems can be impacted.

Censorship and Centralization Risks

Platform operators have the power to censor content and ban users, which can be abused, affecting free speech and diversity. Meanwhile, centralized platform operations also bring single-point-of-failure risks, where platform issues can affect entire ecosystems.

Revolutionary Features of the Protocol Economy

Web3's protocol economy represents a new stage in internet development, with its core feature being the coordination of economic activities through decentralized protocols rather than reliance on centralized platforms.

Decentralized Governance

In the protocol economy, governance power is no longer concentrated in the hands of a few but achieved through decentralized decision-making via token holder voting, DAO mechanisms, etc. This model allows more participants to influence protocol development direction, improving governance transparency and fairness.

Value Distribution Restructuring

In the protocol economy, value creators can directly receive corresponding benefits. Through smart contracts and token economics, creators, developers, users, and other participants can all receive returns from value creation, achieving fairer value distribution.

Openness and Interoperability

The protocol economy is built on open standards, enabling interoperability between different protocols. This openness breaks down barriers between platforms, promoting innovation and competition while giving users more choices.

Data Sovereignty Return

Web3 technology allows users to regain control over their data. Through encryption and decentralized storage, users can autonomously manage data and decide how to share and use it.

Technical Architecture Transformation

From Centralized to Decentralized

Traditional internet uses centralized server architecture with data and computing concentrated on few servers. Web3 uses distributed architecture with data stored on multiple nodes and computing completed through consensus mechanisms, improving system attack resistance and reliability.

From APIs to Smart Contracts

In the Web2.0 era, developers interacted with platforms through APIs, limited by platform rules. In the Web3 era, developers interact with protocols through smart contracts, with contract execution guaranteed by blockchain and not controlled by any single party.

From Databases to Blockchain

Traditional applications use centralized databases to store data, while Web3 applications use blockchain to store critical data, ensuring data immutability and verifiability.

From Centralized Identity to Decentralized Identity

Web3 introduces the concept of Decentralized Identity (DID), where users own their identity identifiers and no longer depend on platform identity systems.

Fundamental Changes in Economic Models

Value Capture Mechanisms

In the platform economy, value is primarily captured by platform operators. In the protocol economy, value is distributed among participants through token economic models, including token holders, protocol users, and developers.

Incentive Alignment

The protocol economy uses token incentives to align participants with protocol success. Token holders, users, and developers all have motives to maintain and improve protocols, forming healthier ecosystems.

Open Competition

The protocol economy breaks platform monopolies, allowing any developer to build applications based on open protocols, promoting innovation and competition.

Long-term Value Creation

The protocol economy focuses more on long-term value creation rather than short-term user growth and monetization. Through governance tokens and long-term incentives, participants are motivated to make long-term investments.

Profound Social Changes

Democratization of Power Structures

Web3's decentralized nature disperses power more widely, reducing single-party control over ecosystems, promoting the democratization process in the digital world.

Innovation Ecosystem Prosperity

The openness of the protocol economy provides better environments for innovation. Small developers and startups are no longer limited by large platforms and can build their own applications based on open protocols.

Enhanced Global Collaboration

Web3's global nature promotes cross-border collaboration. Through smart contracts and token incentives, participants from different countries and regions can collaborate more effectively.

Digital Identity Autonomy

Web3 allows users to regain control over digital identity, selectively sharing information, protecting privacy while enjoying personalized services.

Challenges and Risks

Technical Complexity

Web3 technology is relatively complex with high barriers for ordinary users. How to simplify user experience and reduce usage costs is an important challenge for Web3 adoption.

Regulatory Uncertainty

Web3's decentralized nature conflicts with traditional regulatory frameworks. How to ensure compliance while protecting innovation requires new regulatory approaches.

Governance Efficiency

While decentralized governance is fairer, decision-making efficiency may be lower. Balancing democratic participation and decision efficiency is a problem the protocol economy needs to solve.

Security Risks

Although blockchain technology itself has high security, issues like smart contract vulnerabilities and private key management still exist. How to improve security and protect user assets is an important task for Web3 development.

Future Outlook

Technical Maturation

With continuous technological development, Web3 user experience will improve and technical barriers will lower, creating conditions for large-scale adoption.

Regulatory Framework Improvement

Countries will gradually establish regulatory frameworks suitable for Web3, protecting user rights while promoting innovation.

Ecosystem Integration

Different Web3 protocols will integrate better, forming complete ecosystems providing one-stop services for users.

Increased Social Acceptance

With Web3 application proliferation, social acceptance of decentralized technology will improve, driving the transition from platform economy to protocol economy.

Conclusion

Web3's disruptive impact on traditional internet is not only technical but also represents fundamental changes in economic, social, and political dimensions. The transition from platform economy to protocol economy represents internet evolution from centralization to decentralization, from monopoly to openness, from single control to multi-party governance. Although this transformation faces challenges, it provides possibilities for building a more fair, open, and innovative digital world.

In the future, with technological maturation and ecosystem development, Web3 will continue driving internet transformation, ultimately realizing a digital economic system truly controlled by users, with shared value and open collaboration. This transformation will not only reshape internet business models but also profoundly influence the development direction of human society.