Web3: a route to harness the web's Natural Monopolies

In January 2021, Twitter and Facebook banned a sitting president. Apple and Google removed Parler from their app stores. Amazon Web Services kicked Parler off its hosting infrastructure. In the space of a few days, a handful of companies demonstrated their ability to remove anyone — even the most powerful person in the world — from the digital public sphere.

The reaction split into predictable camps. “They’re private companies, they can do what they want.” “They’re the public square, they shouldn’t censor speech.” “They’re monopolies, they should be regulated.” “They’re communities, they should moderate content.”

All of these framings capture something real. None of them capture the core problem.

The natural monopoly framing

The better frame: big tech platforms are natural monopolies.

A natural monopoly exists when the structure of a market makes competition impossible — not just difficult, but structurally infeasible. Network effects, high fixed costs, and near-zero marginal costs create markets where one provider naturally dominates and competitors can’t viably enter.

Utilities are the classic example. It doesn’t make sense to have five competing power grids running to every house. The infrastructure cost is too high and the network is too important. So we end up with one provider, and then we need regulation to prevent abuse.

Big tech platforms have the same structural properties. Social networks have extreme network effects — a social network with your friends on it is infinitely more valuable than one without them. Cloud infrastructure has enormous fixed costs. App stores and search engines have winner-take-all dynamics. These aren’t monopolies because the companies are uniquely evil or because regulators failed. They’re monopolies because the market structure makes monopoly the natural outcome.

The three roles

The tech giants operate as three things simultaneously:

Public square. Twitter and Facebook are where public discourse happens. Not exclusively, but substantially. When you’re removed from these platforms, you lose access to the primary venue for public communication. This is the speech concern.

Public utilities. Google Search, Apple’s App Store, and Google Play are essential services that nearly everyone depends on. Try running a mobile business without access to either app store. Try reaching customers without appearing in Google search results. These are utilities in everything but legal classification.

Public infrastructure. AWS, Google Cloud, and Azure host a massive share of the internet itself. When AWS removes a customer, that customer doesn’t just lose a vendor — they may lose the ability to operate online entirely. This is infrastructure-level power.

Taken together, these companies are effectively the government of our digital society. They set the rules for speech, commerce, and access. They enforce those rules unilaterally. And unlike actual governments, they have no democratic accountability, no due process, and no obligation to treat participants fairly.

It is, structurally, a dictatorship. Usually a benign one. But dictatorships are defined by the structure of power, not the quality of the dictator.

The standard responses and their limits

Leave them private and hope for the best. This is the default, and it amounts to hoping that companies with monopoly power will voluntarily exercise it responsibly forever. History gives us no reason to believe this.

Government regulation. Regulate tech platforms like utilities, with rules about who can be excluded and under what circumstances. The concern: regulated monopolies tend to become captured by the industries they regulate. Think Comcast — technically regulated, practically unchecked. Regulation that entrenches incumbents while providing minimal accountability is worse than no regulation.

Antitrust and breakup. Break up the big platforms into smaller companies. This treats the symptom (current companies are too powerful) without addressing the cause (the market structure naturally produces monopolies). Break up Facebook, and in ten years one of the fragments or a new entrant will re-consolidate. The network effects don’t go away.

Forced interoperability. Require platforms to interoperate — like telephone carriers are required to connect calls between networks. This is more promising but extremely hard to implement. What does interoperability mean for a social network? For a search engine? For a cloud provider? The complexity is enormous, and the details determine whether it actually works or becomes another box-checking exercise.

The Web3 approach: separate data from applications

Here’s the framing I find most productive: the core problem is that data and applications are fused. Your social graph lives inside Facebook. Your content lives inside Twitter. Your apps live inside Apple’s App Store. Your infrastructure lives inside AWS. The data and the application are the same thing, which means switching applications means losing data, which means you can’t switch, which means monopoly.

Web3 offers a structural solution: separate the data layer from the application layer.

Applications remain proprietary — companies build them, compete on user experience, and make money however they can. But the underlying data — social graphs, user accounts, content, transaction histories — lives on shared, interoperable networks that no single company controls.

In this model, you can use Twitter or a competitor, and see the same messages. Your social connections aren’t locked inside any platform. Your content follows you across applications. The application is a view on shared data rather than a container for exclusive data.

This gives you something that sounds contradictory: more diversity AND more network effects simultaneously. More diversity because the barrier to entry for new applications drops dramatically — you don’t need to bootstrap a new social graph from zero. More network effects because all applications contribute to and benefit from the same shared data network.

How this works technically

The building blocks exist:

Decentralized identifiers (DIDs) let users have portable accounts not controlled by any platform. You don’t “sign up” for each new service — you connect your existing identity.

Content-addressable storage (IPFS, Arweave) lets content be stored on decentralized networks. Your posts don’t live on Twitter’s servers — they live on a shared network that any application can read.

Mutable data streams (Ceramic) let users maintain dynamic data — social connections, preferences, profiles — on user-controlled infrastructure that any application can access with permission.

Blockchain-based governance lets the rules of the shared data network be set by participants rather than by a single company.

Together, these create a shared data layer where applications are interfaces on top of shared information rather than walled gardens with exclusive access to user data.

The competitive web again

The web was originally competitive. Anyone could build a website. Anyone could link to anyone else. Search engines indexed the open web and directed traffic based on relevance. Competition was real because switching costs were low — if one website was better than another, you just went there instead.

Platforms broke this by making the web’s underlying data proprietary. Your Facebook social graph, your Twitter content, your Amazon purchase history — this data became the moat that prevented competition.

Web3 data interoperability restores competition by removing the moat. Applications compete on experience, features, and trust — not on data lock-in. The web becomes a marketplace of interfaces on shared infrastructure, rather than a collection of digital fiefdoms.

This doesn’t solve every problem. Content moderation still needs to happen. Bad actors still need to be addressed. The transition from the current architecture to an interoperable one is a massive coordination challenge. But it addresses the root cause — the fusion of data and applications that creates natural monopolies — rather than applying band-aids to symptoms.

The natural monopoly problem isn’t going away. Network effects aren’t going away. But the question of whether those network effects benefit a single company or an entire ecosystem — that’s an architectural choice. And Web3 is the most promising architecture for choosing the latter.