April 21, 2023
6 mins

Breaking the Power Law


  1. A large number of small experiments (rather than a few large experiments) is the path to radical innovation
  2. Web3 shifts power from giants to small, adaptable communities
  3. Open protocols and modular architectures enable collaboration between those communities
  4. The dWeb's ultimate use case is to create the ideal environment for innovation through decentralization
  5. Improving usability is currently the main barrier to widespread community adoption of web3 technology


Web3 is enduring an ongoing crisis of self-confidence, as it asks itself (along with the skeptics) - what is the point of it all?

Common arguments in favor of web3 invoke a list of familiar abstract nouns such as privacy, transparency, security, and so on. These may be accurate, but it’s hard to get inspired by them.

A bolder and more daring claim is that web3 is a crucial boost to humanity’s innovation game. This is inspiring, because human progress is a function of innovation.

Innovation is how we will survive climate change, avert famines and water shortages, and eventually make our way - via dimension-hacking or some other such means - to the other side of the cosmos.

While many fields such as high-energy particle physics, antibiotics development, and (until recently) space exploration have stagnated in the past fifty years, the rise of decentralized civilization could herald the dawn of a new golden age of innovation.

Let me explain how.


In an obscurely titled but lucidly argued paper, writer and thinker Nassim Taleb proposes a simple strategy for radical innovation: 1/n.

Boiling it down: if you want to strike innovation gold, you are much better off investing across a large number of small experiments, than betting everything on one or two big ones. The larger the n, the better.

Intuitively, we can see examples in history where fragmentation (=decentralization in web3 jargon) led to higher levels of innovation. The most commonly cited example is the city-states of Renaissance Europe. These states both specialized and competed with one another and together dragged Europe out of the Middle Ages.

An equally commonly cited contrasting example is the Tokugawa Shogunate of Japan, which until the late 19th century imposed strict, hierarchical order on the country, stifling the exchange of value, information, and ideas. The gap with Europe was revealed when Japan was forced to open its borders.

Decentralized Innovation vs Centralized Stagnation

The winner takes it all

Of course, centralization - the opposite of fragmentation - is a naturally occurring phenomenon. Abba wrote a song about it.

A fancier way to explain this is by invoking the concept of power laws.

Zipf distributions (which interestingly are based on the formula 1/n) are an example. They occur frequently in nature (e.g. the relative abundance of species) and in certain areas of human society (e.g. city populations, wealth distribution).

Various factors make the emergence of power law distributions more likely.

In business, it often comes down largely to the well-known phenomenon of network effects, which explains the rise of Facebook, Amazon, and other web2 ‘winners’ who took all.

To recap the concept: when the value of a platform increases as more people use it (e.g. in Amazon’s case: more buyers → more sellers → wider product range → more buyers → more sellers etc.), network effects will create a monopoly or oligopoly.

The internet supercharges network effects by facilitating the fast and cheap spread of information and by lowering the incremental costs of adding new users.

Why we need to move on

There is of course a reason that people use Facebook and Amazon - they provide a good service that people want. Their centralized nature affords users the convenience of dealing with one platform rather than several.

But increasingly, the problems of centralization and the concentration of power and data it entails have become all too obvious.

Quite apart from the issues of selling customer data and general anti-competitiveness, the rise of ‘winners’ creates a situation in which each vertical (retail, social media, search) resembles the calm yet rigid despotism of a mini-Tokugawa shogunate. What we really need is a chaotic melee of Italian noble families slugging it out for the benefit of the end consumer.

How the dWeb can help (but is not enough)

We all know - because we have all heard it a million times - that web3 technology lets us redistribute value, data, and decision-making thanks to new paradigms such as cryptographic tokenization and distributed computing power & data storage.

It is less often pointed out that with a web2 mentality, blockchain systems can quite easily end up as centralized entities, in which the majority of power (be it in tokens or nodes) is under the control of ‘winners’.

This mentality of ‘dominate or be eaten’ or ‘growth maximalism’ - i.e. the pursuit of growth and scale through network effects - creates the ideal conditions for the power law to reassert itself.

Interestingly, blockchain networks tend to resist attempts to scale them, forcing us to compromise on decentralization and/or security to accommodate more users. While this trilemma is commonly seen as a bug to be fixed, it may turn out to be blockchain’s killer feature.

The infamous blockchain trilemma could be a blessing in disguise

Back to basics (again)

The consultant Steven Wilkinson has pointed out that money is one of the only things that doesn’t become denatured with scale.

For most valuable things besides money, scale takes a toll. Personal relationships are an example. Famously constrained by Dunbar’s number, the more relationships you have, the shallower they become and the more strained.

Put positively, some things are only possible on a small scale - such as communities.

Communities form, operate, and endure on the basis of shared values. These values lead people to maintain certain standards of behavior that cannot be enforced by computer code.

They also provide the necessary collective resolve to withstand - and more crucially, adapt to - the constant buffetings of fate, more common in the web3 space than in other more mature fields.

Web3 literally rewires the world, bypassing incurable structural roadblocks

And we need blockchain for this because….

Always a good question to ask!

While it is possible to coordinate using web2 systems, this overlooks the fact that on-chain communities are not subject to the whims of governments or powerful corporate entities.

Insofar as tokens, multi sigs and on-chain voting systems help to facilitate communities (or DAOs in web3 speak), blockchain technology can support the proliferation of hundreds of Venices, Florences, and Milans, and so usher in a new age of post-web2 innovation.

Furthermore, the Renaissance model would not have worked without the exchange of ideas between city-states (via the relatively new technology of mass-printing) so that innovations could proliferate and cross-pollinate when successful.

Web3 technology has the potential to encourage open-source and/or interoperable applications that allow communities to collaborate horizontally. These open protocols and modular architectures contrast with the siloed and proprietary nature of many web2 platforms.

When scale is not the object, collaboration is a positive-sum game.

Facilitating this horizontal flow of data, value, and influence so that innovations in communities can flow freely irrespective of geopolitics and corporatist agendas is a clear role for a worldwide decentralized web.

A stark comparison

What’s next?

As Taleb points out in the paper mentioned above, one cannot theorize and then build. One must build, see what breaks, and then (if time permits) write up a theoretical construct that explains it all.

There is no better way to break a product than to launch it and see how and if users use it.

The next big hurdle to decentralized adoption, and therefore innovation, is probably usability.

Most would-be innovator communities are not in a position to move their activities on-chain for the simple reason that it is not straightforward, safe, or advisable for a non-technical expert to do so.

It is usability problems that will drive these communities back into the arms of centralized entities with streamlined, intuitive processes and sympathetic customer service teams.

Striking a balance between functionality and usability is an age-old problem with technology, and so web3’s ‘builders’ - the vanguard of the new renaissance - have a noble but heavy burden to bear.

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Matthew Jackson, Founder
matthew@elyptik.net+82 10 6679 3720
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