This phase represents mainly the birth and growth of Social Media, Marketplaces, and Finance led by companies like Amazon, Facebook, Apple, Paypal, eBay, and many others.
They allowed users to be able to, for the first time, easily create content and personal pages, build and influence large audiences, trade globally, and have access to free financial services.
Web2 was the true responsible for connecting billions of people on this open global network. The Internet finally took off, went mainstream, and changed the global economy forever.
But, again, this has not happened without its own tradeoffs.
What used to be an open and neutral environment, became several closed giant private silos built on top of the open Internet.
Users gave up ownership and privacy in exchange for convenience and scale, leading to problems such as 1. lock-in data, 2. surveillance, 3. lack of neutrality, and 4. biased algorithms.
1. In the Web2 environment, users were not able to host their own data, which make them hostages of the platforms. They can’t move their content or follower list to another platform. Once they created the audience, they are locked in that platform forever. The only way of using another service is to create an audience from scratch.
2. Since the Big Tech business model is targeted ads, they are incentivized to collect the most data they can from users. Location, use pattern, navigation history, contact list, and so on. And this clearly generates tension between users and companies, mainly because the rules are not transparent at all. It’s a black box that no one externally can have access to. Users have no idea which data are being collected and how and where they are being used.
3. Several services, like Zynga (Farmville), built on Facebook, and Meerkat on Twitter, had their business model completely destroyed overnight due to abrupt and questionable (to say the least) changes in the Facebook/Twitter APIs, mostly motivated by a conflict of interest. For instance when Twitter restricted its APIs, used by the ascending Meerkat (live streaming platform) because it just had acquired the competitor Periscope.
4. And, again, because Big Tech’s main business model is target advertisement, the incentive is to create strategies that increase users’ screen time. And turns out the most engaging content is those that reinforce the users’ point of view or triggers outrage. This has created echo chambers and a polarized part of society.
Given such problems, we needed some breakthrough innovation to give users back ownership and control over data without losing the awesome benefits of Web2 features like great UX, discoverability, network effect, and scale.
And this innovation came along in 2009 through the whitepaper of Bitcoin, a peer-to-peer digital currency running over a decentralized Blockchain, kicking off the golden age of the Internet.