The Critical Question Facing Web3 Infrastructure Startups
When I hosted this blog on Amazon Web Services, I used 5 products. I paid for them each in US dollars every month. One invoice.
Suppose I wanted to rebuild my site on web3 using fully decentralized components. I would pay each product provider in their own token: one for storage, compute, caching/CDN, email subscription management, etc. Tokens reward the validators and the stakers powering the decentralized networks.
Paying five decentralized providers in five different tokens means managing several wallets and monitoring token prices to hedge expenses. That’s much more work than the automatic credit card payment with AWS. It’s too much complexity for a simple static blog.
Developers building sophisticated applications employ 10, 20, maybe 30 services. Can you imagine a site reliability engineer managing 15 to 20 tokens, coordinating with finance teams to ensure proper treasury management, while ensuring high uptime?
It’s hard to imagine such a scenario playing out. Instead, three possibilities are more likely.
First, the ecosystem decides that infrastructure payments should occur in stablecoins - like USDC or UST. This absolves customers from most of the challenges of managing various tokens.
Second, the fastest growing web3 infrastructure players parlay their tokens as an ecosystem reserve currency, a petrodollar for gigabytes. Developers pay for low-latency storage with the same protocol token as they would pay for compute. Perhaps this dynamic drives consolidation in the market, paralleling the web2 infrastructure hypermarts of AWS, GCP, and Azure.
Third, software engineers decentralize only a subset of the app. Migrate the database (blockchain) and the file system to ensure on-chain asset ownership survives the company. The remaining part of the stack remains on web2.
How this quandary resolves will determine the most attractive places to build new infrastructure startups.