There's a hot debate in web3 right now about protocols vs. platforms in web3. I'm going to breakdown the debate and offer my opinion on it.
Platforms are centralised and enforce user lock-in. The platform alone benefits from network effects. Instagram, Facebook and Twitter are platforms. The more you post on Instagram, the more followers you'll get. If you leave, you can't take your followers with you. Money made via advertisements stays with Instagram.
Protocols are templates. SMTP is the standard protocol for sending an email via the internet. Protocols are great for decentralisation because the template lets you can choose to switch easily. For example, you could choose to send emails from your Gmail account using a service like Superhuman.
Decentralised platforms or protocols?
Services like Opensea are a bit of both. They are platforms that connect buyers and sellers. But their backend is a protocol - the Ethereum network. The debate is whether this is decentralised enough. These hybrids will never be as decentralised as protocols because of:
- Governance: they are run centrally, and not governed by users.
- Network effects: the service can build network effects on the demand-side. What do you do if Opensea increases prices and they have all the buyers?
- Switching costs: may be close to zero but will be higher than a protocol. By definition, protocols will make it easier to switch because they are "templates".
I believe there is a place for platforms, protocols and hybrids, but protocols will always be the most decentralised.