The Composability Thesis: Why Web3 Wins
Published: 15 December, 2025 | Marcus Chen, Managing Partner
Composability is Web3's fundamental advantage over Web2. While Web2 created silos, Web3 creates building blocks that can be combined in infinite ways. This composability creates exponential innovation potential and sustainable competitive moats that traditional technology can't match. Understanding composability is crucial for evaluating Web3 investments and predicting where value will accrue.
The Composability Advantage
Web2 platforms are closed systems. Each company builds its own infrastructure, creates its own data formats, and controls its own APIs. Integration is possible but difficult, requiring partnerships, APIs, and ongoing maintenance.
Web3 protocols are open by design. Smart contracts are permissionless, data is transparent, and integration is automatic. Any developer can build on top of any protocol without permission, creating a global shared infrastructure.
This difference creates exponential innovation potential. In Web2, innovation is additive - new features are built on top of existing platforms. In Web3, innovation is multiplicative - new protocols can be combined with existing ones to create entirely new possibilities.
The Lego Block Metaphor
DeFi protocols are often compared to Lego blocks - standardized components that can be combined in countless ways. This metaphor captures the essence of composability:
- Standardized Interfaces - Protocols follow common standards that enable integration
- Modular Design - Each protocol does one thing well and can be combined with others
- Permissionless Innovation - Anyone can build new combinations without asking permission
- Emergent Complexity - Simple components combine to create sophisticated systems
This modularity enables rapid innovation and experimentation that's impossible in Web2's walled gardens.
Network Effects Through Composability
Composability creates unique network effects. As more protocols join an ecosystem, the value of each individual protocol increases:
Metcalfe's Law Squared - The value of a composable network grows exponentially with the number of components
Cross-Protocol Liquidity - Protocols benefit from liquidity shared across the ecosystem
Reduced Development Costs - New protocols can leverage existing infrastructure
Accelerated Innovation - Faster development cycles through code reuse
These network effects create powerful moats that become stronger over time.
The DeFi Composability Example
DeFi demonstrates composability's power. A single transaction can:
- Borrow assets from Compound
- Trade them on Uniswap
- Provide liquidity to Curve
- Stake LP tokens on Convex
- Use rewards to repay the original loan
This complex strategy is possible because each protocol is composable with the others. In Web2, this would require partnerships between multiple companies, complex integrations, and ongoing maintenance.
The result is that DeFi innovation happens at the speed of smart contract deployment, not corporate partnership negotiations.
Infrastructure Composability
Composability extends beyond DeFi to all Web3 infrastructure. Infrastructure protocols that embrace composability create more value than those that don't:
Modular Blockchains - Separate execution, settlement, and data availability layers
Cross-Chain Protocols - Enable composability across different blockchain networks
Decentralized Storage - Composable storage solutions that work with any application
Identity Systems - Portable identity that works across platforms
These infrastructure components combine to create more powerful and flexible systems than monolithic alternatives.
The Composability Moat
Composability creates sustainable competitive moats in several ways:
Ecosystem Lock-in - Protocols become more valuable as more applications build on them
Developer Mindshare - Developers prefer composable protocols because they're easier to integrate
Data Network Effects - Shared data becomes more valuable as more protocols contribute
Liquidity Aggregation - Composable protocols can tap into ecosystem-wide liquidity
These moats are different from traditional competitive advantages because they strengthen through openness rather than exclusivity.
The Creator Economy Composability
The creator economy benefits enormously from composability. Creators can combine:
Content Platforms - Publish content across multiple platforms simultaneously
Monetization Tools - Combine subscriptions, tips, NFTs, and token sales
Social Graphs - Maintain audience relationships across platforms
Analytics Tools - Aggregate data from multiple sources
This composability gives creators more flexibility and bargaining power than Web2's platform-dependent model.
Challenges of Composability
Composability isn't without challenges:
Complexity Management - Composed systems can be difficult to understand and debug
Security Risks - Vulnerabilities in one protocol can affect the entire ecosystem
Governance Coordination - Changes to core protocols affect all dependent systems
Performance Overhead - Composable systems can be slower than monolithic alternatives
However, these challenges are being addressed through better tooling, security practices, and governance mechanisms.
The AI-Composability Intersection
The intersection of AI and crypto is creating new composability possibilities:
AI-Powered Composition - AI systems that automatically compose protocols to achieve specific goals
Intelligent Routing - AI that finds optimal paths through composable protocol networks
Automated Arbitrage - AI-driven strategies that exploit composability for profit
Dynamic Optimization - Real-time optimization of composed systems based on market conditions
This AI-composability intersection represents a massive opportunity for automation and efficiency gains.
Investment Implications
Understanding composability is crucial for Web3 investing:
Protocol Selection - Invest in protocols that embrace composability over those that don't
Ecosystem Effects - Consider how protocols benefit from ecosystem growth
Network Effects - Evaluate how composability creates sustainable moats
Innovation Potential - Assess how composability enables future innovation
The most successful Web3 investments will be in protocols that leverage composability to create exponential value growth.
The Future of Composability
Composability will continue to evolve and expand:
Cross-Chain Composability - Protocols that work seamlessly across different blockchains
AI-Enhanced Composability - Intelligent systems that automatically compose protocols
Real-World Integration - Composable protocols that interact with physical infrastructure
Mainstream Adoption - Composability benefits hidden behind simple user interfaces
As composability matures, it will become the foundation for a new generation of applications and services.
Why Web3 Wins
Composability is why Web3 will ultimately win over Web2. The ability to combine protocols creates:
Faster Innovation - New features and services can be built by combining existing protocols
Lower Costs - Shared infrastructure reduces development and operational costs
Better User Experiences - Composed systems can provide more comprehensive solutions
Stronger Network Effects - Composable networks grow exponentially in value
Web2's closed systems can't compete with Web3's open composability. As more protocols join the ecosystem, the advantage becomes insurmountable.
The Composability Investment Thesis
Our investment thesis is built on composability. We look for protocols that:
- Embrace open standards and composability
- Provide valuable building blocks for other protocols
- Benefit from ecosystem growth
- Create sustainable competitive moats through network effects
These protocols will capture disproportionate value as the Web3 ecosystem grows and matures.
Composability is Web3's superpower. Understanding and investing in composable protocols is the key to successful Web3 investing.
Building composable Web3 protocols? We're looking for teams that understand how to create valuable building blocks that benefit from ecosystem growth. Contact us at funding@zerdius.com.