Web3 relies on the participatory economy, and that’s what’s missing — Participation
Web3 is hailed as a technology paradigm powered by the creator economy and represents the future, or rather the next evolution of the Internet. As we draw evolutionary comparisons of the technology that underpins everything from information consumption to content creation, Web2 contributed to unprecedented economic growth and represented an important era in human evolution with many new ways of working, consumer insights and advances in human civilization. So with this huge success of Web2, why is Web3 necessary?
As we reimagine the Internet, which relies primarily on a few centralized entities that have devices, information channels that feed social media, mobile applications, and provide points of connectivity between service providers and requesters of these services, control of these channels provides the custodian of this infrastructure not only monopoly control, but also a “too big to fail” economic choke point. So rethinking the Internet, which was designed primarily to move information and turned into value and truth in motion, is a fundamental shift in empowering creators and participants and not just guardians of the infrastructure.
The drivers that fueled this disruptive thinking were the excessive evaluation and control of web2 companies, the enforcement of censorship through the existing control of information channels, and the rapid dissemination of information, which was a force for the good as in knowledge transfer, but which is now armed with the speed and veracity of information and the spread of prejudice, mistrust and misinformation, making it difficult to distinguish between signal and noise. These drivers not only signal the dawn of a new era, but also the creative nature of the human species to rethink, redesign and renew, shaping the next era of our evolution.
Related: What is Web3 anyway?
So how do we envision this new paradigm taking shape? As Web3 aims to theorize that the internet is taking another step towards being self-sufficient – leading to a whole new set of technologies and protocol development, which will then be the foundation of a creator-controlled economy jumping on the bandwagon. of information and value, and has discernible channels with built-in protocol-enabled trust. Blockchain and decentralization are often presented as the fundamental enabling concepts deemed essential to the development of such a platform. But before we drink the Kool-Aid of decentralization, I think we should take a step back and reevaluate the success (and failures) of Web2 and, more importantly, a transition to this new paradigm, because I suspect the challenges don’t are not just technological. leads.
Related: Web3 could be the key to consumer market crypto
To enable a web3-led creator economy that empowers creators and participants, we must first understand the imperatives of the participatory economy, where there is a strong emphasis on self-reliance, efficiency, sustainability and the creation of a decentralized economic system designed with strong incentives and protected by protocols that involve social ownership, self-directed work, and accountability for results.
The participatory economy has its origins in previous centuries of thinking and experimentation around the idea that people should be able to manage their own lives with others (on the same network plane) in a cooperative and equitable way with rules embedded in the incentive economy that reward participation and penalize wrongdoing and activity. that the network considers unfair. In other words, for Web3 to work and deliver on its promises, we need participation.
At a very basic level, participation, just like in the real world, can come from the commitment of resources – such as systems, protocols, skills, intellectual capital and expertise, etc., and the Value created must be distributed equitably among the various participants depending on the fundamental principles of supply and demand to address the element of equity. The economic value created should then be realized, accounted for, disseminated and exchanged with other fungible and non-fungible assets to maintain a balance in any economic network – all without any central accounting system or authority – to meet self-governance and protocol-induced equitable structure.
Web3, in its current context, is starting to look like a stateful system of tokenized networks. Where these symbolic networks not only attract capital, talent, and technology giving them nation-state status (with their networked economic structure and currencies), but are also marketplaces and laboratories for co-creation between various projects. We have started to see them manifest in various decentralized finance (DeFi) and non-fungible token (NFT) projects, and in a real sense, they are creating metaversical synergies between various tokenized networks.
Related: How NFT, DeFi and Web3 are intertwined
Providing a true multi-token peer-to-peer network (literally, it’s metaverse) where projects and individuals can co-create and contribute their crowdsourced energy is essentially the basic infrastructure needed to deliver on the promise Web3. Although we have seen unprecedented growth in the token-driven economy and exponential growth in investment and valuation of these projects, I believe that many of these projects do not embody the participatory principles of the Web3 and do not have an economic result in accordance with the principles of Web3. The fundamental ingredient missing here is participation.
Evolution of Web3 economies and current volatility
Two fundamental technological concepts that allow us to discern between data (for validation and truth) and value transfer (for the participation economy) are the Semantic Web and decentralization, which will shape the future and facilitate the transition from the rapidly growing legacy Web2 to the new property-driven Web3.
The Semantic Web extends the notion of document/information on the Web to data that has value, facilitating information that becomes more meaningful (and valuable) when it is semantically linked to data. The data is then converted into elements of value, which leads to monetization and the accountability elements of the Web3 principles.
Decentralization, on the other hand, facilitates peer-to-peer networks such as blockchain and allows us to move tokenized value – whether systemically created (cryptocurrency) or induced (tokens that represent value ) – and to address the autonomy and protocol-equity elements induced from the Web3 principles. At a very basic level, as we frame various emerging interdependent ecosystems on the principles of Web3, it is fair to assume that their economies are interconnected. And while we’re building a solid foundation of Web3 with decentralized processing, interconnects, and storage as building blocks, they look like Web2 cloud infrastructure but with a different economic structure and checkpoints.
Related: DAOs are the foundation of Web3, the creator economy and the future of work
As projects grow and evolve, these token values would include the collective value of the underlying infrastructure, services, and layers of talent. This interdependent ecosystem as manifested in the natural system will thrive; and a well-functioning ecosystem and economy will attract talent, capital and resources with preserved mutual interest.
For example, a metaverse project that includes NFTs and liquid crypto assets for fungibility will also have as its source of success decentralized storage for artifacts, an organized data model and analytics for its operation, decentralized processing, etc. ., lifting the entire ecosystem of services that would include Web3 ecology.
Now many of these services are centralized so that the challenges of the current economic system are also inherent in them, meaning they embrace the promise of Web3 but lack its principles. This is quite evident with the volatility of crypto and the increasing supply of traditional finance liquidity in the form of stablecoins or banking on-ramps that allow the free flow of traditional finance liquidity, preserving thus not only the growth but also the challenges of the existing one. financial system. So, we need to discuss this link between volatility and stability in crypto markets and how it impacts volatility and what it means for alternative financial yield and return systems.
For example, a high return in the crypto markets will attract liquidity, and while the risk-risk equation at play will attract capital and the issuance of stablecoins, it also inherits the mechanics of the global macro economy, which implies that any changes in traditional finance capital markets, interest rates, money supply, inflation, etc., which play an important role in the calculation of asset valuation, begin to have an impact in the crypto market, which, in principle, is supposed to be independent and disruptive. What if we aim for self-sufficiency with truly liquid and fungible crypto assets and let the economic system function and self-correct? I find this equation worthy of study and interesting, but also ironic.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Nitin Gaur is the founder and director of IBM Digital Asset Labs, where he develops industry standards and use cases, and works to make blockchain for the enterprise a reality. He previously served as CTO of IBM World Wire and IBM Mobile Payments and Enterprise Mobile Solutions, and he founded IBM Blockchain Labs, where he led efforts to establish the blockchain practice for the company. Gaur is also a Distinguished IBM Engineer and an IBM Master Inventor with a rich patent portfolio. Additionally, he is a research and portfolio manager for Portal Asset Management, a multi-manager fund specializing in digital assets and DeFi investment strategies.