Web3 has been hailed as a technology paradigm fueled by the creative economy and being the future, or rather, the next evolution of the Internet. As we make evolutionary comparisons of the technology that underpinned everything from information consumption to content creation, Web2 contributed to unparalleled economic growth and represented an important era in human evolution with new ways of working, consumer information and advancement. in human civilization. So with this huge success of Web2 why is there a need for Web3?
If we revisit the internet, which relies mainly on a few centralized entities that have devices, information channels that feed the social media, mobile apps, and connection points between service providers and seekers of these services, control over these channels provides the custodian of these infrastructure not only monopolistic control, but also a “too big to fail” economic bottleneck. So rethinking the Internet, which was primarily designed to move information and turned it into moving value and truth, is a fundamental shift in empowering creators and participants and not just infrastructure managers.
The driving forces behind this disruptive thinking have been excessive valuation and control of Web2 companies, enforcement of censorship by existing control of information channels, and the rapid dissemination of information, which was a good force as in knowledge transfer, but is now armed with the speed and veracity of information and the spread of bias, mistrust and misinformation — making it difficult to distinguish between signal and noise. These drives indicate not only the dawning of a new era, but also the creative nature of the human species to rethink, redesign and innovate, thus shaping the next era of our evolution.
Related: What the hell 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 an entirely new set of technology and protocol development, which will then form the basis for a creator-controlled economy that begins with information and value movement, and has observable channels with built-in trust enabled by protocol. Blockchain and decentralization are often touted as the underpinning concepts considered essential for the development of such a platform. But before we drink the Kool-Aid decentralization, I think we need to step back and re-evaluate the success (and failures) of Web2 and, most importantly, a transition to this new paradigm, because I suspect the challenges are not only technology driven.
Related: Web3 may be crypto’s key to the mainstream market
To enable a web-led maker economy that empowers creators and participants, we must first understand the imperatives of participatory economics, where the focus is largely driven by self-government, efficiency, sustainability, and creating a decentralized economic system. that is designed with strong incentives and protected by protocols that involve social ownership, self-managed works, and accountability for results.
Participatory economics stems from previous centuries of thinking and experimentation around the idea that people should be able to live their own lives with others (on the same network plane) cooperatively and fairly with rules embedded in the incentive economy that rewards participation and punishes misbehavior and activities that considers the network unfair. In other words, for Web3 to work and deliver on its promise, we need participation.
At a very basic level, as in the real world, participation can take place through the deployment of resources – such as systems, protocols, skills, intellectual capital and expertise, etc., and the value created must be distributed fairly among the different participants across the fundamental principles of supply and demand to address the fairness element. The economic value created would then have to be realized, accounted for, distributed and exchanged with other fungible and non-fungal assets to maintain a balance in any economic network – all without any central accounting system or authority – to maintain self-government and protocol. induced equitable structure.
Web3 in its current context is beginning to resemble a stateful system of tokenized networks. Where these tokenized networks not only attract capital, talent and technology, giving them nation-state status (with their economic structure and in-network currencies), but are also marketplaces and labs for co-creation between different projects. We are starting to see these manifest in various decentralized financial (DeFi) and nonfungible token (NFT) projects, and in the true sense they create metaversical synergies between different tokenized networks.
Related: How NFTs, DeFi and Web3 are intertwined
Providing a true peer-to-peer, multi-token network (in a true sense, it’s metavers) where projects and individuals can co-create and bring their participatory energy is essentially the basic infrastructure needed to run the Web3. – to fulfill the promise. While 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 neither embody the Web3 principles of participation, nor have an economic output that conforms to the Web3 principles. The fundamental ingredient missing here is participation.
Evolution of Web3 economies and current volatility
Two fundamental technology concepts that allow us to distinguish between data (for validation and truth) and value transfer (for the participatory economy) are the Semantic Web and decentralization, which will shape the future and transition from the existing high-growth Web2 to the newer, proprietary Web3.
The Semantic Web extends the notion of document/information on the web to data that has value, enabling information that becomes more meaningful (and valuable) when linked semantically to data. Data is then turned into things of value – leading to the monetization and accountability elements of Web3 principles.
Decentralization, on the other hand, facilitates peer-to-peer networks such as blockchain and allows us to move tokenized value – be it systemically created (cryptocurrency) or induced (tokens that represent value) – and address the self-governing and protocol-induced fairness elements of Web3 principles. At a very basic level, since we frame several interdependent ecosystems that emerge based on Web3 principles, it is reasonable to assume that their economies are interconnected. And as we build a strong foundation of Web3 with decentralized processing, interconnections and storage as fundamental building blocks, they are similar to the Web2 cloud infrastructure, but with a different economic structure and checkpoints.
Related: DAOs are the foundation of Web3, the creative economy and the future of work
As projects develop and evolve, these tokenized values would encompass the collective value of the underlying infrastructure, services and talent layers. This interdependent ecosystem, as manifested in the natural system, will thrive; and a successful ecosystem and economy will attract talent, capital and resources while preserving mutual interest.
For example, a metaverse project that includes NFTs and liquid crypto-assets for fungibility will also have the source of its success decentralized storage for artifacts, composite data model and analysis for its operation, decentralized processing and so on, eliminating all the service ecosystem that Web3 would include ecology.
Now many of these services are centralized so the challenges of the current economic system are also inherent in them, meaning they deliver on the promise of Web3 but lack its principles. This is evident in the volatility of crypto and the increased liquidity supply of traditional financing in the form of stablecoin or ascending banks that allow the free flow of liquidity from traditional financing, thereby reducing not only the growth but also the challenges of the existing financial system. . So this linking of volatility and stability of crypto markets is something that we should discuss and the impact of this on volatility and what it means for the parallel financial systems of returns and returns.
For example, high returns in crypto markets will attract liquidity, and while the in-game risk-to-risk-out equation will attract capital and stablecoin issuance, it also inherits the mechanics of global macro, implying any shifts in traditional financial capital markets, interest rates, money supply, inflation etc., which play an important role in the calculation of asset valuation, are starting to influence the crypto market, which is basically meant to be independent and disruptive. What if we strive for self-sufficiency with truly crypto-liquid and fungible assets and let the economic system work and correct itself? I find this comparison worth studying and interesting, but also ironic.
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The views, thoughts and opinions expressed herein are those of the author only 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 creates industry standards and use cases and works to realize blockchain for the enterprise. He was previously Chief Technology Officer of IBM World Wire and of IBM Mobile Payments and Enterprise Mobile Solutions, and he founded IBM Blockchain Labs, where he led efforts to bring blockchain practice to the enterprise. Gaur is also an IBM award-winning engineer and an IBM inventor with a rich patent portfolio. In addition, he is a research and portfolio manager for Portal Asset Management, a multi-manager fund specializing in digital assets and DeFi investment strategies.