Web3 – 1
Web3 has become conflated with cryptocurrencies. Regulators do not like cryptocurrencies and so are throwing the baby out with the bath water. Web3 is much bigger and more fundamental.
Here is an excerpt from Chainalysis’s June 2022 report on Web3:
One day in the near future, all companies will become crypto companies, complete with a “Connect wallet” button on their homepages. And web3 is how they’ll get there…As more people put a higher percentage of their net worth into cryptocurrency, they’ll want the ability to use cryptocurrency for the full range of transactions they can currently carry out with fiat, such as lending and borrowing, trading assets, and payments. Web3 will enable them to do that with cryptocurrency faster and more easily than they can today.
…Web3 won’t just streamline existing financial activity though. It’ll also unlock new use cases in finance that currently aren’t possible due to the illiquidity of traditional assets. Imagine a world where you could sell fractional ownership of physical assets like real estate or vehicles. Sellers would be able to access capital they can’t today, while buyers could invest in those assets more affordably via partial ownership. Web3 can make that happen. Web3 can also eliminate middlemen and foster more direct relationships between sellers and customers.
…Web3 can take middlemen out of the equation completely, and even opens up the possibility of fans purchasing full ownership of work from their favorite creators, rather than essentially renting it as they currently do from content providers like Netflix. NFTs are already enabling much of this, largely in static digital art, but the arrangement could easily be applied to music, film, and other mediums.
Finally, web3 can bring decentralization to the business world by enabling community ownership of companies rather than the current norm of top-down corporate control. We see this happening now with DAOs — decentralized autonomous organizations — in which anyone who buys in can help guide the direction of a company or project through an asynchronous voting process.
Praphul Chandra adds: “The biggest impact of Web3 is the ability to extend the process of creating any asset into capital – virtually on demand. It is trivially easy to create a trusted ledger of ownership of any asset using Blockchain and embodying it in a title as a NFT. This NFT can then be used as a put up as “collateral” for a loan. In Web3, the loan is facilitated by digital escrows (smart contracts) which are programmed to lock the NFTs as collaterals, release cryptocurrency based loans and vice versa. This is one of the innovations of DeFi (Decentralized Finance) – so called since there is no bank or financial institution intermediating the collateral-loan process. This is the real Aha! Moment. What Web3 is fundamentally about is the ability to create economies on demand by converting any asset into capital.”
As Chris Dixon puts it:
web1: read
web2: read / write
web3: read / write / own
Ownership, enabled by decentralisation, is at the heart of Web3.
Li Jin and others wrote in a report on the Ownership Economy: “Ownership has long been embraced by Silicon Valley startups to align incentives among employees through option grants. Still, the vast majority of internet users own exactly 0% of the services they contribute to. Creators don’t own their content, developers can’t control their code, and consumers can’t influence the policies or decisions of the platforms they use. This scenario, which once went unquestioned, looks increasingly archaic. This is starting to change via the ownership economy—often referred to as web3—with products and services that turn users into owners. What started with Bitcoin and Ethereum—both of which reward participants who secure the network with their native tokens—is becoming prevalent across all categories of software, from developer infrastructure and new financial markets in DeFi to consumer products, marketplaces and social…If the last generation of software was built upon a foundation of user-generated content, the next generation of software will be user-owned, with digital ownership leveraged as a building block to enable novel user experiences.”
