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Cryptocurrency, blockchain and tokens are more than just magic internet money.
These digital finance technologies are maturing into a full-blown parallel
economy that is native to the internet.
article here
“What we’re actually seeing is the birth of the world’s
first global internet-native economy,” says Patrick Rivera, Product
Engineer at Web3 developer Mirror.xyz.
Rivera argues that Web3 products perform specific functions
in the digital economy that regular financial mechanisms just can’t fulfil.
“Crypto tokens are the first digitally native asset and an
entire digital economy is developing around them that is parallel to the
traditional economy. This is the real significance of Web3.”
To understand what he means, we need to contrast his
understanding of Web3 with the two stages of the internet that have come
before:
Web1: Read-Only. Period: 1980s-2003. The internet consisted
of static websites like Geocities, Yahoo, and AOL. Users read online content or
information without interacting with or generating content themselves.
Web2: Read/Write. Period: 2004-2022. UGC is enabled on
social networks like Instagram, Twitter, YouTube, Facebook, and TikTok. Data is
“written” to centralized databases that own user data where platforms (like
those listed) can sell it to advertisers or arbitrarily taking down content
and/or banning users without user consent.
Web3: Read/Write/Own. Period: now emerging. It leverages
blockchain technology to enable users to own digital assets and their data.
Web3 also represents a return to open-source protocols that cannot be altered
or manipulated “according to the whims of centralized companies like Google and
Apple,” Rivera notes.
“What distinguishes Web3 from the two previous eras is
ownership,” he underscores. “That ownership is enabled by tokens, which are the
fundamental unit of value in crypto economies.”
There is more than one type of token in Web3. Fungible
(interchangeable 1-for-1, such as one bitcoin for one bitcoin) and non-fungible
(unique), and they play different roles in the digital economy.
“Tokens stored on public blockchains distinguish Web3 from
previous eras of the web. These tokens enable digitally-native property rights
which for the first time will unlock the ownership layer of the internet.”
With that in mind, what are the constituent parts of the
global internet-native economy?
Pieces of the New Digital Economy
Tokens: Internet-native assets that incentivize
participants to work together without requiring a human intermediary or central
authority. Instead, the operating rules are encoded at the inception of a
protocol, enforced by smart contracts and can’t be changed without the consent
of network participants.
Smart Contracts: Programmable open-source contracts that
automatically execute when preset conditions are met, run on public
blockchains. These are the productive assets of the digital economy, allow for
the mass production of digital goods like NFTs and fungible tokens.
Decentralized Exchanges: These are to the Web3 economy what
the stock market, retail stores, or ecommerce are to the traditional economy.
Examples include Uniswap (a crypto trading protocol) and OpenSea (a
peer-to-peer marketplace for NFTs). Just like you can buy physical goods at
Walmart or online at Amazon or eBay, you can buy crypto-native digital goods on
OpenSea.
DAOs: Decentralized versions of traditional companies which
allow people who work or participate in the project to own it and make
collective decisions using smart contracts. DAOs are to the internet-native
economy what the joint stock corporations were to the traditional economy — a
new way of organizing people to fractionalize ownership, engage in joint
enterprises, pool together capital, produce products or services, and make
collective decisions.
None of these elements work in isolation. “Only by putting
it all together, are we able to see that Web3 enables digitally-native products
to be produced, owned, and traded via blockchain technology in ways that were
not previously possible,” says Rivera.
The Birth of the Crypto-Native Creator Economy
A crypto-native creator economy is emerging in which
creators generate revenue through NFTs. This might happen with different types
of NFTs:
·
1-of-1 NFTs — things like Beeple’s “Everydays:
The First 5000 Days,” artwork, which was purchased for $69 million in 2021.
Only one person can collect it, with the downside that this usually prices out
most people.
·
Open edition NFTs — an emerging model. These can
be priced at different tiers according to their relative scarcity and can be
any type of media; art, content, music, writing, videos, and more.
·
Tiered subscription NFTs — instead of buying a
subscription, you can buy something you can display, and play with collecting
subscriptions to unlock other benefits. Subscription NFTs will be tradable on
global 24/7 marketplaces and enable early backers to share in the upside of a
creator’s work.
What To Expect Next?
Given the early stages of Web3, Rivera speculates on future
developments for the internet-native economy. He thinks there could be “massive
adoption” of the following:
Crypto Social Networks: Crypto-native versions of YouTube,
Spotify, Instagram where people are rewarded for creating content with tokens.
Instead of relying on algorithmic curation of feeds and lists, people with
tokens get to decide how content is curated. Moreover, things like “likes” and
“shares” can be turned into portable tokens owned by users themselves. This
could be used to completely change how social interaction happens online.
Crypto Gaming: The ability to own in-game items that
are portable across different gaming environments and tradeable on a global
24/7 marketplace.
Crypto Work: DAOs with freelancers getting paid in
stablecoins and equity tokens with streaming payment solutions. This includes
the emergence of DAO tools for specific verticals like musicians, artists, NFT
collectors, investors, and writers.
Crypto Firms: New types of organizations built without
a CEO or board of directors, and governed by tokens and small,
focused-committees (i.e., DAOs).
Crypto States: Buy digital real estate (it’s pixels,
folks) via tokens, and have decisions made on ownership (or rent?) through an
on-chain governance process.
Rivera notes that “today the experience of onboarding to
Web3 products is still pretty janky,” especially in the initial stages like
transferring money from your standard bank account to crypto in your digital
wallet but thinks this will change as Web3 begins to mature.
As it stands there are only about 10 million Ethereum users
worldwide, which is just 0.2% of the total number of internet users.
Nonetheless, Rivera thinks Web3 is past the point of no return.
“The internet-native economy is in its infancy…. Adoption is
likely to massively scale over the coming decade. Builders and creators now
have a generational opportunity to meaningfully impact the next era of the
internet.”
It’s just a matter of time.
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