Web3 relies on participatory economics, and that is what is missing — Participation

Web3 is hailed as a technological paradigm driven by the maker economy and is in 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 unprecedented economic growth and represented a significant era in human evolution with new ways of working, consuming information and progress in human civilization. So with this huge success of Web2, why is there a need for Web3?

As we rethink the Internet, which is largely based on a few centralized entities that have devices, information channels that feed social networks, mobile applications, and provide points of connectivity between service providers and seekers of these services, control over these channels provides the custodian of this infrastructure with not only monopoly control but also a “too big to fail” economic bottleneck. Therefore, rethinking the Internet, which was designed primarily to move information and was transformed into value and truth in motion, is a fundamental change to empower creators and participants and not just the custodians of the infrastructure.

The drivers that fueled this disruptive thinking were the excessive valuation and control of Web2 companies, the enforcement of censorship through existing control of information channels, and the rapid spread of information, which was a force for good in the world. the transfer of knowledge, but now it is armed with the speed and veracity of information and the spread of prejudice, distrust and misinformation, which makes it difficult to discern between signal and noise. These drivers indicate not only 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 the heck is Web3 anyway?

Web3 Imperatives

So how do we envision this new paradigm taking shape? As Web3 aims to theorize that the Internet takes another step towards being self-sufficient, leading to an entirely new set of technology and protocol development, which will then be the basis of a creator-controlled economy that embarks on the movement of information. and value, and has perceptible channels with protocol-enabled built-in trust. Blockchain and decentralization are often promoted as the fundamental enabling concepts that are considered essential for the development of such a platform. But before we drink the Kool-Aid of decentralization, I think we should take a step back and re-evaluate the success (and failures) of Web2 and, more importantly, a transition to this new paradigm, as I suspect the challenges They are not just technological. driven.

Related: Web3 could be the key to cryptocurrencies for the mainstream market

To enable a Web3-led creator economy that empowers creators and participants, we must first understand the imperatives of the participatory economy, where the focus is largely driven by self-governance, efficiency, sustainability, and creating an economic system. decentralized designed with strong incentives and protected by protocols that imply social appropriation, self-management of works and accountability for results.

The participatory economy stems from earlier centuries of thought and experimentation around the idea that people should be able to manage their own lives with others (on the same network plane) cooperatively and fairly with rules built into the sharing economy. incentives that reward participation and penalize bad actions and activities. that the network sees as unfair. In other words, for Web3 to work and deliver on its promise, we need participation.

At a very basic level, participation, just like in the real world, can come through the commitment of resources, such as systems, protocols, skills, intellectual capital and experience, etc., and the value created must have an equitable distribution. between the various participants based on the fundamental principles of supply and demand to address the element of fairness. The economic value created would then have to 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 address the self-governance and equitable structure induced per protocol.

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 a nation-state status (with their economic structure and currencies within the network), but also are places of market and co-creation laboratories 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 intertwine

Providing a true peer-to-peer, multi-token network (in a true sense, it's a metaverse) where projects and people can co-create and contribute their participatory energy is essentially the basic infrastructure needed to fulfill the promise of Web3 . While we have seen unprecedented growth in the token-driven economy and exponential growth in the investment and valuation of these projects, I believe that many of these projects do not incorporate the Web3 principles of participation nor do they have an economic output that adheres to them. to the principles of Web3. The critical missing ingredient here is participation.

Evolution of Web3 economies and current volatility

Two fundamental technological concepts that allow us to discern between data (for validation and veracity) and value transfer (for the participatory economy) are the Semantic Web and decentralization, which will shape the future and facilitate the transition from the rapidly growing existing Web2 to the Web3 powered by the latest property.

The semantic web extends the notion of document/information on the web to value data, providing information that becomes more meaningful (and valuable) when semantically linked to data. The data is then turned into things of value, which leads to the monetization and accountability elements of the Web3 principles.

Decentralization, on the other hand, facilitates peer-to-peer networks like blockchain and allows us to move tokenized value, whether systemically created (cryptocurrency) or induced (tokens that represent value), and address self-governance and protocol. induced fairness elements of Web3 principles. At a very basic level, as we frame the various interdependent ecosystems that emerge from the principles of Web3, it is fair to assume that their economies are interrelated. And as we build a strong foundation of Web3 with decentralized compute, interconnects, and storage as building blocks, they resemble the Web2 cloud infrastructure but with a different economic structure and control points.

Related: DAOs are the foundation of Web3, the maker economy, and the future of work

As projects develop and evolve, these tokenized values ​​would include the collective value of the underlying layers of infrastructure, services, and talent. 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 decentralized storage of artifacts, selected data model and analysis for its operation, decentralized processing, etc. as the source of success, elevating the entire ecosystem of services that would comprise the Web3 ecology.

Many of these services are now centralized, so the challenges of today's 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 cryptocurrencies and the increased provisioning of liquidity from traditional finance in the form of stablecoins or banking on-ramps that allow the free flow of liquidity from traditional finance, thus preserving not only growth but also the challenges of existing ones. Finance system. So this linkage of volatility and stability of crypto markets is something we need to discuss and the impact of this on volatility and what it means for performance and performance parallel financial systems.

For example, a high yield in the crypto markets will attract liquidity, and although the risk-risk-off equation at stake will attract capital and stablecoin issuance, it also inherits the mechanics of the global macro, which implies that any change in the traditional finance Capital markets, interest rates, money supply, inflation, etc., which play an important role in the calculation that is carried out in the valuation of assets, begin to affect the crypto market, which, in principle, it is meant to be independent and disruptive. What if we aim for self-sufficiency with truly crypto-liquid and fungible assets and let the economic system run and self-correct? I find this equation worth studying and interesting, but also ironic.

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The views, thoughts, and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.