How the Web3 economy works and who controls it

If you are paying attention to the news, you will hear terms like ICO, Airdrop and Metaverse thrown around with great frequency. Even outside of the business and tech sites, shows like “The Good Wife” have Bitcoin-related storylines. Obviously, digital currencies are becoming more popular, but what exactly is this new economy being built on top of blockchain?

in my previous postI discussed how web 3.0 works and its benefits decentralized internet. We also talked about the fair and democratic economics of this new system. But how does the web 3.0 economy actually work?

Note that this is not an entry level discussion about ICOs and blockchains. Instead, we will talk about how this new economy is fundamentally different and has many advantages over the current economy that runs on centralized systems like banks, governments and companies. big technology.

Global economy and decentralization of power

To understand how the web 3.0 economy works, we must first understand our current global economic system and the power hierarchy that exists within it.

Our current economy runs on a centralized system. This means that there is a small group of organizations that have control over the entire system. For example, banks control the cash flow, governments control the regulatory framework and big tech companies control our data.

These organizations have very different agendas and interests. Banks want to make as much profit as possible, governments want to maintain stability and order, and big tech companies want to monopolize their respective markets.

The problem with this system is that it leads to inequality and injustice. The rich are getting richer while the poor are getting poorer. The strong receive more power while the powerless are left behind.

On the other hand, the web 3.0 economy is based on decentralized system. This means that no central authority or organization has control over the system. Instead, it is a network of interconnected computers.

This network is powered by blockchain, which is a distributed database that records all transactions that take place on the network. This database is public and transparent, which means everyone can see what’s happening online.

The result is a just and democratic economy where everyone has an equal opportunity to participate in and benefit from the system. No central authority can manipulate the system for its own benefit.

The bureaucracy of modern projects

Have you ever asked yourself: Why is it so hard for the US to build high-speed rail? The answer is bureaucracy. Of course, it’s not just the United States. France has a similar problem. So does Brazil, Russia, India and most other countries in the world.

The problem with bureaucracy is that it is very inefficient. Projects take years to complete because there are so many layers of bureaucracy that need to be navigated.

So let’s think about what would happen to high-speed rail in the United States. First, a project like this would have to be proposed. It will then have to undergo feasibility studies. Then it will need to be passed by Congress.

Once approved, the project will then need to be tendered to contractors. And even after all that, there is no guarantee that the project will actually build. It is very likely that the project will be delayed or even canceled due to bureaucracy.

Politicians, lawyers and consultants – all of whom really knew nothing about railroad construction – got involved and complicated the process. And the longer this process goes on, the more expensive it becomes.

Of monopoly and cartel – antitrust and distrust

John D. Rockefeller and Bill Gates are two of the richest men in history. They built their fortunes by creating monopolies or quasi-monopolies in their respective industries. And, both of them have been taken to court for their antitrust practices.

These practices were enabled by a system that favored the rich and powerful. The illusion of a free and open market is just that – an illusion. In fact, the market is favoring those with the most money and power.

But what if there was a system designed to distrust? What if there was a system where monopolies and cartels could not survive?

In a blockchain-powered economy, the practice of monopoly and cartel would be impossible. This is because the decentralized nature of the system will make it very difficult for any entity to gain control of the network.

So how exactly will this prevent monopolies and cartels? Besides decentralization, trustlessness is also related to the fact that all transactions in a blockchain-powered economy are transparent. This means everyone can see what’s happening online.

If someone tries to create a monopoly or corporation, it will be very difficult to do so because everyone can see what is happening. A real-life example of something that can be prevented by transparency is the Enron scandal.

The Enron scandal was only possible because the company’s accounting practices were not transparent. If they are, it will be very difficult for the operators to fool their investors.

Importance of market integrity

If you’ve read Adam Smith with his idea of ​​”invisible hand“As an agent that shapes the decentralized free market, you know that the key to a thriving market is justice. Unfortunately, in today’s world, the market is anything but honest. Governments back failed companies with taxpayer money. Banks and corporations engage in fraudulent and other illegal activities. And the rich and powerful system benefits them.

We can define market integrity as it relates to Smith’s teachings as adherence to free market principles of voluntary exchange, open competition, and limited interference by government.

In a blockchain-enabled economy, market integrity will be ensured through transparency and trustlessness. As we have seen, these two attributes will make it very difficult for people to engage in fraudulent or other illegal activities.

The trustless nature of such an economy will ensure that prosperity is accessible to everyone, not just the rich and powerful. This is evident in the way retail traders in the crypto space can participate as opposed to accredited investors.

A blockchain-powered economy would also be much more efficient. This is because there will be no need for middlemen like banks and governments to facilitate transactions. Decentralized finance (DeFi) has the potential to disrupt the entire financial industry, because in a blockchain-powered economy, all transactions will be peer-to-peer.

So to close the deal – the economics of web 3.0 could usher in a financial renaissance where anyone in the world can join and benefit from the system.

Fast transactions, accountable code, and global access are key features of the web 3.0 economy.

In the next post in This series, we’ll step into the realities of science fiction and discuss the rise of machines. What do big tech companies and other organizations do with your data? Could blockchain be the “Sarah Connor” we’ve all been waiting for?

So wait a moment!

Daniel Saito is the CEO and Co-Founder of StrongNode.