Quick thoughts on Web3
A brief compilation of all things in the space that I believe shouldn't be slept on.
After the Facebook outage drama, I thought it was important to mention that none of us should be sleeping on Web3. This is a quick summary of the undergoing developments along with mentions of some interesting projects underway within the space. I may expand on each of these in separate articles at a later point. For now, let's dive in.
What is Web3?
The version of the internet most of us know today is Web2 - an internet dominated by companies that provide services in exchange for your personal data. Unlike Web2, which is run by a few centralized players, decentralization is at the core of Web3. Web3 is trustless - one doesn't need to trust the controlling authority, because there is no controlling authority. The power is in the hands of all individual participants involved and game theory works in a beautiful way to incentivize participants to maintain the sanity of the network.
5 important developments in Web3 -
Decentralized Identifiers - These allow users to create their own identities in an open-source, trustless manner instead of a central body 'issuing' them to the users. The inability of users to not be able to create their identities and be recognized as the same person anywhere in the network has been the core reason why centralized networks had monopolized identity creation and control. Not your identity, not your network, not your followers. Get cancelled and banned on Facebook and you've lost your followers. With decentralized identities, the identities stay connected and own their data. The social platform one operates on, only becomes the interface layer of things. When the platform degrades, users exit along with the data and network. "I want it to be something I can store on a system that's not gonna go up in smoke and leave me without access to my 'me-ness' online." This also means there's no way to control or ban the network as it is stored across distributed databases. Huge win for free speech and privacy.
Watch out for Project Bluesky. They are building an open-source decentralized social media base layer that aims to become a plugin into X number of future social media interfaces. Have hung around the discord and attended some meetings - they are open for contributions from anybody. The things happening there are pretty mind-blowing. Participating in Bluesky is an unparalleled opportunity to witness the live development of a new form of the web from first principles.
Decentralized finance - Blockchains enable a trustless mechanism for users to interact with other parties without the need of 3rd parties (banks, etc.) that have harrassed the masses because of their legal monopoly. Blockchain assets are already worth $2 trillion + in value and these assets and make up for collateral that holders can leverage to lend and borrow by trusting tamperproof smart contracts. The terms of a smart contract are open and easily auditable and the computer code will only work accordingly. This eliminates the need for trust between multiple stakeholders as now everybody can be assured that the code with run according to the conditions it carries. This eliminates massive operational inefficiencies, delay and legal pain and is already benefiting a large number of borrowers and lenders. At the time of writing, TVL in Defi is already north of $90B - in easy words, people already have $90B+ worth of savings in these decentralized banks.
Watch out for Market.xyz. Market is building a platform that allows people to create their own banks(pools) of digital assets of their choice on their own terms in a permissionless way. Lol, in the decade of people getting overwhelmed with government regulation in traditional finance, who could have thought. Market is a ‘market of markets’ & strongly believes in the power of free markets in building efficient systems. Caveat - I am a core contributor at Market, so might be biased.
DAOs - Decentralized autonomous organizations enable direct stakeholder voting almost at every decision point as against the traditional way of appointing a Board of directors who further appoint the C suite to take decisions in their favour. The idea is that DAO proposals are backed by smart contracts that auto-implement the outcome of the vote. This not only takes out the need of the stakeholders to keep a check on whether the C-suite and the workforce are effectively implementing their views but also saves time as the decisions get implemented instantaneously.
Watch out for: DAOhaus DAOhaus is a platform for running and launching DAOs. It’s worth checking out the DAO proposals on different DAOs on DAOhaus.
A new incentive structure that changes how projects are scaled and brings power to the creators - So far in centralized teams, only team members could contribute and take the project ahead. Participation has been open gated in Open Source projects but kind developers who want to build public goods and are okay with no money in return are the only active contributors. Token rewards bring the best of both worlds - the financial upside of working on something you own a piece of and community participation to develop a project - i.e. - giving the community a chance to contribute and grow the platform and earn tokens (ownership) in return so that the best talent is invested in taking the projects with the highest potential impact ahead while also making some $ in return. This is huge not only for developers and but also for influencers and creators. Imagine being an influencer in the first few months of Instagram and being rewarded certain shares of the company .or every X engagement you get on the platform. Probably negligible value at that time but eventually the early believers of the platform earn the upside. Influencers can now have skin in the game and double down on getting more of their followers on the platform as the growth of the platform also means personal financial upside.
Watch out for: Audius - Essentially Spotify on the blockchain.
Native payments - Web3 has native tokens that users can use for transactions without going through a centralized payment infrastructure like Stripe or Paypal. This allows users to transact directly with each other without going through a third party and keep their data private. Transaction capacities of some latest networks are mind-blowing. Point is, the infrastructure for these near-zero fees lightning-fast payments already exists, and I am quite bullish that because of their immediate utility they will be widely adopted in no time.
Watch out for: Solana and the Lightning network on Bitcoin. Just last night I witnessed 1500 SolanaBananas NFTs worth $300k getting minted on Solana in under 5 seconds. Obviously, I couldn't get my hands on any as they got sold out before I could even click but the experience was unreal.
Thanks for making it through my first write-up on this newsletter. Comments and thoughts that can take this discussion forward are welcomed!
Hi harshal...very interesting and insightful article....just a couple of questions..
1. By when do you see these things affecting the existing organizations like banks, tech giants etc and what are they doing to address this threat to their very existence?
2. Since the decentralisation through blockchain is making inroads into almost every usecase around the world, do you think this will lead to significant job loss around the globe in near future?