The Benefits of Decentralized Economies

This all changed in 2009 when Satoshi Nakamoto invented Bitcoin, solving the Byzantine General’s Problem and setting off a chain of events which made the concept of “decentralization” possible.

While the mechanics of this invention will be discussed more below, the key thing to remember is that he (or she) combined three technologies - blockchains, public and private key cryptography and consensus mining – to create a system that could autonomously authenticate economic actors, verify their funds and guarantee the completion of a transaction.

In effect, for the first time in history, Satoshi made it possible to create an economy that doesn’t rely on third parties such as corporations, banks, governments or courts to function.

Web3 Economies don’t Require Banks, Governments, Courts or Corporations to Function

The effect of this cannot be overstated and requires a bit of tabula rasa thinking. Imagine for a bit, how you would design an economy if you no longer needed intermediaries:

• After all, what’s the point of relying on central banks and treasury departments if you can issue your own money and control the supply?

• What’s the point of banks if you can safely hold your own assets, raise your own funds and orchestrate your own lending and borrowing protocols?

• Why do we need Big Tech if we can create and own our own digital goods?

• Why do we need to rely on local governments and courts if we can enforce our own laws through smart contracts?

If you’re like me, you’re probably envisioning something much simpler and more elegant than what we have today…

In short, an economy without unnecessary middlemen.

This, my friends, is Web3. And it may allow us to reap all the benefits of a traditional economy – namely trust, security and growth – while removing most of the downsides. Indeed, Web3 is:

• Fast and Efficient: Web3 operates almost entirely via computer programs which automate the execution of all transactions. As such, there’s no need for intermediaries such as bankers, regulators, lawyers, accountants, executives or government bureaucrats – making the system much faster and cheaper

• Transparency: Every transaction in Web3 is broadcast to the public allowing for real-time monitoring and maximum transparency. In addition, protocols are built with open-source code allowing any user to audit them, greatly reducing the threat of corruption and serving as a safeguard against negligence

• Seizure-Proof: In Web3, you control your assets. Instead of relying on banks, governments and corporations, you hold your funds, identity and digital goods in your own digital wallet. As such, there’s no one to seize your assets, limit withdrawals or tell you where you can and can’t spend your money

• Permission-Less: No one can stop you from accessing Web3. Anyone with an internet connection can participate in markets that are open 24 hours a day, 7 days a week and 365 days a year

• Borderless: Web3 has no borders. Users can store millions (or more) on a thumb drive or online wallet (not recommended) and go anywhere they please. They can send money to relatives living abroad, perform cross-border transactions and invest in foreign companies without having to pay outrageous fees or navigate a labyrinth of international laws

• Private: Web3 is designed so that users have complete ownership of their data – in fact, it’s completely possible (and often preferred) to navigate Web3 in a completely anonymous fashion

• Eliminates Censorship: No one in Web3 can censor you. Anyone is free to upload any content, no matter how controversial, to any platform they so choose

• Permanence: Because a decentralized internet is hosted on thousands of devices across the world, it’s very resistant to failures and almost impossible to shut down (unlike traditional nations, digital states can’t be conquered with tanks, bombs or guns)

• More Money for Artists: Artists, musicians, game developers and entrepreneurs could increase their profits by an order of magnitude when we remove the current gatekeepers of the web. In fact, we are already seeing this take shape, as some Web3 services such as Audius (a decentralized version of Spotify) increase a musician’s share from 12% to 90%!

• More Money for Consumers: Users will be able to choose whether they want to be paid for creating content or sharing their data and they will also have the right to sell the virtual goods that they earn online. We already saw this happen last year in the Philippines, where many citizens made more money selling the digital assets they earned playing the blockchain-based game Axie Infinity than they would have from working full-time as a teacher, construction workers or office assistant

• Interoperability: Web3 protocols are built to be composable, that is, they can be programmed to work with one another allowing users to build increasingly complex and novel products

I know this is a lot to take in. Crypto is so unique, so transformative, so unintuitive that I’ve been studying it for over six years now and sometimes I feel like I only partially get it.

But to help you understand more about how Web3 can transform the world, let’s go a bit deeper down the rabbit hole and learn how it works on a technical level…