How the Web3 Economy Works and Who’s in Charge

If you pay attention to the news at all, you will hear terms like ICO, Airdrop and Metaverse floating around with great regularity. Even beyond the business and tech pages, shows like “The Good Wife” have storylines involving Bitcoin. It is clear that digital currencies are becoming more mainstream, but what exactly is this new economy being built on the blockchain?

In my previous articles I have discussed how web 3.0 works and the benefits of this new decentralized internet. We also talked about the fair and democratic economy of this new system. But how does the web 3.0 economy actually work?

Note that this is not an entry-level discussion of: ICOs and blockchain. Instead, we will talk about how this new economy is fundamentally different and more beneficial compared to the current economy that runs on centralized systems such as banks, governments and big technology companies.

Global Economy and Power Hierarchies

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

Our current economy runs on a centralized system. This means that there is a small group of institutions that have control over the entire system. For example, banks control the flow of money, governments control the legal framework and large technology companies control our data.

These institutions have very different agendas and interests. Banks want to maximize profits, governments want to maintain stability and order and big technology companies want to monopolize their respective markets.

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

The web 3.0 economy, on the other hand, is based on a decentralized system. This means that there is no central authority or institution that has control over the system. Instead, it’s a network of computers all connected together.

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

The result is a fair and democratic economy where everyone has an equal opportunity to participate and benefit from the system. There is no central authority that can manipulate the system to its own advantage.

The bureaucracy of modern projects

Have you ever asked yourself: Why is it so hard for the United States to build high-speed trains? The answer is bureaucracy. It’s not just the United States, of course. France has the same problem. So are Brazil, Russia, India, and pretty much every other country 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 to navigate.

So let’s think about what needs to be done before high-speed rail is implemented in the United States. Such a project should first be presented. Then it should go through feasibility studies. Then it would have to be approved by Congress.

Once it is finally approved, the project should be outsourced to contractors. And even after all that, there is no guarantee that the project will actually be built. It is very likely that the project will be delayed or even canceled due to bureaucracy.

Politicians, lawyers and consultants – none of whom know anything about building railways – are interfering and complicating the process. And the longer the process takes, the more expensive it becomes.

From monopolies and cartels — antitrust versus trustlessness

John D. Rockefeller and Bill Gates are two of the richest men in history. They built their fortunes by creating monopolies or near monopolies in their respective industries. And both have been sued for their antitrust practices.

These practices are made possible by a system that favors the rich and powerful. The illusion of free and open markets is just that – an illusion. In reality, the markets are manipulated in favor of those who have the most money and the most power.

But what if there was a system designed to be reliable? What if there was a system where monopolies and cartels couldn’t exist?

In a blockchain-enabled economy, the practices of monopoly and cartel would be impossible. This is because the decentralized nature of the system would make it very difficult for a single entity to gain control over the network.

So how exactly would this stop monopolies and cartels? Aside from decentralization, trustlessness has to do with the fact that all transactions in a blockchain economy are transparent. This way everyone can see what is happening on the network.

If someone were to try to create a monopoly or cartel, it would be very difficult because everyone would be able to see what was happening. A real-life example of something that would have been stopped by transparency is the Enron scandal.

The Enron scandal was only possible because the company’s accounting practices were not transparent. If they had, it would have been very difficult for the executives to cheat their investors.

The importance of market integrity

If you have read Adam Smith with his idea of ​​the “invisible handAs an agent of decentralized free market formation, you know that the key to a prosperous market is fairness. Unfortunately, markets in today’s world are anything but fair. Governments support failing companies with taxpayers’ money. Banks and companies engage in fraud and other illegal activities. And the rich and powerful are rigging the system to their advantage.

We can define market integrity with respect to Smith’s teaching as adherence to the free-market principles of voluntary exchange, open competition, and limited government intervention.

In a blockchain-based economy, market integrity would be ensured through transparency and trustlessness. As we have seen, these two characteristics would make it very difficult for anyone to engage in fraud or other illegal activities.

The trustless nature of such an economy would ensure that prosperity could be accessible to everyone, not just the rich and powerful. This is evident in how retail traders in the crypto space can get involved as opposed to accredited investors.

A blockchain-enabled economy would also be much more efficient. This is because there would be no need for intermediaries such as banks and governments to facilitate transactions. Decentralized Finance (DeFi) has the potential to disrupt the entire financial sector because in a blockchain-enabled economy, all transactions would be peer-to-peer.

So to get the point across, the web 3.0 economy could usher in a financial renaissance where anyone in the world can participate in and benefit from the system.

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

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

So stay tuned!

Daniel Saito is CEO and co-founder of StrongNode.