READ MORE: Understanding Web3 as the Internet-Native Economy (On Deck Journal)
Cryptocurrency, blockchain and tokens are more than just magic internet money. These digital finance technologies are maturing into a full-blown parallel economy that is native to the internet.
“What we’re actually seeing is the birth of the world’s first global internet-native economy,” says Patrick Rivera, Product Engineer at Web3 developer Mirror.xyz.
Rivera argues that Web3 products perform specific functions in the digital economy that regular financial mechanisms just can’t fulfil.
“Crypto tokens are the first digitally native asset and an entire digital economy is developing around them that is parallel to the traditional economy. This is the real significance of Web3.”
To understand what he means, we need to contrast his understanding of Web3 with the two stages of the internet that have come before:
Web1: Read-Only. Period: 1980s-2003. The internet consisted of static websites like Geocities, Yahoo, and AOL. Users read online content or information without interacting with or generating content themselves.
Web2: Read/Write. Period: 2004-2022. UGC is enabled on social networks like Instagram, Twitter, YouTube, Facebook, and TikTok. Data is “written” to centralized databases that own user data where platforms (like those listed) can sell it to advertisers or arbitrarily taking down content and/or banning users without user consent.
Web3: Read/Write/Own. Period: now emerging. It leverages blockchain technology to enable users to own digital assets and their data. Web3 also represents a return to open-source protocols that cannot be altered or manipulated “according to the whims of centralized companies like Google and Apple,” Rivera notes.
“What distinguishes Web3 from the two previous eras is ownership,” he underscores. “That ownership is enabled by tokens, which are the fundamental unit of value in crypto economies.”
YOUR ROADMAP TO Web3:
Does web3 offer the promise of a truly decentralized internet, or is it just another way for Big Tech to maintain its stranglehold on our personal data? Hand-picked from the NAB Amplify archives, here are the expert insights you need to understand web3’s potential and stay ahead of the curve on the information superhighway:
- Magnificent Obsession: Why Are We in Love With Web3?
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- Avatar to Web3: An A-Z Compendium of the Metaverse
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There is more than one type of token in Web3. Fungible (interchangeable 1-for-1, such as one bitcoin for one bitcoin) and non-fungible (unique), and they play different roles in the digital economy.
“Tokens stored on public blockchains distinguish Web3 from previous eras of the web. These tokens enable digitally-native property rights which for the first time will unlock the ownership layer of the internet.”
With that in mind, what are the constituent parts of the global internet-native economy?
Pieces of the New Digital Economy
Tokens: Internet-native assets that incentivize participants to work together without requiring a human intermediary or central authority. Instead, the operating rules are encoded at the inception of a protocol, enforced by smart contracts and can’t be changed without the consent of network participants.
Smart Contracts: Programmable open-source contracts that automatically execute when preset conditions are met, run on public blockchains. These are the productive assets of the digital economy, allow for the mass production of digital goods like NFTs and fungible tokens.
Decentralized Exchanges: These are to the Web3 economy what the stock market, retail stores, or ecommerce are to the traditional economy. Examples include Uniswap (a crypto trading protocol) and OpenSea (a peer-to-peer marketplace for NFTs). Just like you can buy physical goods at Walmart or online at Amazon or eBay, you can buy crypto-native digital goods on OpenSea.
DAOs: Decentralized versions of traditional companies which allow people who work or participate in the project to own it and make collective decisions using smart contracts. DAOs are to the internet-native economy what the joint stock corporations were to the traditional economy — a new way of organizing people to fractionalize ownership, engage in joint enterprises, pool together capital, produce products or services, and make collective decisions.
THE ABCs of NFTs:
Are NFTs just more hype, or are they actually the building blocks of the creator economy? Understanding blockchain technology can seem like a lot, but NAB Amplify has the expert knowledge and insights you need to remain at the top of the intersection of art and technology:
- NAB Amplify’s NFT Primer
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- What Is the Value of an NFT?
- NFTs: Content Strategy or Digital Craze?
None of these elements work in isolation. “Only by putting it all together, are we able to see that Web3 enables digitally-native products to be produced, owned, and traded via blockchain technology in ways that were not previously possible,” says Rivera.
The Birth of the Crypto-Native Creator Economy
A crypto-native creator economy is emerging in which creators generate revenue through NFTs. This might happen with different types of NFTs:
- 1-of-1 NFTs — things like Beeple’s “Everydays: The First 5000 Days,” artwork, which was purchased for $69 million in 2021. Only one person can collect it, with the downside that this usually prices out most people.
- Open edition NFTs — an emerging model. These can be priced at different tiers according to their relative scarcity and can be any type of media; art, content, music, writing, videos, and more.
- Tiered subscription NFTs — instead of buying a subscription, you can buy something you can display, and play with collecting subscriptions to unlock other benefits. Subscription NFTs will be tradable on global 24/7 marketplaces and enable early backers to share in the upside of a creator’s work.
What To Expect Next?
Given the early stages of Web3, Rivera speculates on future developments for the internet-native economy. He thinks there could be “massive adoption” of the following:
Crypto Social Networks: Crypto-native versions of YouTube, Spotify, Instagram where people are rewarded for creating content with tokens. Instead of relying on algorithmic curation of feeds and lists, people with tokens get to decide how content is curated. Moreover, things like “likes” and “shares” can be turned into portable tokens owned by users themselves. This could be used to completely change how social interaction happens online.
Crypto Gaming: The ability to own in-game items that are portable across different gaming environments and tradeable on a global 24/7 marketplace.
Crypto Work: DAOs with freelancers getting paid in stablecoins and equity tokens with streaming payment solutions. This includes the emergence of DAO tools for specific verticals like musicians, artists, NFT collectors, investors, and writers.
Crypto Firms: New types of organizations built without a CEO or board of directors, and governed by tokens and small, focused-committees (i.e., DAOs).
Crypto States: Buy digital real estate (it’s pixels, folks) via tokens, and have decisions made on ownership (or rent?) through an on-chain governance process.
Rivera notes that “today the experience of onboarding to Web3 products is still pretty janky,” especially in the initial stages like transferring money from your standard bank account to crypto in your digital wallet but thinks this will change as Web3 begins to mature.
As it stands there are only about 10 million Ethereum users worldwide, which is just 0.2% of the total number of internet users. Nonetheless, Rivera thinks Web3 is past the point of no return.
“The internet-native economy is in its infancy…. Adoption is likely to massively scale over the coming decade. Builders and creators now have a generational opportunity to meaningfully impact the next era of the internet.”
It’s just a matter of time.