Our thoughts on Web3 pathways, a primer series
Chapter 3: Should we define web3?
This article doesn’t aim at defining web3, a definition per se should not exist but should continuously evolve with time to better humankind as with any innovation. What we aim to achieve here is seed web3 opportunities without limitation across two pathways.
1. Opportunities where web3 will run on a completely new set of rails
2. Web3 opportunities which further extend its predecessors (Web 1.0 and Web 2.0) into the immersive digital realm
The evolution of Web 1.0 and 2.0 was flawed, these innovations ended up being governed and regulated by governments and monetized by powerful lobbyists and institutions, each tightly coupled with the other for mutual gain and security, though never the original intent of the internet and the web. Despite this, the internet and the web are the biggest innovations of the last century.
Looking back, governance and regulation haven’t been the best resolution for innovation. It mandates directives which impose influence on what can or cannot be achieved without truly understanding the potential of innovation and disruption it can create to ease the way people live, coexist and thrive in a sustainable world. The focus of governance and regulation should eliminate barriers, enable a level playing field for individuals and institutions alike, should promote active participation, co-creation and shared benefits; this is seen as a key differentiator and the true pivot for web3.
Governments and regulators have historically addressed conflict with compromise. Most of us have witnessed and comprehended this with the last 3 recessions in the digital era. The philosophy behind governance and regulation is pure as innovation for starters but tends to get convoluted over time, losing sight of their core founding principles. The process of blunting a sharp edge repeatedly fails people, the true producers and consumers of the world. Mathematical and quant models fall flat when they violate supply and demand constructs as experienced innumerable times, most recently with the subprime mortgage crisis of 2008.
The web3 movement, a new set of rails
People’s participation in the acquisition of decentralised currencies (crypto) reflects a shared desire and purpose to disrupt traditional monetary systems, processes and methods. This stems from the fact that they are not equally accessible to all and the sovereign governance systems are biased. Interestingly the birth and definition of crypto were an outcome of the subprime mortgage crisis of 2008. At the outset, decentralisation is a step towards eliminating barriers, distributing ownership, creating equitable participation and enabling benefits for all. It’s a new paradigm that runs parallel to the centralised government and institutional regime.
That said, innovation and change paradigms have their own challenges with acceptance and adoption. The influence and grasp of governments, lobbyists and institutions can stall adoption by simply deeming crypto as illegal tender. With crypto, we’ve witnessed exponential growth in acquisition, adoption and value over the last 5–7 years followed by a 60% value shedding in the first 6 months of 2022. This has predominantly been driven by an impending recession, weak global cues, geo-political instability, lack of acceptance by leading governments and negative commentary from institutions and institutional influencers restricting the participation of people from key global economies. Blockchain-backed cryptocurrencies run in parallel (on a new set of rails) to governments with complex tax regimes and institutions. This poses a threat to sovereign systems, institutions and lobbyists, their strongholds, influence and relevance.
These are exciting times, it’s interesting to see how this plays out in the years to come. We’ll see futuristic governments proactively work to understand, participate and implement simplistic methods to onboard crypto as legal tender with simplified tax regimes; regressive governments will give it the bad dream treatment.
Figure 3: Prominent cryptocurrencies
The evolution of the internet, connectivity and access to the corners of the world has created a second reality for people, a purely digital one. The Metaverse will further enable this second life with immersive emotional engagement and trust. Crypto will play the alternate currency to fiat currencies in this new reality, both of which will further grow in prominence in time running in parallel to existing Web 2.0 engagement paradigms and fiat currencies.
Web3 can be broken down into a few key concepts;
1. The Metaverse: A paradigm shift from the internet as we know it, evolving into a 3D, real-time embodiment of people living, engaging and interacting within the internet. A seismic shift from the current Web 2.0 interaction model where we access the internet everywhere but always from the outside.
2. Cryptocurrency for payments
3. Digital twins; digital equivalents of physical goods
4. Digital goods and accessories
5. Digital artefacts/NFTs with provenance, perks, memberships and utilities
6. Avatars and Digital identities
7. Blockchain smart contracts backed by data, history and benefits
With Web3, we’re witnessing a dramatic disruptive change to standard operating paradigms with blockchain smart contracts forming the backbone of every web3 transaction providing transparency, authenticity and provenance with speed and resilience.
1. The Metaverse is transforming into boundless virtual spaces of immersive engagement, influenced by our current realities, extending our current realities and more importantly disrupting traditional behaviours of producer and consumer economies
2. The rampant adoption of cryptocurrencies for payment executed across a decentralised peer-peer network with no government and institutional intermediary
3. The growth of consensus-driven Decentralised Autonomous Organisations (DAOs) independent of government and institutions
4. The proliferation of digital twins, digital equivalents for physical goods
5. The rapid evolution of avatars into accepted digital-first identities
6. Thriving creator economies coming to life with artefacts and NFTs sold, auctioned, and traded across a myriad of emerging marketplaces
7. Designer brands experimenting with virtual goods, showrooms, marketplaces and experience centres to engage consumers in this completely new realm
These behavioural changes signify a new trend of interaction and engagement to fulfil the necessity of a second life. Web3 further extends digital identities to digital spaces in a digitally native realm. The result is exponential growth in digital footprints and consequently diminishing the value of physical constructs, the traditional playground for interaction, engagement and commerce.
The Metaverse has already evolved into avatar-based 3D shopping arcades, virtual experience centres, virtual block parties and concerts with leading celebrity artists delivering avatar-based performances to tens of thousands of attendees in an immersive embodied format. Luxury fashion brands, sports brands, auction houses, banking and financial institutions, media houses are building out their Metaverse equivalents to further engagement, fan followings, digital twins of physical products; further moving to digital-first artefacts to fulfil this disruption in consumer behaviour and its resulting demand.
Digital avatars representing identities are now accepted on social media, further extending this realm into the future. NFTs have gone beyond being a new fad to widespread adoption with millions of creators and collectors transacting across NFT marketplaces. Digital communities driven by cause, purpose and meaning are rampantly growing with new interactive products enabling these communities. Web3 start-ups and established players are rapidly spinning up NFT marketplaces, digital products to accelerate web3 adoption to service new product categories and asset classes.
The widespread adoption of crypto as a truly digital global currency, its simplicity thereof further connects producers to consumers directly, eliminating middlemen, saving time and cross-border transaction friction faced with fiat currencies. Blockchain and smart contract technologies have evolved to power these new asset classes with utility, rarity, value and provenance. Blockchain-backed FinTech companies are rampantly on the rise building new FinTech products to service these new asset classes.
Industries including insurance, banking and supply chain are leveraging blockchain smart contracts to realise products that enable efficiencies at scale, shorten compute and transaction time backed by data and insights, eliminating manual intervention fraud and foul play. Judicial systems are ready to experiment with moving Wills, Trusts and Fiduciary to the blockchain where transactions are immutable and can be amended in time with trust and authenticity. Further to this, they are experimenting with moving arbitration, conflict resolution and courtrooms to the Metaverse to be accessible from anywhere, leverage consensus, populist opinions and further speed up resolution of cases that are actually promoted to courts of law. Some of us may witness courts of law be replaced with Metaverse equivalents in our lifetimes.
Figure 4: The Metaverse according to Facebook
Web3 opportunities which further extend its predecessors (Web 1.0 and Web 2.0) into the immersive digital realm
We’ve experienced digital acceptance grow in the last decade, digital copies of travel tickets and government identities are now accepted at airports as valid travel documents. We’ve seen flight simulators used to train pilots and crew, these training methods are now extended to virtual spaces (the Metaverse) to be accessible anywhere as against the current physical training facilities. Virtual cockpits from the gaming industry are now the standard for new cars across the world. Sports cars have replicated the gaming experience with controllers becoming digitally immersive. We’ve seen competitive motorsport adopt the virtual safety car over the last three years and this is the accepted standard.
What if government identities like passports, driver's licences, tax records etc. were purely digital artefacts maintained as smart contracts on the blockchain, accessible and acceptable anywhere with no physical equivalent needed? This will become the accepted standard in a few years. What if birth records, education records, government identification, credit history, health records, insurance policies and claim history, loan history, assets owned, tax records, criminal records, job history, death records and every other trait associated with a person were blockchain-enabled smart contracts? Would this be an invasion of privacy or simply an efficient mechanism to simplify governance and trust to speed up transactions and approvals eliminating fraud and foul play? We do believe that this is a near eventuality and will speak more to these aspects moving into the digital native realm with upcoming podcasts, blogs and articles.
The opportunities for governments, industries, civic bodies, law enforcement agencies, education, skills training, health and wellness, social and sustainability agencies etc are immense. All have historically suffered from inefficiencies associated with qualification, accessibility and physical space restrictions. What if these were Metaverse enabled? We could leverage the Metaverse to grow engagement, enable inclusive and diverse participation, establish consensus to rapidly model, prototype and solve for all interests and the greater common good; think smart governance, urban planning, resource management, waste management, traffic management, sustainability and causes such as climate change from the smallest unit of governance, to cities, further extended to states, countries and the world as a whole.
The ability to solve for important causes in the Metaverse with access to all, participation, populist opinions and consensus on change is boundless. The Metaverse’s ability to enable cities the world over to collaborate in a real-time embodied format to rapidly enable the next set of smart and sustainable cities at speed is limitless. The ability for governments, courts, law enforcement, civic bodies and people to come together in partnership, to revisit archaic systems, processes and methods to revamp and make relevant for today’s people and the generations to come is possible at scale and speed in the Metaverse.
Afforestation, a Metaverse trend has influenced and transcended into the physical world with micro forests popping up across the world as community initiatives. Active community participation is creating populist influences to leave a thriving and sustainable world for generations to come. This is a key trend reversal to be noted and is gaining immense global traction.