Hi-ya, my name is Jae Ha shin (Syns-Seeyounxtsummer). I am currently organizing and running a blockchain academy based in the UK, Deltoid. It is also exclusively for educational purposes. Furthermore, it aims to obtain new knowledge in crypto economies and blockchain technology between university students and other related- crypto figures.
I would like to become a crypto media communicator who can explain useful information and knowledge about blockchain technology/crypto economics in a simple way for those crypto beginners and enthusiasts. Meanwhile, let’s hope to learn together and prepare for the next crypto summer!!
1. Evolution of Web 3.0 – Users (Creators) can properly receive their reward/compensation for their digital assets in the Web 3.0 environment. A transparent, open protocol and a token economy on decentralized blockchain technology powers it.
2. Blockchain technology – Decentralized application: blockchain has been the only technological structure, which is politically and architecturally decentralized without a centralized agency or organizational infrastructure. However, it is logically centralized (there is one commonly agreed state (Consensus), system behaving like a single computer) (Ethereum Founder: Vitalic Buterin).
3. Token Economy revolution– Designing and building up the Token Economy for business: how should we design the future’s business? Significant steps for better transparency for the trustless organizational structure.
1.0 Introduction – A Call for Trust in a Trustless Society
In human history, public organizations such as a central government or those powerful authorities are always manipulating and controlled the issuance of currency/fiat money.
*Keynotes-Fiat Money: A government-issued currency that is not pegged to a valuable physical commodity such as gold.
Fiat Money gives central banks or powerful authorities greater power over the economy. It has been generating centralized problems which can lead to risks; such as losing trust among the general public. Furthermore, Fiat is not linked to physical reserves such as gold unlike (the emergency banking act of 1933 Gold standard) to back its values.
Additionally, we can see all sorts of centralized problems throughout the history of the 2008 world economic recession. This also includes sub-prime mortgages case to the most current failure of FTX bankruptcy in 2022.
2008: Sub-prime mortgage case
In 2008, dysfunctional lending practices and subprime mortgages started the financial crisis. An economic bubble broke out of the centralized bank Lehman Brothers.
The FTX collapse was the latest of the 2022 Crypto winter, but it was a centralization failure. In the case of FTX, customers’ exchange deposits were utilized for speculation on the account of trading firm Alameda. It was a prohibited banking practice, which was prohibited by the Glass Stegall act 1933 (Repealed in 1999). It also effectively separated CB Commercial bank from the IB investment Bank to prevent banks from using customers’ funds for their speculation.
In the real-world application of the blockchain and crypto industry, the power of central actors does not dissolve. However, we still can see uncontrolled, even illegitimate power centers. There are no substitutes for the traditional political process, such as the FTX case previously mentioned above.
Trustless blockchain technology and its web 3.0 does not efficiently solve real-world centralized crises. Now, is the time for the call for real trust in a trustless society.
With the form of Web 3.0 and blockchain technology, this article would like to look at the vision of the crypto economy on blockchain technology. We will also look at how it can revolutionize current businesses in the very near future.
2.0 The evolution of Web 1.0 2.0 3.0
The necessity of blockchain and its distinct features, as the underlying technology of cryptocurrencies such as Bitcoin and Ethereum, are expected to formulate a new economic system by revolutionizing and presently entering the Web 3.0 digital industry.
Web 2.0 Problematic Centralized Organizational Structure
Web 2.0 (2004-Present/Users can read and write) allows more users to interact and take part in the creation of web-based content. It is much better than in the traditional days of Web 1.0 (1991-2004/One way and Read Only). It also expands the facilitation of more engaging and social online experiences. Furthermore, it has given rise to a wide range of new business models. All these came from advanced network effects, crowdsourced content, and multidirectional data flow.
The growth of UGC(User-Generated-Contents) marked the transition from Web 1.0 to Web 2.0. The wealth generated by its UGC is, however, primarily captured by a few monopolies. Unfortunately, YouTube content creators(users) are a good example of this. The majority of market shares in this centralized YouTube platform are owned by just a handful of firms and the majority of that share is owned by YouTube.
Despite providing all the actual content, content creators(users) would not fully capture the net revenue generated by its social platform.
This leads to the big tech companies have lost the trust of the public. They also grab too much profit and control power and leave inappropriate rewards for the existing user. Thus, we call this a “Web 2.0 problematic centralized organizational structure”.
Web 3 As a New Era
Regarding Web 2.0’s prolonged centralized problems, Web 3.0 marks a new era of the internet by effectively resolving many of the underlying issues inherent in Web 2.0.
The definition of Web 3.0 can incorporate various concepts: Blockchain Technology, Decentralization, and the Token Economy.
Amongst the divergent terms, Web 3.0 can be defined as a value-linked internet platform. It is powered by transparent, open protocols and a token economy on a decentralized blockchain (Hashed Partner Ethan Kim). It also illustrates the decentralized ecosystem of the blockchain (transparent and open protocols on the distributed ledgers) which creates the concept of a token-based economy, in which the community’s revenue can be properly allocated to the actual content creators who generate digital values or assets.
Thus, Web 3.0 is not a sort of brand-new technology. Yet, it is a set of philosophical values toward the current businesses’ organizational architecture. Reshaping the new forms of an economy that is associated with transparent governance, autonomous and decentralized community owned by the community, and interaction between the users and their digital values transaction on the distributed- blockchain technology.
*Keynote (1)- Generation of Web 1.0 2.0 3.0
|Web 1.0 1991-2004 – Static/User read-only (FGC) ex) Yahoo|
|Web 2.0 2004-Present– User can read and write (User-generated content (UGC) based on the centralized organizational structure/platform ex) GAFA/ Facebook, Twitter, YouTube|
|Web 3.0 – A value-linked internet platform powered by transparent, open protocols and a token economy on a decentralized blockchain. ex) Blockchain/Defi/DApps|
*Keynote (2)- 3 Characteristics of Web 3.0
- Open – Open-source software will be utilized to generate content platforms.
- Trustless – Public would be Zero Trust, and network protection will reach the edge.
- Distributed – Interaction between creators (Users, and their services) would be enabled without a centralized authority(platform)’s approval.
3.0 Features of Web 3.0
As we defined Web 3.0, with its 3 different alternative concepts which are Blockchain technology, Decentralization, and the Token Economy. The following sections would like to break down each of the defining notions and unpack its meaning as well as applications in the contemporary Web 3.0 era.
3. 1 Blockchain
The Economist (2015) says Blockchain is the Trust machine recolonizing our future society.
In 2008, the biggest world economic recession happened. Meanwhile, an anonymous developer, going by the name Satoshi Nakamoto, was known to be the first to publish a White Paper on Bitcoin A Peer-to-Peer Electronic Cash System to the public.
Keynote- White Paper: A document outlining the key features and technical specifications of a specific cryptocurrency or blockchain project.
What is blockchain and how does it work in Web 3.0?
According to its Bitcoin White paper, Blockchain has been defined as a distributed ledger system in which information on transaction details is shared and verified by P2P network users.
The consensus mechanism that verifies transaction details can be added to existing blocks and once added to the chain, the block cannot be changed or modified. This is because all transactions within a network are validated and recorded by consensus of the nodes, hence the need for a trusted central entity or authority is eliminated.
Therefore, along with the development of blockchain technology, we estimate that blockchain is going to expand its disruptive potential to tokenize and decentralize. It includes currency, tangible, and intangible digital assets or values over the revolutionized Web 3.0 era.
In addition to the preceding concept of blockchain, Decentralization is a core principle of Web 3.0. When it comes to Web 2.0, computers and servers employ HTTP in the form of unique web addresses to search for information that is stored at a certain location, generally a single server. On the other hand, data on Web 3.0 would be kept in multiple locations. For example, distributed ledgers inside the blockchain system while simultaneously rendering it decentralized.
It is often vague to clearly comprehend the differences between the concept of decentralized and distributed networks. In fact, even before the emergence of Bitcoin gained huge attention from the public, there have been many cases where the idea of a decentralized network for digital cryptocurrencies was attempted. For example, there are Digicash(1992), Cybercash(1994), and e-Gold(1996). They have contributed some core technological findings to which bitcoin has utilized to be invented.
However, the reason why bitcoin and its underlying technology blockchain have revolutionized business and redefined companies and economics is that blockchain was the only technological structure. It is politically and architecturally decentralized without a centralized agency or organizational infrastructure. Furthermore with saying that, it did trigger an opening of a new era of Web 3.0. Meanwhile, it is logically centralized (there is one commonly agreed state (Consensus), and the system behaves like a single computer), according to Vitalik Buterin (Ethereum Founder).
3 types of Decentralization
For a better understanding of decentralization, Vitalik Buterin further explained its three types of decentralization concepts down below: Architectural, Political, and Logical decentralization categories. Below are 3 types of Decentralization with further explanations:
Definition of Decentralization
The meaning of Decentralization – Blockchains are politically decentralized (no one controls them) and architecturally decentralized (no infrastructural central point of failure) but they are logically centralized (there is one commonly agreed state and the system behaves like a single computer.
Three Types of Decentralizations
- Architectural (de)centralization — how many physical computers is a system made up of? How many of those computers can it tolerate breaking down at any single time?
- Political (de)centralization — how many individuals or organizations ultimately control the computers that the system is made up of?
- Logical (de)centralization— does the interface and data structures that the system presents and maintains look more like a single monolithic object, or an amorphous swarm? One simple heuristic is: if you cut the system in half, including both providers and users, will both halves continue to fully operate as independent units?
3.3 -Token Economy
*Keynote Token Economy- it is a small and circular economy. It also has the supply and demand characteristics of cryptocurrencies (Tokens) utilities on the decentralized blockchain-application ecosystem.
Hashed 3 Fundamental investment criteria (Hashed Partner Ethan Kim)
- How strong are the projects, or teams (Business)?
- How does the project plan or unique technology get involved in solving or revolutionizing problems?
- Healthy Community– does the project try to build up a healthy token-based economy for the users (Transparency)?
As many people are aware that Bitcoin and cryptocurrency are not everything about decentralized blockchain applications. There are also many other businesses and a bunch of new crypto projects around the world, that are coming up with new services using blockchain.
One of the most important features of the successful blockchain-based business model in the web 3.0 era is the healthy community of a compensation system. Under this ideal design of the token economy for participant behavior enhancement/engagement in the blockchain network, it gives a multitude of different benefits which contribute to building a healthy community.
Thus, in other words, a healthy community building should have a proper token economy. This includes the amount of token insurance, compensation for users, redistribution of wealth, and users’ ongoing service engagement.
This means that blockchain developers must solve various problems in addition to simply implementing services through approaches.
Here are 6 considerations to build a healthy tokenomic (community)
1. On what criteria will the reward (token) be given to which participant?
2. How token will have a value to their participants
3. What are the incentives for people to hold tokens?
4. What is the amount of token insurance and how will they distribute it?
5. How do you link network growth with token value growth?
6. How do we solve the price volatility of tokens?
4.0 What is Next in 2023 – Importance of DAO for the Trust in a Trustless Society, a Step for Blockchain Mass Adoption
Considering all the important preceding concepts of Web 3.0 in regard to the trust crisis cases such as FTX and the past world economic recession in 2008, what WOULD BE EXTREMELY CRUCIAL in rebuilding the crypto market after the meltdown is the advancement of Decentralized Autonomous Organization (DAO).
*Keynote DAO– It is an entity without centralized authorities with a bottom-up decision-making process. A democratic community governance governs it around a specific set of regulations on a decentralized blockchain network.
Many people and I personally assume that 2023 would be the year of DAO. Furthermore, many crypto businesses and projects and their users have been facing a crypto-in-trust crisis. Therefore, they are pursuing more transparent governance for a healthier community.
Benefit of DAO
- Operation via computer protocols- whereas traditional businesses are operated by central shareholders, DAO operates via computer codes, and decisions are generated faster in a transparent practice.
- Use of smart contract-DAO utilizes their consensus algorithms by digital smart contracts that exist on the blockchain network. -This smart contract would have useful information-Rules and regulations, Guidelines, Functionalities, and contract addresses.
- Trust and Transparency- Offering immediate trust and transparency for organizations to focus on achieving collective goals, encouragement, and interests upon open-source blockchain records.
- Community-Based – it is a Democratic bottom-up decision-making approach, that is quite the opposite of the traditional organizational structure (Each individual has the right to vote).
Although DAO would not fit all types of business existing today. Its distinct features and implemented/appealing function toward the “trustless” society would revolutionize current businesses and organizations in more efficient manners.
In this article, we have looked at the evolution of the Web from 1.0 to Web 3.0. We also looked at its relevant features with the remarkable notion of blockchain technology, Decentralization, and the Token-based economy (Tokonomas). Trust is the key for the upcoming generation after the crypto market meltdown from its extreme winter. Furthermore, the advancement of Decentralized Autonomous Organization or Decentralized finance would be a necessary call for trust for the trustless society in the upcoming 2023.
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