Even with mind-breaking levels of growth in the last 5 years, cryptocurrency adoption still sits below 10% globally.
While the typical narrative surrounding the crypto industry is focused on volatile prices and the opportunity to make mind-blowing returns, I believe not enough attention is paid to the remarkable redistribution of power from institutional and state level down to the individual.
This power shift hasn’t fully played out yet, but the cracks in the traditional paradigm are clear and growing. As Web3 thesis takes hold, we can expect a new emphasis placed on the individual, and more specifically, the individual within a network. What this will look like, I don’t know for sure, but I’ve observed 3 social trends that are already underway:
- Power is being transferred from corporations/institutions to the individual.
- Decentralization enables individuals to innovate and create change at scale.
- Open-source technology leads to exponential innovation.
Right now, the projects we are most interested in are those with the potential to change the lives of millions (or billions) of people, and it starts with these shifts.
The Individual Matters More Than Ever.
Like many other people, I was drawn into the world of crypto by the promise of sound money and all that entailed. However, what’s more recently captured my interest is the idea of sovereign individual identity and the democratization of power that is today captured by institutions and governments.
Decentralization is fuelling the financial revolution and building the products that will provide real utility to people all over the world. The more users on these decentralized platforms, the more unstoppable they become.
That’s the fundamental promise of Web3. It has the potential to disrupt every industry in which people organize themselves and their information… so pretty much everything.
An old saying goes “Power is never given away freely; it must be taken.” This is the defining principle of Web3. This power shift won’t come from the generosity of our existing elites. Instead, we must build a new system that overshadows the old and rips the reins of power away from those who today wield it as tyrants.
Individuals always have more power than they give themselves credit for. Only when they start building something do they see how fragile the old system was and how many of their compatriots wanted the same changes they did. Just look at the civil uprisings happening all over the world today. When people coordinate for a common goal, they can amass far more power than their repressive leaders.
The best way to measure this shift is by asking, “Is network is becoming more or less powerful?” Look at the institutions and corporations we grew up knowing, respecting, and even fearing. Are they gaining or losing power right now? Compare that to the burgeoning technology and talent networks of the last decade, and the change is clear.
A Good Connection Can Change Everything.
My biggest mistake in my first few years in crypto was trying to do it on my own. It was only after founding Contango that I really started to grow my network and reputation in the space. When I made it my mission to build my network in crypto, opportunities started pouring in. I was finally able to see my value through the investors and builders who trusted me with their capital and their attention.
In these newfound connections, I realized this industry is not built to compete from within, it is built to compete with the corruption of legacy systems. Our goal is to increase the pie, not to steal more of the pie for ourselves. This became part of our core thesis at Contango. We may not be able to support our portfolio companies with all their capital, marketing and development needs, but we can definitely connect them with partners who can help them with every facet of their business.
We are now somewhat of a matchmaker for our portfolio companies, with ample connections at arm’s reach, we are far more powerful than if we came in alone.
I shifted my paradigm from “I can do this better,” to “we can do this together.” To me, this demonstrates a shift from a Web2 mindset to a Web3 mindset.
In Web2, innovation is siloed. Many companies work towards the same goals, with slightly different proprietary software, and in some cases, the same problem can be solved 100 times by 100 different businesses… such a waste of our global human resources. Web3 thrives on collaboration, on openness and sharing of information and ideas.
Imagine a world where a problem could be solved once, and that solution could be tweaked, replicated, and used freely by billions of people. How much more productive would we be as a global society?
Open-Source Solves More Problems, Faster.
All over the world, employees are working on the same problem, but not doing so collaboratively.
A problem needs to be solved once for the human race. Duplicating effort is setting us back. Yet, all these big FAANG companies are working on the same proprietary solution, as they compete to create benefits for their company. Their innovative effort won’t be shared with the world, so someone else will have to solve that problem at another company.
Sounds inefficient, doesn’t it?
The open-source nature of Web3 means that one person now has the power to solve a problem for the entire human race. Once they find a solution, no one else has to, it is available to everyone.
“Compossibility is to code, what compound interest is to finance.” - Chris Dixon
Composability allows for that same code to be freely iterated on, tweaked, and built into new and more complex infrastructure.
When the U.S.A. put a man on the Moon or created the nuclear bomb, everyone was working collaboratively and combining their best efforts to get a higher-level outcome. Open-source does the same thing, but for every scale and type of project.
Tesla open sources their patents for the same reason. The more people who buy into open-source and add to it, the more all companies can benefit by providing more value to customers. With Hyperloop, Elon Musk created the plans and released them publicly for someone else to pull up. Now, you can get from San Francisco to Los Angeles in 35 minutes. Similarly, Bancor solved the AMM problem once and now that code has been copied hundreds if not thousands of times.
When the world starts working in this open-source manner, everyone benefits. Rather than 1,000 people all working on the same problem, you have 1,000 people working on 1,000 problems. That’s a win for the world.
When you realise this power, it’s easy to see that centralized competition is NGMI.
Ideas Will Continue to Attract Other Ideas
There will be no shortage of problems to solve in the future, but there will be a shortage of people willing to give away their intellectual property to centralized companies trying to solve them. Open-source ideology is catching on.
Ideas form in the same way the universe was formed.
A small amount of space dust starts to coalesce. Gravity pulls more space dust together. As more dust that attracts, density increases and the mass heats up, until eventually a star is born. Eventually that star explodes and shoots elements and space dust everywhere in the universe, eventually leading to the formation of new stars and planets like the one we call home.
The same is true for an idea. A kernel of insight can coalesce into a revolutionary idea when enough human consciousness is dedicated to it. Eventually that idea can explode into a burning revolution spurring millions of others in the process.
This is exactly what is happening in Web3 right now.
Ideas are like basic gravitational force, and their impact can be massively accelerated when millions of people can simultaneously dedicate their consciousness to that same idea. This is the open-source way of working.
We now live in this open universe where anyone can share their ideas. There’s no immaculate conception of ideas. Just one group inspiring another group ad infinitum.
Web2 was built by a small group of genius CEOs. Web3 will be stronger because it is build by the collective consciousness of all developers and innovators within it.
The shift from closed-source to open-source is speeding up the power shift from corporations to the individual. As a result, we’re going to end up with more problems being solved, individuals gaining more power, and the world at large benefitting.
At Contango, we fund projects that accelerate the adoption of Web3 and this financial revolution. This is the intersection of social benefit and outsized returns.
This is how we invest.