Sometimes the biggest shifts in general-purpose technology seem to take the longest time to reach mass adoption. Web3 is no exception - or is it? In this piece, we’re going to take a look at the concepts of decentralization, blockchain, and token-based economics and pick a use case for each.

5 LIFETIMES FOR POWER

Electricity as we know it took 130 years to reach the potential for mass adoption. That is if you consider Ben Franklin’s lightning, key, and kite experiment (1752) through to Thomas Edison’s first coal-fired public power station in London (1882) and second the following year in New York. Only in 1925 did HALF of all homes in the U.S. have electric power. From hunch to hot lunch actually took more like 175 years. Crazy, especially when you consider the life expectancy in 1776 was 35 in America.

LET’S DIVE IN

Most of everything we’re going to explore today started in 2009. In 14 years, these technologies have moved from idea, through testing, and into use. This is a nano-second of time and yet it defies the adoption curve by requiring an understanding of adaptation models. Web3 is an iteration. These technologies are often mistakenly classified as ‘tech in search of a problem’ ‘Ponzi schemes’ and ‘fake centralization that can’t fix a web that isn’t broken.’

We could spend days illustrating just how broken the current web is - and probably illustrate thousands of Ponzi schemes that originated FROM the current web landscape, but that’s not why we’re here today. We’re here to talk about three concepts: decentralization, blockchain, and token-based economics.

DECENTRALIZATION

A decentralized web3 seeks to deliver a permissionless (no centralized gatekeeper) trustless (no need to place trust in a third party) and open to all (little-to-no censorship of individual/ideas) internet. Basically, utopia in comparison to the centralized data-driven, human-as-a-product, misinformation-laden, social media-driven, what’s-in-it-for-me, porn machine we’ve created to date. I digress.

Perhaps the simplest form of a decentralized process is DeFi or decentralized finance. Ironically, it’s also the most controversial. Think about how the word ‘crypto’ makes you feel. It’s always easy to illustrate something when it hits you in the wallet and exactly where the fraudsters target.

Decentralized finance offers financial instruments without relying on intermediaries such as brokerages, exchanges, or banks by using smart contracts on a blockchain. A simple way to think of it is direct, peer-to-peer exchange. A personal favorite use case is global remittance. Remittance is referred to as the sending of money by a foreign migrant across the border to another person via electronic payments, drafts, and checks. The Global Digital Remittance Market is currently valued at $1.6B and is projected to reach $4.3B by 2030. The total market size is currently estimated at $702B and is projected to reach $1.2T by 2030.

The average cost for sending remittances in 2022 was 6.2% of the amount sent. For illustration, if that percentage stays static for the next 7 years, that translates to $74B in transaction fees. Needless to say, there’s room here for cheaper solutions through disintermediation. Even crypto gas isn’t that expensive.

BLOCKCHAIN

A blockchain is a distributed database or ledger shared among a computer network’s nodes. What’s important when understanding blockchain is that it can be used to make data immutable - the term used to describe the inability to be altered. Because there’s no way to change a block, the only trust needed is at the origin of the transaction - which negates costly third parties and their perfunctory fee-for-service models. If I agree to send you $100, the blockchain ledger hash will show 6 transaction details:

• Sending Address

• Receiving Address

• Amount

• Date and Time

• Network Fees

• Confirmations

The transaction hash or hash ID acts as a receipt between the two parties. If we think beyond currency, verifying and validating the exchange of just about anything has value. If we can prove it, we can protect the exchange of ideas, assets, information even our personal identity just like we can the exchange of transactional currency. The blockchain is the mechanism by which we can inscribe the activity. Decentralized, public blockchains are accessible by all - so no secrets!

TOKENS, TOKENS, TOKENS

Tokenomics is an emerging field concerned with the economic properties of agent-driven systems that use cryptographic tokens that are created and managed on blockchain-based ledgers. There’s a whole science behind this - so a simple definition really doesn’t do it justice. For the purposes of this article, it’s important to make a couple of simple distinctions; fungible vs non-fungible tokens & utility vs security tokens.

Fungible tokens are divisible and non-unique. For instance, fiat currencies like the U.S. Dollar are fungible: A $100 bill in Miami has the same value as a $100 bill in Chicago. This is also true for many cryptocurrencies such as Bitcoin and Ethereum.

Nonfungible tokens (or assets) are unique and non-divisible. They should be considered a type of deed or title of ownership. A non-replicable item. Examples could be a house, a car, an original piece of art, or even a hotel reservation. Intellectual property falls into this category - including this article which is written and inscribed to the Optimism blockchain. Businesses build their token on a blockchain to serve purposes that include transferring value, giving access to a subscription, and even voting. This is where it becomes really interesting….well, to me anyway.

One of the most promising use cases for tokenomics is loyalty and incentive programs in the workplace. Seemingly abstract right now, blockchain-driven tokens can be programmed into modern workflows in the form of rewards, accomplishment, recognition, and even standard compensation. All the employee needs to do is grant access to their wallet, and employers can issue both fungible and non-fungible tokens. Smart contracts can automate governance while distributed ledgers keep track of transaction data without third-party involvement. It gets really exciting when consideration is given to ‘points’ programs similar to frequent flyer miles or other rewards incentives. The gaming industry has already blazed that trail.

To review, blockchain is the underlying technology that can easily prove ownership of an intangible digital item. Tokens can be fungible (think dollars) or non-fungible (think ownership) and businesses can build their tokens to transfer value, give access, or even allow voting rights. Smart contracts live in the same ecosystem and can be programmed to automate terms and conditions.

IN SUMMARY

So there you have it. A brief explanation of three key ingredients of web3 (decentralization, blockchain, and tokens) complete with overly simplified use cases of remittance and loyalty/incentive programs in the workplace. In reality, this is just the tip of the iceberg. Concepts such as interoperability, dapps, self-sovereign ID, zero-knowledge proof and so much more round out what REALLY makes the web3 metaverse so much more robust than the traditional internet. If this interests you, please reach out to discuss it in greater depth. The crypto winter is showing signs of thaw….we are gonna make it….might as well embrace #bettertogether.

Just wait till we see the approval of the first BitcoinETF…..🍌🍌🍌

#WAGMI_frens | #OrionGrowth | #HODL

References: Alex Murray Blockchain Council

Image cred: Rapid Innovation for WEF