Web3 and the Vision of Decentralization

The conversation in crypto/web3 surrounding the value and intent of decentralized networks has progressed quickly over the past several years. However, most people not involved in the space still don’t immediately agree that decentralizing existing institutions is actually a worthwhile cause to champion, and perhaps don’t see the point to begin with. In addition, recent financial scandals rocking the industry have left the general public understandably skeptical of our nascent technology. 

Many of us who are passionate about crypto have boldly promised that it will change the world for the better, but as of the end of 2022 we have failed to deliver tangible, global-scale results. However, for many of us, the vision of a decentralized future is clearer than it’s ever been and we remain optimistic.

The goal of this article is to lay out in plain language the actual implications of a global-scale decentralized internet, and the practical benefits it can have on our societies. 

What Problems are We Solving?

As a starting point, we must identify the relevant issues affecting humanity on a global scale today. Regardless of one’s conviction in technology or political affiliation, these problems are relevant for all of us. Here is a list of some of the big ones:

• Economic inequality

• Abuse of power/incompetence in national governments

• Unhinged waste and consumption, leading to environmental destruction

• Failing public infrastructure/institutions

• Food scarcity, homelessness, poverty

I certainly am not claiming that the existence of blockchains solves any of these issues directly. Rather, I would ask the reader to seriously explore this question: To what extent are these problems enabled by lack of transparency, inefficient use of resources, or misalignment of economic incentives?

Every problem listed above, despite being extremely complex and nuanced, is almost certainly enabled by one or more of these underlying issues. We live in a world where our collective productive capabilities should enable more than adequate supply of our universal basic needs. The fact that there are massive gaps in such needs being met suggests we have a grossly wasteful and inefficient global system, where economic actors are not necessarily incentivized to bring about the greatest good for humanity. Small failures in organization, coordination and consensus repeated billions of times become the massive, global-scale problems we face today.

How can web3 illuminate a path forward toward solving some of these issues?

Identity and Transparent Record Keeping

In modern society, transparency is ensured by accurate and verifiable records. In order for good decisions to be made, all interested parties must have access to truthful and reliable data. 

Even in wealthy countries today, there are obvious inefficiencies and inconsistencies in the quality of record-keeping services received from large-scale organizations, both private and public. Ask any US citizen about their experience with the IRS, DMV, or their health insurance provider and chances are there will be just as many complaints as there is praise.

The problem is much worse in countries where the societal infrastructure for such services is not well established, or threatened by political/economic instability. Basic documents such as birth certificates, ID cards, property registries, and voter registration are all mundane and necessary prerequisites for the functioning of prosperous and just societies. 

How do we provide these services efficiently to every person on the planet who needs them? The pieces for solving this puzzle are actively being built in web3 and may arrive to the public sooner than many expect. Imagine a digital ID card that is not issued by a centralized government institution, and yet has the same level of acceptance and legitimacy because of social proof verification and the immutable nature of blockchain ledgers. Decentralized identity protocols (like lens or Polygon ID) are platforms that are bringing us closer to this reality. 

Zero-knowledge (zk) proofs are another essential tool being implemented in conjunction with web3 identity. ZK allows users to keep data on blockchains private, but still verifiable. Currently, it is not widely appreciated how broadly applicable and useful ZK proofs will be. Here are some examples of the possibilities:

-You can scan your web3 wallet address to prove that you’re eligible to vote in an election, but can keep who you vote for private. 

-Securely store your medical records on chain and only have them be viewable by parties that you approve, like your doctor. 

-Prove that you’re qualified for a mortgage or business loan without revealing how much money you have in your account. 

The list goes on and the possibilities are almost limitless. Combining these two puzzle pieces, we have a scalable solution for secure and reliable record-keeping and identity verification around the world. Decentralized identity with zero-knowledge proofs allows us to bring organization to areas where only chaos was possible before, and increase transparency while still protecting privacy.

Incentive Alignment and Resource Production 

With clear rules and reliable functionality, web3 can create fair opportunities for people to provide in-demand services in peer-to-peer marketplaces that otherwise would not have the chance to exist.

Currently, if a small business wants to sell a product to a large customer base, it must use a massive platform such as Amazon. Similarly, gig workers depend on their platform of choice for access to customers, such as Uber, Lyft, or Doordash. These platforms obviously charge fees for the services they provide and have the final say over the terms of each transaction.

Decentralized web3 versions of these platforms can root out rent-seeking, which essentially lowers the cost for users and increases the profit for workers. Web3 also enables the creation of platforms for new kinds of peer-to-peer markets, like electricity. In the United States, utility companies enjoy monopolistic control over the production of power. As solar panels become more common, it will become possible for homeowners to sell the excess energy they generate back to the grid and their neighbors. Individual landowners could find it profitable to set up solar or wind farms and become small-scale utility providers. 

Web3 enables new types of economic organization, which means incentives can be created for participants that previously would’ve been impractical to introduce. These incentives can be specified based on the specific context and scale of the market they are serving.

Widely implemented, this model can lead to the creation of entirely new types of decentralized organizations that target positive outcomes. Imagine cooperatives for insurance, public works projects, or community-driven initiatives to reduce homelessness that are transparent and reliable. Arriving at this dreamed-of reality will take a tremendous amount of work, but all the necessary tools are in fact being built today. For the first time, we have the ability to design systems for mutually beneficial human cooperation at any scale.

Conclusion

Much more important than any individual killer app, web3 should be thought of rather as a new set of tools for human organization and coordination. 

Bitcoin serves as inspiration for so many because it proves that it’s possible to unleash a decentralized system into the world that is self-sufficient. When an idea like this achieves critical mass, it cannot be stopped. Similarly, our collective efforts in web3 can achieve positive sum desired outcomes once they are adopted by a critical mass of people around the world. 

The mass adoption of web3 must be a bottom-up movement that comes from providing real benefits and tangible results to a very large number of people. As an industry, we must fine-tune our ideas and products, and leave behind predatory business methods that seek to extract value rather than create it. The challenge of accomplishing this is huge, but the vision remains clear.