What is the Web3 economy?

Exploring the different economic areas and how they are relevant to the Web3 economy

Web3 technology will have an increasingly profound impact on how economies function. Web3 technologies such as smart contracts and tokens have the potential to improve and replace many of the economic systems and processes that are widely being used today.

Smart contracts represent software programs that can be automatically executed when certain conditions are met. These programs can execute transactions and enforce agreements without the need for intermediaries.

Token based digital assets are electronic files or records that often represent ownership or rights over a specific asset. Tokens could represent physical or digital assets and they can be easily transferred or exchanged within these networks.

Money

Web3 ecosystems have their own network coin and also commonly enable the creation of token based assets. Systems of money can be created using Web3 technology and these forms of money could be adopted globally by anyone in the world that wants to adopt these systems and networks.

Web3 technology is highly suitable for systems of money as distributed ledger technology can help with increasing the transparency, security, interoperability and inclusiveness of these systems. Tokens are programmable, meaning a wide range of ideas could be experimented with that could help with perfecting the system of money for each community. Web3 ecosystems create an open and permissionless free market for systems of money.

Exchange

Web3 technology could change how people conduct economic exchange. This is due to the introduction of token based assets. Tokens are digital representations of physical and digital assets. These tokens can give the holder ownership or certain rights over these assets. People are able to create and send these tokens to any other user in the network. Web3 ecosystems will eventually be filled with a wide range of tokens that people can hold, use and transact with. New approaches for exchanging value could likely emerge, and people will be able to decide themselves how they want to transfer value.

Governments

Existing nation state governments often have democratic elections where representatives get selected to serve the interests of the public for a period of time. In the future another election takes place and the cycle repeats. Web3 technology could be used to change how these governments operate and how elections are handled. An example of this could be the implementation of liquid democracies. Liquid democracies are political systems where individuals can either vote directly on issues or delegate their voting power to trusted representatives who vote on their behalf. This enables highly flexible decision-making. Web3 technology will be able to increase the granularity and control over how someone wants to participate in governance decisions. This could mean people delegate their voting power to someone else to handle a decision or it could mean that they directly vote on many or all of the decisions themselves. The user can be as involved as they like, or alternatively they could delegate their voting power to other people.

Web3 technology removes the need for intermediaries to handle the voting process. All decisions could be recorded publicly and be verifiable using cryptographic signatures. Whether votes are public or private would be a decision that is up to each community. Distributed ledgers are a highly suitable solution for recording voting decisions. Voting systems should increasingly become fully digital thanks to cryptography, distributed ledgers and emerging self sovereign identity solutions.

Organisations

How organisations are owned, governed and incentivised could be completely overhauled through the usage of Web3 technology. Distributed ledgers give people a way to record and verify any contributions they make towards an organisation. Self sovereign identity solutions could help people with creating digital identities that can record and demonstrate their skills and contributions. Users should be able to fully own their identity, reputation and contribution data. Smart contracts could be used to automate profit sharing systems or they could be used for creating different incentive structures within these new and emerging organisations.

Treasuries

Web3 networks have the opportunity to create circular economies that generate income for a community treasury. These treasuries could be highly effective for funding impactful initiatives that maintain and improve the ecosystem. Eventually these treasuries might even end up funding global public goods that benefit society more broadly. Web3 treasuries could potentially become much larger and more important than existing nation state and corporate treasuries.

Web3 technology should help with increasing the opportunity for people to participate and influence how these emerging treasuries are governed and managed. Rather than only being able to elect representatives to handle this responsibility, people should be able to directly influence how funding is going to be allocated to generate impact across these ecosystems.