To-Do List for Web 3 and Metaverse Transformers

What blockchain and Metaverse enthusiasts need to know to prevent institutions and governments from closing their windows of innovation.

With every major technological revolution, zealots have come to believe that their innovations will not only generate material wealth, but fundamentally restructure human relationships by transcending old social and political rules. For example, the Industrial Revolution gave birth to a range of ideologies, from Marxism to laissez-faire capitalism, that predicted the inevitable replacement of traditional politics by a perfectly functioning market or a fully empowered and enlightened proletariat.

In the early internet age, equally radical and visionary proclaimed that the digital web would usher in an era without politics. Silicon Valley utopians who built the Web 1 (the first generation of web technology and business, culminating in the dot-com era) believed that eliminating transaction costs would help create a global economic and socio-political order that would integrate nearly every possible social interaction All are marketized. The logic of the time was embodied in the slogan “everything is finally commoditized.” This means that things will be traded on a completely free market until every resource falls into the hands of the owner who can make the best use of it, a narrative derived from the Coase theorem, named after Nobel Prize-winning economist Rhone Named after Ronald Harry Coase.

559ebb4592094a2cad06aa5655510a2b.png

This vision of “the best of all possible worlds” has influenced traditional politics as much as Marxism or early free-market fundamentalism. It also crashes. Network effects lead to self-reinforcing corporate power; early leaders gain a lasting advantage in the market, then by locking in favorable technical standards and regulatory frameworks, economic power is transformed into a durable commercial moat. Kosutopia morphed into something more like plutocratic rule, which brought us the tech shock of the 2020s—a global anti-tech movement led by many political actors that the internet age should have been abandoned.

The story sounds familiar to Karl Polanyi, the Vienna-based economic sociologist who coined the concept of a “dual movement” in which efforts to separate the economy and markets from society are doomed to fail. Polanyi captures the technology-driven disruptive dynamics that fuel a backlash against anti-tech as society begins to reassert market interests.

“If anything, Web 3 visionaries are more concerned with political and social disruption than their predecessors.”

Today, we may be standing on the precipice of another technological revolution powered by Web 3’s cryptographic protocols.

The term Web 3 is currently used to refer to a broad mix of technology and business, but its essence is to disrupt the entrenched power of existing financial, governance and corporate institutions by enabling cryptocurrencies and decentralizing decision-making – for some Said to do so in a three-dimensional immersive environment known as the Metaverse. As before, the greatest zealots call Web 3 a force that will finally break the iron grip of politics and existing social structures through radical digitization, decentralization, and democratization, replacing governance with consensus, replacing governance with Centralized Autonomous Organizations (DAOs) replace formal organizations.

The radical marketers of Web 1 didn’t spend much time thinking about what representation of value (i.e. money) could be used to name and settle transactions in their “Coase theorem heaven”. Web 3 first hits directly at one of the most central elements of being a sovereign political entity: the control of money.

It is no coincidence that DAOs, the Metaverse, and other Web 3 concepts rely on the use of cryptocurrencies. But not because cryptocurrencies are inherently essential—fiat currencies in digital form function just as well in immersive 3D computing environments as cryptocurrencies. This is because Web 3 is not just a new set of technologies or business models, or that blockchain-based finance is more efficient or convenient (in fact, the opposite is true). Crypto and blockchain are at the core because they represent a clear agenda to bypass and undermine central authority, be it a formal governance body, traditional corporations or central banks.

Advocates of Web 3 have a point when they say these traditional institutions have become rigid, inefficient, expensive, inadequate to represent different human interests, and sometimes just corrupt. But it’s one thing to compete with the traditional institutions in the market, it’s another to try to ignore them and end up making them irrelevant.

That’s what much of the talk of Web 3 says, and like previous technological revolutions, it ends up falling into Polanyi’s “dual movement.”

Karl+Polanyi_+Double+Movement.jpeg

There are two reasons:

First, this is a simple political reality. Social movements, including those based on revolutionary technologies, did not start from scratch. When cars first started on the road, they had to obey laws designed for horses. Infrastructure and regulations must evolve, but they evolve incrementally through negotiations, not overnight with new indisputable advantages.

Banks, corporations, and bureaucracies will not simply back down and allow themselves to be replaced by distributed ledger technology and DAOs, incumbents will resist and ultimately negotiate a mix of old and new.

Web 3 poses an existential threat to incumbents that are purely middlemen charging rent, adding no meaningful value, and creating friction in the marketplace. Everyone encounters these incumbents and wonders why they exist. For example, when you’re buying a home, think about title insurance companies and escrow services, or that some states in the US require manufacturers to only sell cars through brick-and-mortar dealerships. Web 3 enthusiasts see the potential to replace these middlemen with self-enforcing “smart” contracts that execute software code when a precisely defined set of parameters are met and ensure that the distributed ledger maintains an impeccable record. While the incumbents will have a tough fight, Web 3 can reasonably expect to win. Blockchain-based smart contracts can assure you that the person who sells you your home actually has clear title to the home and transfers the title to you at essentially zero cost.

The second category of incumbents does provide real value, but is inefficient, rents exorbitant, and costs more than it should. Many regulatory and legislative bodies fall into this category. Thinking of the US Congress and the major regulators in Washington, D.C., making and enforcing laws is an important enabling function for society – but Web 3 proponents directly capitalize on the ingrained notion that it can certainly improve done efficiently and more equitably.Shouldn’t there be support for creative negotiation between competing interest groups to find consensus on an agreement in a way that is less tortured and painful than seen in democracies?

Web 3 can drive such institutions to become more efficient by limiting rent-seeking behavior and reducing unreasonable costs and profits. Likewise, smart contracts can execute agreements efficiently and without ambiguity.

A bolder assumption would be to be able to suggest common and collective interests to negotiating participants, not just a trade-off between the immediate interests of competing parties. For example, consider forward-looking tax policies that support social cohesion—or investment in future generations or high-risk innovation policies that will benefit companies that have not yet been created. We can’t build an entirely similar future system yet, but the ability to do so consistently has real potential to make meaningful progress in one of the biggest challenges facing democracies — long-term planning.

To be sure, it’s going to be a tough competition as Web 3 evolves and these agencies think about how to adapt. This is a good thing for society, the simplest example being most of the wallets we currently use. For example, whether or not blockchain-based payment systems replace credit card networks, they will almost certainly reduce the huge fees that networks have been charging (and maintaining) for decades.

The third category of fundamental institutions is conceptually irreplaceable, even for the most advanced decentralized, consensus-driven alternatives. The courts are a clear example. DAO enthusiasts will dispute this claim, but they have yet to explain how smart contracts can address unexpected contingencies in the execution of complex agreements. Incomplete contracts—it is absolutely impossible to foresee all the potential events that complicate the original terms—are a problem, made worse by the human nature of what Oliver Williamson calls “shrewd opportunism.”

It’s not just that contracts can’t account for unforeseen contingencies; it’s humans who find ways to use this uncertainty to their advantage. 9/11 is a tragic example. There is a multibillion-dollar insurance disagreement over whether it constitutes one event or two. If insurers and their customers were smarter, the failure to define such contingencies (and others like them) ahead of time would be more than a failure of the imagination. How will smart contracts solve this problem? Auto-enforcing protocols is the equivalent of software crashing when the world is outside the parameters the code was designed to operate on.

So these institutions are almost certain to persist. Their continued presence and influence will require Web 3 organizations and advocates to engage constructively with them to achieve their goals.

The second fundamental reason why “dual movements” will shape Web 3 deployments is that every technological revolution encounters a crisis of public trust. This could be a market panic, a major security breach in a key blockchain protocol, or even a catastrophic crypto-funded terrorist attack.

Markets alone cannot adequately respond to a crisis of confidence. Only those institutions that are outside the market and whose purpose is greater than profit—such as central banks and treasuries—can intervene to prevent a true market collapse, just as only government-sanctioned law enforcement and security services can crack down on certain foreign or domestic actor. In fact, relying on some version of crowd wisdom here is really just a euphemism for policing justice.

Trust is inherently a non-market (or pre-market) phenomenon. As we transition to the new Internet architecture, trust will inevitably be severely tested in multiple crises. In those moments, non-market actors—elected officials, empowered regulators, and public opinion as legitimacy—take the extraordinary action necessary to restore order and begin efforts to rebuild the trust of market participants.

There is also a political reality different from this moment in history, but still crucial. Crypto enthusiasts point out that many of the ills of the modern U.S. financial system are a function of corporate concentration in the financial sector, with a few very large institutions controlling the majority of total assets. But the financial industry is not as concentrated at the top as the tech industry is. If Web 3 becomes associated with Big Tech in the minds of the public and regulators (rightly or wrongly), the argument for Web 3 as a decentralizing and democratizing force in the digital world will collapse.

akrales_170907_1974_0026_02.1504880732.jpg

Web 3 deserves to be explored for its potential, and we attempt to characterize the important issues that may “short-circuit” this change and develop a strategic approach that enables extensive experimentation. In that spirit, here’s a mindset and near-term practical To-Do List.

This mindset requires embracing radical change in two forms. The first thing to remember is that Polanyi’s dual movement is the basic fact that non-market forces are also shaping the market; they can do it well or badly, but they won’t go unnoticed. Web 3 enthusiasts should keep this in mind and use non-market influence to target a competitive and experimental playing field. The biggest risk to Web 3 is not really the governments and regulators that incumbents use to avoid competition from looking or acting like their competitors.

The second proposition is that trust is always a psychosocial phenomenon, not a purely material phenomenon. The socio-psychological component that needs trust most at times of greatest material economic and market pressure, this pressure occurs repeatedly and inevitably. Radical narratives that claim revolution and “this changed everything” don’t really serve Web 3 goals. The most effective revolutionaries don’t need to talk like that. When things get ugly, it’s not a good way to build the broader trust base that Web 3 needs.

The point of thorough acceptance is not passivity, but courageous action. The first action to take was simple: drop the ridicule at regulators that are stupid, old, and slow to respond. Instead, respect their mission of risk assessment and balance and make a sincere effort to educate them and their public supporters. Regulators should be considered directors of public company boards – not responsible for technical decisions per se, but for enterprise risk oversight of those decisions. Washington, D.C. didn’t have as many computer scientists infiltrating regulation when it passed Web 1-related laws, and it wasn’t necessary, and today’s blockchain and crypto space isn’t all that different in this regard.

This means that the Web 3 community should use high-quality risk assessment tools to help and support the lay community, which in turn means full transparency of known and unknown risks. For example, crypto’s ability to reduce transaction costs for cross-border payments does (and very importantly) has many benefits. But it also carries foreseeable macroeconomic downside risks, especially for emerging markets, which could experience a more severe liquidity crisis, leading to real macroeconomic pain.

There is very little public talk about this risk and how to mitigate it in the cryptocurrency or decentralized finance community these days. Confronting these risks and dealing with them is an important part of a non-market strategy. Don’t wait for others to build the risk assessment dashboards boards and regulators want – build them yourself.

“Radical slogans proclaiming revolution and ‘this changes everything’ don’t really serve the goals of Web 3, and the most effective revolutionaries don’t need to talk like that.”

And don’t think that more education and understanding of encryption and Web 3 will automatically drive more positive attitudes towards it. Hiring lobbyists and advertising the inherent promise of encryption and Web 3 doesn’t alone change the basic equation. What is needed is a complementary effort to drive more thoughtful policies that reduce risk without stifling innovation.

The second brave action that Web 3 can take is to drastically reduce the negative externalities already associated with it . Crypto enthusiasts believe that coin mining has less of an impact on the climate than is generally believed. The fact remains that institutions of all types are making non-economic decisions to deny or limit their exposure to Bitcoin due to concerns about Bitcoin’s impact on climate change (real, exaggerated or possibly underestimated), similar to citing A notable example is the surge in cybercrime.

Negative external factors may not have a perfect solution, but that’s no excuse to ignore them or imagine them.Acceptance tends to increase as confidence grows that the industry is serious about finding solutions to these problems.Car companies have bought themselves decades of runway to develop electric vehicles on their own schedules, not the ones the government has imposed on them, and through continued proving and continued efforts to educate policy makers, they are finally transitioning to an all-electric fleet. promise.

The third key action is for Web 3 organizations to take the lead on data protection and security in a way that today’s large technology platform companies do not . The rule of thumb for Web 3 might be to think of regulation here as the floor, not the ceiling. The logic is simple: data protection and security concerns in Web 2 social media are likely to multiply in Web 3 immersive environments. What’s more, regulators and many consumers have every reason to believe this will happen, or hesitate to accept the arguments of digital skeptics who claim it will inevitably happen. It’s easy to imagine how the rhetoric of “Surveillance Capitalism” could be reinforced in the virtual world, and it’s already underway.

Consider Section 230 of the Communications Decency Act of 1996, an increasingly controversial driver of the digital economy that places limits on platform liability for user-published and user-generated content. Now, even for today’s platform companies, it’s struggling to maintain a slim grip. The architecture of Web 3 limits the available options for how to develop such regulation: how can user-generated content be held accountable if there is no central authority in law?Does it depend on open source developers who build and maintain the codebase?

DAO proponents see this as a positive, but they cannot ignore the real problems posed by the horrible and harmful content in this codebase. No one now has the right mix of tools—including machine learning systems for content moderation, social norms, sweeping rules, and others—to manage this dilemma, which is the best argument for extensive, radical, and deep experimentation. Ignore or defer attention to this, and sooner or later, non-market forces will close the window on Web 3 development.

Fourth, Web 3 organizations need to focus and consciously apply their technologies to real, high-profile societal problems . These issues often surface in public statements by major crypto players — expanding access to financial services, reducing transaction fees for the most vulnerable (such as those who rely on remittances), creating secure digital voting tools, and more. But preaching value is different from actually proving it, and sustained, robust investment is needed to pilot and scale up these efforts.

The last item on the to-do list is more general, but crucially strategic. Every non-market move considered by Web 3 advocates should pass this simple decision filter: Is it easier or harder for policymakers and regulators to grant permission to experiment? This is where communication is very important. If you claim that your mission is to weaken the U.S. government, the Federal Reserve, Citibank and Goldman Sachs, Meta and Google, you should be able to guess that these institutions will temporarily put aside their differences and then unite against you. If you declare that your mission is to build alternatives that bring the necessary competition to traditional institutions, you are more likely to have a chance of proving that you can.

Case in point: U.S. dollar-backed stablecoins (crypto tokens designed to peg the value of fiat currencies) certainly don’t have to undermine the dollar’s ​​power in international finance — so why would anyone talk about it that way? In fact, the impact on the dollar is more likely to be positive. For example, dollar-pegged stablecoins would make it easier to obtain dollar-denominated assets in areas where demand for these assets is high, such as many emerging markets with poor governance and low confidence in their own currencies, so put it another way.

It sounds less revolutionary and less exciting. But if Web 3 is the real technological and social revolution its advocates claim, it doesn’t need to be so incendiary now. The excitement will come from the innovations themselves, which will be shaped by the incentives of the market. What is needed are parallel non-market efforts to build relationships, understanding and confidence with actors who behave beyond the laws of the economy.

Regulators, policy makers, and the public who support them will inevitably influence the development of Web 3, which is a dual movement. Those who believe in the potential of Web 3, if they accept this fact, and then strive to take urgent action, their Web 3 revolution will be smooth sailing.

Compilation and finishing: Betui Mary Liu

About the Author:

Arik Ben-Zvi: President, CEO and Founder of Breakwater Strategy, a strategic communications and insight agency.

Steven Weber: Partner at Breakwater Strategy, Professor at UC Berkeley Graduate School, 2019-2020 Berggruen Institute Fellow.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/to-do-list-for-web-3-and-metaverse-transformers/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-03-25 23:16
Next 2022-03-25 23:17

Related articles