With the Avalanche Summit kickstarting on March 22, here are some some interesting insights and highlights from one panel — “10 Prophecies for the Web3.0 Age” by macroeconomist Tascha Che and the COO of AVA Labs Kevin Sekniqi. She has written a full article on her 10 points which can be accessed here.
As a major bull on Web3 adoption, Che describes this coming industry as “a revolution in production and distribution of economic value to society.”
But what exactly does she mean? This article will break down and categorise her key points in her panel and work into three main points here:
Every form of asset with a cash flow will have a token representing it and will be on-chain. We see current trends in DeFi where synthetic assets representing stocks are already traded on platforms like Synthetix on Ethereum and Mirror Protocol on the Terra Network.
This happens as liquidity is flowing on-chain to take advantages of projects that have the properties of decentralization.
We can describe liquidity as “eyeballs” of the Web3 ecosystem, and where the eyeballs are, everything else will follow.
Akin to the early 90s-00s when the Internet had its first website, everybody eventually hopped on-board this trend and everybody needed to have a website due to certain superior properties (for example, ease in communication).
In the 2010s as social media erupted, we saw a second example of this happening as more and more users on-boarded onto social media and created accounts and platforms to interact with others online in a meaningful way.
There were certain key advantages that drove people to such an action (such as the ability to share about your life via videos and shorts, or from a business perspective the ability to reach a larger audience). Once these benefits became clear, adoption simply became unstoppable.
The movement of crypto and funds coming in is representative of such a shift: There are clear benefits to the Web3 ecosystem, namely decentralization and transparency. People want open access to new services without being restricted by third parties or even borders. Others may want to just earn a better income and make use of the yields that are present in the ecosystem today.
The idea of liquidity being the “eyeball” is because on-chain liquidity is used to provide many things: For example in DeFi we provide liquidity for tokens on DEXes so it can be traded.
As more and more liquidity has a net inflow on-chain, this could drive and create a virtuous cycle of adoption, similar to the earlier two trends described in the past.
What we see today for example is that the United States has about ~8% of its GDP represented by financial markets and services.
However, financial executives and managers take up 25% of this industry and are the highest paid. In a world where hypertokenization occurs, value could actually be redistributed in a network where there is mass participation and distribution of people (such as those running nodes in blockchains).
2. The rise of a borderless decentralized economy
Due to the properties of Web3, we now have a transparent and decentralized ecosystem where one can access services such as financial services, to rudimentary gaming on blockchain, to our access to NFTs and the Metaverse.
We do not have national borders and economic value that is created in the space can be considered as “global”. One can technically participate in the same on-chain economy whether you are from Singapore, the United States or even London.
One medium of exchange used in this new economy will be “super-currencies”, which can act as the main trading pair for most tokens that will be on-chain, following the first idea of hypertokenization occurring.
A “super-currency” is important to facilitate conversions and trading between different pairs of tokens. In DEXes today that use the AMM (automated market maker system), USDC and USDT are 2 examples of stablecoins that have the potential to be a “super-currency” due to its function across multi-chain ecosystem as a common trading pair.
In other words, USD and its stablecoin variants are a strong candidate to fulfil this role. Other tokens that can provide a function as a medium of exchange and have large liquidity and demand could also be one of them – a base token from a large widely used public blockchain for example.
Other tokens that are not super-currencies are also likely to gain adoption in this hypertokenized scenario. The usage of some of them as payments are also a clear sign: The rise of the SLP token from Axie Infinity being used as payment for taxi drivers from Envirocab are some examples of trends that will snowball and accelerate in the future.
In fact, central banks all over the world have already piloted or are into researching into Central Bank Digital Currencies (CBDC) for the race towards a super-currency in a world where tokens are being created every day.
In fact, current applications on chain and ecosystems could become much more powerful in the 21st century: by becoming important players in this decentralized economy, these ecosystems could rival large nation states of today.
Apps that become cross-chain and have liquidity and usage across multiple chains are likely to be the “MNC” equivalent of what we have today.
Globalization in the past is what Tascha writes as “labor arbitrage”, where companies take advantage of building stuff in low-cost countries and selling them to rich countries.
This causes the benefits and income generated in the less developed countries to have an inherent net outflow, many of which is seized by the entrepreneur.
In today’s world the transfer of the wealth will not go from the poor to the rich, but rather it will flow from those who do not have the knowledge and understanding of the digital world to those that are ahead of the trend and can thrive in the Web3 Age!
3. The importance of investment in the Web3 Age
For the current use cases of crypto today, there is a vast focus on mechanisms such as staking to generate yield.
This occurs in many different mechanics, such as running an AVAX node and staking AVAX to earn rewards, or staking a liquidity pair token and earning yield farming rewards from the latest degen APY farm.
While some might be sceptical of the sustainability of some of these projects, generally the trend is that a new form of income has been created for the current users of the Web3 world. This trend is a net positive and the masses will eventually catch up.
Whereas in the past where income was split into labour (exchange of some form of work or production for money) and capital (using your current wealth to make more wealth in the form of dividends, cash flows, capital yield etc), staking represents both: by encouraging others to grow the network and participate in it (a form of labour), and earn lucrative rewards on top of your initial investment (capital).
As everything becomes tokenized and knowledge and information becomes abundant, the individual can expect many investment opportunities than in the past.
In other words, staking could eventually be a full-time job for those that are savvy and put in the work. The skillset of discerning what is a good and bad investment and taking control of your own portfolio will be increasingly important as a basic life skill.
Tascha emphasizes that this will be as important as certain things such as learning to write, and learning to code etc.
The Avalanche Summit’s Day 1 had already kickstarted with a great panel on general macro trends in Web3 and predictions for the time to come.
At Chain Debrief, we hope to bring about more resources that are largely educational to equip users to develop different skills and perspectives when it comes to the world of investing in crypto.
We hope that this will allow you to take advantage of this clear generational shift and adoption. The wealth transfer and digital revolution is already here — the question is, are you ready for it?
Featured Image Credit: Visa / Chain Debrief