The Pandemic, Web 3 and a Decentralized FutureBy Juan Montoya | Fri, 07/02/2021 - 13:03
There can be no doubt that we live in extraordinary times. This is as evident in the many advancements that continuously transform our lives as it is in the magnitude of the global challenges we face, many of which are brought about by this same evolution of our society and lifestyle. At no time has this contrast been more apparent than today, outlined in every way by a pandemic that continues to reshape our world.
On the one hand, the pandemic itself, the spread of which is aided by population and urbanization growth and globalization, has sent 22 million more people in our region into poverty, 8 million of them into extreme poverty, in 2020 alone. To put this into perspective, the UN estimates that 15 years of economic progress were wiped out in about a year, a precarious situation presenting the region and its leaders with unprecedented challenges going forward.
In contrast, technological advances taking shape over the last decade, particularly the internet and mobile technologies, have allowed sectors of our economies to remain vibrant and even experience exponential growth during the same time frame. For those on the right side of the digital divide, these technologies allowed them to remain connected, work productively and enjoy continued access to education. And while connectivity and access increased:
- 40 million people in the region became financially included between May and October 2020
- 13 million made their first online transaction ever in 2020
- E-commerce retail grew in the region by 37 percent
The unprecedented wealth generated in technology sectors will mainly benefit the owners and shareholders of the centralized platforms that house and facilitate the commerce and entertainment we have come to depend on.
As we grapple with the lasting effects of this crisis and the steep road we face to overcome it, it is important to consider the realm in which some of this plays out and what this could mean for the recovery.
This realm, of course, is the internet. Arguably, at or near the top of the list when it comes to transformative inventions, it’s hard to argue that increasing access to it should not be among the top priorities of any modern economy. But as important as it has proven to simply enable people to access and consume information and transact online, the next phase of the internet, known to many as the “Decentralized Web” or simply “Web 3,” holds the promise to be a key enabler for a quicker and farther-reaching recovery.
To understand this, it’s useful to consider how the internet has evolved from its early days when its basic functionality was to share static content (Web 1) to its current state in which users can do much more, including transacting online, creating their own content and collaborating with each other (Web 2). This interaction comes at a price though: the relinquishing of our personal data and content to the platforms that enable that interaction. Economically speaking, these centralized platforms are the real winners as they capture and monetize data, using it to further strengthen their own positions in the marketplace. In a very real sense, their users work for them. That is, with every click, like and share, with every contribution of original content, we are helping these platforms grow and getting very little, at least economically speaking, in return.
The Decentralized Web, however, completely changes the paradigm of how users and online platforms interact. A few examples include:
- Decentralized Finance (DeFi), a combination of decentralized applications, cryptocurrencies and smart contracts that can essentially put any financial service at anyone’s fingertips, which I discussed in a prior article.
- Economic models revolving around Non-fungible Tokens (NFTs), which essentially allow the creation of unique digital assets, which can then be traded and monetized. This is the world in which original content can be monetized by its creators across decentralized platforms, digital art and collectibles can be offered and sold by artists across the world and entire virtual worlds, or metaverses, exist, complete with virtual real estate and NFT virtual creatures.
- Decentralized Autonomous Organizations (DAOs), are web entities collectively owned and managed by their members, providing a transparent governance structure for participants around the world to collaborate and invest around a shared business or purpose.
Through the development of decentralized platforms and concepts like those mentioned above, users can not only collaborate, but also participate economically and in the governance of the platforms themselves, completely transforming the prevailing Web 2 model and creating entirely new economic opportunities. And although it is true that the decentralized web is in its infancy, I would argue that understanding and leveraging the concepts, structures and technologies underpinning it represents an amazing opportunity for Latin American entrepreneurs and governments as they create the new businesses and frameworks that will help the region recover.