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Vellir #2 → The world in web3

Take a journey through a web3 future...
Vellir #2 → The world in web3

It took me several years to go down the crypto rabbithole, but like many people, once I did, it came all at once.

The first jump was listening to Chris Dixon (a16z) speak to Patrick O'Shaughnessy in April 2021 when something clicked. Web3, DAOs, DeFi and smart contracts all made sense. Read (web1), write (web2) and own (web3) became a powerful anecdote that is part of our core thesis.

The second was Packy McCormick’s Not Boring note on Idea Legos: “composability is just software building on other software”. While also applicable to web2 via APIs, the concept of snapping together different bits of code to build new products, which are each interoperable, provided space for a new level of creativity about what could be built using web3 tools.

It didn’t mean that some of the reservations I had went away, but they were reconcilable. Yes, I still think that some crypto projects have ponzi/pyramid scheme dynamics, and yes, I still think that there are lots of scams around. But crucially, I could see that if enough people used these tools and platforms there would be value created and we would move into a new digital phase built on web3/crypto rails. We are reaching the critical mass moment when it becomes less and less likely that the ponzi dynamics are realised on aggregate, and more and more likely that web3 is accepted by the masses and is a core part of the future.

With a little imagination, I began to see what this future might look like.

A web3 future

Once these building blocks fell into place, the possibilities for what a crypto enabled digital – and physical –world might look like started to come into view.

So imagine it’s – one? five? ten? – years from now...

My ticket to a football match is an NFT, which I buy via my [Metamask] wallet. Watching the match, I decide to invest in personality of Player X by buying their token $PLYX on [Rally]. I also vote for my player of the match via [Snapshot], and am rewarded with Chelsea tokens $CLSA from the club, which is now run as a DAO. These tokens mean I can vote and influence future player transfers and decisions about whether the manager is doing a good job.

I get a notification later that day that as I own both the NFT for the game and $CLSA tokens, I can access a community space for fans [RareCircles]. And given I own a certain amount of $PLYX, I also get to ask a question directly of the player. I am an owner of a number of other creators/celebrities tokens, each of which provide different benefits – from access to communities, to tickets, to personal coaching sessions, to merchandise, etc.

On my way home from the game I listen to music and play a game on my phone. My internet connection is via a decentralised wifi network [Helium]. I spend time in a metaverse [Decentraland] and the NFT ticket I bought earlier in the day allows me to enter the Chelsea arena, where I can compete against other fans in a bespoke Fifa match. While here, I also stream music, which others in the arena can also listen into. It’s a playlist i’ve made on [Audius] and I receive $AUDIO when it’s used by others, with the artists also gaining tokens directly. I purposefully added a particular song to the playlist, which I own as an NFT, and means I co-own and receive royalties alongside the artist [Royal].

Rather than go to twitter or another platform, my digital homepage is now [Gallery]. It curates what I do, see and engage with. Alongside my wallet, this provides my public facing digital identity. I have configured it so that it shows that i’ve been to watch the match, the communities i’m part of, which subscriptions I have, and keeps a running score of whether i’m carbon neutral (more on which later).

My information feed comes from a decentralised social media site [gm.xyz], which could be embedded into my Gallery homepage. By uploading content to the site I gain $GM tokens proportionate to the number of views or engagements there is with the content. This means that I share in the advertising revenue that the platform receives. The chat function is gated, so that I can choose to speak with people that I share values or interests with – for instance, groups based on NFT ownership [Playground]. I also own the data that is captured by this and other similar sites, so I can decide whether I want to be part of polling or allow my data to be used for cohort/marketing analysis through providing permissions via my wallet (more on which below), for which I would then be rewarded automatically. And given I own my data, I can quickly switch between social media providers or interfaces – moving my posts, followers and data with me. Moderation on the site is managed by consensus via a network (or networks), rather than a central authority.

When I look at a news article, I am able to track the origins of text or video content as each is stored on chain, giving me confidence that it is unaltered and is not fake or disinformation.

Linked to my wallet will be a wide array of information, all stored on chain, which I can give permission to access. This portable digital identity could include my:

  • driving licence;
  • health data;
  • home ownership deeds;
  • university records; and
  • NFT ownership.

If I need to borrow money to refurbish my house, I give a lending protocol [Blockfi, Compound, Aave] access to the elements of this data that it needs, including assets (digital and physical), home ownership and employment status, and it provides the funds immediately to my wallet on the basis of a personalised interest rate derived from a risk score based on my information. I would find a builder through an online marketplace, where a smart contract would be created; money would be sent directly from the lending protocol to be held by the smart contract, and released to the builder automatically when milestones on the build had been met; and any disputes would be resolved by a community of experts via [Aragon Court], incentivised through tokens. I would also take out home insurance (or any other kind of insurance) from a protocol [Nexus Mutual].

But there will also be more proactive uses for this data too. For instance, automated analysis could show that I have a particular blood type and am in the age bracket needed for a clinical trial and ask me to participate. By participating, perhaps even just through offering my anonymised health data, I would be rewarded with $HLTH tokens. My smart watch would also track exercise data, which would be added to my health records on chain, and also earn me $HLTH tokens – which might give health insurance discounts, access to spas or an NFT that provided some status about my level of fitness when milestones were reached. My $HLTH level could be part of what I signal on my Gallery page.

I would also have a number of other opportunities (h/t Collab Currency) to earn from crypto rails:

  • play to earn → gaming economies enable ownership, including of currencies, which are exchangeable [Axie];
  • create to earn → via new music, publishing, art platforms, I can create content and earn via primary and secondary sales [Audius, sound.xyz, Mirror, SuperRare];
  • learn to earn → learn to use new protocols, networks or anything else, and be rewarded by them for doing so [Rabbithole, 1729] and what you do is added to your on-chain CV/resume as a digital credential;
  • participate to earn → in voting, or a clinical trial, or anything else;
  • judge to earn → I could earn by helping to adjudicate where I have expertise and where smart contracts need human involvement for dispute resolution [Aragon Court], or by providing my view/forecast on a particular issue [Upshot]; and
  • move to earn → by gaining tokens for walking or running, linked to NFT ownership [STEPN].

Those tokens could be exchanged, invested or redeemed with participating retailers. This would also be true for any purchases that I make - where I would receive reward tokens (like points), which I could automate to be exchanged, invested or redeemed [Life]. For instance, I might get an NFT if I bought a particular pair of trainers, which if I was also part of a particular community might give me access to an event or the opportunity to purchase other limited products; or get $DSNY tokens for watching a Disney movie and supporting the brand.

My employment would be governed by a smart contract. Within this contract, I would be paid in a token of my choice [OnJuno] and could pre-programme or ‘stream’ some of this income to pay taxes and my mortgage, be invested, go to charities and so on. Some of these actions would be contingent on others – for instance, I would only invest X if my bonus was > Y Eth or £Y; or if my income from $AUDIO and $HLTH were > Z Eth or £Z [SuperFluid]. The smart contact could be set up to pay out on a daily rather than monthly basis, and could have incentives built in - for instance, pay could respond dynamically to my performance, hours worked or other criteria, or be proportional to my level of skill/experience, which would be captured by my digital credentials or tools like Rabbithole (as above).

My company would also be setup in part as a DAO (now legally recognised) rather than an LLC. There would remain some centralisation of decision making on core issues, but others would be delegated to the DAO structure, and as an employee I would have the right to vote on certain issues about the direction of the company. I would also own and accrue tokens in the company through vesting, much like I might accrue equity today. As the company increases in value, so would the tokens. The company produces physical goods, and therefore has labour and capital input costs. The information, inventory and financial flows that constitute the main elements of the supply chain process are managed on chain, providing a transparent and efficient system. The company earns interest on its balance sheet through Defi protocols [Meow].

My wallet will also integrate or connect with wider communities [Backdrop]. If I was a member of a gaming, investment, social or media community, all run as DAOs, I would gain access – perhaps to spaces for discussion, events or proprietary information. I would be rewarded with tokens for participating in these communities – whether offering ideas, writing code or providing other services. Membership of these communities would therefore mean having ownership in them and provide governance rights, enabling me to actively vote on decisions about the organisations.  These decisions could be based on quadratic voting, which could take us closer to a system where the weight of your vote is proportional to the amount that you care about the issue.

These governance systems would also extend to politics and public policy decision making. At the local level, I would be able to vote on issues in my area on chain, with direct democracy far more commonplace on issues that matter to local communities. The local council might have a scheme where I could propose a project to regenerate my local park, use on chain systems to crowdfund for it [Mirror], with a voting system linked to where I live and how often I use the park. If the vote passed, the project would automatically gain match funding from the council via the smart contract. At a national level, I would no longer delegate my vote on an issue to my local MP – representative democracy based on geography – but to the person that I thought had the most expertise on a particular issue, all handled on chain.

I might decide that I want all the data about what I do and how I live to be compiled and an assessment made on how much carbon I emit: this could take anonymised data from spending, travel, energy use, consumption patterns, and so on, and spit out a sophisticated estimate of my carbon footprint (as many web2 platforms already do in a relatively simplistic way e.g. Wren). I could subsequently use income streaming (see above) to offset this carbon, giving me confidence I was acting in a climate neutral way, and given an automated tax break for doing so.

At a macro level, much of this data would also be appropriately captured to inform particular decisions. For instance, prices would be monitored in detail and central banks would respond more sensitively to price changes via CBDCs, including by using negative rates during downturns.

Much of this would be taking place without me knowing that crypto infrastructure was being used. I would still spend money through an app on my phone; listen to music via a steaming service; get paid electronically into an account; and have a social media presence. But these pieces would now be tied together seamlessly, as interconnecting building blocks that make up my digital identity and affect what I do in the physical world.

This picture is far from exhaustive, or especially creative – the majority of these applications are already under development. But by putting them together it is possible to see how the web3 stack will start to penetrate into large parts of modern life.

Is this really a better future?

But would this world be any better than today? There are reasons to be cautious - whether related to security, energy use, regulatory concerns, privacy, inequality or user experience (on which we’ll talk more about in future posts). But I think there are three reasons to think this system could be beneficial: efficiency, incentives and inclusivity.

  1. Efficiency: These systems would in many cases be automated through smart contracts and remove many frictions from how existing markets operate, not least related to financial services and payments – removing fees and intermediaries from numerous processes.
  2. Incentives: Protocols and programmability can help to incentivise behaviour to reduce negative externalities and promote positive ones. For instance, as above, that could mean the government offering rewards if you can prove on chain you or your business is carbon neutral, perhaps through a smart contract that links to your tax payments.
  3. Inclusivity: Many of the protocols that I use would reward me for doing so, likely through tokens. This would mean I would become an asset owner and a participant in the system, rather than just a user. This would fundamentally shift the economic balance between labour vs capital and include many more people into the upside of the economic and social structures in which they live.

Taken together, these factors  create an opportunity to improve how many services and processes work. But care and thought will be needed to overcome the challenges that are inherit within any new system or infrastructure. Ultimately, mass adoption will only happen if people want to use these products and services – they must make things better. And I think in many cases, they can. Project Vellir is about making this happen.

In future posts, we’ll take a deeper look at a number of the themes, sectors and companies discussed in this post and explore how web3 is changing the world and more importantly, how to be part of it.