The Importance of WEB3 Ecosystems, Decentralized Markets and DAOs

As the web3 space develops and continues to undergo rapid transformation, clearly awareness of blockchain and web3 in general is growing. Often the attention drawn to web3 space is riddled with information about dishonest participants, market manipulation, exploits, vulnerabilities, rug pulls, etc.. More and more we hear the mainstream media charring the crypto markets for the events that transpire causing market upheavals. Though let us revisit a bit of the history of how traditional financial markets developed and events that transformed them. Many forget or simply don’t know the history surrounding the markets we take for granted today, which have a tumultuous past, with many black swan events that threatened the economic, fiscal and structural well being of countries, the world and society as a whole.

Greed, opportunism and authoritarian capitalism are at the core of what we call financial markets today. We easily forget or simply skirt the history of how these markets were forged, here are a few reminders;

List of economic crises — Wikipedia (what history tells us!)

When reviewing this list, it clearly becomes evident that it took several hundred years for efficient markets to develop that had sufficient resilience and regulation to prevent collapse of economies and financial systems, even then many countries’ economies failed in the 20th century. Overall we still saw markets grow and develop dramatically over the past 100 years, as both qualitative and quantitative effects of rapidly expanding GDPs world wide and growth in consumption, continued to spur markets and economies, ultimately creating the markets we know today. Over time the underlying market fundamentals eroded due to creative finance, financial engineering, derivatives, overproduction, not my problem mentality and governments’ intervening with quantitative easing through money supply intervention and other contributing factors.

Over the last 70 years we saw markets grow proportionally to global money supply, which greatly outpaced consumer demand in the last 20 years. Currently our world economies overproduce almost 28% more goods, products and services than can actually be consumed or used. This is caused by relentless pursuits for growth and profits, which heavily rely on offshore suppliers, offshore industry, third party services, supply chain economics, custodians, lenders, market makers, traders and financiers, all interested to support continuous overproduction and oversupply, sustain inflationary growth in order for the select few to capture vast wealth and influence.

Market participants can no longer use demand and supply curves as a long term guideline for markets predictive analytics and statistics. Today producers, employers, employees, domestic and global economies find themselves at the mercy of governments, the establishment and special interest groups that dictate and control fiscal policy in turn driving GDP growth and job creation through means of stimulus, subsidies and irresponsible fiscal policies aimed at sustaining over production at all cost.

Why are market corrections a necessity? Any free market requires multiple correction points in order to adjust for currency values, imperfect competition, imperfect supply and imperfect demand, but this is mostly avoided in our modern markets through stimulus and other interventive measures, driven by short term fiscal policy, short sighted regulatory measures and of course the all encompassing pursuit of greed. This in turn leads to blind markets, meaning markets which are no longer driven by market forces, markets which no longer strive to achieve perfect competition.. In other words unavoidable disaster, meaning market collapse becomes imminent over time due to violation and manipulation of market mechanics.

So, now that we covered some of the history and current state of our traditional markets, we are ready to address the “Importance of Web3 Ecosystems”. *Web3’s primary aim is to remove the middleman. It’s a simple goal with massive implications for every aspect of how modern day markets may develop in the near future. The middleman is replaced by dApps which run on peer-to-peer networks, such as blockchains, and use code-based smart contracts to facilitate agreements between parties without the need for pre-established trust. In theory, these apps wouldn’t be owned by any single person or company. So, the practical implications of Web3 technology and creation of decentralized markets, is that markets would tend to seek to achieve a more perfect competition curve, while becoming far more efficient in terms of cost of access, cost of liquidity, returns on capital and over time reduce the ability of special interest groups, governments and multinational behemoths to influence and intervene in the markets.

This brings us to the efficacy and efficiency of “Decentralized Markets” as it pertains to free market forces, impact on future GDPs, impact demand & supply curves, improvements in supply chain efficiency, productivity, while curbing inflationary tendencies, reducing intervention and offering to all participants equal rights in terms of access, allowing anyone to derive a direct benefit.

While within centralized markets the presence of middlemen, government intervention and gatekeepers restricting or limiting access for certain participants means that the artificial boundaries creating inequality and market inefficiency continue to grow, while up to 40% of the world still lives below the World Bank poverty line benchmark of roughly $3 per day.

This brings us to market participation through emerging Decentralized Autonomous Organizations “DAOs”. DAOs can be viewed as the new age transformation of the traditional company structure. While the idea of decentralized organizations isn’t entirely new, the use of smart contracts to automate working mechanisms and functionalities is what makes the DAO a useful and interesting tool.

DAOs envisage a group organization owned and run by its members, which provides a voice to all members and ability to delegate their vote in representative form of governance which is fully transparent thanks to the blockchain. DAOs are rapidly growing in popularity with many new organizations completely transitioning to on-chain DAOs, thereby replacing traditional business entities, which are expensive to create, own and operate, while not offering the transparency, efficiency, immutability or the fluid governance that are provided by DAOs. Overtime we see DAOs as the dominant form of collective governance & regulation for decentralized markets, wealth creation, capital distribution and barrier free market participation within the web3 landscape.

In conclusion, this article is intended to briefly address topics that we often encounter and to also provide others new to web3 space a brief overview. Of course, each of the subjects raised here are very extensive, and should be further explored by readers. Our goal is to briefly shed some light on these topics and remind everyone of the economic horizon shift that has already begun globally, which we believe will continue to speed the shift to web3 and propel the shift to decentralized free market economies.

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