The Future of Web3: Balancing Power and Decentralization
As we rapidly approach the quarter-mark of the 21st century, it is impossible to ignore the profound impact of global digital migration on our lives. Many aspects of life and society are now conducted at least in part – and often entirely – online.
The Proliferation of Web3
With the global average internet penetration standing at approximately 67.5%, digitalization has accelerated rapidly in many regions. The European Union, for instance, boasts a staggering 93.1% of households connected to the internet. This trend shows no signs of slowing down and is instead accelerating toward its next milestone: Web3.
The Uneven Power Balance
While Web3 offers numerous benefits, it also raises significant concerns and unanswered questions – chief among them being the imbalance of power between creators and consumers. Although initially designed to be decentralized, creators are increasingly developing protocols that are often exploitative or manipulative, consisting of pump and dumps. In some cases, these are outright scams and frauds.
The Alarming Statistics
In the United States alone, a staggering $5.6 billion was stolen from investors through cryptocurrency scams in 2023. The concentration of power in the hands of a few creators is becoming a major concern, and the only way to combat this is by redistributing strength back to the many.
Facilitating Decentralized Governance
To facilitate decentralized governance and a safe, equitable transition to Web3, we need tools built for the blockchain that democratize digital society and enable collective decision-making among general populations. This should mirror real-life social behavior and allow communities to thrive.
The Potential of Memecoins
Memecoins, otherwise known as ‘community’ or ‘culture’ coins, present a key tool in achieving this goal. While frequently lacking traditional utility, memecoins are designed exclusively to serve the communities they emerge from. If developed correctly, these community-driven infrastructures can enable decentralized governance and collective decision-making.
The New Stellar Initiative
Recently, the new Stellar initiative has crowdsourced ideas for Web3 innovation. This is a promising development, as it highlights the potential of memecoins in driving positive change in the industry.
The Dark Side of Memecoins
However, memecoins are also susceptible to manipulative pump-and-dump projects in many current forms. Events like this have harmed most coin holders while favoring select and limited insiders who are privy to certain information surrounding the memecoin cycle.
The Unsustainable Power Dynamic
Bad crypto typically has a messianic leader and a flock. Yet, this power dynamic is unsustainable and contradicts why crypto was created in the first place – to give people a voice in governance.
Overcoming Crypto Manipulation
To overcome crypto manipulation from a small group of bad actors, we need to develop memecoins underpinned by community-empowering infrastructures, including decentralized autonomous organizations (DAOs). A DAO is an organizational structure with no central governing body. Combining a DAO with a meme/community coin means that holders of the coin have built-in rights to collectively govern within the remit of the DAO.
The Power of Decentralized Governance
Only people with a stake in the memecoin have such privileges, meaning the holders’ interests are placed firmly in the center of voting and governance systems. The community’s development and growth coin mirrors the community’s development and growth. DAOs are already changing the face of decentralized finance. Uniswap DAO, for instance, has been working toward expanding its $6 billion treasury – a treasury that uses its DAO to vote on what it should do with the capital.
The Potential for Global Breakthrough
Whether it be a small group of African entrepreneurs looking to build a liquidity pool or a group of residents in Ohio raising funds for a school, the power of digitally administered democracy is the global breakthrough that will redefine the current state of crypto and finance. This momentum and support will only continue under US President-elect Donald Trump’s administration.
The Risks of Abuse
Web3 has the potential to transform everyday life and is developing rapidly, but in its current form, it is at risk of abuse by a small number of malicious creators. We must proceed cautiously to protect Web3 and ensure it delivers on the promise of decentralized finance and decentralized governance.
Giving Power Back to the Community
The best option is to take measured steps to develop community-driven infrastructures and systems like community coins. It is time for the industry to give power back to the community.
Conclusion
Zach Burks is a blockchain developer and the CEO of Mintable. Zach collaborated with the Ethereum Foundation on improving ERC-721 and is the author of ERC-2981.
This article is for general information purposes only and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed in this article are those of the author and do not reflect the views of any other individual or organization.
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