The future is quite an intriguing thing. Today’s technologies have already made the fantasies of “ancient” philosophers real, bringing them further than they could ever imagine. The metaverse is one such idea or phenomena. Neal Stephenson introduced the word “Metaverse” in his science-fiction novel “Snow Crash” 30 years ago (1992) to describe a world that people use to escape a dystopian reality, creating digital avatars of themselves and exploring the online world. This is exactly what is happening right now, and this concept has already been taken even further.
The fixed-line internet of the 1990s inspired many of us to purchase a personal computer, and the mobile internet allowed almost everyone to stay continuously connected. The metaverse goes further by placing everyone inside an “embodied,” “virtual,” or “3D” version of the internet on a nearly unending basis. It means we will constantly be “within” the internet, rather than merely having access to it, and within the billions of interconnected computers around us, rather than occasionally reaching for them, and alongside all other users in real-time.
Follow along to reach an understanding of what the metaverse is and where to find it, how big companies may find a new approach to their business, the evolution of video games, the opportunities to invest in new technologies, the future of the internet, and what is a reality nowadays.
While digging into this theme, one may perceive the metaverse as virtual reality. This is a common issue. In truth, virtual reality is merely a way to experience the metaverse. VR devices (like headsets) and VR games come in handy to explore the metaverse, though they aren’t the metaverse itself.
Sometimes the metaverse is described as a user-generated virtual world or virtual world platform, or an online multiplayer video game. This is also not a fully correct notion. We will play games in the metaverse, but those games in the metaverse are not the metaverse itself.
The metaverse is a network of interconnected experiences and applications, devices and products, tools and infrastructure that will surely change us.
You might be a bit confused:
“Alright then. Do you mean the metaverse is everything and nothing, and it’s too early to dive into?”
Don’t worry, we will show examples and explain in detail how it currently looks and where it is expected to reach in the near future. For now, we want you to understand the metaverse as a virtual space, the user of which is not just watching the content but is an actual part of this content, or inside the content, and can be or do anything they want.
…the metaverse as a virtual space, the user of which is not just watching the content but is an actual part of this content, or inside the content, and can be or do anything they want.
One of the Winklevoss brothers, Cameron, called it “Recreation of real-world online.” And the Meta leader, Mark Zuckerberg, sees the metaverse as “a virtual environment where you can be present with people in digital spaces, an embodied Internet that you’re inside of rather than just looking at.” Zuckerberg believes “that this is going to be the successor to the mobile Internet.”
Now for some examples. Let’s dive into the legendary Fortnite from the Epic Games company with over 250 million players, which has already grown from just a funny game-shooter into something phenomenal. Fortnite is developing the ability to offer its users beyond-gaming opportunities. For example, in April 2020, Travis Scott played the game online and brought together 12 million “visitors” all at once! (Video Of The Concert) That’s a safe and impressive way of holding such a huge event with fans being able to join and be in the center of the party from anywhere on the planet . Moreover, a whole sub-economy on Fortnite has emerged where “players” can build (and monetize) their own content. This approach shows the longer-term vision for the game. Its Creative Director, Donald Mustard says: “Fortnite isn’t the metaverse, but nothing is closer to the metaverse today in spirit and it is clear how the “game” might eventually underpin one.”
To sum up, Fortnite combines an online shooter and Battle Royale game, a virtual space to connect in real-time with other users to attend concerts or watch movies, a platform to make money creating own “rooms,” unique items or moves to share with other “players,” and last but not least,, Fortnite brings together multiple closed platforms. Your Counter-Strike gun skin, for example, could also be used to decorate a gun in Fortnite, and it’s even one of the few places where the intellectual properties of Marvel and DC intersect.
One of the Winklevoss brothers, Cameron, called it “Recreation of real-world online.” And the Meta leader, Mark Zuckerberg, sees the metaverse as “a virtual environment where you can be present with people in digital spaces, an embodied Internet that you’re inside of rather than just looking at.” Zuckerberg believes “that this is going to be the successor to the mobile Internet.”
Now for some examples. Let’s dive into the legendary Fortnite from the Epic Games company with over 250 million players, which has already grown from just a funny game-shooter into something phenomenal. Fortnite is developing the ability to offer its users beyond-gaming opportunities. For example, in April 2020, Travis Scott played the game online and brought together 12 million “visitors” all at once! (Video Of The Concert) That’s a safe and impressive way of holding such a huge event with fans being able to join and be in the center of the party from anywhere on the planet . Moreover, a whole sub-economy on Fortnite has emerged where “players” can build (and monetize) their own content. This approach shows the longer-term vision for the game. Its Creative Director, Donald Mustard says: “Fortnite isn’t the metaverse, but nothing is closer to the metaverse today in spirit and it is clear how the “game” might eventually underpin one.”
To sum up, Fortnite combines an online shooter and Battle Royale game, a virtual space to connect in real-time with other users to attend concerts or watch movies, a platform to make money creating own “rooms,” unique items or moves to share with other “players,” and last but not least,, Fortnite brings together multiple closed platforms. Your Counter-Strike gun skin, for example, could also be used to decorate a gun in Fortnite, and it’s even one of the few places where the intellectual properties of Marvel and DC intersect.
Do you think virtual reality will become as valuable as a physical one? The next generation will probably value digital items more than physical things. Of course, it’s currently hard for most people to understand, but let’s jump beyond the boundaries of the human mind and take a look at new investment and development opportunities.
Many people of the older generation have a different way of looking at things. For example, they can’t fully trust digital currency, since it’s crucial for them to feel the physical presence of money. Therefore, kids may often hear from their father something like: “We shouldn’t rely on digital banks since they don’t even have an office – they do not exist in our reality. It would be safer to keep your money under a pillow.”
This point of view is understandable. The human connection to tangible things is still strong. We’re only now beginning to understand the value of digital items, while our kids and grandchildren will value their originality recorded on the blockchain – something that can be shared but can’t be touched, only seen.
If the example of digital banks sounds weird now, try to understand that the AK-47 skin from the CS:GO computer game was sold for $776,000 and, as of today, the most expensive item in the game is the knife “Karambit | Case Hardened,” which has been estimated to be worth around $800,000. Some people already pay high prices for items they would never be able to touch or take for a walk in real life. Same with clothes. Gucci introduced a virtual dress for $10K. Right now, you have an opportunity to buy digital Nike sneakers so your avatar can “wear” them in the metaverse.
Yes! It’s already happening. People buy digital clothes to “wear” on Instagram and will never take them out for dinner. Many companies see a big future in the metaverse. For example, in December 2021, Nike acquired the RTFKT virtual shoe company that makes NFTs and sneakers “for the metaverse,” positioning RTFKT’s lightning bolt-style logo alongside its own iconic Swoosh, Jumpman, and Converse marks.
To remain on the same wavelength, we should all understand what an NFT is and why it’s vital for the metaverse. The digital item and its owner are registered in a smart contract, named NFT (non-fungible token), which we have already discussed in detail *here*. For now, we should recall that an NFT tracks a virtual asset that you own (like a picture, video, wearables, or anything else digital) and records your ownership in the blockchain – the code that can’t be forged, stolen, or hacked. You do own your NFT and can sell it, destroy it, show or rent it. The difference with physical assets is that your virtual item exists on the screen, and you (or better say your Avatar) can use it only in a virtual world.
If we combine NFT, metaverse and cryptocurrency, we get Decentraland, which is a virtual world divided into LAND Parcels of 16×16 meters each (about 17.5 yards). Each parcel is an NFT that can be bought. Why? To create anything you want, just like in the physical world. You may want to build a casino, organize an exhibition of NFT art or install a billboard – anything to attract other players with incentives to gain more income. You may be curious about the platform’s rewards? When entering the game, you may soon come across the local Marketplace where a nice robot will explain how everything works in their world:
“There is a thriving economy behind Decentraland and every day people buy and sell unique items. Items like Land parcels, wearable items, and reserved names. As more trading happens on the platform, it grows and moves faster. All sales, bids and other operations are transactions on the blockchain. Like all transactions, they require a small gas fee that is paid to the network of miners. The Marketplace charges a small fee over all transactions. This fee doesn’t go into anyone’s pocket. Instead, it gets burned like fuel to drive the platform’s development. Happy shopping!”
While exploring the Marketplace, you will find real-time stats showing the items on sale, their highest/lowest price, sales volume, and currency rates (Decentraland’s cryptocurrency MANA to EUR, USD, ETH and BTC).
The current picture of Decentraland (as well as its competitors) is primitive, but here we should cast our minds back to the beginning of the internet. The era of Web1.0 was the entire internet looking like Wikipedia, which lasted until 2004. There were no opportunities to buy anything, no social networks, and no familiar (normal) video content. From 2004 until now is the era of Web2.0. Socials (like Facebook and Instagram) and smartphones gather our data and sell advertisements while allowing everybody to create their own content. The coming Web3.0 will decentralize everything: financials with the help of cryptocurrencies, ownership – with NFTs and deals – with smart contracts. If you become a millionaire in “games” like Decentraland, you become a millionaire in real life as well, and so far we’ve only discussed projects that already exist. Many more will appear going forward.
In October 2021, CEO of Facebook, Mark Zuckerberg, renamed his company Meta and showcased its prospects. Just think about it. Facebook, with a market cap of over $900 billion and 3Q2021 revenue of almost $800 million, decided to change its name. Why does a successful company need a rebrand? Because they have decided to shift away from social media platforms, choosing instead the direction of the metaverse because “there is always more to build.” “Meta” translates to “beyond” in Greek. And the Meta company believes that “the defining quality of the metaverse will be a feeling of presence” with its users being able to socialize, work, learn, play, shop and create “like you are right there with another person or in another place.” Mark Zuckerberg, CEO of Meta, says: “I think we’re basically moving from being Facebook first as a company to being metaverse first.” Thus, “Meta” represents all his intentions, beliefs and plans for the future of the company and our society.
You may want to ask, “what’s the difference in practice?”
Well, you’d be right to be curious. Time for an example.
Many people describe commuting to the office as the most awful thing in their work life. What would you suggest to them? Stay on remote work forever? Well, OK. But how do we treat those who feel the need to have real meetings with their colleagues? Don’t worry. Facebook, sorry, Meta, has already shown the way. Zuckerberg intends to replace video chats with virtual meetings of the participants’ holograms, where you can even change the way you look however you see fit.
Let’s imagine you want to hang out with your friends after work (or during a break) but they’re far away on the opposite edge of the metropolis, or in a different city, or maybe country, or planet. Why not? We’re developing our imagination. Wherever they are, Meta can provide you with virtual space to play a game of tennis. Meta introduces more ways to experience a life of fitness. Jump into the metaverse and play basketball or try to “visit” a group cycling class. Maybe you want to train your boxing skills but your opponent is busy? Go ahead and show this AI what you’re made of! The opportunities are endless.
Eventually, we’ll be connected to the metaverse all the time, extending our senses of sight, sound, and touch, blending digital items into the physical world, or popping into fully immersive 3D environments whenever we want. This family of technologies is known collectively as eXtended Reality (XR). Follow us (Instagram, Twitter, Telegram) to satisfy your curiosity about related topics like Open Source and Web 3, which will appear soon!
Things we could barely even begin to dream about only a few years ago are now coming true, but first, all these currently existing metaverse platforms must face some challenges before they become worthy of the name. You may be able to help them, for example, by participating in code development. Decentraland, as well as most other similar platforms, is an open-source project, supported (and governed) by its users. We will reveal the power of “open source” in one of our next topics, so please let us know as soon as possible if this is something you would like to learn about.
The realistic worlds created by VR technologies provide a greater potential for overuse. Therefore, one of the metaverse problems might be people massively escaping into virtual reality, which may lead to self-isolation from society. As the futurist Ray Kurzweil predicted: “We will all become virtual humans.”
Virtual reality also allows users to create avatars of various forms. On the one hand, it’s a way to express yourself, on the other, avatars may affect self-awareness in the physical world. The influence of avatars on identity will one day almost certainly be studied but for now, we can only guess where it’s going to lead.
Another issue is that there is definitely a lack of tactual sensation in virtual reality. The good news, however, is that Teslasuit allows you to feel virtual objects. The bad news is that it costs about $20-30K, which might be reasonable for training the rescue team but too expensive just to “play games.” However, the first mobile phone introduced to the market in 1983 by Motorola measured about 30 cm (11 inches) and weighed about 1 kg (2.5 pounds). With its peak battery capacity of 30-minute talk time, the phone cost $3,995. Today, after almost 40 years, everyone has a phone and, usually, they cost way less. The high price of the tools (like Teslasuit) that will soon be common in the metaverse confirms that everything is only just beginning.
Next, what do you think about court practice in VR? How can we organize it? Nobody yet knows. For example, two teenagers in Russia were judged for blowing up the Department of Home Affairs, recreated in Minecraft. They were brought into a real court for their virtual actions that didn’t harm anyone. We can say they were judged for form, not the content. So, was this the right action from local authorities, or a silly overreaction?
The UAE Minister of State for Artificial Intelligence believes that new laws should be created to prevent people from committing crimes. The minister also claims that “the realistic nature of any metaverse that does come to fruition could allow people to be terrorized in ways that aren’t currently possible.” As a result, the minister proposed setting international safety standards for the metaverse that people must adhere to regardless of where they live.
Users also report cases of assault and sexual violation of their digital avatars. This is stoking consternation amongst legal experts confronted by new-age crimes that are not covered under existing laws. Most of the metaverse platforms allow you to mute other users and set personal boundaries like a shield on the avatar. However, this way, those committing crimes remain unpunished, while the users who faced the violation in the metaverse have to limit their avatars to ensure their safety.
Moreover, who is going to control the court system in VR? Do we need a new Department of Metaverse Affairs? There are many questions relating to this issue and, for now, they don’t interfere with the development of the metaverse. However, as soon as a virtual citizen commits a crime, we would need to find the answer.
Until that moment we have more urgent challenges. The metaverse would require decentralized data storage, which requires huge cloud resources. The technology works only when tens and hundreds of millions of users are involved in the process, which will require enormous server resources. Each user needs to be provided with a stable amount of frames that can be repainted in one second (FPS) from any point in the world, otherwise, the picture will be disturbed and won’t be perceived accurately by the human eye. If we’re discussing how people will “live” in VR, then it’s a crucial moment. We also need to support a constant transition from one platform to another (relating to the multiverse). This process requires an open code of each platform constantly interacting with each other. By the way, this will reduce the risk of monopolists, since it hardly seems realistic to create such a system alone. So, open-source is a solution, though such huge projects have so far never existed.
The last issue is quite an unlikely outcome, but still, what is going to happen if electricity disappears? Will communication/work/study/construction/Life in the metaverse be abruptly interrupted?
It can be easy to get carried away with the idea of the metaverse, but the reality is it hasn’t been built yet. The full vision of the metaverse is decades away. It requires extraordinary technical advancements (we are far from being able to produce shared, persistent simulations for millions of users synchronized in real-time), and perhaps regulatory involvement too. In addition, it will require overhauls in business policies and changes to consumer behavior.
Besides, even the most detailed understanding of electricity and mobile internet (at the dawn of their time) didn’t make clear which specific secondary innovations and inventions they required to achieve mass adoption and change the world. And how they would change the world was almost entirely unknown. We don’t know exactly where the metaverse and its related technologies will lead and how it will impact our society. Many companies are trying to create the best virtual environment, though it’s still important to keep the metaverse decentralized and not to get surrounded by continuous advertisements at every corner and uncontrolled transfer of personal data to the managing companies.
If you followed us carefully, you might have noticed that there are many opportunities with the metaverse, and alsomany issues. Once again, it’s only the beginning. People are often afraid of breakthrough technologies. However, it’s important to understand that VR, NFT and Metaverse are just tools. We shouldn’t be scared of loading into the Matrix, we should fear the lack of meaning.
Since we are on the verge of the future and have already become familiar with its “tools,” let’s find an approach to earn using this knowledge! We’ll share ideas giving you the chance to increase your income and support the development of new technologies.
The metaverse market is poised for drastic and swift growth, driven by increased adoption from various companies. The market is hard to accurately predict in terms of numbers, except all analysts agree it will grow. For example, the Artillery Intelligence company report states that corporate VR market size was expected to surge more than fivefold from $829 million in 2018 to $4.3 billion in 2023. However, in 2021, experts from the same company released an updated analysis, according to which the market size already stood at $4.48 billion in 2020 and is expected to grow to over $22 billion by 2025. According to another company (Fortune Business Insights) report, the VR market was $4.42 billion in 2020, and they predict its growth of up to $84.09 billion by 2028, at a compound annual growth rate (CAGR) of 44.8% in the forecasted period.
Today sees the launch of a new tool called the Metaverse Index (MVI), which tracks the metaverse projects and their tokens. The new Metaverse Index will follow the leading tokens and projects in the NFT and virtual metaverse space. The MVI aims to provide exposure to the top assets in the burgeoning digital art, collectibles, and virtual metaverse scene. There is Enjin Coin, Decentraland, SAND, Axie Infinity and RedFOX Labs among metaverse and NFT projects listed in the index. From its launch in April 2021, this index increased in price from $95 to its maximum of $367 in November, and is currently fluctuating in the range of $36-42 in July 2022, with a daily trading volume of over $50 thousand. As of mid-July, the fully diluted MVI market cap on CoinMarketCap almost reached $1.5million.
Besides the index, we can also follow certain cryptocurrencies, for example, Decentraland’s MANA, which occupies about 12% exposure in the Index or ENJ (almost 20%).
The development of the metaverse opens endless opportunities for investment because not just one company will benefit from it. Beside crypto projects, we’ve already taken a look at several companies striving to participate in the metaverse, even if their core business is not related. Among them were Nike, Gucci, Meta, and Epic Games. There are more still. Even National Geographic announced they would expand their activities in the metaverse.
This means we don’t have to be lucky and put our whole budget into one winning stock. Instead, it’s a much better idea to build a diversified portfolio of companies, which will include crypto companies, classic companies engaged in metaverse projects, as well as third-party companies, the business of which will one way or another influence, or be influenced by, the development of the metaverse. This way you’re hedging your bets, and at the end of the day, they could all end up being crucial parts of the metaverse. Since we’ve already looked at crypto companies, let’s now review five classic companies investing in the public stock market.
First on the list is Unity Software (NYSE: U) who recently acquired Weta Digital’s tech division, which is the visual effects studio behind huge films like Avatar and Lord of the Rings Their experience in 3D visualization, combined with Unity software, could offer the perfect building blocks for the metaverse. The second company is Snapchat (NYSE: SNAP) since they are focused on innovations and are already preparing its users for the metaverse by normalizing virtual and augmented experiences. All the company’s technologies and initiatives will play an important role in the development of the metaverse. Then there’s Matterport (NASDAQ: MTTR), which specializes in digitizing the real world. There is a huge opportunity to apply their business in the metaverse. Investing in this company might be riskier than the others, as it’s a much smaller company, but they have the potential for amazing growth. Disney (NYSE: DIS) – one of the biggest companies in the world that still has an opportunity to grow. Disney could create a full-blown Disneyland metaverse including all the characters and movies they own. And, of course, Meta (NYSE ARCA: META) who can invest as much money as they want in the metaverse and get it right. Meta develops things fast and has already introduced Horizon, which allows you to create places to hang out with friends and also work from the metaverse.
Please note that these are only a few “classic companies” to give you something to think about, and remember, it’s always necessary to conduct your own research before investing your money.
The idea of the metaverse looks exciting for some people and scares others. Investors look for new opportunities and operate with data, trying to predict how the company’s actions will influence its cost in the market. Since the metaverse is a startup for most companies, it can be related to higher investment risks. Moreover, while betting money, remember that there are issues concerning the metaverse that still need to be resolved. Nevertheless, smart-organized startups always grow faster and make more money for their investors.
The idea of the metaverse might be overwhelming. Even though it really brings endless investment opportunities, we should be careful trusting our money to any of the related “meta” projects. Zet Fund offers its investment management service and consultancy, helping you to choose the most reliable and promising directions to earn. Taking advantage of new technologies, Zet Fund is open for worldwide investors with a starting investment balance of $10. Just choose one of two Zet Strategies and join the journey into the world of new investment opportunities by completing an easy application at zet.fund.
There are still many questions to ask. One of them that we haven’t yet discussed is the opposite side to living in the metaverse. Death. Take it easy. Let’s say death is an inevitable issue after a deep dive into this theme. Here are two points; the first is the death of a person and the second is the “death” of an avatar.
If the owner dies, what happens to their account? With the new technologies, human-like AI can already imitate people’s behavior and voice. Lil Miquela has over 3 million followers on Instagram, a YouTube channel, hit songs with millions of streams and collaborations with major brands like Calvin Klein, Prada and Samsung. She was on Time magazine’s list of the 25 most influential people on the internet in 2018. And finally, she is not a human. She is a character made by a team of writers and graphic artists in Los Angeles. However, that makes no difference to her audience. People leave comments under her posts and trust her since Lil Miquela behaves like a human expressing her own opinion.
Getting back on topic, AI could clone a real person and exist using their identity in a virtual world. But why do we need this technology after somebody dies? For example, to apply the person’s skills. Kobe Bryant, an American professional basketball player who died in a helicopter crash in January 2020, could have continued contributing to basketball by training the younger generation and, therefore, kept supporting his family. Of course, it wouldn’t have been Kobe anymore, but AI could have imitated his moves and speech.
Furthermore, we could also establish a memorial museum in the metaverse, where prominent people from the physical world speak about their lives and share their experiences with visitors firsthand. Although the idea may sound weird and even unethical, in the case of its realization, death no longer means the suspension of a person’s lifework.
When the initial owner of the avatar can no longer (or doesn’t want to) manage the account, AI could also take on the human duties. Therefore, the established “metabusiness” would run automatically. But who is going to take the income if the person disappears? Should someone inherit the person’s account or perhaps only part of the rights to manage the avatar and activities inside the metaverse? Just to recall, the avatar can be a millionaire, which makes the owner a millionaire in the real world as well. And the initial owner doesn’t have to share complete access to the account with only one person. Instead, they might want to divide their assets between several people. One will receive a land parcel and others – pieces of NFT art.
The other issue is when the owner is fine but their avatar is lost. We all want to ensure the complete security of our accounts. In this case, we should definitely keep the password safe otherwise the avatar might be lost forever and there will no longer be anything that can be done. Same if the account is stolen, deleted, or banned, for example. What then?
First of all, we could develop a technology of “life insurance” for avatars in the metaverse. After the insured accident is verified, payment will be received but the account will no longer be available, which will force us to create a new one. The creation of a new avatar with a new background and “interests,” intersects with the idea of regeneration.
Does the metaverse bring us closer to digital immortality? We will soon see. Share your thoughts in the comments section.
After all that we discussed today, we can claim that the metaverse will revolutionize nearly every industry and function. In addition, this future will stimulate the creation of new industries, marketplaces and resources, as well as skills, professions, and certifications. The collective value of these changes will be in the trillions.
Today’s metaverse is already demonstrating new ways to interact with each other: informal socializing, joint games, attending virtual events and art exhibitions, virtual fashion, business communication, and virtual representation of business or government (e.g. Domino’s pizza is available to order in Decentraland, and the digital diplomatic embassy of Barbados was established in Decentraland as well). Another area for the future is the corporate metaverse. This represents virtual simulators or virtual environments to train and prepare specialists in the fields of engineering, medicine, cinema and space exploration.
Now, let’s carry out an interesting exercise. Switch on your imagination and envision how you want to live in the metaverse. What do you think it will look like? How will human behavior change in such an environment? What will be the effect on human relationships and reality perception? Try to capture what you see when you find yourself standing in the center of the metaverse. It would be interesting to read your thoughts, so please share them in the comments below. Then set a notification “my ideal metaverse” for 2032 in your calendar app and return back to the comments in 10 years. Let’s see together how what you imagined will be different from what future humans will actually have.
See you in our next project!
Illustrator – Maryana (tg: @maryana_chelovek)
Copywriter – Kirill (tg: @MysteriousLeo)
Editor – Damo Jackson
Project Coordinator – Artem Kopylskiy
Producer – Roman Gorbunov
Do you know what the internet is? This was the main topic of the Today Show, an American news and morning talk show: “What is the Internet, anyway?” dated 1994. Today, in 2022, 28 years later, this question needs no answer. We rarely spend time without socials, Google searches, online entertainment or work. Most of us stay connected 24/7. But this question is very similar to the discussion we are having today about the blockchain. Or the metaverse. Or NFTs. These technologies (that we covered in our previous projects) are still gaining momentum. But if only a few years ago blockchain was something for “the next generation,” today it’s a multi-billion dollar sector and life-changing idea that may lead us to the new era of Web3 (or Web 3.0).
From hereon we will use Web3 following the idea on a popular internet forum: “You may notice that web 1.0 and 2.0 are spelled with decimals, while web3 is not. There’s no particular reason for this, other than expedience. While some do write “web 3.0,” the “web3” designation is just an additional indicator that things are different in the decentralized web.”
Does this statement give you any clearer picture of what Web3 is? Or rather, what people expect it to become? Even if this is the first time you’ve seen the words Web 1.0, Web 2.0 and Web3, and you have no idea what we’re talking about, there’s no need to worry! We will explain everything from the very beginning and after several minutes with us, you will be able to participate in any hot discussions on the future of the internet.
Well, yes. we’re going to share with you everything we know about Web3: what it is, why we need it, what issues Web3 solves and which it brings instead, when it starts, how governments react to the loss of control, related technologies and projects based on Web3, why we don’t need this, what people think about it, and simply what to expect from Web3 and how you can earn money with it.
Today’s article consists of five main parts, including the history of the internet’s evolution, technologies brought by Web3, Web3 drawbacks, controversial opinions on the future of the internet, and finally, investments. If you’re interested in specific sub-topics, you’re welcome to jump to the related part. Otherwise, let’s begin with the first chapter.
It’s widely believed that we are currently in Web 2.0. This term was introduced by Tim O’Reilly between 1999 and 2004. Web 2.0 is about the centralized internet, which has provided people with social networks and allowed them to create their own content. The previous term, Web 1.0, only appeared after Web 2.0 was distinguished. Web 1.0 is the decentralized internet where one could read texts from web pages, but there was nothing else to do. Web 1.0 is well-known as “read-only.” Web3 is the next generation of the internet. If we compare expectations from Web3 to that of earlier times, we will see how they vary greatly. Today we determine Web3 to be the decentralized internet, based on blockchain technologies, and with all the benefits of Web 2.0.
If you want to continue with Web3 and skip a more detailed explanation of Web 1.0 and Web 2.0 then you are welcome to scroll to the next chapter. But if you’re not in a hurry and would like to learn more then let’s continue.
The first workable prototype of the Internet came in the late 1960s with the creation of ARPANET, or the Advanced Research Projects Agency Network, originally funded by the U.S. Department of Defense.
On October 29 1969, ARPANET delivered its first message: a “node-to-node” communication from one computer to another. The first computer was located in a research lab at UCLA and the second was at Stanford. Each was the size of a small house. The message “LOGIN” was short and simple, but the Stanford computer only received the note’s first two letters “LO”.
In the 1970s, Robert Kahn and Vinton Cerf developed the Transmission Control Protocol and Internet Protocol, or TCP/IP, a communications model that set standards for how data could be transmitted between multiple networks. ARPANET adopted TCP/IP on January 1 1983 and from there researchers began to assemble the “network of networks” that became the modern Internet.
The online world then took a more recognizable form in 1990 when computer scientist Tim Berners-Lee invented the World Wide Web. While it’s often confused with the internet itself, the web is actually just the most common means of accessing data online in the form of websites and hyperlinks.
Web 1.0 enabled people to reach online content published on websites by its creators and become users. A distinctive feature of that time was static content (rather than dynamic HTML). The websites were not really interactive, users could only read things that other organizations published. One other feature, which I’ve already mentioned above, was the decentralization of the internet, which meant the content came from different file systems rather than a database system.
The internet of that time had technical issues and wasn’t affordable to many. It was also hard to load your own information since the internet wasn’t widely spread and there were no modern-like tools for developers. Content on the internet was created by just a handful of people and mostly represented an e-library.
Moreover, it was impossible to control or protect copyrights and intellectual property. If an article appeared in Web 1.0, no one could check where it came from: was it original or did somebody just copy the work of others and publish it on the internet?
It led to the understanding that content makers and content consumers needed an intermediary that would take the role of regulatory body.
For so long, if you wanted to invest in music you needed to fork over millions of dollars to purchase an artist’s catalog in order to reap the rewards and get paid every time a song is played. Today, blockchain technologies open up a new way to invest in the music industry.
As we’ve already mentioned, currently most people acquire NFTs not to profit but to support a favorite artist or to feel the ownership of a legendary item. If you want to buy an NFT as a lucrative investment, it’s important to find a product that you can purchase in the usual way, by going to one of the platforms selling NFTs (beware of scammers), choosing a digital asset, and paying with a cryptocurrency accepted by the service.
Then social platforms appeared and passing the registration process meant users losing their anonymity. Today we invite foreigners to stay in our homes via Airbnb, and are ready to get into a stranger’s car via Uber or car-sharing.
So, the development of smartphones with fast mobile internet attracted the world to always stay online. The development of social networks (mostly by giant corporations) + smartphones forced people to abandon their anonymity, though besides consuming, users began producing content. However, this still wasn’t enough to fully switch to the centralized model. The major role here was played by the cloud services.
Big tech realized that the development of their services requires huge resources and that keeping and supporting such “rooms” with servers makes no sense. It’s much easier and more beneficial to rent needed server capacity and instead focus on the development of their own business. Facebook, Apple and Netflix use the services of Amazon, Google and Microsoft. Therefore, almost all the information and data these companies own are being stored in one place. This is centralization.
In the current system, the big companies are running the world by controlling users’ choices and behavior. All the platforms, providing various services, are focused on attention economics. This means their activities are aimed at grabbing your attention and keeping the user there for as long as possible. From this point of view, Steam and Netflix are competitors. Which company will grab your attention tonight: the one where you can play a game or the one where you watch a series?
The more attention the platform keeps, the more advertisements and recommendations it can show, the more influence with a certain agenda the company holds over different groups of users. With the power to predict and control human behavior, mood and preferences, it’s easy to sell anything to them.
One example would be the 2016 US electoral campaign involving Cambridge Analytica. The company says that its political wing “combines predictive data analytics, behavioral sciences, and innovative ad tech into one award-winning approach.” They were running targeted advertisements to Facebook users depending on their personality. The company aimed to persuade users to vote a certain way by showing different advertisements on the same issue, to different people. The persuasion was done by gathering information on the Facebook page likes of users and leveraging that data to create models that predict personality.
With such a system brands are capable of making us spend money we haven’t even earned yet on products we do not actually need. We see one advertisement and immediately want to make a purchase. Moreover, users are tools in this approach. After posting a comment, this comment no longer belongs to us and works for the platform, keeping users’ attention and making them participate in the discussion. We feel like expressing our opinion but it’s the company that earned money from it. We share an interesting moment with our followers on Instagram but again, it’s the company that made money from it.
The next problem is centralization. As already mentioned, 3-4 companies provide the major part of all server capacity which means all information from all platforms are stored in the data centers of these four companies. More precisely, the backend of 90% of all the websites on the internet are hosted by four providers. It’s beyond belief! And might also be unsafe. Annually, companies spend about $100 billion on cybersecurity. At the same time, the damage caused by cyberattacks is expected to reach $10-15 billion by 2025.
Besides hackers, the stored data can be used or blocked by the decisions of separate governments. Censorship is currently a relevant issue all around the world.
Web3 is expected to lead us once again to the decentralized internet. So, should we welcome slow connection and the complete loss of copyrights? Of course, not. We want to save all the benefits of Web 2.0 and solve the issue with regards user privacy. We don’t want companies to sell our personal data, we instead want to decide for ourselves which advertisements we want to see, and we would also like to track the use of our own content on the web. And get paid for it. Sounds crazy, right? Let’s now see if this is even possible as well as what new challenges Web3 creates.
Decentralization is expected to be reached with the use of blockchain technologies. Blockchain is a distributed database, or ledger, that is shared among the nodes of a computer network.
We may describe Web3 as the next age of the internet. A decentralized and therefore open, verifiable, trustless and permissionless age.
We may describe Web3 as the next age of the internet. A decentralized and therefore open, verifiable, trustless and permissionless age.
Verifiable means that any content, once published by you, can be tracked through the blockchain and your ownership is easily proved. A good example of ownership through the blockchain is NFTs, which we discussed previously in our article “WDH is music royalty NFT?”
Besides provable identity, Web3 relies on open-source software built by an open community of developers. You may have more thoughts on the subject of open source in our separate topic, but the long story short is that the code is publicly available, which means anybody can contribute to the development of the technology or verify the validity of the apps (or better to say DApps) they use. It also creates some additional risks, which we will discuss a bit later, but in general this approach comes in handy.
We also called the network of the future “trustless.” You don’t think it’s because you can’t trust Web3, do you? Well, it’s vice versa because Web3 eliminates a trusted third party during the users’ interactions, just like in the origins of Web 1.0 but now intellectual property can be protected better than ever. All the reached agreements are stored on blockchain and you don’t need any other person while making a deal with a user.
And finally, “permissionless” means that both users and content makers can participate without authorization from a governing body. It’s a controversial subject since there is a different point of view saying that without the participation of a regulatory body, there won’t be any global evolution of the internet. Companies and states don’t like losing control and income, nevertheless, as soon as they find a way to earn using a new business model, they will put every effort into making the internet decentralized. The same is happening with electric cars. Cars with ICE (internal combustion engine) generate a stable income but governments instead decided to support ecology and preserve natural resources. This prompted the same companies that yesterday sold cars only with ICE to promise to switch to electric cars as soon as possible because they found a way to earn more within the new business model. Big tech will also find a way to benefit from decentralization and will still keep a huge share of the niche.
Saying that, Web3 is permissionless, which means that any content, once published, stays available as long as there is at least one node in the blockchain network it’s on. Since there is no “center,” it means no one is able to delete any files from the blockchain or ban certain websites. At least, that is how we expect it to be.
It’s probably still those deciding upon Web 1.0 and Web 2.0 — time and circumstances.
After Web 2.0 was described as a term, people expressed their beliefs on what Web 3.0 would be like. Tim O’Reilly assumed that humans, as an unreliable intermediary, are not required to publish information on the network and suggested understanding Web3 as already familiar to the Internet of Things. In 2006, Tim Berners-Lee, the one who created the World Wide Web, coined Web3 as the “Semantic Web” and until recently his theory was the leading one. Web3, as a semantic web, means that the content of the web pages is understandable for a computer, or machine-readable. In 2014, Gavin Wood, one of the cocreators of Ethereum, described Web3 simply as “Less trust, more truth.” Jason Calacanis, Head of Netscape, worried about the poor quality of content provided by users and looked at Web3 as the network where talented people will create high-quality content.
Today, to the concept of the pure semantic web the blockchain was added. And we understand Web3 as the decentralized internet built on blockchain technology.
Web 1.0 is characterized by static pages and content that came from a file system — not from a database system. Therefore, Web 1.0 was decentralized with websites limited in their functionality and only a handful of content creators.
Web 2.0 is most commonly considered where we are now and is the era of mobiles, socials and clouds. Users have received constant access to the internet and the power to generate their own content. However, they paid with their privacy and attention instead. Web 2.0 transitioned to the idea of “the internet as a platform.”
Discussions regarding the future of Web3 are still ongoing. We express our expectations based on the actual steps taken towards its development. Therefore, Web3 should solve the problem with the lack of user privacy and bring more control to them. Since Web3 is not here yet, there might be contradictory opinions about it, which we will discuss further. But still, it’s mostly believed that after coming through some challenges, blockchain will become the fundamental technology for the future of the internet.
When will Web3 arrive? No predictions here. But the technologies, applications and projects that already exist or are being developed we will discuss in our next chapter!
As we know, Web3 is a concept, an idea of the future, which today unites like-minded developers to create decentralized projects and features. This is what Web3 brings, and the list of startups in the decentralized web is constantly expanding. In this part we’re going to take a look at some of the browsers developed following the idea of Web3, consider decentralized applications and finance, acquaint ourselves with tokenomics and self-sovereign identity, and we’ll also discuss management principles in the decentralized world.
Brave Browser serves as a web browser to surf the internet like Google Chrome, but with several features. Brave promises privacy and security, a rewards system based on BAT (Basic Attention Token) and a crypto wallet built into the browser with no need to install any extensions. The description is really optimistic. It says that you can set Brave considering your needs by importing the history, bookmarks/favorites and extensions from your previous browser and that Brave Browser works faster and protects your “valuable attention” from salesy ads.
We used Brave whilst working on the current project to share a real user experience with you. After a month, it left a good impression. First of all, the import from Google Chrome works smoothly without any headaches. While surfing the internet you’ll face no ads, except those you consciously decide to watch in order to experience the reward system. How does it work? Brave offers you the chance to visit the websites of its partners to earn BAT. It’s hard to say that you’ll actually earn anything, but a small reward for spending seconds of your attention is a pleasant feature. For two weeks we were rewarded 130 BAT (a bit over $0.1), after which we disabled all advertisements.
It’s also worth noting that the currently offered advertisements are kinda monotonous and often useless. There are mostly crypto exchanges, crypto wallets or some virtual games to “win” crypto. For sure, it depends on partners that officially registered their activities in Brave Browser. So, if the browser continues to grow then we may see many more interesting ads with an opportunity to support our favorite creators.
As we said, you can switch off all advertisements entirely. Despite Chrome extensions that block ads (for example, Adblock), websites do not hide their content if you search using the active settings to block ads from Brave Browser. While free websites need ads to gain some income, in Brave Browser we can support confirmed creators with BAT earned on advertisements we already watched.
We cannot say much about the security of personal data but we noticed that sometimes you’re given a choice about whether or not to share your personal info with certain websites. We always refused and the websites still worked. That’s nice.
One more thing you might not be really happy about relates to the required CPU and RAM of the computer. Brave claims it requires less memory compared to other browsers. However, in case of a not super powerful laptop, Brave Browser takes from 800 to 2 thousand MB of memory, while Firefox requires only upto 800 MB. This may make the laptop quite slow. It happened only once during our research and there is a hope that developers will continue to improve their Brave technology.
To sum up, Brave Browser may be quite useful, fast and convenient. Brave currently has 62.4 million monthly active users (as of June 2022). Brave Browser and Basic Attention Token say that they’re focused on the popularization of crypto and DeFi (we will discuss this later). While it requires some knowledge and experience to use, with their browser it’s simple and natively understandable for everyone. Is this true? You decide. Besides Brave Browser, we have alternatives, of course. For example, see Opera’s new Web3 initiative.
It might be quite complicated to understand what Сyber is. It’s also something like a browser but not the type we are used to. It uses IPFS technology to store data decentralized (more detailed about IPFS further) and creates cyberlinks. Despite hyperlinks that connect links with information stored on the server, cyberlinks connect the search word and the content. Cyberlinks bring together information spread on IPFS. Since this data is stored on “different computers” (decentralized), nobody can replace the stored information, while this is still possible with information kept on the centralized server.
“Well, it’s a safe way to surf the internet!” you may think. Here is the link to the future miracle of Cyber technology: https://cyb.ai/search/help. It’s a half-baked idea still. If you know more about it, please share your knowledge with us in the comments. It would be really nice to learn how to use Cyber if it’s as safe and promising as described. However, the idea of Cyber proves the semantic focus of Web3.
“The web of tomorrow needs IPFS today,” says the official website of IPFS. But what is it and how is it used?
Our expectations are really high when it comes to the web. We need content and web pages to load instantly and be constantly available. With the centralized model of today’s web, companies can easily control how fast their services work. So, the centralized internet has its benefits. We’re not ready to abandon all the benefits of the centralized internet and take a step back to slow but secure loading. The lack of alternatives is one of the reasons why we still share personal data with anyone who asks on the internet.
IPFS, the InterPlanetary File System, aims to surpass HTTP in building a better web for all of us. They want to make the web completely distributed by running it on a P2P network. When you want to download an image, HTTP shows exactly where this image is located by its IP. This is called “location-based” addressing. In the case of the location for a desirable file not being accessible (for example, it may be blocked in your country), you won’t get this image. However, there’s a high chance that somebody else managed to download this photo before the server went down. The issue is, however, that we can’t just grab the file from the other person’s computer.
To fix this, IPFS moves from “location-based” addressing to “content-based” addressing. Instead of saying “where” to find the file, you say “what” the file is that you want. This is the system explained in as simple a way as possible.
Every file has a unique hash (or name), called content identifier (CID). When you want to download the file, you ask users if they have the file with the same CID that you need, and someone on the IPFS network will provide it to you.
Moreover, the security is already built-in. When you receive a file, you just need to compare the hash you requested with the hash you received. If they match, then you received the confirmed version of the file you asked for. Another benefit is deduplication. This means that files with similar CIDs will be created only once, which makes the network very efficient.
Files in IPFS are stored in smaller chunks of 256kb maximum. After the file is loaded and cut into smaller parts, IPFS creates an empty object that links to all the other pieces of the file.
Once something is added to IPFS, it can’t be changed. When you upload another version of the document, the system updates your file and links to the previous version. Therefore, IPFS supports the versioning of your files. The process of updating can be repeated endlessly, and IPFS ensures that your file plus its entire history is accessible to the other nodes on the network.
There are already many compromised projects using just the name of Web3 to trick their users. To distinguish promising companies and really understand their business model and technological breakthrough innovations, you need to have certain skills. Therefore, we invite you to follow Zet Strategies and find more ways to earn in the decentralized future. Zet Fund constantly monitors all crypto projects in the field of Web3 to pick the most relevant and reliable ones. Zet can offer two strategies depending on your intentions: Short and Midterm Strategy for those investing for 1-3 years and Lifelong Strategy, where the investment horizon starts with 5 years. While other funds accept exclusively professional investors with a tremendous amount of money, Zet investors can begin their journey with just $10. To join the company and start earning, or for more information, follow the link. Welcome aboard!
A Decentralized Application is any program (not only a mobile app), the back-end of which is running not from a centralized server but is based on a blockchain (only a smart-contract network).
The back-end of a program is like the engine of the car. The driver doesn’t have to know how everything works, we just want the car to move when the gas is hit. However, we can imagine how many processes are necessary for this to happen. Same with software development. While surfing the internet and interacting with elements on the website, we only see the work of the front-end developer. An attractive animation, loading bar and a smooth scroll are the tasks realized by the front-end developer, but the heavy lifting processes that run the application and provide value to it, being invisible for the user, are prepared by the back-end developer, database and infrastructure engineers.
The front-end part of DApps can be displayed in our browsers, while the back-end computing is processed on the blockchain. We mentioned that only a smart-contract network is suitable for the development of a DApp. A smart contract is a code that makes up a program so that it can be run to do more complicated things. One of the smart contract features allows two parties to enter an agreement written as a piece of code, which will be automatically executed once particular agreement conditions occur, so they do not need to trust either each other or a third party notary, they just trust the code instead. Taking into account that the engine processes are hidden from users, we won’t see any difference using DApps if they look like a common website or application.
Now we’ll briefly explain what types of DApps already exist and why people use them (benefits of DApss). You will also find some links to the DApps so you can have your own experience.
We can use a decentralized application in DeFi, or Decentralized Finance. DeFi is a new monetary protocol that uses blockchain to allow investors to do new things with their money. DApps allow people to make transactions in DeFi, which include borrowing and lending, providing liquidity (a new form of relations between traders and investors based on the operations with tokens) and exchanges.
One of the most popular ways of trying DApps is Game DApps. Many of these are based on NFT assets, which can be earned or sold during the game. Along with games we have gambling applications, and there is an absolutely massive list of blockchain gambling websites out there. One more category is marketplaces where you can buy, sell and even create new NFTs.
There are a lot of projects already existing and still many new ones emerge every day. What is so special about DApps except for their safety and our personal data security?
The great benefit of DApps is open source development, which we will discover in more detail in one of our next projects. Open source allows anyone to get access to the code, which again leads to much more trust in the application. On the opposite side are centralized applications and platforms that do not disclose the code working behind their features, and we can’t check what types of personal information the company uses and where it goes, as well as where it came from.
One more feature is that DApps are censorship-resistant. Once the code is triggered, the program starts working and no one can interrupt it. This is both good and bad, depending on the purpose of the developer. But that makes a big difference in the financial sector. Government can control its citizens’ money in banks, and Facebook can control our accounts and block it if they wish. The decentralized application does not allow this.
And the final benefit worth mentioning is that DApps are built in a way to never go offline. Sometimes it happens to centralized platforms that they’re down for a short period of time. The reasons may be different: maintenance break, outage, ban due to official decision, or they simply do not work. The same might happen with the visible part (front-end) of most of the DApps, however, the idea of DApps is to be run on hundreds of thousands of computers all around the world. Since it’s infeasible to turn them all off, the data of an app, stored on the blockchain, is safely preserved and will never be lost. Therefore, applications can be easily restarted with all the information restored.
But before getting too excited we should also understand that there are still tough shortcomings. We will discuss all the disadvantages and challenges of Web3 a bit later. For now, let’s take a look at decentralized finance.
Decentralized Finance (DeFi) is another promising aspect of Web3. This brings new investment tools and opportunities to manage our money. We’ll quickly take a look at DeFi to understand what it is, its benefits and its principles. If you want to dive deeper into DeFi, just let us know and we’ll be sure to have more to discuss here.
First of all, there are no banks in DeFi, there are pieces of code instead. It’s open to anyone (again) and doesn’t ask you to trust the program — you can read the code and verify it’s not going to scam you. The code won’t limit your operations based on any conditions and it’s also believed to be much cheaper than centralized finance. It’s just a code that is set in a certain way.
DeFi is built on cryptography (secure communication), blockchain and smart contracts. DeFi consists of five main elements.
Stablecoins. We can understand this as a bridge between centralized and decentralized finance. Stablecoin is a cryptocurrency, which is matched to real-world assets like the US dollar. We may use them to avoid extra payments (fees) when we sell cryptocurrencies (like Ethereum) at a gain to something equal in dollars and then buy this crypto back when its price falls. We don’t want to withdraw them, therefore we don’t want to pay extra fees for the sell and buy transactions with ETH. We use stablecoins for this. By the way, this is much faster and the transactions (as well as the amount and quantity of transactions) are not limited.
A new way of lending and borrowing. In the blockchain, borrowing is based on smart contracts without a third-party interaction. However, it’s convenient (and actually reasonable) only if you borrow coins (not USD) to trade further in the DeFi and then pay them back. In the case of lending, coins and money work in the same way. You will receive your interest either way. Another tool for traders is a “flash loan.” By signing a smart contract for a flash loan, you may receive millions of dollars to buy tokens in one marketplace before immediately selling them in another marketplace in order to make a small profit. Taking into account the fact you operated using a large amount of money, the profit may be substantial.
Decentralized Exchanges (DEX) allow users to exchange their coins for, usually, tiny fees. Decentralized Exchanges also bring to the world a whole new variety of tokens and coins. Since the centralized exchange is regulated by the government and can only present tokens that comply with their requirements, DEX is regulated by anyone and is happy to introduce new coins as soon as they appear on the market.
Smart contracts also allow making insurance digital. They’re going to work the same as in the real world but the conditions will be written in a smart contract. If an insurance claim is made, the person gets paid. To verify the conditions that are happening in the physical world, we need oracles, which are another bridge between the physical and digital worlds. An oracle can be represented by a group of people who verify whether the insurance event complies with the set contract, and based on their decisions (made independently from each other), the person receives payment (or not).
Even though Web3 is not regulated by the officials or certain platforms, we still need somebody to determine and point to the direction of the development of separate projects, and partially the whole Web3 concept. DAO (Decentralized Autonomous Organization) is an organization, the participants of which are making decisions by voting with the coins issued within the project they are investing in.
Giant companies also hold meetings of their board of directors where guys in business suits are discussing the next steps their company will take. Then the CEO of the company takes control over the implementation of the set plans and regulates the working flow to achieve the goal.
DAO has no managers, CEOs, leaders, or board of directors. At first, a project is launched by several developers and they fully control how it goes. When the project becomes strong enough to be run autonomously, the initial developers give the right to make all further decisions to the investors. People who keep the tokens of the project can vote for its further direction of development. Usually one token is one vote. Some DAOs have a limit, which says that you need to own a certain amount of tokens to vote. Autonomy comes when the decision is set and written in the code. Everything then works without human participation.
DAO is based on open source, smart contracts and cryptocurrencies and, of course, everything is recorded in the blockchain. It leads us to the already well-known benefits.
First of all, the project doesn’t depend on the leading developer or founder. The code should keep running no matter what happens. External factors, such as the decision of the platform to block access to its services to certain countries, also can’t interrupt the process. Everybody, including the government, needs to come through the voting process to apply any decision.
Another benefit is open source, which we’ve already briefly discussed above. Besides the fact that code can be checked, it’s also contributed to by many developers interested in the project from all around the world. They can help to find bugs and even perform a solution.
We will discuss all the disadvantages in the next chapter. There are several examples of DAOs: Gitcoin (one of the ways to explore and join the development in open web), MakerDAO (a cryptocurrency project), and Aragon (a DAO that helps to create DAOs).
Self-sovereign identity (SSI) is a method of identity used in Web3 to return control over personal data back to the user. Simply stated, we want SSI to avoid storing personal information on a central database and control what pieces of information we want to share in order to prove our identity. Therefore, SSI is also known as a user-centric approach, which allows exchanging authentic and digitally signed information in a much more secure way.
We often need to prove that we are who we are claiming to be. In physical reality, we have paper documents that confirm our identity. We are used to trusting public organizations that issue passports, driver’s licenses, birth certificates and so on. The problem here is that sometimes we provide more information than the third party needs to confirm certain details. For example, you may be asked to use your bank statement to prove your living address. Therefore, the third party receives additional information they didn’t initially require and we don’t know where this information goes or where it is stored. Moreover, the current system doesn’t protect from forgery (e.g. fake COVID-19 vaccination certificates).
Digital identity may help us to overcome the stated issues. Gov.uk says that digital identity is an easy way to verify who we are without physical documents, and it can also help us to prove things about ourselves, such as our age or qualifications. However, the existing problems we have now with digital identity derived from similar problems using paper documents.
To set the system in the right way we appeal to self-sovereign identity, which is a more user-centric approach, as I’ve already mentioned at the beginning. With SSI we don’t need to keep information on a central database. We keep control over what information we want to share. Unlike the existing system, it’s a user-centric and user-controlled approach to exchanging authentic data in a much more secure way. Authentic data is information the source of which can be proven. McKinsey Global Institute research believes that the popularization of digital identity in the UK can lead to economic growth numbers in the country of 3-13% by 2030.
Without deep diving into technical issues, we just need to understand that SSI works on the blockchain (what a surprise…). The identity and other personal information can be trusted after the process of cryptographic verification is completed. It should be cryptographically secure, privacy-respecting, and machine-verifiable. It is all achieved through the use of decentralized identifiers and decentralized identifier documents. Where do we access self-sovereign identity?
While some haven’t heard about SSI at all, others are applying the technology to combat industry-specific challenges (e.g. IATA Travel Pass). SSI is receiving more support, and 2022 is expected to become the year for global SSI adoption. We can also find cases of SSI use in the banking sector. The technology improves a customer experience since it can simplify the repeating actions to prove the identity during a bunch of operations or transactions. Therefore, the KYC (Know Your Customer) process becomes easier for both banks and clients. The technology finds its place in the NFT industry as well. Self-sovereign identity helps to prove both the creator and current owner of an NFT. What SSI use cases can you come up with? Share in the comment section.
The crypto industry is always bustling with several digital assets, tokens being one of them. The study of the economics of crypto tokens, or cryptocurrencies, is called tokenomics. It fundamentally involves studying the factors that impact the demand and supply of tokens. These factors include the quality, distribution and production of crypto tokens.
Seth Klarman, an adherent of value investing, writes in his book “Margin of Safety” that, “In the short run supply and demand alone determine market prices.” If we consider this to be true and that it applies to crypto-assets, then understanding the factors that will impact either supply or demand are of vital importance to both speculators and investors. In that case, there are several factors to consider when looking at crypto tokenomics. Perhaps the most important is to understand how the digital currency will be used. Is there a clear link between the usage of the platform or service and the asset? If there is then there is a strong chance that a growing service will require purchases and usage that ultimately support the price. If there is not then what can the token be used for?
Here we just wanted to say that the development of a whole new industry requires the development of a new study to understand how the former operates. Tokenomics may provide us with some theories and knowledge and can help us to save and earn money through investments in this fast-growing sector of the economy. If you want to know more about tokenomics then let us know by leaving a comment below.
Nothing is perfect. Some people believe Web3 will change everything for the better and others say Web3 is no more than a picture to fool us. “It’s a bunch of fluff!” they claim. We will call its advantages and disadvantages. The first group we have already discussed: all these hopes for the next generation of the internet, new jobs and entertainment, data security, convenient services and revolutionary apps. It’s now time to look at the opposite side. What’s wrong with Web3?
Decentralization is the main pillar of Web3. At the same time, it’s one of its biggest concerns. To understand some of the aspects we need to take a look at how blockchain and servers work, and we’ll try to explain everything in simple phrases.
Decentralization is the main pillar of Web3. At the same time, it’s one of its biggest concerns.
The first thing we want to discuss is decentralized management. As you remember, we have DAOs (instead of CEOs and boards of directors) that are responsible for the further development of the projects in Web3. DAOs adopt decisions based on voting. Everyone who owns tokens of a certain project may vote. One coin = one vote.
While preparing the project there was one example, which aimed at proving the efficiency of DAOs. It was said that governments can’t influence Web3 projects without voting. So, if you want to implement any changes in the code, your suggestion has to be supported by most of the votes. But what if you’re extremely rich? You found a startup with a DAO management system. Since the project is young, its coins are cheap. You buy the greater share of a project at the time it’s been announced as a DAO. And now what? Any decision needs your approval and any of your initiatives are automatically approved? Sounds quite centralized.
Of course, both DAOs and the Web3 projects use different tools to avoid such a scenario, and it currently looks democratic enough. Through this overplayed example, we just wanted to point out that we need to keep an eye on who and how many tokens are owned to preserve the decentralized and democratic management in Web3.
If you think: “It’s impossible to own most of the issued coins,” then let us recall that the digital world has already inherited some of the realities of the physical one. Among them is that 80% of the $41B market value of NFTs on Ethereum is owned by the top 9% of accounts. Furthermore, the top 2% of accounts hold 95% of the $800B supply of Bitcoin, and just a scanty 0.1% of Bitcoin miners provide half of all mining output.
Some people believe that the Web3 initiative is aimed at taking power out of the hands of the few richest people, enabling everyone on the web to have equal power instead. Therefore, they claim that Web3 has already failed. However, Web3 was never about to become Robin Hood. The introduction of the blockchain, DApps and decentralized management into our everyday lives is aimed at (at least it’s said it does) returning control over personal data back to the user.
The situation that 20% of people control 80% of the money is not new and it’s here to stay. Even looking globally, the theory says, the more resources you have the more values you’ll have access to. It sounds logical but you might have never heard of the social thermodynamics theories before. It’s correlated with the exchange of resources. Nothing comes from nowhere and nothing just disappears. Its nature tends to minimize non-equilibrium energy distributions, however, humans can invest their resources to attract more. At the same time, trying to save as much as possible, driving toward non-equilibrium states, will end up in the return to equilibrium being a dramatic event. This explains why the rich become richer, not because they’re talented in saving but because they know where to place their efforts.
We should emphasize once again: Web3 is not here yet, and we might be wrong as well since we operate with the existing technologies to predict what the future brings. However, in Web3, we need to ensure the management is decentralized and not to allow the leak of users’ data by the decision of a separate company to attract more income.
Besides issues with management in Web3, there are also other issues with decentralization in general. Blockchain works as a network of peers (P2P, peer-to-peer). This is an important part of the blockchain since it makes the system safe and powerful. P2P is a decentralized communications model in which each party has the same capabilities and either one can initiate a communication session. Users share their data amongst each other without the use of a centralized administrative system. The network itself serves as a transmitter and doesn’t control the users’ information.
When you’re connected to the blockchain, your computer may work as a node, and it will provide part of its resources and memory to support the work of the chain, so you use the data stored on the blockchain and make some invisible computations to make the system go.
It’s a very simplified explanation of how the blockchain operates. This system leads to several Web3 issues, which are not often revealed. The first is that people are not ready (and don’t want) to run their own servers. The second is that a mobile device or web browser can’t work as a node but we want them to connect to the blockchain to display the information contained there. Now for some more details.
If we appeal to the evolution of the web, we will find out that Web 2.0 became centralized and popular because companies offered a solution for people not to run their own servers — centralized databases. The greatest part of all information on the planet is stored by 2-3 companies. But people do not need to run servers, and companies that managed to benefit from the new centralized system became even more successful than those running servers for them.
So, why now will people launch their own servers?
Moreover, platforms (as one of the major aspects of the centralized Web 2.0) ensure the fast development of the technologies, vice versa if something becomes truly decentralized because it becomes very difficult to change and often remains stuck in time. To succeed, Web 2.0 took a 90s protocol that was stuck in time, centralized it, and iterated quickly.
After the theoretical part, let’s now take a look at the practical problem. To be rendered on mobile or the web, a DApp needs to interact with the blockchain, however, we recall how this is impossible for a client to do since the blockchain is unable to live on your mobile device or in the desktop browser. So the only alternative (for now) is to interact with the blockchain via a node that is running remotely on a server elsewhere. Therefore, we are witnessing companies that sell API (remote) excess to a blockchain node, which they run as a service. To expand their business, they also provide analytics, additional services built upon the default blockchain APIs, and access to transaction history. Almost all DApps use either Infura or Alchemy to interact with the blockchain. These companies work as intermediaries to provide DApps with information stored on the blockchain. They talk to the blockchain and return the responses back to the application.
So much work, energy, and time have gone into creating a trustless distributed consensus mechanism, but virtually all clients who wish to access it do so by simply trusting the outputs (system responses or results) from certain companies without any further verification.
Once a distributed ecosystem centralizes around a platform for convenience, it becomes the worst of both worlds. It receives centralized control but is still distributed enough to be “trustless.” Some companies are just trying to develop a solution so everybody can use decentralized services without a need to run their own servers. However, the Web3 community may expect some other outcome than what we’re already seeing. For a truly decentralized future, we have to resist the temptations of instant user interface gratification and extremely simple API integrations that depend on data centers. Currently, even the most successful DApps only put very small portions of their code on the blockchain as it’s too expensive.
Unfortunately, the situation with NFTs is ambiguous as well since they challenge almost familiar problems. But people will not give up so easily and we hope for new solutions to be introduced soon.
Along with new technologies, we often bring to the world a new way of scamming people. We are presently in the gold rush stage where the technology is not yet perfect (and in some cases is far from being perfect) and some individuals are glad to use the human desire to make a fast buck in order to trick them and take their money. Fake projects do not help attempts to reach the future and because of them many people are afraid of trying new things.
However, this is our reality — be it physical or digital. What we need to do is to be careful (not scared (!) ) with attractive new applications and coins. Projects are appearing every day! Many developers are interested to feel how DApps work and create one on their own. Many projects are really promising and useful for society, but for ordinary users, it might be hard to distinguish the startups that are valuable.
“They can read the code to know how it works! Web3 is based on open source development,” Web3 partisans may claim.
And they’d be right. The code is open for everyone. But not everyone can understand it. However, it’s still your personal responsibility not to be tricked or scammed. The main thought here is just to be careful and try to avoid the gold rush.
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Projects and coins built on the blockchain are hardly following any of the existing law systems. This allows speculation with crypto assets that are almost out of the control of any state (despite the traditional exchange, the participants of which have to strictly follow the set rules).
Some governments may also be unhappy with the technology that exists to avoid taxes, hide personal information and which does not follow their standards. However, they have no idea what to do with this technology. Some states accept the game and expand payment systems so people can pay using cryptocurrencies, and take some ordinary taxes instead. Others have launched state projects to help startups in Web3 to address real-world problems. Others still try to restrict the blockchain to stop uncontrolled data exchange.
Sooner or later, governments will tighten control over cryptocurrencies and crypto markets. It is likely they will reduce the amount of scammers and, therefore, the total number of projects as well. Currently, there exists only 159 physical currencies vs more than 17,500 cryptocurrencies. It’s a similar situation with companies listed on the stock exchange. There are currently 2,800 companies listed on the NYSE, which is only a small portion of the total number of existing crypto tokens.
Let’s hope that in the end governments, big tech and innovative developers will work together to bring the best of Web3 into our world and that all scammers will be taken down.
There are still many questions to ask and theories to prove or counter related to what Web3 will be like. We’re going to share the controversial opinions of different people, who expressed their guesses about this question based on their beliefs and knowledge. Some of them are famous for their contribution to the development of the internet, and others are average users. If you agree or disagree with any points of view of an author, or if you have your own vision of Web3 and future technologies, share your opinion in the comments!
Tim O’Reilly
As we remember, Tim O’Reilly is the person who defined “Web 2.0” over 15 years ago. On December 13, 2021, he claimed that it’s too early to get excited about Web3.
Tim O’Reilly believes (based on his experience) that we are now in the cycle of decentralization and recentralization. He says that with every step taken towards decentralization, there is one to appear to centralize everything back. E.g. Bitcoin is a purely decentralized system, isn’t it? Tim O’Reilly says “the rapid consolidation of bitcoin mining into a small number of hands by way of lower energy costs for computation indicates one kind of recentralization. There will be others.”
He also considers that Web3 is now a big hype in terms of finance. Cryptocurrencies aim at becoming the future of finance. But at the moment, it’s more like trades of speculative assets that may be wildly overvalued. At the same time the author expressed his opinion that crypto democratizes access to investments, making it possible to invest directly in over 1,150 crypto assets worldwide. In theory, the only true barrier to entry in crypto should be awareness while no accreditation is required. However, Tim O’Reilly claims that neither venture capital investment nor easy access to risky, highly inflated assets predicts lasting success and impact for a particular company or technology. It means that fund managers will still be demanded in Web3, helping you to make conscious choices upon your investments. What has changed is that your 10 USD is enough to start, while previously investments were available only for more wealthy people.
Tim O’Reilly notes that he’s trying to avoid making comments on the future, since “most prognostications about the future turn out to be wrong.” So, we should remember that it’s only his opinion and in his article, Tim O’Reilly refers to investors and developers who are of one mind with him. Therefore, we will consider that the opinion of Tim O’Reilly has combined and introduced the main idea of several investors with a familiar point of view.
Another opinion that may be added to the group “against Web3” was shared by Paul Brody. As far as I know, Paul Brody isn’t a “famous” person (yet), so, for context, he is Ernst & Young’s global blockchain leader and an author on CoinDesk.
Paul Brody begins his article with the phrase “Web 3.0 is too complicated” (from the technical and user-behavior point of view). He warns that if we are not careful, we risk repeating some of the dark patterns of Web 2.0 in the Web3 era. It’s close to one of the issues with Web3 we described in the previous chapter. The main technical issue, in his opinion, lies in building good blockchain interaction tools. While the major user-behavior problem is that we’re used to quick responses from servers, which is hard to achieve with a truly decentralized approach.
Tesla CEO Elon Musk and Twitter co-founder Jack Dorsey also shared their views of Web3.
Long story short, Elon Musk said: “I’m not suggesting Web3 is real — seems more like a marketing buzzword than reality right now.” The statement of Jack Dorsey has already been spread and discussed on the web thousands of times. Our turn! The opinion that Web3 is a scam is also among the most shared. We will consider how Jack Dorsey explained it in a polite way by stating that Web3 is “ultimately a centralized entity with a different label,” and that venture companies “will never escape their incentives,” and they will be the ones who ultimately end up owning Web3.
Of course, opinions are based not only on the quotes of like-minded people, but there are also counter-arguments. We will now take a look at the positive thinking regarding Web3.
One of the most popular opinions that supports the development of Web3 is based on the existing technologies and the hope that we will manage to apply them in the right way.
“Before Web3, users and builders had to choose between the limited functionality of Web 1 or the corporate, centralized model of Web 2. Web3 offers a new way that combines the best aspects of the previous eras. It’s very early in this movement and a great time to get involved,” said twitted investor Chris Dixon.
Such opinions often go with the phrase “it’s too early.” Well, yes, nobody ever said that Web3 is a completed product, and all opinions, both for and against, are built on predictions and history.
Most investors, developers and users who believe that the Web3 benefits will overtake its weaknesses are already putting their efforts and money into the development of the technologies and services. Their opinion is expressed in the best possible way through their actions.
Web3 needs a more user-centric approach and vice versa, users who are eager to protect their data and take control over their information need to contribute to Web3 (and not necessarily money). Web3 may change the way we use the internet. It will bring new services and may become a new reality. We will watch the process and do our best to ensure it moves in the right direction.
Please be advised that the presented information is not investment or financial advice, trading advice or any other type of advice. The author does not take responsibility for any decision made based on the provided content. This content is purely for information purposes and the author does not take responsibility for any missing or wrongful information. Any information included should be used at one’s own risk.
As usual, there are several ways to earn with new technology. First of all, we want you to remember that many of the coins, NFTs and any other assets in Web3 may be speculative and meaningless. Be careful choosing your token.
We can invest in certain coins. There are many “Top-5 (10, 15) cryptos to blow in Web3” on the internet, but it’s always important to determine the business model standing behind it.
There are also several indexes watching the development of the technology and real engagement in Web3. One of them is The Web3 Index. This currently includes only 8 projects (at time of writing), while there are a lot more of them in Web3. It’s said that the index reports on the demand-side fees being paid into Web3 networks, which showcases real usage. The feature of The Web3 Index is the use of a fundamental index methodology. While most indexes in DeFi are based on market capitalization or “total value locked (TVL),” the fundamental index methodology is believed to provide more accurate estimators of a network’s intrinsic value, rather than the listed market value of the project. Therefore, indexes that use a composite of several fundamental factors attempt to average out sector biases that may arise from relying on a single fundamental factor.
DeFi Index (DFX) provides a market-cap-weighted benchmark for a representative basket of DeFi sector cryptocurrencies. It was launched by “professional investors” operating from regulated jurisdictions that are integrated with global financial markets. DFX is composed of 5 assets (at time of writing) suitable for long-term holding based on their measured liquidity, their support by “reliable” service providers and their longevity among the most-valued crypto assets.
Web3 is a somewhat ambiguous term, which makes it difficult to rigorously evaluate what the ambitions for Web3 should be. Today, we understand Web3 as the internet built on the blockchain. The general thesis seems to be that Web 1.0 was decentralized, Web 2.0 centralized everything into platforms, and Web3 will decentralize everything again. Web3 should give us the richness of Web 2.0, but decentralized.
Web3 relies on three main pillars. The first is decentralization, which is achieved through the blockchain. Then open-source development to provide transparency to the system. The resources are accessible for everyone but owned by no one. Web3 also needs a provable identity. It means that everything (ownership and partners’ relations) is written in the code and run by the code. Therefore, partners in Web3 do not need a third party to prove the identity of an item or its owner.
New projects appear under the Web3 label on an everyday basis. We may distinguish those that already contribute to the development of the technology: IPFS, DeFi, DAO, SSI and DApps. The latter, being any program, may exist to solve any task. The future of all companies in Web3 is the interaction with the blockchain to protect users’ data.
Web3 surely has its issues and it’s because of them that many people do not believe this technology deserves to be called “revolutionary.”. The list of problems includes hard-achieved decentralization, fake and speculative projects, and issues with the legislation.
As I’ve already mentioned, not everybody is excited about Web3. While some people are already spending millions of dollars purchasing a land plot in the metaverse (more about metaverse in our recent projects), others call Web3 the gold rush and a huge bubble. Who is right? Time will tell. But innovative people put their work and money into making a better future for all of us. Let’s hope to witness the result. Moreover, progress never stops. Futurists are already dreaming about what Web4 will bring. Will people reach complete decentralization by providing connection for anybody anywhere by becoming independent self-sufficient nodes? How will we solve the problem with the lack of memory to store our data and not having to rely on the servers of large corporations? Maybe Web4 will start when we manage to produce more energy with less resources, which will bring more opportunities for each of us? Or it might be that decentralization is not much fun and we will return to what we have now. At this stage it’s hard to predict but we’ll definitely find the answer and new investment opportunities with every new step of world development. Stay with us for more stories and be sure to check our latest projects.
Illustrator – Maryana (tg: @maryana_chelovek)
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Intro
The secret to buying like a billionaire
Token types
Can tokens bring in the big bucks?
Growth of cryptocurrency tokens
Why should you care?
Tokenization possibilities
How tokenization is disrupting ownership of everything
How tokenization transforms the business landscape
In 2021, Italian museums tried to recoup losses caused by the pandemic. It was also a matter of concern for legendary Uffizi Galleries, a museum in the heart of Florence, which housed some of the world’s most famous artworks. Amid lockdowns that followed one another, the number of annual visitors fell from 4.4 million to 1.2 million, so the venue desperately needed financing to offset losses incurred during the pandemic.
A museum’s director researched various options when he looked for a new way to generate income. How could they continue to showcase their priceless artworks to the world and generate revenue while visitors were unable to come and see them in person? The solution came in the form of asset tokenization.
The Uffizi Galleries decided to create NFTs (non-fungible tokens) for some of their most famous artworks. The venue offered Michelangelo’s masterpiece Doni Tondo (1505–06) for sale as NFTs. The customer was found soon. A wife of a famous Italian collector wanted to buy its tokenized version as a birthday gift for her husband. The amount of the deal was 170,000 USD.
The story of the Uffizi Galleries’ use of NFTs to sell their masterpieces highlights the potential of asset tokenization for generating revenue in times of crisis. Tokenization opens new opportunities for other industries as well. For example, real estate properties, commodities, and even intellectual property can be tokenized and traded on blockchain-based platforms. The possibilities are endless, and many companies are already exploring this new frontier to create new business models and revenue streams.
Imagine being able to own a piece of a rare painting or luxury hotel, worth millions, without having to break the bank. Sounds too good to be true? With tokenization, this is now a reality. The innovative concept of tokenization has changed the way people think about owning and investing in valuable assets. Investors can now own a piece of something they may have never thought possible before.
Though the Italian customer mentioned above was ready to purchase the NFT of the masterpiece as a single asset, tokenization provides the possibility of selling fractions of the artwork to multiple buyers. This would allow more people to have a stake in the artwork, and potentially generate even more revenue for the museum. It’s one of the benefits of tokenization – the ability to divide an asset into smaller parts that can be bought and sold individually. This opens up new possibilities for investment and ownership, and could have a transformative effect on business. It means that more people can have a stake in the asset, even if they don’t have the resources to buy it outright. In the following section, we will explore the basics of tokenization, when real world assets are converted into digital tokens. It all actually starts with a token, which is sold to customers. But what exactly is a token?
Token is a buzz word nowadays. With the arrival of blockchain, the concept of tokens extended to digital format. In the past, commodity money such as shells, grain, tobacco, shark teeth, and other items were used as a means of payment. Today, people can use cryptocurrency tokens to purchase goods and services.
The term “token” was originally used to describe objects that replaced money, and it continues to be used in various contexts today. Examples of tokens in daily life include subway tokens or casino chips, which serve as tokens representing money in the gambling venue.
Token is a proof of asset ownership, which can include cryptocurrency. Tokens represent digitized ownership of an asset that can be used as a means of payment.
Token is a piece of code that represent ownership of a specific asset, and are issued via smart contracts on a blockchain.payment.
However, in the world of blockchain, tokens take on a more complex meaning. They are essentially pieces of code that represent ownership of a specific asset, and are issued via smart contracts on a blockchain. In general, token is a broad term, which is used to describe different groups of digital assets. There is no official classification of tokens, so we came up with our own version of how tokens can be classified by purpose of use. It can help you understand the subject better. You should also remember that the content presented below is based on materials from publicly available sources and provided for informational purposes only, hence should not be construed as investment advice.
As the name suggests, these assets are designed to pay for utilities on the blockchain, providing benefits and granting exclusive access to some services within the ecosystem where the token is issued. Used to access a particular product or service, they are not intended to work as a means of payment or investments though they are still used this way when they become speculative and highly valued. These are cryptocurrencies that enable specific actions in an application, for instance, Binance Coin (BNB), which has several utilities within the Binance ecosystem, and Filecoin (FIL), which is used to pay for storage space on the Filecoin network.
It is also worth saying about DeFi apps that need such assets to fuel their systems since they help to provide liquidity and process transactions. Sometimes utility tokens are additionally used as governance tokens, which occurs in the projects with dual structure, for instance, the MakerDAO token (MKR), which serve both as a governance token and a utility token.
As the term implies, these tokens are native cryptocurrencies, which are used for processing transactions and their rewards. This is a type of digital token that is designed to facilitate transactions on a particular blockchain platform. These tokens are typically used to pay for fees associated with using the blockchain network, such as transaction fees and gas fees. They may also be used as a means of exchange for goods and services within the platform’s ecosystem.
The example of a transactional token is XRP (Ripple). XRP is a cryptocurrency that is designed to facilitate fast and secure cross-border payments with low fees. Its main utility is to act as a bridge currency for different fiat currencies and facilitate transactions between them on the Ripple network. XRP is used to pay for transaction fees and can also be used as a means of payment for goods and services, making it a transactional token.
These are cryptocurrencies designed specifically for use as a medium of exchange. These tokens can be used to pay for goods and services, both within and outside of a particular blockchain platform. Examples include Bitcoin (BTC), Litecoin (LTC), and Bitcoin Cash (BCH).
These tokens are backed by a tangible or intangible asset, such as gold or real estate. They can be used as a store of value or as a way to access a specific asset. Examples include Tether (USDT), which is backed by the US dollar, and Paxos Standard (PAX), which is backed by a combination of US dollars and short-term US Treasury bills.
With development of DeFi, the decision making processes become critical, so governance tokens present the solution to manage such issues. These tokens are used to govern a specific blockchain network or protocol. They allow token holders to vote on proposals, make decisions, and participate in the governance of the network. Examples include MakerDAO (MKR), a blockchain platform, aimed to solve volatility issues for the cryptocurrency market, which allows holders to vote on proposals related to the stability of the Dai stablecoin, and Uniswap (UNI), a popular decentralized crypto trading protocol, which allows holders to vote on changes to the Uniswap protocol, though the token has other utilities as well. It is used to attract liquidity and pay transaction fees when swapping tokens on the Uniswap platform.
These tokens are unique and non-interchangeable, and are used to represent ownership of a specific digital asset, such as artwork, music, or in-game items. Each NFT is unique and has its own distinct value. Such assets are often sold at auction. Examples include CryptoKitties, NFTs of unique digital cats, NBA Top Shot, NBA-themed digital collectibles, and Beeple’s digital artwork, a square collage of 5000 artworks created by the American artist, which was sold for $69 million at auction in March 2021.
These are tokens that represent ownership in a real-world asset. In other worlds, these assets are a digital form of traditional investments, such as stocks, bonds, or real estate. Unlike utility tokens or payment tokens, security tokens are subject to federal securities laws and regulations in their jurisdictions. These tokens can offer investors additional benefits, such as fractional ownership, increased liquidity, and automated compliance. Examples of security tokens include tZERO (TZROP), a blockchain asset exchange, which addresses the issues of ICOs’ regulatory compliance and SPiCE VC (SPICE), the first liquid venture capital fund with full compliance.
What is important for us here is that these tokens are created through a process called tokenization. So, we will delve deeper into this particular aspect in this article.
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The rewards can add up round-the-clock in the cryptocurrency sector. There are different ways to earn tokens on different platforms. The methods of obtaining tokens are indeed different from acquiring classic shares of companies. For example, in some blockchain networks, users can earn tokens by participating in network activities such as mining or staking. In mining, users contribute computing power to verify transactions and earn tokens as a reward. In staking, users hold a certain amount of tokens and use them to participate in consensus mechanisms that help secure the network. By doing so, they earn rewards in the form of additional tokens.
By participating in staking, network validators help to increase the value and trust in the project, which can result in increased transaction volume, larger transactions, and higher token values. This can create a positive feedback loop where the value of tokens increases with the growth of network popularity.
Users can also participate in bug bounty programs, when they need to detect vulnerabilities and report security flaws in the system of the platform so that the team can fix them. The size of the reward often depends on the severity of the bug and the potential impact it could have on the company’s operations or the security of its users.
Once users earn tokens, they can hold onto them as an investment or use them to access products or services within the platform. The value of a token received from one company or another depends on various factors, such as the popularity and adoption of the platform, the supply and demand for the token, and market conditions. Some tokens may have a fixed value, while others may fluctuate in value based on market forces, thus enabling traders to earn on high volatility of crypto tokens. As you see, there are plenty of ways people use to make bank in the crypto world. But let’s not forget about the security tokens, the reliable money makers of the bunch. These tokens generate returns for investors through a variety of mechanisms, like regular dividends, profit sharing, interest payments, and good old-fashioned appreciation. And sometimes, the token issuer even buys them back from you just as a publicly traded company buys back its stock.
Tokens can increase or decrease in value, just like company shares, state bonds, or other assets. However, the growth in the token market comes with higher risks due to its relatively new and unregulated nature. While certain tokens may grow in value, there is no guarantee, and investors should be aware that they could also lose their investment. As regulation is introduced in different countries, it is uncertain how many tokens in circulation may be at risk of default or become subject to stricter compliance requirements. This uncertainty highlights the importance of conducting thorough research and due diligence before making decisions in a crowded market of tokens.
When we tokenize an asset, either a digital asset or physical as the painting described above, it is presented as digital tokens on a blockchain. The value of each token is backed by the underlying asset, so the price is determined by supply and demand in the market.
After Bitcoin made its grand entrance in 2009 and Ethereum joined the party in 2015, the world of crypto has exploded! It is worth saying that tokenization has played a crucial role in this growth. It made it easier for businesses to create their own tokens, leading to an influx of new tokens entering the market. As a result, the number of crypto coins and tokens has been growing like a weed.
The number of cryptocurrencies has grown exponentially over the past decade. In 2013, there were more than 50 different cryptocurrencies, and by the end of the following year, this number had increased by almost ten times to over 500. In 2021, the number of crypto tokens reached 9K, but then it doubled in 2023 and reached almost 20K tokens. Though discounting “dead’ cryptos leaves us with 9K tokens, it still seems too much to make a choice! So, the question is: can there be too many cryptocurrencies?
Various tokens are created by different platforms in the blink of an eye. The market is flooded with memecoins, which are cryptocurrencies created for the purpose of humor or satire, like Dogecoin. However, this proliferation doesn’t remove the dominance of Ether and Bitcoin, which take the lion share of the whole cryptocurrency market. According to the data of Coinmarketcap at the time of writing, together these coins take almost 60% of the market, while other tokens have fierce competition.
As newer cryptocurrency tokens arise, the fragmentation of the industry increases leading to more dead coins, the term that was coined for tokens or coins, which are not in use any longer, therefore are delisted from exchanges.
Higher fragmentation of the market contributes to it since coins should have enough liquidity for a healthy ecosystem.Low liquidity has a negative impact on the system, and, ultimately, kills the token, which is in low demand.
As the token market continues to expand, the number of services and companies aimed at evaluating project reliability and market appeal also grows. Investors mainly use tools for tracking token data, exploring various aspects of the token and its underlying project, such as the token’s price history, market capitalization, trading volume, circulating supply, total supply, the project’s roadmap and whitepaper. They can also monitor the token’s performance on different exchanges, check the project’s social media and community activity, and assess notable partnerships or collaborations established by the project. Additionally, investors can use technical analysis tools to analyze charts and trends to make conscious decisions when buying or selling the token.
Despite tools available for tracking token data, making informed decisions requires a more comprehensive approach. This includes knowledge of technology, macroeconomics, statistics, and psychology, among other fields, to meet market demands. Not an easy task, yeah? It can be challenging for non-savvy users to perform due diligence on the tokens to invest in. These should be credible projects that add value to the ecosystem, so it is necessary to study documentation and technical details to understand if the project is worthy.
Since we touched upon different aspects of tokens, the concept of tokenization should be clear to you. Tokens are a key component in the process of tokenization, which involves converting physical assets into digital tokens that can be traded on a blockchain network. These tokens represent ownership rights to the underlying assets, and investors can use them to buy, sell, or trade their stake in the asset. It opens a brilliant opportunity to trade real world assets on the blockchain, and improve their liquidity that refers to the ease to convert assets into cash.
Tokens are a key component in the process of tokenization, which involves converting physical assets into digital tokens that can be traded on a blockchain network.
Here is an example that helps to describe the concept in a simple way. Each token is like a LEGO block that represents a specific piece of value, such as a share of a company or a unit of real estate. Tokenization is the process of breaking down these assets into smaller, more manageable pieces, just like how a LEGO set comes with many different pieces that can be combined in various ways to build something bigger.
With tokenization, these individual “blocks” can be easily traded, bought, or sold, just like how LEGO blocks can be combined, separated, and used to build different structures. And just as LEGO blocks come in many different shapes and colors, tokens can represent a wide range of assets, from traditional stocks and bonds to alternative assets like real estate and art.
Overall, just like how LEGO blocks have revolutionized the toy industry by allowing endless possibilities for creativity and innovation, tokenization is revolutionizing the investment industry by providing new opportunities for access, liquidity, and flexibility in investing.
So, why should you care about tokenization? Well, do you like money? Tokenization works like magic turning physical assets into digital tokens that can, probably, make you rich. You can turn anything into a valuable asset and sell it. If you are still skeptical about the potential of this technology, let me remind you how hard it is to adapt to changes. But those who do it, can become prosperous.
There was a time when people wore handmade clothing and it was the norm then. It took countless hours for skillful artisans to create exceptional, gorgeous garments, which were crafted with care. As technology evolved, people started using machines for that. So, it doesn’t take that long to produce clothing now. It is also made at a fraction of the cost, which people used to spend on garment before.
Initially, people didn’t believe it would happen. They considered that clothing made by machine is of low quality and it’ll never replace handmade beautiful garments. They were skeptical about it. So, what do we have now? Do you wear handmade clothes? Do you know anybody who does? Thus, the invention of machines created a different reality and changed the world. With time, people adopted new technology and discovered its benefits. They highly appreciated fast production and low prices. In this way, artisans faced serious competition and ultimately lost in that race. Machine-made clothing has finally replaced a more elaborate production, which is a rarity nowadays.
Now the tech world brought other instruments to us. Blockchain-based technologies can make many processes cheaper and faster, but it takes time for people to adapt. Those who do it faster, can win and take the leading position in the market.
You might want to know what exactly can be tokenized. Tokenization is a powerful tool that can be used in just about any industry. The possibilities are almost endless. With tokenization, you can represent anything from real estate to artwork to loyalty points as tokens. Let us look at the opinion of a famous, reputable crypto investor on the subject:
“All the leakage you have today goes away in a world of DeFi because you will financialize every single asset possible. You’ll financialize your homes. You’ll financialize your cars. You’ll financialize your watches, your jewelry, your art. You’ll financialize every random thing including your career.”
Billionaire venture capitalist Chamath Palihapitiya predicted tokenization of all assets in the world driven by the cryptocurrency industry.
Tokenization is a fascinating technique that has numerous applications in the world of business. Companies can create tokens that represent specific projects and assign them a certain value. This makes them super useful for financing new initiatives and automating company processes related to the ownership and transfer of assets. For example, tokenization allows for the creation of smart contracts that can automatically execute the transfer of ownership when certain conditions are met, such as the receipt of payment. This eliminates the need for intermediaries and reduces transaction costs and time.
It is easier to demonstrate the practical examples of tokenization through the particular cases, which are provided below. Thus, we are going to explore the tokenization in the following spheres:
The creation of fractional ownership can boost the real estate industry. Let us suppose, the property owners need money to tackle some problems. Since it’s hard to sell the hotel as a single asset and it takes a lot of time, tokenization can help to address the issue without the necessity to sell it.
The first real estate deal with the help of tokenization was completed in 2018. The St. Regis Aspen, a luxury hotel with views of the Rocky Mountains, offered the public to become owners of 20% of the property through digital currency. It released 20% of ownership in Aspencoins, thereby presenting an opportunity for individuals to attain the status of true owners of the exquisite property. As it was reported, it was possible to spend as little as $100, $1,000, $10,000 or some other amount to become a co-owner of the hotel.
Numerous blockchains such as Ethereum, Solana, Binance Smart Chain, etc. enable smart contracts, which allow to program digital assets for including ownership rights and transaction history. Smart contracts are pieces of code or programs that run automatically when certain conditions are met, hence don’t need intermediaries. In other words, these are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code.
A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code.
The tokens, created as a result of tokenization, include rules that ensure compliance of the asset issuing, distribution, etc. It means that everyone is playing by the same rules. For instance, real estate tokenization can include controls for ensuring the transfer of tokens to the particular counterparties (the terms are specified in the smart contract).
Tokenization of precious metals can be a great alternative for people who want to diversify their portfolio. Let us take gold, for instance. The popularity of this investment option is indisputable. It’s been a reliable inflation hedge for centuries, bringing stability to investors during market volatility.
However, it wasn’t so easy to invest in it. It has always been a headache for people to keep it safe! People used to store it in temples, bury it in the ground, store it in guarded vaults, strongrooms, and heavily fortified castles. Now more sophisticated methods are employed. Many central banks store their gold reserves in secure underground vaults, often protected by advanced security systems like biometric scanners and armed guards. Private individuals can store their gold in specialized vaults and depositories, with high-tech security measures like motion sensors, cameras, and even armed guards.
Buying tokenized gold, you don’t have to worry about its storage. Buying and selling real gold is really a hassle! You have to find a reputable dealer, negotiate a price, and physically transport the gold. Tokenization is an excellent solution that removes all these problems.
With tokenized gold, you can purchase it with just a few clicks from anywhere in the world using Euros, US dollars, Ether, Bitcoin or some other crypto. It is possible to transfer the tokens to any Ethereum wallet or even receive physical gold through global delivery if you decide to.
Art is often considered a luxury investment, only available to the wealthy elite. But what if everyday people could own a piece of a masterpiece by Van Gogh or Monet? Tokenization broke down barriers, so any person can own million-dollar assets nowadays.
Artwork tokenization involves converting the ownership rights of a physical artwork into digital tokens that can be traded on a blockchain. This allows multiple investors to own a stake in a single artwork, making art investing more accessible and democratic. And the benefits don’t stop there. Tokenization also allows for greater transparency in the art market, reducing the risk of fraud and ensuring fair pricing. We have previously discussed how NFTs can help regulate music copyright ownership through blockchain technology. The use of NFTs in the music industry can help make the relationship between musicians and their fans stronger by sharing royalties with supporters. It can also change the current music business model and enter a new era where artists can become independent, and fans can earn along with their favorite bands.You can read more about it in our project “What da hack is music royalty NFT?!”.
Various asset management platforms are now offering a unique opportunity for art enthusiasts and investors alike. With their recent foray into art tokenization, even everyday people can now invest in renowned artworks from world-famous artists like Picasso, Warhol, and Koons using cryptocurrency. This innovative move has opened up exciting new possibilities for those looking to invest in museum-quality art and watch its value grow over time.
In 2021, a Swiss-based bank achieved a significant milestone by using blockchain technology to transfer ownership rights of Picasso’s 1964 masterpiece, Fillette au béret, onto the blockchain. The artwork was divided into 4,000 digital tokens, which were sold to over 50 investors at a price of 1,000 Swiss francs ($1,040) per token. This innovative approach to art ownership allows more people to invest in high-value artworks without the need for large sums of money or specialized knowledge of the art market.
Tokenization in logistics refers to the use of blockchain technology to digitize and tokenize logistics assets and processes. This allows for more secure and efficient tracking, verification, and transfer of goods and services throughout the supply chain. It can be used to represent cargo, shipping containers, or other logistics assets as digital tokens on a blockchain network. This enables easy tracking and monitoring of these assets in real-time, from the point of origin to the point of destination.
It contributes to better transparency and security in logistics transactions by creating a tamper-proof record of ownership and transfer of goods. This can help prevent fraud and reduce the risk of errors and delays in the supply chain.
There are several examples of tokenization in logistics. For instance, in 2019, Maersk, the world’s largest container shipping company, partnered with IBM to launch TradeLens, a blockchain-based platform for tracking and tracing shipping containers. The platform uses tokenization to represent shipping containers as digital tokens, allowing for real-time tracking and monitoring of their movement and condition.
Another example is Walmart’s use of blockchain technology to track the supply chain of pork in China. The company partnered with IBM to create a blockchain-based system that tokenizes pork products, allowing for easy tracking and monitoring of the entire supply chain, from the farm to the store. This ensures greater transparency and accountability in the supply chain, reducing the risk of food contamination and other issues.
WhatDaHack?! provides a full package of services for the digitalization of your business, such as Web 3, NFT, cryptocurrency, Open source, etc.
We also participated in the development of the logistics industry by developing a blockchain system for Volvo Trucks. This product can help in combination with customer service by connecting all Volvo trucks to a single system.
Currently, there are many collectibles that are being actively tokenized, including sports cards, coins, stamps, rare artwork, vintage cars, luxury goods, and even wine.
For instance, a Swiss company tokenized a rare 1930s Mercedes-Benz 300 SL “Gullwing” model, which is highly sought after by car collectors and enthusiasts. The car was turned into “digital tokens,” which allowed investors to own a fractional share of the vehicle. The tokens were sold to investors through an online platform, with the total value of the car being divided into 20,000 tokens. Investors who purchased the tokens were then entitled to a share of any profits that were generated when the car was sold or leased. The car was ultimately sold for $1.8 million, and investors received a return on their investment based on the number of tokens they owned.
Tokenization penetrated the sports industry as well. Many popular football clubs issued their tokens to boost revenues. As more and more football clubs join the exciting tokenization game, they’re not just looking for new ways to score on the pitch. Now they’re also looking to score big on the blockchain!
With the rise of fan tokens, supporters can now become team shareholders and vote on minor club decisions. Holding fan tokens can also unlock VIP rewards like meeting favorite players or sportsmen and securing exclusive seats. Fan tokens can even provide access to a team’s rare memorabilia, which can increase in value over time. Fan tokens can be bought and traded like other crypto assets, and their value is subject to external factors like market trends and fan interest since it helps to generate a new form of engagement experience.
The same is true for indie artists who turned to tokenization to raise money through the token launch. It helps them to break free from mainstream labels, while investors can support their favorite singers and contribute to their career growth. Singer tokens offer numerous perks such as access to merchandise and concerts. Besides, this is a method to invest in the music industry with the goal of getting potential profit if the artist’s career takes off. It is worth noting, however, that investing in any asset carries risk, and the value of singer tokens can fluctuate based on market conditions and the success of the musician or band. Anyway, music lovers enjoy the experience so this is the investment that truly rocks! With singer tokens, your personal concert pass never expires.
It seems like almost anything can be turned into a digital asset nowadays. The ability to tokenize assets is unlocking new possibilities for investors and asset owners alike, offering a new way to trade and exchange ownership stakes in all kinds of things. As the world gets more and more tokenized, many talented individuals are getting in on the game! Also, a number of innovative projects have emerged that seek to leverage this technology in new and exciting ways. Let us take, for instance, the Talent Protocol, which enables artists, musicians, and other gifted people to create their own tokens and let fans and investors participate in their success. At this, patrons of hidden talents are rewarded for their discovery. It’s like buying stock in your favorite musician – only way cooler, because you can say that you own a piece of their talent. Move over, monopoly money – talent tokens are the hot new way to invest in your favorite stars.
Investors can always add a little sophistication to their portfolio, investing in tokenized whiskey! Many prefer to invest in it since it is not just a drink but a lifestyle. Moreover, a high-class hobby can make some serious money for you.
In 2020, a specialized digital asset fund offered tokenized Scotch whiskey casks to customers worth $1,000 per barrel, which was expected to rise 4 times when it matures in 5 years. At the same time, the Singapore exchange offered the tokens of high-end Scotch whiskey collection aged to perfection. The premium whiskey collection is expected to mature from 2022 to 2025. The token holders can trade the asset, which grows in value over time, while real connoisseurs of the drink can opt for physical whiskey delivery.
According to investment experts, rare whiskey has seen a growth of more than 500% in its asset value over the past decade. With the limited supply and high demand for some types of whiskey, it’s no wonder that many investors are turning to it as an alternative investment option during turbulent times. A bottle of single malt scotch seems to be more attractive than stocks and bonds.
While some investors select a rare whiskey token, which may be a luxurious investment, others may prefer the practicality and ease of the water tokens. Given that one-third of the world’s population lacks sufficient water supply for their daily needs, the demand for portable water is on the rise. There are several projects and initiatives related to water tokenization that have gained attention in the crypto and blockchain communities. These projects aim to use blockchain technology to track and verify water usage and ownership, facilitate water trading, and incentivize water conservation and efficient use.
It seems that nothing can escape tokenization, which can be used beyond the realm of traditional finance and assets. Sometimes a huge potential is right underneath your feet! You just need a creative approach to unearth it.
In 2022, the Central African Republic (CAR) came up with a plan to generate investment opportunities in the economy of the country, using this tool. So, it looks like the Central African Republic is jumping on the tokenization bandwagon!
Who knew people could tokenize natural resources? CAR hit the jackpot with all those natural resources like petroleum, diamonds, copper, and more. Since they are so lucky with it, they decided not to sit on all that potential wealth and tokenize it to promote economic growth. And this is a brilliant solution! By doing so, they’re making it easier for investors to get in on the action. Also, it brings more transparency to how they manage natural wealth. No more shady deals in the back room. It’s all out there for everyone to see.
The environmental benefits are also evident. With all that traceability, people of the country can make sure everything’s being managed responsibly. So, this is a win-win solution for all parties involved. Though the process is not that fast since a legal framework should be created for this, CAR is ahead of the game with it. It shows the pattern for others to follow.
Tokenization is no longer just about digitizing assets and streamlining their ownership and trade. With the rise of blockchain technology, some innovators are pushing the boundaries of what can be tokenized. In fact, they are even exploring the potential of tokenizing intangible things like emotions, experiences, and even love.
One of the veterans in the crypto industry Adam B. Levine is a host of the Let’s Talk Bitcoin podcast with over 500 episodes. The podcast has become one of the best Bitcoin podcasts over the web. To facilitate conversation and engagement on the Let’s Talk Bitcoin platform LTBCoin was issued, which can be referred to as a talking coin. It was designed to be earned by users for contributing content and participating in discussions on the platform, which incentivized community engagement. The concept of a talking coin is closely tied to the idea of community building and engagement through blockchain-based rewards systems.
LTBCoin played a role in the early adoption and development of cryptocurrencies and blockchain technology. While it may not have directly kickstarted the token revolution, it was one of the first tokens to be built on the Bitcoin blockchain, which paved the way for the development of other tokens and the wider use of blockchain technology in various industries.
The project of a podcast can be considered an early example of tokenization. It was one of the first tokens to be built atop the Bitcoin blockchain, representing a specific asset (content on the Let’s Talk Bitcoin network) and enabling users to trade, transfer and use it within the network. This laid the foundation for the development of more advanced tokenization use cases, including those we see today in various industries.
One of the startups leveraged tokenization to create limited-edition streetwear that’s unique and easily verifiable. Using smart contracts on the Ethereum blockchain, the company creates digital tokens that represent specific pieces of clothing. A smart technology is used to avoid dodgy replicas and extortionate resales. These tokens are then sold to customers, who can claim their physical counterparts once they’ve received the digital asset. The tokens can also be traded on secondary markets, creating a new form of collectibles for streetwear enthusiasts. The technology helps the company ensure that each item of clothing is unique and not counterfeit, and allows customers to track their purchases from production to delivery.
It means that there is no need to empty the bank account to acquire a piece from your favorite fashion designer. There is also no necessity to line up in the street and wait for hours in rain, hail, or shine, as it often happens on the days of the latest streetwear drops. The collectible streetwear becomes more accessible for token holders.
Tokenization can be also used to protect people’s digital identities. The founder of such a project states that it is one of the biggest challenges for businesses and individuals. Hence, it is necessary to secure digital identity to prevent the threat of identity theft. The identity token was released to solve the problem and create a more secure and trustworthy digital world.
Many companies try to get in on the cannabis industry that is worth more than 50 billion USD in the USA alone and it shows no signs of slowing down. One of the startups tries to leverage the blockchain technology to create a transparent and secure supply chain, making it easier for companies to track and verify the origin of their products. Since recreational marihuana is legal in 10 states of the country, while 33 states have legalized its medicinal use, the potential is huge and high tech technology can contribute to its growth.
People are very creative and very human no matter what they do. Numerous studies were conducted that tried to measure emotion. Scientists investigated the subject for years. The main problem is digitization of the metrics around such non-financial value items as love, happiness, hope, and, in theory, these things can be transacted on a blockchain.
Dr. Hugo Liu is actively working on a project to tokenize love. He believes that love can be quantified and represented as a token on the blockchain. He plans to create a system that allows people to send tokens of love to each other, which can then be traded, collected, and even used as collateral for loans. Some people are skeptical about the idea, while others are intrigued by the concept and see potential in it.
The concept may sound crazy, but it has caught the attention of many people in the tech and finance industries. In this article, we will take a closer look at some of the weird and wonderful ways in which tokenization is being used, and how it could potentially change the way we experience the world around us.
According to the report released in September 2022, the potential of tokenization in the near future is huge. It predicts 50 times market growth, thus reaching 10% of GDP by 2030, which is more than 16 trillion USD. Professionals expect the rise in such spheres as real estate, equities, bonds and funds. It is going to bring significant changes to the business landscape and form a new reality we will have to adapt to.
The advent of tokenization has democratized the market of alternative investments, making it more accessible to a wider range of investors. By transforming illiquid assets like real estate, art, and even whiskey into digital tokens, tokenization has opened up new investment opportunities for individuals with lower net worths. High-end assets that were once the exclusive domain of the ultra-rich are now being democratized and diluted among token holders. With tokenization, anyone can now invest in assets that were previously out of reach, changing the face of investing and wealth creation.
Blockchain transforms the market and ports its model into places where it couldn’t go before. Since the reach of the market extends beyond traditional asset tokenization, it brings new forms of private assets into the focus. We can invest in anything we want, whether it is an enterprise, an art, a singer, a favorite football team, or other assets with traditionally low liquidity. The tokenization process can help to even it out.
Distributed ledger technology employed in tokenization ensures immutability, great transparency and high level security. Smart contracts can’t be misplaced from the blockchain or modified unless this action is initially programmed. It presupposes more convenience and better overall security. Taking into account such benefits as low transaction time, lack of middlemen, and cost-efficiency, tokenization can help to attract investments faster and easier, thus ensuring higher revenues for investors.
Tokenization has the potential to change the landscape of the market since it opens investment to a wider pool of investors. We are just in the early phase of its adoption but its impact is seen already. Digitization helps to facilitate the innovation of new product offerings. It also implies a more democratic approach to investments in expensive assets, such as commercial real estate.
Being highly divisible, tokens remove the need for minimum investments, which is a win-win situation for both parties. Investors can participate in the projects which were inaccessible for them before. Being an easily transferable unit, and representing real value, tokens help to make assets liquid or easily tradable. Instead of registering ownership in the old-fashioned way on paper, investors can transact digitally using tokens. All these factors taken together result in the mitigation of entry barriers to many industries, ensuring a broader investment base, more liquidity in the market and, hence, a more vibrant economy.
Illustrator – TBA
Copywriter – Olga Polina
Editor – Damo Jackson
Project Coordinator – Irene Mishina
Producer – Roman Gorbunov
The history of modern show business knows many stories of worldwide popularity bringing attention, glory, money and problems at the same time. A similar case happened to legendary Beatles musicians, John Lennon and Paul McCartney, when they lost the rights to their own songs nine years after the band was formed. It wasn’t until 48 years later, in 2017, when McCartney finally reached a settlement with Sony/ATV over the copyright to the Beatles catalog. The details of their agreement, however, have not been disclosed. Besides legal issues within the band, The Beatles were also implicated in copyright lawsuits with other artists. These complicated court cases, where the melody, rhythm, or words of one musician are reused in the songs of another, are actually quite common. The decisions of these trials can differ drastically, and no one can be sure of their outcomes when filing a claim.
NFTs (non-fungible tokens) can shed some light on the unclear phenomenon of music copyrights. Blockchain technology can regulate the ownership of art and has clear advantages over the traditional understanding of copyrights.
NFTs are widely used in the metaverse, which we discussed in our project “Theta in Meta”. They serve to set copyrights on the pieces of art, land plots, pieces of clothes and much more. Some artists are convinced that music fosters an emotional connection with the listener. It’s the fans who make a song popular, but they don’t receive any value beyond the emotional connection. If a musician could share their royalties with supporters then they would make that relationship even stronger, and fans would have a financial incentive to stream and promote that song even more.
Besides the problem concerning the unclear approach to music copyrights, there are also issues with unfair royalty payments to musicians. This is owing to the thick layer of intermediaries between an artist and its fans and which makes it almost impossible for an ordinary person to invest in the music industry. NFTs are our chance to change the current music business model and enter a new era where artists can become independent, and fans can earn along with their favorite bands. But what are these mysterious NFTs and can they be bought in local music stores right now? During the next chapters, we explain their principles and benefits in simple phrases. Let’s dive in.
The breaking NFT technology is changing the way we own things digitally. But what exactly is a non-fungible token (NFT)? First, let’s take a look at the word “fungibility.” Fungible items are exchangeable 1:1 with an item of the same description or classification. Each fungible unit is considered identical and therefore interchangeable. The slight physical differences between fungible assets do not impact their perceived or agreed value.
The concept of fungibility is easily explained through the understanding of currency. A crisp ten-dollar bill, a ten-dollar bill found inside the pocket of your old jacket, or a ten-dollar bill with somebody’s phone number scrawled on one side are each worth 10USD. With any of these bills, you can pay for a nice cup of coffee for $5 and receive $5 back. Therefore, fungible assets are also divisible.
On the contrary, things that are not directly interchangeable or replaceable are known as non-fungible. Non-fungible units are unique, and their identity is verifiable. In many ways, non-fungibility is tied closely to identity, be it the identity of the asset itself, its owner, or its creator.
If after long hours in the shopping mall a family found themselves standing in the center of the parking lot unable to recall where the car is, they can’t simply take any other car of the same model as theirs. Every same-looking car in this huge parking space is unique. It might be of the same characteristics and even cost the same, but each vehicle has its own history, scratches, and items inside. It’s only the owner of this precise car that can decide who has access to their property.
At the very beginning, blockchain was all about cryptocurrency. How the blockchain technologies are used today, we’ve covered in our project about Web3. Follow the link to discover more about the future development of the internet. But then some forward-thinking developers realized that this technology could be used to create and store unique, identifiable digital items, digital representations of real-world objects such as diplomas and marriage certificates, and so much more.
Thus, the NFT was born.
An NFT provides a solution essentially anywhere uniqueness or identity plays an important role, whether it’s for art, gaming items, commemorative collectibles, digital rewards, or anything in between.
For so long, if you wanted to invest in music you needed to fork over millions of dollars to purchase an artist’s catalog in order to reap the rewards and get paid every time a song is played. Today, blockchain technologies open up a new way to invest in the music industry.
As we’ve already mentioned, currently most people acquire NFTs not to profit but to support a favorite artist or to feel the ownership of a legendary item. If you want to buy an NFT as a lucrative investment, it’s important to find a product that you can purchase in the usual way, by going to one of the platforms selling NFTs (beware of scammers), choosing a digital asset, and paying with a cryptocurrency accepted by the service.
Investments in new products, as well as classic vehicles such as stocks, require a solid financial background and other skills that an average investor cannot just acquire in a short period. That’s why individual investors need a trusted partner whom they can consult on investment ideas, market risks, or delegate money management tasks. Zet Fund offers its investment management service and consultancy to the whole world. Taking advantage of new technologies, Zet Fund is open for worldwide investors with a starting investment balance of $10. Begin your journey into the world of new investment opportunities by completing an easy application at zet.fund.
The last thing to consider before sharing royalties with celebrities are the current issues with blockchain technology.
The most common concern is that it’s still possible to stream online for free. As with books, one of the earliest editions of The Lord of the Rings is currently being sold for $75 000 (June 24, 2022)! Meanwhile, you can purchase the same book from the local charity shop for a dollar.
Same with the NBA top shots. These videos might be easily watched on YouTube, but it’s more about the feeling of ownership. It’s the verified original file.
While NFTs have the potential to hand back power to the artists, right now there are no clear boundaries as to who owns the intellectual property of a song if it was to be issued as an NFT. The NFT owner will still receive royalties but as of this moment it’s unknown whether we’re also handing over the master rights along with the master file? What is known is that record labels will want to fully monetize their artists and this could lead to future legal battles that could slow the development of music NFTs. It remains to be seen how much power will be restored to an artist who’s already been signed.
However, once the systems are in place, it could simplify some gray areas. Currently, licensing music or transferring ownership is an inconvenient process for labels and lawyers, and something that has to be done manually. With NFTs, the process is about as quick as buying anything else online, and you’re provided with clear documentation. So, once we have the system set up, everything will be more clear-cut, which could also help to avoid a bunch of lawsuits. In addition, an artist could get paid every time a sample of their music is used in a new song, though unfortunately, it’s going to be a while before we arrive there.
Pricing is another definite concern. Anything with scarcity built into it will go to the highest bidder, which means a huge proportion of the population will not be able to afford some of these NFTs. Part of the responsibility for the availability of NFTs at different price points, allowing for all fans to be involved in the connectivity, will go to the artists, labels and anyone else issuing them.
Still, the reality remains that many of these unique and premium NFTs won’t be available to most of us, and although we’ve talked about the potential to increase connectivity, there’s a side to this that could make social divides even greater.
Moreover, some NFTs will be a bubble. We’re going to see many people trying to harness the potential of NFTs, and they’ll try to sell them for as much as anyone will pay. This means we’ll see huge spikes and the usual big falls as demand drops. As the hype around individual NFT projects grows, we’re going to see people who aren’t even music fans trade in and out of the latest music trend or NFT before moving on to the next big thing. This means there’ll be ups and downs that will be difficult to predict.
A large criticism of NFTs, and cryptocurrencies as a whole, is the huge amount of computational power required for them to run. The most popular blockchain for NFTs is Ethereum. Ethereum currently consumes the same amount of energy as the entirety of Peru.
Hopefully, there will be a way around this. Ethereum is planning to switch to Ethereum 2.0, which should cut emissions by 50%. There’s still much work to be done, however, to ensureNFTs don’t cost us
NFTs are changing the music industry and certainly open up some exciting possibilities for artists and their fans. The smart contract has the potential to remove all intermediaries or middlemen in the music business and allow artists to connect with fans more directly.
NFTs can be applied in the film industry as well. A perfect example of a movie to invest in is “Paranormal Activity.” This film was originally developed as an independent feature for $15,000 before being acquired by Paramount Pictures. Some changes brought by the company additionally cost $200,000. After it was released in 2009, the earnings exceeded $190 million! Fashion items, sneaker and shoe models, and handbags often become pieces of art which can also be digitalized through blockchain.
The game-changing technologies of today are opening the door to a new era. No-name artists receive a chance to quickly succeed only with the support of their fans. What if the garage band whose concert you visit tomorrow is the future Beatles? What if the studio where last week you bought your nice jacket will soon become the Fashion House of global renown? NFTs are the next stage of human and economic development that invites everybody to participate and find their place in this game.
Illustrator – Maryana (tg: @maryana_chelovek)
Copywriter – Kirill (tg: @MysteriousLeo)
Editor – Damo Jackson
Project Coordinator – Artem Kopylskiy
Producer – Roman Gorbunov