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Continous organizations are touted as a way to run a company in a radically transparent way on a blockchain. It aims to balance the incentives of the company owners, investors, and employees. However, this is probably impossible to do for a high growth startup.
Applying crypto/blockchain concepts (e.g. proof of work, aligning incentives) to building large scale co-ops that require cooperation and governance. Famous examples of co-ops include Visa and REI. Visa for example needed a co-op model to incentivize banks to join the network which onlocked more network effects (more consumers could use credit cards in more places).
Every financial transaction, no matter how simple or fast, has non-monetary transaction costs. For example, the mental overhead of making a decision “is it worth it?”, even for tiny amounts, adds up. In a world that is fully monetized and filled with micro transactions, the non-monetary transaction costs would be stifling.
Centralized systems are criticized for making unilateral decisions about what people can see and not see within their privately controlled network. This leads to strong anti-censorship sentiment and desire for censorship free content where anyone can say anything. However, look no further than your spam folder for a glimpse of what a truly decentralized and censorship free content network could look like.
A commonly cited reason for Web3 is that centralized systems (government, banking) are broken and decentralized systems are the way forward (blockchains, cryptocurrencies). The problem is that fully decentralized systems have all sorts of issues in the same way that, for example, truly free markets do—exploitation, theft, perverse incentives, and so on. As such, engineering solutions can only go so far and are doomed to rediscover the need for hierarchical regulation to make it work.
Blockchains are transparent ledgers in that anyone with a copy of the blockchain can see every transaction. This is necessary due to the way blocks are validated. However, even though transactions are anonymous they are still public and can be used to associate wallet addresses with someone’s identity.
Crypto is a hotbed of scams, but we shouldn’t be so surprised. It’s not that crypto enables new kinds of scams, but it’s a forum for old scams to be used again. Eventually, legislation and oversight will kick in and it will be harder for scammers to scam. In turn, they will take their playbook of scams and reuse them someplace else.
Smart contracts that run on a distributed ledger effectively need to work forever to be useful. Working forever requires maintenance and security—the longer a computer program runs, the more exposure it has to change and the opportunity to be exploited.
A staggering amount of energy is used to power Bitcoin and Ethereum, the two largest blockchains. The energy required for a single transaction on Bitcoin is the equivalent of powering a two person household for three months.
NFTs lack the legal and regulatory protection of other forms of property. In the event of a dispute, there is no oversight. This fundamental principle of crypto projects (decentralization, no middle man, zero trust) limits what can be represented as a non-fungible token.
One issue with decentralized systems is that, from the onset, such systems are most appealing to outcasts of other systems. These outcast groups are more extreme (political views, illicit activity) than those using mainstream systems. This can be an impediment to development and growth of a network.
The unifying desire to make money through speculation is what will make Web3 successful.
The original idea of the web was that everyone would be both a producer and a consumer. They would run their own server and connect to the servers of others.
Blockchains are a server technology. They don’t live on the client and things like a web frontend to a dApp can’t perform CRUD operations without a server. While it’s possible to host your own node, in reality nobody wants to run their own server, not even the ones with the technical skills to do it.
A commonly cited success story of NFTs is CryptoPunks. They were 10,000 uniquely generated pixel art avatars released on the blockchain for free. They’ve since become a hugely sought after item with market prices greater than $7MM.
Distributed autonomous organzations (DAOs) have more in common with limited liability corporations (LLCs) than C Corporations. There is near infinite variability possible in an LLC’s operating agreement similar to how DAOs can be grant DAOs, investment DAOs, protocol DAOs, and many more. C Corps on the other hand have converged on, more or less, a standard—Delaware C Corp and a well-known governance structure based on ownership of stock.
The growing population of cryptocurrency millionaires have created a new self-tenured class. They don’t need money and are free to work on pursuits that match their interests (likely more things related to Web3). This actually a good thing for innovation.