By Alex Tapscott
Digital assets give internet users a direct way to participate in the growth of the digital economy, which will soon be the richest of economic realms, thanks to the rise of Web3. A reminder: Web1 (1992-2002) was the Read Web, a one-way medium for presenting and consuming information that democratized access to information. Web2 (2002-2020) is the Read/Write web, a platform for communication and collaboration, which was captured by large platforms and digital conglomerates. Web3 (2020-) is the Read/Write/Own web. Internet users now have digital property rights and can be economic stakeholders in the platforms they use and services they consume. They can also move, store, and manage money and digital assets privately peer to peer.
Understanding the Token Taxonomy
In past editions of Digital Asset Digest, we outlined the digital assets gaining traction in Web3: cryptocurrencies like Bitcoin, protocol tokens, like ETH, which are platforms for application development, governance tokens, which give users input in the services they consume, securities tokens, which mimic real world stocks and bonds, natural asset tokens which mimic natural assets like carbon, stablecoins, which hold value against the US dollar, and NFTs, which are unique assets used primarily in art, collectibles and metaverse applications. Collectively these types make up nearly 100% of all digital asset values. This is not an exhaustive list, and while we feel confident that these categories of digital assets will continue to exist, we have less confidence over what individual assets will endure in the long run. And, of course, many new categories will doubtless get added over time. Why?
If digital assets are the fundamental building block of Web3 just as the website was the fundamental building block of Web1, then many of today’s digital assets will end up in the same place as the early Dot-com websites – in the dustbin of history.
Some assets will survive and may become multi-trillion-dollar platforms supporting the new internet of ownership, just as some early dotcom’s like Amazon survived to become leviathans of Web2. However, it’s just as likely that the killer app, and thus killer asset, for Web3 has not yet emerged.
What will be Web3’s Killer Asset?
What should we be looking for in the next crop of Web3 projects? History gives us a guide: new technologies not only make it easier to do something, but they also make it possible to do the impossible. Still, it is common in the early innings of a new technology for emerging innovations to be skeuomorphic- mimicking what already exists: Web1’s early websites looked like magazines, catalogues, and classifieds, but the real power of the internet was its ability to act as a platform for communication and collaboration online. Web3’s early assets look like assets in the real world and even use the same language - cryptocurrencies, cryptocollectibles, stablecoins and so forth. The same was true with Web1’s killer apps of the webpage and email.
Digital Assets Are Just the Latest Way Humans Have Abstracted Value
One thing’s for sure: Web3 assets will be strange and different to incumbents and old-timers.
This is also nothing new. As our economy has become more complex, assets and wealth have become more abstracted. Land was the most important asset of Feudal Times. This was simple enough: farming was the main industry. In industrial times, oil, industrial plant, and other capital assets mattered, as did bank notes, securities, bills of deposit and other intangibles.
In his influential biography of Vanderbilt, T.J. Stiles explains how Vanderbilt helped usher in modern capitalism: “The imagined devices of commerce gradually abstracted the tangible into mere tokens, and then less than tokens. Money transferred from gold coin to gold-backed banknotes to legal-tender slips of paper and ledger entries in bank accounts.”
i “Like a ghost, the business enterprise departed the body of the individual proprietor and became a being in itself.” According to Stiles, the unseen architecture of modern finance which we now all take for granted, came about in Vanderbilt’s time “amid fierce debate, confusion, and intense resistance.” Sound familiar? History does not repeat but it rhymes.
The most important assets to emerge from Web3 won’t simply be digital versions of things we already own, like stocks and other financial assets, just as the most valuable public companies aren’t farmland ETFs. They won’t be skeuomorphic. In the same way Vanderbilt helped push the boundaries of the early industrial world, Web3 will reimagine what’s possible online.
iT.J. Stiles, The FirstTycoon, First Vintage Books, 2010. P 568
