Ownership in Web3: The Internet of Value
If you can copy any digital asset, do you really own it? A digital asset like (say) music files, or photos you upload on the internet, for example. Either way, the ease with which one can copy and share digital assets has raised the question: do we truly own something if it can be replicated infinitely? Sending an email with attached files, for example, creates two copies of the shared content. This traditional way of exchanging data digitally allows for the free flow of information, which is great! But it has also brought about a challenge of unverifiable ownership and an inefficient economy for digital assets. Because of this, a single digital file probably does not hold much significance on its own. Not anymore, at least.
This can be solved, however, and the answer lies in blockchain tech. The Bitcoin blockchain, for starters, resolved the double-spend problem by ensuring that once a Bitcoin is transferred, it can no longer be owned by the sender. This same principle of provable ownership is now being utilized in Web3 through the use of blockchains. It is now possible to have tangible and secure proof of ownership (and transfer) of digital assets. And that’s what we’re going to explore in this article.
If you don’t own it, it is of no value to you.
Web2 platforms like Facebook, Twitter, and Instagram have become an integral part of our lives, providing us with a platform to connect and share our thoughts with the world. However, the current model of these platforms provides for data to be stored centrally, on their systems. This has raised concerns about the lack of ownership of the actual owners over the assets they store or share on these platforms. Further, as an outcome of this, platforms can limit, suspend, or ban users without proper cause, causing frustration and a sense of powerlessness among users.
The sharing economy, for example, has brought about significant changes in the otherwise traditional business model. Ride-sharing apps like Uber and Lyft have revolutionized the taxi industry, but the lack of ownership for drivers has been a cause of concern. As independent contractors, drivers have no say in how the platform operates, which leaves them vulnerable to changes in policies or pricing models.
That apart, not everybody particularly bothers to learn about how their data is collected, stored and used, thereby exposing themselves to the risk of (for example) privacy violation through data leaks. We do not have much (or any) ownership over our content.
This has far-reaching influences on our lives. Circling back to the sharing economy, for example — any change in policies or pricing models can make the participants of the economy vulnerable to financial loss. Like the many hosts who lost money after Airbnb updated its cancellation policy.
Accordingly, now might be a good time to consider alternative models that put the ownership and control of our digital assets in our hands.
Ownership with Benefits
Distributed ownership is a key feature of Web3 platforms that enables users to have tangible, verifiable ownership, and gives users near-complete control and security of their data. Distributed ownership implies that the ownership and control of a platform or network is distributed among all its participants, unlike the currently popular systems. In a distributed ownership model, participants have the tangible right to own their content, with the benefit of protection from data leaks, and the power to shape the future of a protocol.
Distributed ownership is built on blockchain tech — and blockchain allows for the creation of transparent, secure and democratic decentralized networks, and digital assets with transferable ownership.
And what does that mean for us?
Greater control and autonomy
Unlike the centralized ownership model of Web2.0, Web3 allows individuals to store all their data on a decentralized network, where they retain full ownership and control over their assets. This has several benefits for participants of the network.
In DeFi, for example…
When users deposit their assets on a DeFi platform, they receive a digital representation of their assets, such as an ERC-20 token on the Ethereum network. This token represents the user's ownership of the underlying asset and can be traded, transferred, or used as collateral to borrow other assets on the platform.
Built on the Ethereum blockchain, decentralized lending and borrowing protocol AAVE enables people to lend and borrow a wide range of assets without the need for intermediaries.
When users deposit assets into Aave, a smart contract is created with the terms of agreement between the depositor and the platform, and the depositor receives an equal value of aTokens (in-platform currency of AAVE), which represents the user's ownership of the deposited assets.
These aTokens can be traded, transferred, or used as collateral to borrow other assets on the platform. When users want to withdraw their assets, they can redeem their aTokens for the underlying asset at any time.
Simply put, if a user deposits 1 ETH into Aave, they will receive 1 aETH in return. The aETH represents the user's ownership of the deposited ETH and can be traded, transferred, or used as collateral to borrow other assets on the platform. When the user wants to withdraw their ETH, they can redeem their aETH for 1 ETH.
Through a dynamic interest rate model, where interest rates are determined by supply and demand, Aave enables lenders to earn greater interest for providing liquidity to the platform.
When the demand for a certain asset increases, the interest rate for borrowing it also increases, which incentivizes holders of the asset-in-demand to supply it to the platform.
As a result, users who supply assets to Aave can earn interest on their deposits, which can be significantly higher than traditional bank interest rates.
Aave also enables users access to liquidity without having to sell their assets. This is particularly useful for users who want to hold onto their assets for the long term but need liquidity in the short term.
By using their aTokens as collateral, users can borrow other assets like stablecoins or other cryptocurrencies without selling their original assets.
This allows users to access liquidity while maintaining their ownership and control over their assets.
The AAVE token empowers holders to discuss and propose changes to the protocol and vote on decisions like changes in code, fee structure revisions, and other upgrades that might impact them directly or indirectly, while also incentivizing them to contribute to the success of the protocol.
Unparalleled access and interoperability
DeFi also enables ownership of assets that were previously illiquid or inaccessible to the average user. To understand this better, let’s first understand what an NFT is.
To most people, NFTs are known for projects like CryptoPunks and Bored Ape Yacht Club, which attracted a fair bit of media attention. While these projects have catapulted the popularity of the concept, the real-world applications of the underlying technology have not been discussed so much just yet.
Simply put, a Non-Fungible Token (NFT) is a unique (“non-fungible”) token that serves as proof of ownership of any asset — be it a piece of artwork, a tweet, a video clip, or even physical real estate. Unlike traditional cryptocurrencies like Bitcoin, which you can exchange for another Bitcoin, an NFT cannot be replicated and thus, it cannot be exchanged for another NFT. Further, NFTs are stored on the blockchain, which ensures that the ownership and authenticity of the digital asset are tracked and verified.
NFTs allow for the ownership and transfer of assets in a way that was previously impossible. Creators can assign tangible ownership rights to their assets through NFTs, which allows them to transfer the ownership to buyers in a secure and transparent way. This creates a new market for digital assets, allowing creators to monetize their work and buyers to invest in unique digital assets.
The emergence of blockchain technology has led to a new gaming paradigm known as Play-to-Earn (P2E). P2E is a business model where players can earn cryptocurrencies that can be exchanged for in-game assets or real money.
Through the use of NFTs, Play-to-Earn (P2E) games like Axie Infiniti and DeFi Kingdoms empower individuals with true ownership of their in-game assets. As a result, players can sell them outside of the platform on which they were created or transfer them and use them in another P2E game. This assigns real-world value to the time invested in the game — which is a departure from traditional gaming models where all assets and value are held within the game.
Digital Ownership of Real Estate
NFTs have enormous potential for application in the real estate industry, ranging from ownership of virtual property on projects like Decentraland and CryptoVoxels, to the tokenization and ownership of real-world assets.
In the physical world, NFTs also enable fractional ownership of real estate through tokens. This means users can purchase property (or a portion of it) anywhere in the world by buying tokens that represent a share in its ownership. These tokens can be traded, transferred, or used as collateral to borrow other assets. This enables anyone to invest in real estate, regardless of their financial means or location.
As far as the virtual world is concerned, there are several upsides to investing in NFT Real Estate. Firstly, it opens up another asset class, where well-researched and strategic investment decisions will get you some nice gains. Also, depending on your regional regulations, NFTs could be treated with a lower tax level, allowing investors to take home a big chunk of money.
However, in proportion to the upside, it also carries the same amount of risk, just like any other investment. So if and when you make investment decisions, make sure to weigh your risk tolerance and don’t speculate if you can’t afford to.
Decentralized Identity Ownership
The key difference between identity on Web2.0 and identity on Web3 is centered around two things: identity ownership and portability (or interoperability).
Identity ownership is the core outcome of decentralized identity. The word decentralized implies that the ownership is dispersed from the centralized identities and returned to users. And “portability” means you can use a single identity to access different platforms seamlessly.
Let’s understand this better.
Identity on Web2.0, like username, avatar, number of followers, content that you share online — or anything that separates you from others — is essentially entries stored in the databases of (for example) Meta, Google and Twitter. In other words, on these platforms, your identity on these platforms does not belong to you. It belongs to the platforms on which it is stored. This comes with a variety of risks, like being banned from accessing their services (or worse, the platform shutting down!) and security risks such as data leaks. Decentralized identity management is the solution to exactly this problem.
Decentralized Social Networks
Decentralized social networks are the need of the hour today as existing social networks don’t uphold Web3 values. Web3 is kind of the solution to the problems created by these popular social media platforms.
We need social networks that don’t sell your data, don’t violate your privacy, or suppress your voice. The solution: Web3-based open-source and composable social graphs.
A social graph is a structure that depicts the connectivity between people and groups in a social network. The structure builds as one creates profiles, follows users, publishes content, and reacts to content published by other contributors.
Centralized social media like Facebook, Instagram and Twitter (among others) use social graphs (among other things) to modify content and create a suitable user experience for users. Decentralized social networks integrate social graphs into smart contracts and allow users to shape their social media experience by giving them more control over how they manage their connections and more ownership over what they create and how they share.
Why this is game-changing
Ownership. Every user gets a portable, NFT profile that allows users to post content (posts, comments, publications) on it, thus giving them complete ownership of their content and their connections. Further — and contrary to how it works on Web2.0 social media platforms — the transferable nature of the profile “NFT” allows one to transfer their profiles and their connections to another platform within the protocol, without having to start all over again and build from the ground up.
Community Governed. Web3 is all about community as the community members are the ones running the show. So we need social media platforms that support and enable community governance. Towns, a platform by Here Not There Labs, is doing exactly that by providing a Web3 native environment. Communities can utilize their suite of extensible, composable, and upgradeable smart contract optionalities to create their own social experience.
Censorship-Resistant. Censorship is one of the most controversial topics on Web2.0 social media. Several social media platforms have used their power over content creators to suspend or ban accounts in the past. While creators might publish content that goes against a platform’s content guidelines, the moderators themselves aren’t free from personal biases, resulting in the subjective treatment of creators rather than objective proof. Bluesky —- a decentralized platform created by Twitter founder Jack Dorsey — solves this problem by only providing content creators with the right to limit or delete posts.
Monetization. Akin to Web2.0 social media, Lens Protocol, another decentralized social media platform, allows users to comment on and mirror (share/repost) your content — but with ownership comes value — thus providing creators with the added benefit of monetization and making community-building a truly rewarding exercise.
Because of its accessibility and ease of use, cloud storage has become the most popular type of storage in recent years. And while incumbent giants like Google and Amazon have come a long way in developing and democratizing the technology, cloud storage on Web2.0 stores data on central servers, which has its vulnerabilities.
For starters, when one uploads their data on a centralized server, they grant the server permission to “use the data to deliver a more personalized experience” to the user, thus giving the business access to edit, view, analyze and remove the content.
In addition to this, centralized servers come with a higher risk of data loss from system failure — and once lost, this data cannot be recovered. Further, many personalized cloud storage services do not provide insurance against data loss or take accountability for catastrophic failures.
More importantly, however, your data is more vulnerable to cyber-attacks on a centralized server. For once an attacker gains access to the main server, all the data on it is under breach — including yours.
In contrast, Web3 cloud storage providers allow users to store data securely on the blockchain, which is a decentralized, distributed peer-to-peer system. Every file stored on a decentralized cloud is broken up into many shards, and each of these shards is encrypted and distributed to numerous client computers for storage, thus maximizing privacy and reducing the likelihood of data loss and vulnerability to cyber-attacks.
‘Peer-to-peer’ also implies that anybody with a processing node connected to the internet can join and build peer networks, thus maximizing resource usage while earning through providing storage. To maximize security, malicious nodes are punished by seizing their stake from the system.
Having said that…
Web3 technologies are still in their early stages, and the user experience can be complex and confusing for non-technical users. For many individuals, this is a barrier to entry. Further, ownership on Web3 operates outside the traditional regulatory framework, which can create uncertainty and legal challenges. But is that reason enough to ignore the technology?
Even early attempts at decentralization, such as Napster, had their own issues. While Napster did introduce the concept of decentralized file-sharing, it also created problems through double-spending music files. However, the evolution of technology has brought us closer to a world where we can fully own and control our digital assets. The potential for secure ownership of digital assets brings optimism for a future where our online presence can truly be our own.
And that is why, Dyor is driven to simplify Web3 for all.
Dyor is building an investor-friendly decentralized platform to help you navigate and invest in Web3 and DeFi easily. With its unique Swipe-to-Invest interface, access to real user-generated data, and an active community of investors & contributors, Dyor is driven to simplify access to DeFi for all. Learn more on dyor.exchange