Search for:

Short-term mkt volatility obscures long term view.

In uncertain times, good to remind oneself of latter & ask “Do I still believe this is where the world is going?” If so, stay the course.

10 predictions for the web3 age that I expect to manifest regardless of mkt cycles 👇

Note: Making prophecy is tricky biz. Many of these won’t play out exactly as I describe. But being directionally right is better than being precisely wrong. I expect the predictions below to fall in former camp.

1. Hyper tokenization of everything

All assets— stocks, bonds, real estate…— will be tokenized. Anything w/ a cashflow will be tokenized. Companies, governments, nonprofits will all have tokens as a tool for attracting supports & distributing values.

Even things that work perfectly w/o token will be tokenized. Why?

For same reason that everyone & their mom needed a website when internet got adoption. Blockchains & other public ledgers will be where monetary liquidities & eyeballs are. If you don’t join the party you’d be left behind.

2. Most national currencies ≈ another community token

As tokenization proliferates, currencies of most countries will live on as the central government’s token, used to pay public sector employees & vendors, and settle debt w/ government (i.e. taxes).

They’ll be almost indistinguishable from private community tokens w/ good liquidity. And popularity of a national token will depend on how well the country’s economy is doing & its tokeneconomics, i.e. monetary & fiscal policies.

3. Dominance of “super currencies”

Massive tokenization also means the need will be greater than ever for a global common yardstick to measure values & to serve as the common side of liquidity pairs to facilitate conversion among millions of different tokens.

There’ll be less than handful of “super currencies” that take on this role. USD & its various stablecoin forms are well on their way to become such a super currency if they’re not already. But metaverse will also create its competing versions of on-chain measuring sticks.

p.s. I do not expect Euro or RMB to become super currencies. Their user bases are too regional & that’s not going to change anytime soon.

4. More difficult monetary and fiscal policies

National tokens’ll have to compete with so many alternatives in their ability to preserve & transact values in stable ways.

It’ll be harder to monetize fiscal deficit or resolve government debt by ways of financial repression (e.g. suppressing interest rates, mandatory holding of government bonds, capital control).

On the other hand, government outlays are expected to increase w/ population aging & job loss to automation. Demand for public services will grow while space for fiscal/monetary maneuvering diminishes.

Most govs today are not up to the challenge & many will go under. Won’t be surprised if we see faster turnover of govs & entire reconfiguration of some nations in coming decades.

5. Digital nation states & “multinational” apps become powerful players in global economy

Large public blockchains / distributed-ledger ecosystems will become important players of global economy like the large nation states today.

Large cross-chain apps’ll be the new multinational companies that rival the power of blockchain nations. Where they decide to invest will determine economic fortunes of many digital ecosystems, similar to the role of FDI (foreign direct investment) today by multinationals in physical economies.

6. “Staking” becomes 3rd most important income source for the masses

Traditionally economic output is distributed to population via 2 ways, labor income (wages & salaries) & capital income (dividends & interests).

Staking is the new way to participate in economy & at times a more active form of capital income, depending on the context. E.g. staking in liquidity pools of DeFi & staking in PoS network validators are both providing an active service in addition to capital.

More ways of staking will continue to be invented to encourage network participation. It’ll be a prominent way for on-chain economies to distribute values among participants. Its role in income distribution of total society will grow as on-chain economies grow.

(BTW, like this so far? I write about ideas on investment, macro and human potential. Subscribe to my newsletter for updates.)

7. Rebuilding of the middle class

100 yrs ago Henry Ford doubled factory worker wages to $5/day & kickstarted industrial middle class. Workers made enough to buy what they made, which heralded in modern economic growth driven by consumer demand.

Globalization created totally different equilibrium from a century ago, forcing every company to scout the globe to find cheapest labor, or lose out to competition. Consumers of values are no longer makers of values.

A result is that starting last 1/4 of 20th century, middle class in developed world has been—& still is—on decline.

The co-op ownership model of web3 will help restore the basic economic unit in society— contributor & consumer are once again the same persons. Values created in the system are distributed to the system participants, which in turn are spent in the same system.

Web3 will help create a new middle class of the digital age, albeit in more decentralized fashion compared to a century ago.

8. A different kind of globalization

Globalization of 20th century was abt production arbitrage— making stuff in low-cost countries & selling them to rich countries.

That model is going out of fashion fast, as Covid exposed how fragile globalized supply chains are & countries look to rebuild industrial base. More & more production will be moved back on-shore or near shore.

Globalization of 21st century will be abt collectively creating and sharing values across national boundaries— metaverses do not know national borders & any economic values created on chain are by definition “global” (i.e. until we figure out how to trade w/ the Martians).

There’ll be a new kind of divide. This time not btw rich & poor like during 20th century’s globalization, but btw those who thrive in this borderless world & those who don’t.

9. Cross-border capital flow no longer means anything

Monitoring cross-border capital flow is almost mission impossible in a world where most values are moved across faceless & ID-less crypto wallets.

What’s more disturbing is the very idea of cross-border flows becomes meaningless in a metaverse— you participate in the same on-chain economies whether you’re in London, Shanghai or NYC.

It’ll still be some time b/f governments realize the only way they can track “cross border flows” in future is to have their own national blockchain or pubic ledger that interoperate w/ other major networks.

They’ll need to issue their own CBDC on the national chain & encourage domestic entities to issue tokens on & use the said chain.

Changes in activities & values locked in a national chain will then give a clear picture in real time abt how the national economy is doing. Cross-chain flows btw national chain & other chains will be the new metric for “cross border flows”.

10. Everyone becomes an investor

If capital income & staking income become more important relative to labor income, it’ll make sense that all of us spend more time taking care of those just like we spend time at work to earn salaries.

If everything of value becomes tokenized, there’ll always be more investment opportunities than what you have resources for. Screening & evaluating one’s portfolios becomes an essential day-to-day task just like mowing the lawn or washing dishes.

I don’t see delegating investment decisions to asset management companies becomes in vogue, in the same way that I don’t see most people delegate their wage-earning jobs to someone else. If it’s an important source of income, it becomes an essential activity.

Not to mention that working hrs— time you use to earn labor income— will continue to go down w/ increasing productivity & more jobs taken by machines. More time will thus be allocated to investing, i.e. capital-income earning activities.

“How to Invest” will become a basic life skill that needs to be acquired & perfected in most people’s rite of passage to adulthood, along w/ other essential skills like how to write, how to code, how to put on makeups, etc.

 

20 Comments

  1. Cameron Osmers Reply

    Interoperability will be essential. Besides Quant is there any other project that we Should be adding to our bags ?

    • Chainlink is developing CCIP (Cross chain interoperability protocol) worth a bit of research.

  2. Springwater Reply

    Stablecoins and defi seem to be in direct competition with CBDC, capital flow controls and monetary policies. Governments are definitely trying to undermine them, but are they simply too difficult to be banned?

    On the other hand, would CBDCs provide a more legitimate bridge for tokenisation, thus leading to an explosive adoption (instead of a more gradual one) of digital assets when the government can no longer contain them?

  3. Your say that time spent monitoring one’s investment portfolio will overtake a portion of time average people spend earning a daily wage… but don’t you think a daily wage is a way for people to outsource the responsibilities/stress of earning a livelihood to their company? What I’m saying is that a big benefit of a daily wage is that it’s dependable and it frees you from the stress of having to make the kind of decisions you would have to make if you were depending on your investments. So it’s hard for me to imagine the kind of middle class person who is pretty much content with earning a stable wage suddenly taking it upon themselves to have the pro-active sort of entrepreneurial mind set it would take to adjust a portfolio daily. Also, a great many people will only do something of they can confirm the benefit, and investment is that that kind of activity.

  4. Indeed, it’s hard to call the future. Great respects on your calls!
    Always many thanks for your insights.

  5. So… effective governance of these ecosystems or co-ops will be key. This will lead people to cluster in places that they believe in, communities of shared values. People will evangelize around the tokens/ecosystem/communities that they believe in. The result could be some weird religious cult like behavior of believers with hostility toward nonbelievers. In an ideal scenario, perhaps some new models of human organizing will be created for real things getting done in the world that people actually support.

  6. Hi Tascha,

    I agree with just about every point you’ve made. In fact, I believe so strongly in point 10 that I’ve shifted my activities from being a traditional financial advisor to creating a universal platform for crowd-based investing ideas. I think the smart financial advisor will realize he/she can achieve far better global resonance (and therefore steady income) by embracing this model, while the average investor will achieve better long term returns by embracing the wisdom of crowds. We’ll see if this works for me. So far lots of time invested versus immediately shrunken managed portfolio size…

  7. You are the most original thinker in the web3 space. Seems countries may have to re-think their taxation/revenue-generating strategies, especially given the borderless movement of money and nation-state nature of apps/layer1s (vs geographical-state) – curious your thoughts on this? Thank you for sharing your ideas – they are intriguing and thought-provoking 🙂

LEAVE A COMMENT:

%d bloggers like this: