Viewpoint: Decentralized products and services will return in the Web 3.0 era


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Paul Brody, head of Ernst & Young’s blockchain, said that DeFi elegantly demonstrates how to use open protocols to build “shared” businesses.

Original title: “Views丨Web 3.0: The Coming Sharing Economy? 》
Written by: Paul Brody, Head of EY Blockchain Translation: Wang Tiesheng

In the past, financial services attracted most of the attention in the blockchain field, but now, a new era is coming. In the first wave of ICO (Initial Coin Offering), some companies proposed decentralized alternatives to everything from consumer goods to rides and home sharing services. However, due to the lack of specific implementation models for early concepts, most of the proposed alternatives gradually disappeared from people’s vision over time. But as the blockchain industry matures, the concept of decentralized products and services will return.

According to my experience, participants in the centralized digital market (both buyers and sellers) are usually not satisfied with the experience of using the products that the current industry market can provide. Among them, the strongest dissidents are often the sellers in these markets. They found that today, operators with strong market influence firmly control their channels to reach consumers. These top operators not only have more market analysis capabilities and insights, but also have the ability to change market rules at any time. This allows them to obtain a considerable share of revenue in the service.

Also, I noticed that buyers and consumers are not always satisfied. Early low-cost services like ride-hailing and couch surfing no longer exist. Like the sellers in the market, many people do not like the current changes in market rules, and the costs of both parties to the transaction are increasing.

With the maturity of blockchain technology, it is increasingly possible to build a decentralized ecosystem that can provide similar services and is competitive. The company has a better level of ability in building a decentralized market, providing stable and high-quality leverage, and an infrastructure that can handle a certain degree of decentralized disputes.

In other fields such as distributed computing infrastructure or financial services, a fairly typical business model has begun to emerge. Develop an open source code agreement and establish a decentralized community to take over the responsibilities of the government or centralized enterprise management and governance. The foundation or company will be responsible for specific operations to maintain and improve the agreement in exchange for a larger community Governance rights and token rewards.

This more mature decentralized solution balances the openness and transparency required by buyers and sellers to join, while giving enough incentives to individual entities to ensure that someone is willing to take the lead in maintaining and promoting the agreement. Companies such as Aave, Compound Labs, and SKALE Network have deployed certain variants of the model in their actual operations. I think there is no reason why the same model cannot be deployed for ride-sharing or other similar non-financial services. These services also have all the infrastructure needed to support key activities such as liquidity pooling and pricing.

“This will be a Web 3.0 VS Web 2.0 war.”

When these non-financial services adopt this new model, for many reasons, compared with decentralized finance (DeFi), real-life non-financial consumer services may face a more difficult and complicated situation. First of all, their competitors will not be the old-fashioned municipal taxi monopolies, or the traditional financial markets that have been supervised and have a history of 100 years. They face locals in the digital & Internet industry (such as Uber and Airbnb). ), this will be a battle between Web 3.0 and Web 2.0.

Secondly, these emerging decentralized agreements need to understand that although people are full of worries about these new “monopolies,” in fact only a few of them are profitable. Amazon founder Jeff Bezos once said “Your margin is my opportunity”, but without profit, there is no opportunity. From carpooling services to food delivery to sofa surfing, the profitability of many companies has been out of reach. How do you dismiss these “monopolists” who have been cruelly competing with their traditional competitors and have not yet made money?

Finally, the operation of the real world is extremely complicated. One of the reasons that makes DeFi such an elegant and compelling solution is that it hardly depends on any real-time connection to the physical world. On the other hand, non-financial services such as carpooling and food delivery require almost constant connections and updates to the physical world to work properly, and they rely on data input from various sources, some of which are also prone to errors. . In short, these businesses are much harder than they seem. And they obviously require more active management than DeFi.

To fully understand the enormity of the challenge, we can compare industries that are subject to strict scrutiny and precise control requirements (such as regulated financial services or manufacturing) with crowdsourced life business networks. The manufacturing company strives to achieve the quality of Six Sigma, that is, only 3.4 errors can be made per million units of product produced, and I can’t remember the last time my credit card company failed to credit the payment correctly. Yes, but my recent order error rate for burritos is 30%.

Although it may just be my bad luck, even so, the error rate that may be generated by putting such non-financial services into the unchanging transaction infrastructure is still high.

However, these challenges are not insurmountable. I may feel pity and proper sympathy for those investors who have invested billions of dollars to build the Web 2.0 market through subsidies and price wars, but find that their return days have disappeared in the decentralized market . But at the same time, I can’t wait to see how the new generation of decentralized service agreements will be formed in the real world.

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