In this episode of Understanding Crypto, Paul Abercrombie and James Burtt discuss the hidden side of decentralisation and its implications for real-world business owners. Paul predicts that Decentralised Finance (DeFi) organisations will evolve, transforming the typical Web3 business model into a hybridised institution with both decentralised and centralised mechanisms. They reveal an increasing trend among Web3 enterprises to create and use Decentralised Autonomous Organisations (DAOs) as a way to circumvent security constraints imposed by organisations such as the Securities and Exchange Commission (SEC). Paul questions the prevailing decentralised business model, focusing on Web3 firms' hidden money streams and business strategies. 

 

Progressive Decentralisation

Paul and James discuss the emergence of the decentralised web and how DeFi institutions are leading the way forward. The banking system's resistance to financial centralisation, according to Paul, is the driving force behind the development of Web3. "Blockchain exists as a result of people's attitudes regarding the banking industry and the necessity to try to build another store of value or a means of transferring wealth without utilising the bank," he comments. Bitcoin was the most successful attempt at financial decentralisation, bringing a degree of transparency to centralised money that had never been seen before. It's no wonder, then, that decentralised Blockchain technology provides the highest level of security, Paul and James point out. Decentralisation, on the other hand, brings a sluggish, fee-laden system. They both believe that the majority of DeFi institutions will evolve in a coordinated manner, with most Web3 institutions becoming centralised organisations with some decentralised governance. They feel that this will lead crypto down the path that it was meant to avoid in the first place. [Listen from 2:31]

 

Decentralisation through DAOs

Since DAOs are not owned by a single person, they are exempt from SEC or FCA requirements. As a result, Blockchain companies employing DAO mechanisms can continue to function outside of security regulations. Paul expresses his misgivings about this; he also mentions how convenient it is for huge crypto corporations to operate outside of governmental boundaries. Both Paul and James agree that the DAO mechanisms do not fit their Winner’s Club community since they have founding, executive, and voting teams. James examines the difficulties associated with the hierarchical flat management style while unmasking the hidden centralised procedures within some DAOs. "Yes, it's decentralised to some extent," he says, "but I guess there's still top level control of what's going through to that decision-making process." [Listen from 8:51]

 

Examining the Gaps

Paul raises concerns about the existing decentralised business model, which reflects the hidden revenue streams of Web3 and open source companies. He points out that one large social media platform's transparent subscription business model offered on Web 2.0 was rejected by the public, forcing the platform to transition into a data silo. This enables them to strategically use customers' data as a sort of remuneration for their service; "If you're not paying for the service, you're the service," he reminds listeners. The business security provided by the platform's partnership with centralised financial institutions in the actual world overshadows users' differing perspectives on this issue. "What's the business model that we're not seeing?" he asks, implying that there are revenue streams that aren't apparent. He contrasts the  exploitative practices of Web 2.0 with the current decentralised Web3 approach. Blockchain technology's free and open source nature makes it even more difficult for business owners and other app developers in the area to make money. To demonstrate this argument, Paul lists the free tools employed in the Winner’s Club platform's development while also raising questions surrounding the strategies these creators use to garner compensation for their work. James agrees, and expresses concern about the potential for future monetization of these tools and the resulting influence on the Web3 initiative. [Listen from 13:32]

 

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram 

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