In the early stages of a technological innovation, there is often a disconnect between the underlying fundamentals of the technology, and its market value. However, in the long-term, prices tend to follow fundamentals. That explains why companies like Amazon, Apple, and Google survived the dot-com crash, while many others collapsed.
The same applies to blockchain technology. Crypto prices are low and Web3 start-ups are struggling to get attention. However, the infrastructure & use-cases of blockchain technology is growing faster than ever. Reddit, Starbucks, Meta are among the many companies that have started their experimentation phase with this technology.
The growth of blockchain technology will push the world into a new phase of internet user experience: Web 3.0. This new internet logic will be defined by decentralization & ownership. It will disrupt entire industries, and completely revamp the creator economy. Ultimately, it will empower creators with ownership over their creations and their relationship with their fans.
But can it go far beyond that? What if separate pieces of content, or even ideas, were owned by different individuals? What if the content itself was the end-result of decentralized collaboration?
This is the topic of this article, which is the first in a series about community owned and edited IP. However, before we answer those questions, let’s dive deeper into the fundamentals of Web 3.0.
What is Web3?
Web3 is a new internet logic. It’s an internet user experience that’s powered by crypto networks & blockchain technology. As Chris Dixon states in “Why Decentralization Matter”:
“Cryptonetworks are networks built on top of the internet that 1) use consensus mechanisms such as blockchains to maintain and update state, 2) use cryptocurrencies (coins/tokens) to incentivize consensus participants (miners/validators) and other network participants.”
Since Web3 is powered by blockchain technology, users can own their data & content. They’re also able to own pieces of the networks they participate in. Furthermore, this version of the internet is transparent & decentralized. Activity on the internet isn’t influenced by private algorithms. Instead, it’s orchestrated through tokens. The flow of tokens can’t be influenced by centralized control, as it is peer-to-peer.
As Patrick McCormick perfectly defines it: “Web3 is the internet owned by builders and users, orchestrated with tokens.”
Advantages of Web3
The main difference between centralized and decentralized platforms is the networks they are powered by.
Centralized platforms are powered by private networks. That means they have complete control over their networks & algorithms, as well as user data & content. This gives centralized platforms leverage over users & developers. They can exercise power over them, and in some cases, remove them from their platforms.
Centralized control is negative for users. A user can spend years putting out content and building an audience, just for the decisions of a few individuals to take all of that away from them. We’ve seen numerous examples of this, as many people were wiped off platforms for voicing their opinions.
This is negative for builders too. Builders can spend years building applications, just to witness their work getting stolen from them. This happened time and time again in the growth of today’s social networks as Facebook either bought, or removed their competition.
Web3 fixes this, through data portability. Since Web3 is an internet user experiences catered powered by crypto networks, users & developers will be able to own their data & content. They won’t fear removal. And if they don’t like a platform, they’ll be able to take their data and leave.
Blockchain technology grants users & builders security and stability, by protecting them from centralized control & providing them with ownership rights.
The sense of security & stability that comes from using decentralized platforms will also increase innovation. As more users & builders migrate there, decentralized networks will scale faster. They’ll also welcome and reward a more diverse set of builders without requiring exclusivity.
Another thing to remember is about decentralized networks is that they have much more flexibility to align incentives for all ecosystem participants through tokens. But it’s important for those tokens to have applicational utility, so that the falling value of the token doesn’t kill a promising project. If done right, decentralized networks can grow beyond the “bootstrapping problem” stage quickly.
Tokens upgrade networks into smaller sub-economies. The combination of those sub-economies will create a new digital economy. Thus, Web3 isn’t just a new version of the internet experience. It’s also a new model for a digital economy that puts users and builders in control.
From business to science, this economy will disrupt many industries. Let’s explore some examples.
The Decentralized Science Movement
One of the most promising applications is the decentralized science movement or (DeSci).
“The DeSci movement aims to enhance scientific funding; unleash knowledge from silos; eliminate reliance on profit-hungry intermediaries such as publisher conglomerates; and increase collaboration across the field.” — Sarah Hamburg, cofounder of phas3 and LYNX
Historically, censorship by political powers and the scientific establishment has been a big impediment to scientific research. Even today, a lot of scientific research is trapped behind paywalls and in private databases, preventing it from being leveraged for further scientific research. Eliminating censorship and increasing collaboration promise to accelerate scientific development.
Properly structured, NFTs and blockchain technology make scientific research open-source and verifiably attributable to its contributors. Scientists can be rewarded for their contributions when their work is referenced or when technologies are built leveraging their research through tokens.¹
An equally encouraging application of web3 tech that has not yet received attention are decentralized books.
Why Decentralized Books?
Our ability to tell stories is unique, separating humanity from the rest of the animal kingdom. This ability evolved over the millennia from cave paintings and oral traditions to the invention of writing and eventually the printing press.
Most books today are written by a single author. But this is a relatively recent development. Our species’ oldest stories were passed down as oral traditions by generations of bards who each added their own creative flair to the story. Thus, many of the most important books in history like the Bible, the Iliad and the Odyssey were composed by many people over centuries. Their origins and authorship are therefore unknown and unknowable.
Web3 technology allows for similar cases of emergent collaborations while simultaneously providing the tools to attribute credit for various sections to their authors.
Simply put, these stories evolved based on old technology.
We can now do better.
Web3 technology offers writers the ability to take back control of their creative work by providing a flexible market for crowdfunding and a better value proposition for investors. Moreover, web3 promises to enable a new generation of living books which continually incorporate community contributions into the writer’s original work — creating books capable of self-evolving.
The value behind crowdfunding through NFTs and decentralized books becomes more apparent when we examine the difficulties authors face with the traditional publishing industry.
Why the Traditional Publishing Industry Sucks
The book publishing industry has not changed substantially since the 1990s despite the advent of the internet and the rise of Amazon. The industry operates as an oligopoly that has in fact become more concentrated over the last several decades through a series of M&A transactions.
Today, 5 global publishing companies control 90% of the anticipated top-selling books. This industry concentration decreases the leverage authors have and leaves them with lower pay & benefits.
The global publishing industry suffers from several other problems. Here are a few examples of those problems.
- The industry is Slow
- Outdated Economic Model
- Opaque Approval Structure
- Legacy Business Models & Antiquated Marketing Strategies
1. The industry moves slowly.
It can take weeks or months for authors to hear back after submissions. And that’s just acquisition. Getting your book into print can take up to two years.
2. Outdated Economic Model.
Despite the increased accessibility on the customers end, authors typically only receive 5–20% of a book’s royalties after the advance has been repaid.
3. Complicated and Opaque Industry Structure with Multiple Gatekeepers.
Authors need to hire agents to pitch their manuscript to publishing houses. Those agents typically take 15% of the authors net pay. Authors also need an acquiring editor, and editors usually assign prereaders to pre-approve submitted content. Even if the editor loves your manuscript, they still must sell it to the rest of the team. This complexity creates an opaque approval process in which books often get rejected for unknown reasons.
4. The Traditional Publishing Process is Rife with Discrimination.
The 2020 study Rethinking ‘Diversity’ in Publishing, found that writers of color do not receive the same industry access, creative freedoms, or economic value as white counterparts. Black writers with large followings frequently get paid 3 to 10 times less than white authors with smaller followings.
5. Outdated Marketing Strategies
Publishing houses have large marketing budgets and strong relationships with bookstores, online reviewers and media outlets. However, their marketing strategies have not changed substantially since the 1980s.
Even so, Publishing houses typically only use these resources for books they believe can be bestsellers. This leaves most indie authors having to self-promote their content while still paying a huge percentage of their economics to publishers.
The Rise of Self-publishing
The difficulty and poor economics offered by the publishing industry have led a huge number of authors to self-publish. The self-publishing industry began in 2007 with Amazon’s self-publishing innovation, Kindle Direct Publishing. In 2011, at least 148k books and 87k eBooks were self-published. By 2017, the total number of self-published books had grown to 1.5 million.
Self-publishing is no longer restricted to niche books or authors who couldn’t make it in traditional publishing. Certain self-published books witness extraordinary levels of successful. A few examples: The Martian, Fifty Shades of Grey, Eragon, Rich Dad Poor Dad and Still Alice.
Self-publishing allows authors to move faster, keep creative control, retain subsidiary rights (audiobooks etc) and earn better economics. Self-published authors typically retain 50–70% of their book’s royalties.
Many self-published books that went on to be successful were considered too niche to be economically viable by traditional publishers. There’s also evidence that self-publishing is increasing diversity, as its improving access to content from minority groups.
But self-publishing in its current form also has its problem. While self-publishing offers significant advantages compared to the traditional publishing model, it suffers from some drawbacks.
Drawbacks to Self-Publishing
Publishing through a traditional publisher usually means that authors get a cash advance, and the publisher bears the expense of editors, designers and marketing strategists. Thus, self-publishing requires significant up-front capital in order to hire the professionals necessary to get your book ready for market.
Crowdfunding might enable authors to battle some of these problems. But crowdfunding platforms typically charge high fees and offer limited returns for investors. This decreases overall participation and liquidity.
The Promise of Decentralized Books
Web3 has the potential to be the greatest improvement to the storytelling industry since the invention of the printing press. Over the last decade, financial markets have been trending towards inclusion and democratization of access. Huge numbers of successful start-ups have focused on providing ordinary retail investors the opportunity to invest in asset classes that have traditionally been reserved for the financial elite.
Crowdfunding books through the sale of security tokens and non-fungible tokens (NFTs) is an extension of that trend. NFTs enable people to invest in their favourite books and authors, while receiving robust property rights in return. Over the years, the success of those books & authors will be directly linked to the value of IP. Imagine investing in Harry Potter in its early years and receiving revenues from and characters in JK Rowling’s incredible fantasy universe.
Furthermore, investors will have access to more methods of monetization. Instead of waiting for royalty payments, investors will have the option to sell their IP rights in decentralized markets whenever they see fit. The infrastructure such markets already exists.
Another thing to consider is that the NFT’s can be dynamic in nature. Dynamic NFT’s can evolve. This evolution happens in the token ID, Metadata or the content attached to the token. This method allows holders to propose changes and improvements to the book. Investors can then vote on those suggestions. The winning ones would then be incorporated into the token metadata. This serves to protect the decentralized nature of the investment process.
Crowdfunding through NFT’s can convert financial backers into contributors. Investors are now able to contribute to the overall project. With time, those contributions will help to convey knowledge, skills, expertise and experience of these investors to other IP projects. This will not only benefit the investors, but it’ll also significantly benefit the final product.
The US constitution is a perfect example of how this might work. It’s a powerful document built upon certain “self-evident” truths that proposed a new form of representative government by and for the people. This was a heretical idea in the days of absolute monarchy, and it went on to reshape Western Civilization. The Constitution was not written or decreed by a single individual. Instead, it was the end-result of the ideas of several founding fathers.
The document is the result of collaboration.
However, even the constitution had to be amended numerous times to better reflect the universal values it stood for. Today we believe, slavery and denying women the right to vote are inconsistent with the ideal “that all men are created equal”. The 13th and 19th amendments ironed out inconsistencies in the Constitution’s message and made it a better document. In total, the US constitution has been amended 27 times. Yet the process for amending the constitution is extremely difficult and time consuming.
While the underlying ideas of the constitution are universal, its systems are not. The world the founders lived in is very different from the world we live in today. In many ways the constitution is preventing meaningful reform on issues like mass shootings, women’s’ right to abortion and the influence of money and PACs in politics. While the ideas espoused by the constitution were revolutionary. The methodology by which it is updated was constrained by the technology at the time.
Decentralized books through web3 technology have the potential to arrest a decades long decline in the earnings of writers and supercharge a new literary golden age. Leveraging web3 technologies allows existing authors to find investors and contributors to their project who will help them finance and create the best version of their work while making money in the process.
Community-owned and edited IP promises to give control of NFT project lore and content back to the holders, creating better products in the process.
Ultimately, I believe that this technology will enable a new generation of DAO constitutions, powered by web3 and controlled by the community of holders. These constitutions can help to establish robust governance frameworks and enable DAOs to organize effectively in much the same way as the US constitution did for our government 250 years ago.
This is the topic of my next medium post, so give me a follow if you want to learn more.