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Credit, Progress and Web3 or Credit3.0

I wanted to share a worry about Web3, progress and credit. The idea of credit is linked to the tremendous economic success of developed countries in the last 400 years. As Yuval Noah Harari described so succinctly in his book Sapiens.

‘Credit enables us to build the present at the expense of the future. It’s found on the assumption that our future resources are sure to be more abundant than our present resources. A host of new and wonderful things open up if we can build things in the present using future income.’

As Harari explains the essence of this belief comes from the continuous invention of science leading to ever more new technologies driving this perpetual growth.  Over the last decade the creation of enormous amounts of cheap credit places a huge responsibility on these technologists to deliver. However, much to their credit from biotechnology to artificial intelligence and neuroscience they are keeping their side of the deal and often are deserving of more funding than is provided for their astonishing new ideas.

While at the heart of much of this discovery has been the world wide web acting as a stable global platform for creation, collaboration and acceleration of these ideas. Here again the innovators have been in overdrive evolving the system from the original web to a very powerful, mobile and empowering system for billions.

The next important element of this progress is the merging of three soft technologies of language, money and software into a single system. The diagram below illustrates how some of these technical web developments move from a system that allowed us to read together, to read and write together into being able to read, write and own together.

The economic impact of this new Web3 idea is hard to underestimate. Statistica estimates that as early as 2017 the valuation of Web2 companies was 14 trillion dollars. What will be the valuation by 2030 of a Web3 system? Clearly if the early progress of crypto is any yardstick, the valuation will be in the trillions enough to justify a good amount of credit.

Yet what enables credit – and the entire system of money – to survive and flourish is the ability to evaluate past behaviour and data and so assess who to trust with credit. However, here is the rub, in many parts of the world this data simply does not exist. Importantly in the new world of Web3 and crypto there is no accurate scoring of this data. While an estimated 15% of the Indian adult population already experiment with crypto this is a problem. Indeed this paradox exposes a major flaw in this crucial mechanism of the future paying for today. We urgently need credit systems for this new world – it is a failure in the many trillions if we don’t.

So central to my worry are two key challenges around the security and sustainability of such a system of finance and it would be crucial to understand these two obstacles and so create a system for Credit3.0.

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