Digital Scarcity

There’s a lot of talk these days about “digital scarcity”, in the context of blockchain and NFTs. Because now we can access content protected with our cryptographic keys, on decentralized databases, instead of accessing them with password stored on centralized servers, the predominant train of thought is that we can create “true ownership”. And because we have this “true ownership” of our data, of our identity, we can then create “digital scarcity”.

If this sounds cryptic to you, you’d better go ahead and listen to this two hours podcast on Tim’s blog, with Chris Dixon and Naval Ravikant. You’ll probably get a better understanding of how the concept is presented.

To be honest, I’m a bit confused about this trend. I don’t really see how we can create scarcity by using private keys. If anything, I think we’re creating exponential wealth, not scarcity.

You owned your data in Web2 ecosystems too (these Web2 ecosystems are Google, Facebook or Apple walled gardens). You could still control what you post and what not, you could change your name, avatar, etc. What Web3 improves – and by Web3 I understand all the technologies based on blockchain, like NFT – is related to the friction that you get between your data and the platform providers. Namely lowering that amount drastically, to the level where the interaction is frictionless, instant and cheap.

Broadcasting information is not for free. Nothing is for free. Web2 companies have huge expenses in infrastructure. Some of them just piggy backed on the work of other companies who built the roads, so to speak, but still, they are spending a lot on “invisible” things, like storage, 24×7 availability, etc. As an end-user, you don’t need to know that, you just want a good service. So, they did all the plumbing and wiring and presented you with a nice playground. All you need to do is to play there. That’s it. Of course, if you want to get out of the playground, it will be difficult. They own the playground and they will create a lot of friction, so you spend more time inside. That’s how they make their money, while you are inside, if you’re out, it’s game over for them, they cease to exist.

On the other side, in this new wave of technologies that are taking the wold by storm, the infrastructure is embedded in the stack. You don’t have to pay with your data. Everything is tokenized, so you pay with the tokens of the DAO, and then the DAO processes, exchanges the tokens and pay for the plumbing and wiring. All this is in the code. All this can be audited, changed, re-implemented as the community sees fit.

And that lowers the friction tremendously.

And in doing that, it allows you to draw a clearer boundary around what you own and what you don’t own. Everything is (more or less) transparent in a blockchain, so what you have is public by design. It’s not owned by a single entity, but collectively, by all the members of the DAO. It’s not even “owned” in the traditional sense of the term, but rather “enabled”. You have the true ownership, but presenting that, broadcasting that, is made by a collective effort, by a DAO, to which you belong.

I think this is the true innovation of the Web3 revolution: the lower friction in creating, broadcasting and proving ownership of assets. We are at the beginning of this, but I expect an exponential increase in digital ownership.

Photo by Christopher Burns on Unsplash

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.