Cutting out the middle man – a web3 social impact perspective
When it comes to social impact in web3, the most obvious examples are projects that encourage crypto giving or organize around a certain charitable cause. But, sometimes the less obvious use cases can be just as impactful, and this is certainly the case when it comes to blockchain and web3.
One of the biggest benefits for humanity, that will be ushered in by blockchain, is the role it will play in helping cut out the middle man, or intermediary organizations, that have traditionally funneled money away from the average individual and put it in the hands of the already wealthy.
Inherent in the web3 space is the value of decentralization, and by helping take power away from the centre, and redistributing it to the periphery, blockchain will usher in greater equity and inclusion for traditionally underserved populations.
“The blockchain symbolizes a shift in power from the centers to the edges of the networks.”
So, how exactly does decentralization, or cutting out intermediaries, lead to social impact? To drive home the point, there are three use cases I will highlight.
Financial Inclusion
“The power and advantages of decentralization are becoming increasingly clear. We deserve a financial system where no one can be censored or excluded from full participation.”
There is an estimated two billion unbanked people around the world. This means that they lack access to the basic financial instruments that many of us take for granted, including bank accounts, loans, credit cards, insurance, and more. By lacking access to these vital financial tools, these individuals face barriers to full economic participation, reinforcing the cycle of poverty and existing inequities.
Why exactly is this the case? Well, banks, with the exception of a select few, exist to create wealth for shareholders, plain and simple. There is not money to be made in individuals that live in rural or remote regions with low-incomes, and as such, these individuals are denied the opportunity to participate in the financial system.
Blockchain and cryptocurrency present an alternate vision – one where anyone, regardless of there circumstances, are able to access financial instruments. As a result, we have seen projects emerge within the decentralized finance (DeFi) movement that provide financial services to the unbanked.
One example of a project looking to do this is Kotani Pay, which allows unbanked populations to send and receive money via blockchain without the need for internet connectivity, a smart phone, or a bank account.
Another example of a unique project that cuts out the middle man to deliver vital financial services is Etherisc, a decentralized insurance protocol that uses smart contracts and Chainlink’s Oracle to deliver automated insurance to underserved populations.
These are just two of many examples that are aiming to cut out the middle man and deliver vital financial services to traditionally underserved populations. The benefits, from a social impact lens, are immense. For those utilizing blockchain-based “banking” services, it enables them to send and receive money to family, without going through costly intermediaries such as Western Union. It allows them to safely store their funds as opposed to having to hold cash, while also allowing them to hedge against inflation. It allows them to finally have insurance to protect them in the event of an extreme weather event that could wipe out their crop harvest and their livelihood.
In summary, cutting out the middle man in financial services helps underserved populations fully access and participate in the economy, save money from processing fees charged by intermediaries, and have access to tools to protect them in the event of a life-altering emergency.
NFTs
“It’s kind of almost silly to sit around talking about what you can do with NFTs. You can do anything with NFTs that you can do with a webpage, but on top of it, you can have scarcity and ownership and allocation and rights associated with it. This is really big.”
We’ve all heard the story of the starving artist, right? The one barely scraping by, spending every last penny on ramen noodles while they couch surf?
Whether you are a musician, a painter, or a photographer, entry to the professional arts world is extremely prohibitive. If you are lucky enough to be born in a developed economy with a thriving arts scene, you still have to deal with professional studios, record labels, and talent scouts that act as the gatekeeper to the world of professional arts. And then, if you do get in, you are working for them, and providing most of your economic value to them, the middle man.
Let’s look at professional musicians, for example. Record labels typically pay out only 10-15% of album retail, with the vast majority going back to the label, and their wealthy owners or shareholders. Spotify, on the other hand, pays an average royalty of a measly $0.004 per stream. These “middleman organizations” funnel profits away from artists, and into the pockets of the likely already rich owners or shareholders. NFTs, on the other hand, provide an opportunity for artists to take full ownership of their work, and all the financial benefits that come with it.
Furthermore, access to a career in professional arts has typically been restricted to those who were lucky enough to be born in developed economies, and those who aren’t are typically out of luck. As an artist in the NFT space, you don’t need to go through a professional studio, or a record label, to bring your works to market, and it doesn’t matter where you are born, although obviously those from wealthy backgrounds still face great advantages.
In summary, by cutting out the middlemen or “gatekeepers” in the professional arts world, in this case the studios, talent scouts, and record labels, and instead bringing your works to market directly via NFTs, artists can take full ownership of their careers and their economic value.
The Service Economy
“Whereas most technologies tend to automate workers on the periphery doing menial tasks, blockchains automate away the center. Instead of putting the taxi driver out of a job, blockchain puts Uber out of a job and lets the taxi drivers work with the customer directly.”
Although this use case is more in its infancy than the first two presented, the opportunity when it comes to decentralizing the service economy is truly amazing.
One of the biggest challenges in todays work environment, is that you aren’t truly getting paid for the value of work that you produce. Up until about the early-1970s, increases in worker productivity was matched consistently with increases in hourly compensation. However, this all changed in the late-1970s when compensation and productivity began to diverge rapidly. In fact, according to the Economic Policy Institute (2019), between 1948 and 2018, productivity increased roughly 253%, while hourly compensation only increased by about 116%, with this inequity growing substantially from the 80s onward. In other words, workers are getting less than half of the pay per “unit” of compensation as they were in the early 1970s.
For decades, centralized bodies, that is the employer, has used their position as an intermediary to extract massive wealth from workers, while giving them less from their efforts. This is done in exchange for the “service” they provide as the employer. In the example of a taxi driver, this would be the taxi company that provides its name brand, and dispatch. In the case of Uber, they simply provide the software for customers to connect with the individual providing the service.
In the world of web3, it is only a matter of time before we start seeing decentralized organizations providing opportunities for individuals to bring their labor directly to market without the need for an intermediary organization, or employer. This could be in the form of a DAO, for example, which offers opportunities for gig economy workers where they get to keep the vast majority of their wealth with the exception of a small administrative fee to maintain the DAO.
The end result will be greater economic opportunity for workers, and less money going into the pockets of already wealthy employers, executives, and shareholders.
Conclusion
Web3 is still in its infancy, and it will be a while before the use cases highlighted above are implemented at scale. That being said, to some extent, all of the use cases are already happening in practice, whether through pilot projects, emerging DAOs, or up-and-coming collectives. It will take time for the kinks to be worked out, and for these ideas to catch on, but when they do, the end result will be a fairer, more equitable economy and world. This is the connection between social impact and cutting out the middle man.
What are some of the other ways that cutting out the middle man will help drive social impact? Tweet us at @Crypto_Altruism, we would love to hear from you!
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